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Trump Moves to Ease Anti-Fraud Rules in Bid to Improve Care (1)

Oct. 9, 2019, 12:01 PMUpdated: Oct. 9, 2019, 1:27 PM

The Trump administration today released proposed changes to how two anti-fraud laws are carried out that are aimed at easing restraints on health-care providers and improving care.

Modifications to the rules under the physician self-referral law and the anti-kickback statute include exceptions and safe harbors to make it easier for doctors to experiment with new financial arrangements and ways to pay for health care, administration officials say.

Some of the ways that physicians want to coordinate care are not always illegal under the laws, but they may be effectively prohibited because of the difficulty in understanding the laws’ provisions, Eric Hargan, deputy secretary of the Department of Health and Human Services, said in a call with reporters.

The penalties for both laws are steep, and attorneys say the laws currently prevent doctors from trying to find better ways to work together. A hospital could run afoul of the laws if it offers incentive payments to physicians for providing more efficient and cost-effective care, for example.

The Trump administration has made it a top priority to pay for patient outcomes rather than the number of services provided, a concept known as value-based care. Officials say they are concerned the current laws prevent coordination of care.

Existing Restrictions

The physician self-referral law—also known as the Stark law after its congressional sponsor, former Rep. Pete Stark (D-Calif.)—prevents physicians from referring patients to medical facilities where they or their immediate family members have financial interests.

Penalties for violating the law can include $15,000 for each medical service and three times the amount of Medicare payments received for services.

The anti-kickback statute prohibits payments for recommending products or services to patients covered by Medicare or Medicaid and is meant to protect against fraud and abuse.

Penalties can be up to $25,000 and a potential five-year prison sentence per violation in addition to $50,000 in civil penalties per violation and three times the amount of government overpayment. Safe harbors give doctors and hospitals the green light to conduct business in ways they previously feared would get them in trouble.

It’s difficult for doctors who work in different medical groups to experiment with new ways to pay for health care because Medicare could interpret that as a kickback, Bob Kocher, former special assistant to President Barack Obama for health care, said.

A Broad, Permanent Exception

The self-referral rule includes a broad, permanent exception for certain value-based care arrangements, Centers for Medicare & Medicaid Services Administrator Seema Verma told reporters on the Oct. 8 call.

Providers will need to establish a value-based arrangement between two or more entities, and write out goals and a targeted patient population to qualify for a self-referral exemption, Hargan said.

Providers can be eligible for three new safe harbors that address value-based care arrangements: one for arrangements that focus on improving quality, health outcomes, and efficiency; one for arrangements that take on “substantial downside financial risk"; and one for arrangements that take on full financial risk for their patients’ health-care spending, according to an HHS Inspector General fact sheet.

The extent of the protections would vary based on which of the safe harbors providers are eligible for.

The self-referral rule also includes clarification and guidance for terms in the statute, said Verma. She did not specify which terms would be clarified.

Doctors would also be allowed to provide new tools to patients to improve their health outcomes, according to the fact sheet.

New Safe Harbors

New safe harbors under the anti-kickback statute include one for the donation of cybersecurity software, Verma said. And, the safe harbor for donating electronic health records, which is set to expire, will be made permanent, Hargan said.

The proposed regulation also includes a safe harbor for all innovative models sponsored by the CMS, replacing the separate waivers currently needed for each model, according to the fact sheet.

The new ways of paying for care could include one doctor paying a specialist a fixed amount for sending them all her or his patients, but that kind of financial risk sharing isn’t allowed now if they’re not employed at the same place, Kocher, who is a partner at venture capital firm Venrock, said.

The doctors could also use telemedicine, pay for social needs such as food and transportation, and provide Apple watches or other benefits to improve a patient’s care under the changes, Kocher said.

In-home dialysis providers would be able to provide free or discounted telehealth technology to dialysis patients under a new safe harbor, according to the fact sheet. The administration is working on an initiative to have more dialysis patients receive care in their homes.

Fraud and Abuse Concerns

The changes were made with a “great appreciation for the intents of these statutes,” to prevent fraud and abuse, HHS Secretary Alex Azar told reporters on the call.

Some concerns about fraud and abuse are not as relevant under these new financial arrangements, Rick Gilfillan, the former director of the Center for Medicare & Medicaid Innovation, said. Providers in these new payment arrangements will have incentives to manage the total cost of care and benefit from reduced use of medical services.

He also said the CMS is better at monitoring payments now and can spot anyone increasing the cost of care.

The administration also is working on safe harbor protections to allow outcomes-based arrangements for drugs, but that work is not finished, Azar said.

To contact the reporter on this story: Shira Stein in Washington at sstein@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Brent Bierman at bbierman@bloomberglaw.com