Feds Revise Stark Law, Anti-Kickback Statute

New rules are intended to support providers in value-based or coordinated-care arrangements

CEO SUMMARY: It is essential that all clinical laboratories and anatomic pathology groups understand major changes in two new federal rules that take effect next month. Revisions to the Physician Self-Referral Law (also known as the Stark Law) and the Anti-Kickback Statue will have wide-ranging effects on how clinical labs engage in value-based and care-coordination contracts—as well as how they sell their services. Lab executives are advised to discuss these rules with their attorneys.

FOR MANY YEARS, THE FEDERAL ANTI-KICKBACK STATUTE AND THE STARK LAW have been the primary laws governing fraud in the Medicare and Medicaid programs. Last month, federal health officials issued new final rules for both laws that all clinical laboratories and pathology groups would be advised to study and understand. 

One rule involves how labs can comply with the Anti-Kickback Statute (AKS) and one addresses how to comply with the Stark Law, also known as the Physician Self-Referral Law. 

Coordinated-Care Programs 

Both rules seek to reduce the burden laboratories and other providers face when engaging in value-based or coordinated-care arrangements by lowering the barriers that labs face when contracting with health insurers and physician groups in care-coordination arrangements, said the federal Department of Health and Human Services (HHS) in a press release. The two new rules will be effective on Jan. 19, although certain provisions will become effective on Jan. 21. 

One important, unanswered question is whether and how these revised new rules may be positive or negative for clinical laboratories and pathology groups. The new rules also affect how labs sell their services. In an interview with The Dark Report, one attorney commented that the new AKS regulations raise the potential for criminal fraud risk for clinical laboratories and pathology groups. 

“When participating in some value-based arrangements, clinical labs may not be fully protected from criminal fraud risk,” commented Danielle Holley Tangorre, a partner with the law firm of O’Connell and Aronowitz in Albany, N.Y. “The problem is that the HHS Office of Inspector General (OIG) did not extend the protection of all of the safe harbors to laboratories because the OIG sees labs as potentially exploiting the new safe harbors and were concerned about the potential of fraud and abuse. 

“But overall, the new rules provide more flexibility for innovation when clinical laboratories and other providers contract with health plans and providers,” she added. 

Two HHS departments issued the final rules: 

• The OIG issued, “Revisions to the Safe Harbors Under the Anti- Kickback Statute and Civil Monetary Penalty Rules Regarding Beneficiary Inducements.” 

• The Centers for Medicare and Medicaid Services (CMS) issued, “Modernizing and Clarifying the Physician Self-Referral Regulations.” Commonly known as the Stark Law, the physician self-referral law aims to protect patients from receiving lower quality or more costly services from physicians with a financial self-interest. 

Clinical Labs Excluded 

For lawyers working with clinical laboratories, the new rules may generate increased legal work, in part because the rules depart from the current practices under the Stark Law and the AKS, Tangorre said. For example, regarding care-coordination regulations, CMS took a different approach in the new Stark rule, compared to the approach used by the OIG as it revised the Anti-Kickback Statute. 

“The new anti-kickback regulations from OIG specifically exclude clinical laboratories from being able to access many of the new safe harbors built into the rules on value-based arrangements,” she explained. “Under the Stark final rule, however, CMS choose not to specifically exclude clinical laboratories. Therefore, labs can potentially participate in value-based arrangements under the Stark final rule, but have to consider the implications of the AKS final rule. 

“In fact, the CMS rule makes clear that laboratories may play a beneficial role in the delivery of value-based healthcare services,” added Tangorre. 

For each rule, Tangorre focused on the three most important sections of the AKS and the Stark rules. Here are the top three issues for clinical laboratories as written into the OIG’s new anti-kick rules. 

“First, it should be noted that the OIG said labs would still no longer be allowed to participate in the safe harbor involving electronic health record (EHR) systems,” Tangorre explained. 

Under laws passed along with the Affordable Care Act in 2010, clinical labs were allowed to assist client physicians and other providers in establishing systems to send clinical lab test requisitions to labs electronically and to receive lab test results in the same way. 

Clinical Labs Excluded 

“Those federal rules were sunsetting and this new rule reaffirms that labs are not allowed to participate in the safe harbor for EHR systems,” she commented. “Some labs still operate under the theory that they can provide EHR systems to physicians, but this new rule makes it clear that they are no longer protected when they do so.” 

A second important aspect of the OIG AKS rule involves whether clinical laboratories can participate in outcomes-based payments under a safe harbor regarding personal service management. “The final role specifically excludes laboratories from that particular provision,” Tangorre said. 

“Laboratories can still use the old safe harbor regarding personal service management, which labs use frequently for the consulting and other arrangements they have with independent contractors for some marketing activities,” she noted. “But clinical labs will not be able to use the new provision that relates to outcomes-based payments.” 

Safe Harbors in AKS Rule 

A third point involves the impetus behind issuing the final rules and how those issues relate to coordinated-care arrangements. “The new anti-kickback rule sets out a whole set of safe harbors relating to value-based payment arrangements.

These safe harbors allow for innovation in how physicians and other healthcare providers coordinate patient care,” commented Tangorre. 

“The OIG specifically excluded clinical laboratories from these safe harbors because OIG found there could be too much risk of fraud based on the OIG’s historical enforcement experience with clinical laboratories,” she added. “The OIG may consider that laboratories could misuse the value-based safe harbors when marketing tests and services.” 

