The Situation: The Office of Inspector General ("OIG") recently modified the personal services and management contracts safe harbor of the federal Anti-Kickback Statute ("AKS"). These modifications expand protections to payment structures that incorporate value-based care models.
The Action: The personal services and management contracts safe harbor was revised in three meaningful ways: (i) replaced the requirement to specify aggregate compensation in advance with a more lenient requirement to specify compensation methodology in advance; (ii) eliminated certain written requirements for part-time or periodic contracts; and (iii) created new protections for outcome-based payment arrangements.
Looking Ahead: The final rule: (i) provides enhanced flexibility in crafting compensation agreements that can satisfy the personal services safe harbor; (ii) better aligns protections with those available under the Physician Self-Referral Law (the "Stark Law"); and (iii) reduces regulatory barriers associated with value-based compensation arrangements in order to improve coordination and quality of patient care.
This Commentary is part of a series of nine Commentaries on the newly finalized Stark Law and Anti-Kickback Statute exceptions and safe harbors seeking to remove regulatory barriers to care coordination.
Introduction
On December 2, 2020, the Department of Health and Human Services ("HHS") Office of Inspector General ("OIG") issued final rules including a host of reforms to the AKS, including three changes to the personal services and management contracts safe harbor ("Safe Harbor"). These historic reforms became effective January 19, 2021 and are part of HHS’s "Regulatory Sprint to Coordinated Care," which focuses on regulations that may impede the industry transition to value-based and coordinated care across settings.
The Final Rule Safe Harbor Changes
The OIG altered the Safe Harbor in three meaningful ways: (i) requiring that the compensation methodology be set in advance as opposed to the prior requirement that aggregate compensation be set in advance; (ii) eliminating the requirement that part-time or periodic contracts specify the schedule, length, and specific charge for the intervals of services provided; and (iii) extending safe harbor protection to certain outcome-based payment arrangements. These changes track the October 17, 2019 Proposed Rule, with minor changes to the outcome-based payment models.
Compensation Methodology
The OIG substituted the requirement that aggregate compensation be set in advance with a requirement that the methodology for determining compensation be set in advance. This change allows more flexibility in designing agreements and mitigates the difficulty of satisfying this Safe Harbor by generating compensation schedules (instead of the methodology) in advance. Additionally, the new rule better aligns the Safe Harbor with the equivalent Stark Law exception, which streamlines and simplifies drafting of personal services agreements.
Such methodologies must still adhere to the Safe Harbor’s other conditions, including requirements that the methodology be commercially reasonable, consistent with fair market value, and not take into account referrals or other business implicating federal health care programs. The Safe Harbor will not protect arrangements that do not meet the above conditions. Notably, the agency declined to define or interpret the term fair market value.
Part-Time Periodic Arrangements
The OIG eliminated the requirement that agreements for part-time or periodic services specify the exact schedule, length, and charge for services. This elimination affords providers, suppliers, and practitioners greater flexibility in the use of part-time or periodic services on an as-needed basis. It also improves alignment with the corresponding Stark Law exception with regard to part-time or periodic arrangements.
New Protections for Outcome-Based Payments
The OIG extended Safe Harbor protection to arrangements with innovative outcome-based payment models, subject to certain performance measurement requirements and exceptions.
Outcomes-based payment models include those that improve patient health, coordinate care across settings, or reduce payor costs, while maintaining improved care quality. An outcome-based payment may be a reward for successfully achieving an outcome measure or a recoupment or reduction in payment for failure to achieve an outcome measure. Arrangements that solely reduce internal costs or are solely based on patient satisfaction or convenience measures are not eligible for Safe Harbor protection.
The following entities are ineligible for Safe Harbor protection for an outcomes based arrangement: pharmaceutical manufacturers, distributors, and wholesalers; pharmacy benefit managers; laboratory companies; compounding pharmacies; manufacturers of medical devices or supplies; entities that sell or rent DMEPOS, other than a pharmacy or a physician, provider, or other entity that primarily furnishes services; and medical device distributors or wholesalers that are not otherwise manufacturers of devices or medical supplies.
The Safe Harbor requires the parties to regularly monitor and assess performance under the arrangement, including the impact of the outcomes-based payment arrangement on patient quality of care. The parties must periodically assess, and revise as necessary, benchmarks and remuneration to ensure that the remuneration is consistent with fair market value. Additionally, the arrangement must be measured with clinical outcome measures that: (i) are selected based on clinical evidence or credible medical support, and (ii) have benchmarks that are used to quantify improvements in the quality of patient care or a material reduction in costs to or growth in expenditures of payors while maintaining or improving quality of care for the patient. A signed written agreement is required and must describe the types of services to be performed under the outcomes-based payment arrangement, the clinical evidence or credible medical support relied upon to select the outcome measure, and the schedule for the parties to regularly monitor and assess the outcome measures. Monitoring and assessment must occur no less frequently than annually or at least once during the term for value-based arrangements with terms of less than one year.
Finally, the methodology for determining any outcome-based payment must be set in advance, commercially reasonable, consistent with fair market value, and not determined in a manner that directly takes referrals into account.
Three Key Takeaways
