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CMS finalizes major updates to the Stark Law

February 17, 2021
From the January/February issue of HealthCare Business News magazine

Given CMS’ new clarifications to the “group practice” definitions, practices that rely on the IOASE to provide in-office ancillary services, should review the updates to ensure their internal policies and profit distributions meet the new CMS standards. CMS has afforded such practices one year to come into compliance with the updates, as the group practice updates are effective January 1, 2022.

Arturo Trafny, Esq.
Three new exceptions for value-based arrangements
While previously existing exceptions may provide protection for certain value-based arrangements (VBAs) under the Stark Law, many VBAs may not meet the fair market value (FMV) standards and other requirements for these exceptions. Accordingly, CMS created three new exceptions to the Stark Law for value-based arrangements. A VBA is an arrangement providing at least one value-based activity (i.e., an action/inaction designed to achieve a value-based purpose (e.g., improved healthcare or reduced costs) meant to meet the needs of a target patient population).

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The first exception protects VBAs where the value-based enterprise (VBE) (i.e., the participants collaborating in the VBA) assumes full financial risk for patient care services for the entire duration of the VBA. VBEs relying on this exception must ensure: (1) the VBE assumes full financial risk for the entire duration of the VBE within 12 months of commencing the VBA; (2) remuneration is based on value-based activities undertaken by the recipient; (3) remuneration is not used to reduce/limit any medically necessary items/services to any patient; (4) remuneration is not conditioned on referrals of patients outside the target patient population for the VBA; (5) if remuneration is conditioned on a physician’s referrals, the requirement is set out in writing, signed, and does not apply if the patient expresses a preference for a different provider, practitioner, or supplier; and (6) records are maintained for at least 6 years showing the methodology for determining all remuneration.

The second exception protects VBAs where the participating physician assumes meaningful downside financial risk (i.e., at least 10% of the total value of the VBA’s remuneration) for failure of achieving their value-based purposes. Those relying on this exception must meet the above-cited requirements under the first exception, except the first requirement (i.e., that the VBE assumes full financial risk). In addition to meeting those requirements, the VBE must ensure: (1) the participating physician assumes meaningful downside financial risk for the duration of the VBA; and (2) a description of the financial risk is set out in writing.

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