Laboratory directors interested in providing clinical lab test results to assist physician groups, accountable care organizations (ACOs), and health plans in coordinated-care arrangements will need to understand when the safe harbor applies. “Depending on the arrangement, those contracts could now be protected under value-based, coordinated-care arrangements for other entities, but not for laboratories,” Tangorre explained. 

Business for Lab Lawyers 

Unlike the OIG’s AKS rule, CMS’ rule on the Stark Law allows clinical laboratories to participate in value-based, coordinated care arrangements. In this way, the two new rules are likely to drive new lab business to health law attorneys. 

“The big takeaway in how CMS addressed value-based care is that the agency deviated from the OIG’s approach in that CMS did not specifically exclude clinical laboratories as a group,” explained Tangorre. “That’s important, for at least two reasons. 

“First, under the Stark Law, a laboratory can participate in a value-based arrangement. In fact, CMS found that laboratories may play a beneficial role in the delivery of value-based healthcare,” she said. “It will be interesting to see how that plays out because value-based contracts are allowed under Stark, but laboratories may run afoul of the AKS depending on the type of arrangement they have. 

“It’s important to understand that the Stark Law is known as a strict interpretation or strict liability law,” she added. “That means you either comply with the safe harbors or you don’t. If you don’t, then you could suffer penalties. 

“On the other hand, the anti-kickback statute is a criminal law, which means guilt or innocence could turn on intent,” Tangorre noted. “If your lab can comply with the Stark statute, you will have to assess the risk of whether your lab is knowingly, willfully, or blatantly violating the AKS. 

Requests for OIG Opinions 

“For these reasons, we can expect that more clinical laboratories may seek OIG opinions on whether their value-based arrangements are protected under a safe harbor or whether they run afoul of the AKS for enforcement purposes,” predicted Tangorre. “This will be true, even if a lab requesting the opinion is complying with the Stark Law.” 

Another important issue for labs to understand is how the Stark rule could affect physician office labs and large group practices. “The new rule changed parts of the definition of the term ‘group practice’ under the Stark Law,” she said. 

“When a physician office has a laboratory, it must meet the exceptions for group practices and for in-office ancillary work,” she explained. “Meeting those exceptions will affect how profits can be distributed among the participating physicians.” 

In making her comments on these two rules, Tangorre addressed how the new rules apply to clinical laboratories participating in value-based or coordinated-care arrangements. 

“My advice to lab managers is that they meet with their lawyers before Jan. 19 to understand what they need to do to comply with these new final rules,” she commented. “For these meetings, labs should review their current contracting arrangements with health plans and physician groups and go over all innovative collaborative or technology arrangements they have or are negotiating with health plans and physician groups.”

Federal Government’s Changes to AKS, Stark Rules Are Intended to Encourage More Value-Based Care

TWO NEW FINAL RULES GOVERNING VALUE-BASED CARE AND CARE-COORDINATION ARRANGEMENTS are designed to accelerate the transformation of the healthcare system from one that pays providers to deliver volume under fee-for-service payments, to one that pays for value under capitated payment, according to the federal Department of Health and Human Services (HHS). 

By shifting away from volume-based payment, HHS seeks to give labs and other providers more flexibility in contracting, while protecting patients and federal healthcare programs from fraud, the agency said. 

On Nov. 20, the HHS Office of Inspector General (OIG) issued the final rule, “Revisions to the Safe Harbors Under the Anti-Kickback Statute and Civil Monetary Penalty Rules Regarding Beneficiary Inducements,” and the federal Centers for Medicare and Medicaid Services (CMS) issued the final rule, “Modernizing and Clarifying the Physician Self-Referral Regulations.” 

The new rules are part of what HHS calls its Regulatory Sprint to Coordinated Care. This is an effort to revise those federal regulations that could impede healthcare providers’ efforts to advance the transition to value-based care, HHS said. 

Danielle Holley Tangorre, a partner with the law firm of O’Connell and Aronowitz in Albany, N.Y., commented on how HHS set an effective date of Jan. 19 for both new rules. That date is a departure from an earlier plan to make these two rules effective in August, she added. 

In response to publication of the draft rules, healthcare provider groups submitted comments that urged HHS to issue the long-awaited final rules, in part, based on speculation that a Biden administration might be less likely to finalize the rules, Tangorre explained. 

The two new federal rules themselves, however, are not political in nature, she added. “These rules show a bipartisan approach to address problems in the healthcare system as it evolves to support value-base care,” she added. 

Coordination of Care Between Providers 

HEALTHCARE OFFICIALS WITHIN THE FEDERAL GOVERNMENT are working to implement two major goals. One goal is transition providers away from fee-for-service payment by using new payment models that reward providers for improving patient care and reducing the cost of care. 

The second goal is to encourage healthcare providers to keep patients healthy and to provide clinical care that helps prevent acute episodes, thus avoiding expensive hospitalizations. 

But to accomplish this second goal, hospitals, physicians, nursing homes, labs, and other providers need to better integrate their services. In turn, tighter integration of different providers creates the need for funding and reimbursement arrangements that encourage quality care, while discouraging the many types of fraud and abuse that are associated with fee-for-service payments to providers. 

The new revisions to the Stark Law and the Anti-Kickback Statute are intended to help providers achieve both goals described above. 

Contact Danielle Holley Tangorre at dhtangorre@oalaw.com or 518-694-5658. 



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