In the long-forgotten days before COVID-19 became the be-all, end-all of every conversation, news report, and waking thought, the United States of Health and Human Services (“HHS”), under the direction of President Trump, began what was described as a “regulatory sprint” to update and modernize healthcare regulations to reflect the current state of technology, care delivery, and payment. Comments were solicited, proposed rules were even issued, and then the curtain of COVID-19 fell upon the healthcare landscape. Heady speculation about which proposed rules for expanding Stark Law and Anti-Kickback Statute safe harbors was abruptly replaced by nurses’ choreographed Tik-Tok videos and a focus on front-line workers that disguised the immediate crises in healthcare: layoffs occasioned by cancelled elective procedures, catastrophic burnout of healthcare providers across all levels, and confusion about the proper course of care for a disease that was new and not understood.
Time marched on like it always does. We learned that the ventilators that were in such short supply at the beginning of the pandemic were probably harming patients due to being used on too aggressive a setting. Politicians and health officials criticizing masks as alarmist and unnecessary gave way to mandates requiring masks all the time and everywhere. Pharmaceutical companies long criticized for their overly accessible marketing and enormous revenues were heralded for their vaccines. Against this background, it hardly is surprising that the healthcare industry’s takeaway will be lasting changes that took effect in 2021, the year following the onset of a pandemic that changed the present and possibly the lives for all of us. These new and anticipated changes follow:
New Anti-Kickback Statute Safe Harbors and Stark Law Exceptions.
On January 20, 2021, new rules took effect that significantly changed the application of the two principal laws governing healthcare contracting and relationships, the Anti-Kickback Statute and the Stark Law. Both of these laws place restrictions on the contracting practices and financial relationships that may be created by healthcare providers that submit claims to and receive payment from Medicare and Medicaid. The new regulations added numerous safe harbors that, if complied with, immunizes certain financial relationships from criminal prosecution under the Anti-Kickback Statute. Similarly, correlating rule changes created exceptions to the Stark Law’s prohibition against physician self-referral that correspond to the new Anti-Kickback Statute safe harbors; complying with the conditions of these exceptions will protect physicians from being liable for civil damages under the Stark Law where healthcare services are referred to a physician or entity (such as a pharmacy, physical therapy practice, imaging company, hospital, or other facility) that has a financial relationship with the referring physician.
Prompted by the growth of clinically integrated networks and value-based payment relationships between payers (e.g., Medicaid control organizations), the Anti-Kickback Statute and Stark Law revisions allow more flexibility in contracting. Participants in value-based enterprises are allowed to make payments that reflect one party taking full risk for performing its contractual obligations, or partial risk of thirty percent (30%) or twenty percent (20%) based on the level of financial exposure the contracting party assumes for rendering care to a patient population for a period of time. The new rules also make it easier for providers to exchange in-kind compensation in the form of services in order to coordinate patient care. Limited in-kind remuneration is also allowed for patients in order to facilitate their participation in a compliance and post-care program. Finally, payments to contractors can be outcome-based as long as the outcomes are measurable, defined in advance, and backed by clinical research.
As the sweep of these changes is tremendously broad, not all of them can be discussed in detail in this article. The new rules create a framework for collaboration that previously was missing, or imperfectly addressed, by existing safe harbors and exceptions. These new rules serve as a catalyst to inter-group cooperation and coordination that has been slow to emerge in Las Vegas, but that have been the norm for years in other markets across the East Coast and Midwest.
The changes to the Anti-Kickback Statute’s safe harbors and Stark Law exception regulations were vast and years in the making. The United States Senate Finance Committee had long investigated potential changes to the Stark Law and HHS regulations to reduce the compliance burdens on physicians who were employees or did not own the business or enterprise at issue. While the new regulations did not go that far, they offered significant relief, flexibility, and new opportunities for individual providers and other entities subject to these laws.
Changes to Organ Donation and Delivery.
Following on the Trump administration’s executive order to expand the availability of kidney transplants and reform under-performing organ procurement organizations (OPOs) in July of 2019, a new rule implemented by the Centers for Medicare and Medicaid Services (“CMS”) took effect in January of 2021. CMS is the agency within HHS that is responsible for regulating Medicare and state Medicaid programs, but also is tasked with overseeing OPOs.
CMS’s organ donation rule mandates more transparency regarding OPO performance, allowing the ranking and identification of best- and worst-performing organization, and requiring competition among OPOs based on their success in facilitating organ transplants. These new standards reward OPOs for seeking and securing the successful transplant of as many organs as possible, measured by objective data. The new CMS rule contemplates a wave of consolidation within the OPO marketplace, where low-performing organizations will be absorbed into higher-performing organizations. Upon threat of obliteration, CMS has made it clear that OPOs will be measured, and publicly ranked, based on their contribution to procuring organs to satisfy a large waitlist that cannot be satisfied by current organ supply levels, and ensuring that donated organs successfully reach a recipient.
Proposed Changes to HIPAA.
In December of 2020, the HHS issued proposed changes to the Privacy Rule that implements the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) with respect to confidentiality and access of patient information. Following a recent trend in HIPAA enforcement actions to remedy lack of patient access to healthcare records, the proposed revisions to the Privacy Rule focus on expanding the definition of healthcare activities to facilitate the sharing of patient records across numerous entities—including those that might not be covered entities—to ensure patient information is shared along the continuum of care.
