New Stark Law, Anti-Kickback Statute Exceptions and Safe Harbors for Value-Based Arrangements

In Short

The Situation: As health care providers transition to value-based care models, they have often been forced to rely on exceptions and safe harbors under the Stark Law and Anti-Kickback Statute ("AKS") that were never designed with value-based payment arrangements in mind. While providers have had the option of using flexible waivers of the Stark Law and Anti-Kickback Statute under the Medicare Shared Savings Program ("MSSP"), those waivers are only available for activities related to accountable care organizations ("ACOs") that participate in the MSSP.

The Action: On November 20, 2020, as part of the Regulatory Sprint to Coordinated Care initiative by the U.S. Department of Health and Human Services ("HHS") to remove regulatory barriers to care coordination, HHS agencies, the Office of Inspector General ("OIG") and the Centers for Medicare & Medicaid Services ("CMS"), issued final rules that, among other things, establish new exceptions under the Stark Law and new safe harbors under the AKS for certain value-based compensation arrangements.

Looking Ahead: The final rules allow greater flexibility for value-based compensation arrangements. However, the newly crafted exceptions and safe harbors are often narrowly tailored. Health care providers must carefully evaluate the detailed requirements of the exceptions and safe harbors to fully comply with these final rules.


On November 20, 2020, the Department of Health and Human Services ("HHS") Office of Inspector General ("OIG") and the Centers for Medicare & Medicaid Services ("CMS") concurrently issued final rules modifying regulations for the Physician Self-Referral Law (the "Stark Law") and the Anti-Kickback Statute ("AKS"). Through these newly crafted exceptions and safe harbors, HHS expects that these rules will encourage the development of value-based arrangements ("VBAs") while minimizing the potential for fraud and abuse.

VBA Exceptions to the Stark Law

The Stark Law prohibits physicians from making referrals for certain "designated health services" payable by Medicare to an entity with which the physician or an immediate family member has a financial relationship, unless an exception applies. Among other changes, the CMS final rules create the following VBA-specific exceptions to the Stark Law:

  1. Remuneration Paid Under a VBA: This exception protects remuneration paid under a VBA, regardless of whether VBAs include any downside risk for participating providers. 
  2. VBAs with Meaningful Downside Financial Risk to the Physician: This exception protects remuneration paid under a VBA where the physician will be at "meaningful downside financial risk" ("MDFR") for failing to achieve the VBA purposes. MDFR means repaying or forgoing at least 10% of the total value of the remuneration the physician receives under the VBA.
  3. VBAs with Full Financial Risk: This exception protects remuneration paid under a VBA where the value based enterprise ("VBE") is at "full financial risk" ("FFR") within a year of the commencement date of the VBA on a prospective basis for the total cost of care. FFR requires the VBE to be financially responsible for the payer-covered cost of all patient care items and services for the target population for a specific period.
  4. Special Rule for Indirect Compensation Arrangements Involving VBAs: To ease compliance, the special rule allows the three VBA-specific exceptions to apply even if the VBA constitutes an indirect compensation arrangement under the traditional Stark Law analysis.

Safe Harbors Under the AKS

The AKS prohibits offering, paying, soliciting, or receiving remuneration (e.g., kickbacks, bribes, or rebates) to induce or reward the referral of business reimbursable under any federal health care program. Among other changes, the OIG final rules add the following safe harbors that specifically address VBAs:

  1. Care Coordination Arrangements to Improve Quality, Health Outcomes, and Efficiency: This safe harbor protects in-kind remuneration between a VBE and any VBE participant pursuant to a VBA, regardless of whether VBAs include any downside risk. With its limitation to in-kind remuneration, this safe harbor will have a more limited scope than the similar exception under the Stark Law that extends to monetary and nonmonetary remuneration.
  2. VBAs with Substantial Downside Financial Risk: This safe harbor protects monetary or in-kind remuneration between a VBE and a VBE participant if the VBE participant "meaningfully shares" in "substantial downside risk" ("SDR") the VBE assumes from a payer. The safe harbor includes methodologies to determine SDR and meaningful share.
  3. VBAs with Full Financial Risk: This safe harbor protects monetary or in-kind remuneration between a VBE and a VBE Participant if the VBE, within six months of the commencement date of the VBA, prospectively assumes FFR for all payor-covered items and services in the target population.

Five Key Takeaways

  1. The CMS and OIG final rules provide flexibility under the Stark Law and AKS for the health care industry to continue developing VBAs.
  2. Just like any traditional exception to the Stark Law and safe harbor to the AKS, a VBA must meet many requirements that each exception or safe harbor imposes in order for the participants to benefit from the protection and flexibility of such exception or safe harbor. Additionally, while the Stark Law and the AKS may have exceptions and safe harbors that protect similar arrangements, those exceptions and safe harbors may impose different requirements that must be taken into account.
  3. The exceptions and safe harbors only protect with respect to prosecution and enforcement under the federal Stark Law and AKS. Participants must continue taking into account and complying with a variety of other legal issues implicated by any VBA, including state Stark Law and AKS analogues, medical practice/licensure requirements, tax matters, insurance laws, and antitrust issues.
  4. Although CMS suggests that the new rules may reduce the need to rely on the MSSP ACO waivers, neither CMS nor the OIG made any changes to the scope or availability of the waivers. The waivers continue in effect and likely offer VBA participants who also participate in an MSSP ACO more flexibility than any of the new value-based Stark Law exceptions and AKS safe harbors.
  5. The CMS blanket waivers of the Stark Law and the OIG’s policy statement and other guidance for AKS enforcement discretion issued in response to the COVID-19 outbreak also remain available.
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