The proposed rule also eases the burdens patients sometimes face in obtaining their healthcare records, ranging from proof of identity requirements to per-page copy charges set by state law (in Nevada, $0.60 per page). Depending on the portions of the proposed rule that are made final, health care providers may face new requirements for providing healthcare records to patients and third parties, and may have to adopt new policies and practices, in addition to conducting new training to frontline staff responsible for handling patient records.
These rules are merely proposed rules, for which comments were solicited from affected parties—including physicians, medical facilities, and service providers who may facilitate the exchange of records between covered entities and patients. As seen in the comparison between the proposed rules and the final rules actually adopted by HHS in changing the safe harbors and exceptions to the Anti-Kickback Statute and Stark Law, as discussed above, the contents of the proposed rule are often more expansive than what ultimately is adopted in the final rule.
An unexpectedly controversial choice for the Secretary of HHS, the Biden administration nominated California Attorney General Xavier Becerra to lead the department at the outset of his administration. At the time of this article’s writing, his confirmation for this role by the Senate is expected but has not yet occurred. Observers on both sides of the political aisle have criticized Becerra’s nomination for different reasons.
While the political right has faulted Becerra’s record on family planning and the availability of abortion, the right and those on the left to criticize Becerra have found common ground in questioning his nomination when he lacks experience in public health administration.
What Becerra lacks in healthcare policy experience, however, he more than compensates with law enforcement experience. As California’s Attorney General, he repeatedly represented the state before the United States Supreme Court and oversaw California’s law enforcement priorities. Thus, Becerra’s appointment as secretary may presage more aggressive enforcement of laws that HHS is empowered to enforce, including seeking civil damages under the Stark Law and the Civil Monetary Penalties Law (which includes a mechanism for recovering civil penalties—i.e., money—for violations of the Anti-Kickback Statute).
Any gaps in Becerra’s healthcare experience may be filled by the Centers for Medicare and Medicaid Innovation (“CMMI”). CMMI is an office within CMS that is responsible for developing and adjusting innovative payment plans, including bundled and episodic payments, value-based payments, and reimbursement through accountable care organizations. Consequently, HHS’s leadership by an official with limited healthcare policy experience may not be an impediment to developments in healthcare policy and new agency-level initiatives, even if not led directly by the Secretary himself.
J. Malcolm (“Jay”) DeVoy is Of Counsel in the Las Vegas office of Holland & Hart LLP, a multi-state law firm of 400 attorneys serving the Mountain-West region. Jay regularly advises physicians, practices, and medical facilities including psychiatric facilities, surgery centers, and hospitals regarding compliance with federal and state healthcare laws, including the Anti-Kickback Statute, Stark Law, HIPAA, and Nevada’s self-referral law.
1 Bram Sable-Smith, ‘Almost a Death Sentence’: How Wisconsin Doctors, Peers are Rethinking Ventilators for Coronavirus, Wisconsin Public Radio (Mar. 5, 2020), available at https://www.wpr.org/almost-death-sentence-how-wisconsin-doctors-peers-are-rethinking-ventilators-coronavirus (last accessed Mar. 7, 2021).
2 Megan Molteni & Adam Rogers, How Masks Went from Don’t-Wear to Must-Have, Wired (July 2, 2020) available at https://www.wired.com/story/how-masks-went-from-dont-wear-to-must-have/ (last accessed Mar. 7, 2021)
3 42 U.S.C. § 1320a-7b.
4 42 U.S.C. § 1395nn.
5 J. Malcolm DeVoy & Amber C. Ellis, Final Rules of Stark and Anti-Kickback Reforms Issued by CMS and OIG, Holland & Hart LLP (Nov. 23, 2020), https://www.hollandhart.com/final-rules-for-stark-and-anti-kickback-reforms-issued-by-cms-and-oig (last accessed Mar. 7, 2021).
7 CMS Finalizes Policy that will Increase the Number of Available Lifesaving Organs by Holding Organ Procurement Organizations Accountable through Transparency and Competition, CMS (Nov. 20, 2020), https://www.cms.gov/newsroom/press-releases/cms-finalizes-policy-will-increase-number-available-lifesavings-organs-holding-organ-procurement (last accessed Mar. 7, 2021).
8 45 C.F.R. Part 164, Subpart E.
9 Codified in 42 U.S.C §§ 1320d through 1320d-8.
10 Jennifer J. Hennessy, et al., HIPAA Right of Access Initiative: 2020 Year in Review, National Law Journal (Dec. 11, 2020), available at https://www.natlawreview.com/article/hipaa-right-access-initiative-2020-year-review#:~:text=Summary%20of%20HIPAA’s%20Access%20Right,45%20CFR%20%C2%A7%20164.524. (last accessed Mar. 7, 2021).
11 See NRS 6239.061(3), (4), and (5).
12 “Covered entities” are defined within the HIPAA regulations to include health care providers who transmit health information in electronic form in connection with a transaction covered by HIPAA. 45 C.F.R. § 160.103
13 42 U.S.C. § 1320a-7a.
14 Id. § 1320-7a(a)(7).