Earlier this month, as part of its Regulatory Sprint to Coordinated Care, the Department of Health and Human Services (HHS) published highly anticipated final rules to modernize and reform the regulations that interpret the federal Anti-Kickback Statute (AKS) and the Physician Self-Referral Law (Stark Law). Like so many other health attorneys, I have been poring over the details of the lengthy and complex HHS rules to assess the impact on the medtech industry.
A product of close coordination between the Office of Inspector General (OIG) and the Centers for Medicare & Medicaid Services (CMS); input from the greatest legal minds across industries; and bipartisan support, these final rules represent sensible, historic changes to an outdated framework and a starting point for delivering on the agency’s promise to “provide greater flexibility for healthcare providers to participate in value-based arrangements and to provide coordinated care for patients[, and] . . . ease unnecessary compliance burden[s] . . ., while maintaining strong safeguards to protect patients and programs from fraud and abuse.”
Changes to the AKS Safe Harbors
The changes are expansive, encompassing (i) three new “tiered” AKS safe harbors that offer increasing flexibility with increasing financial risk for innovative value-based health care arrangements, (ii) a new AKS safe harbor for the donation of cybersecurity technology and services, (iii) three additional new AKS safe harbors, including one related to patient engagement tools and supports, and (iv) a number of changes intended to ease compliance with existing AKS safe harbors, including new protection for certain outcomes-based payments and part-time arrangements under the modified AKS safe harbor for personal services and management contracts.
Notably, in the AKS final rule, OIG chose to list entities ineligible to use each value-based safe harbor, including (i) pharmaceutical manufacturers, distributors, and wholesalers, (ii) pharmacy benefit managers, (iii) laboratory companies, (iv) pharmacies that primarily compound drugs or primarily dispense compounded drugs, (v) manufacturers of devices or medical supplies, (vi) entities or individuals that sell or rent durable medical equipment, prosthetics, orthotics and supplies (DMEPOS), and (vii) medical device distributors and wholesalers. Importantly, OIG carved out a special pathway for medical device manufacturers and DMEPOS companies to participate as “limited technology participants” in protected care coordination arrangements that involve digital health technology, provided that certain enumerated requirements are met. Similarly, OIG created a separate pathway for certain medical device manufacturers to use the patient engagement and support safe harbor.
Reflection on the Changes to the AKS and the Stark Law
Given that medtech companies are on the front lines of care coordination and management –indeed, the crucial role currently played by medtech innovators in the fight against COVID-19 has only made this more readily apparent— the fact that device and DMEPOS manufacturers cannot use all of the new value-based safe harbors or the new outcomes-based payments safe harbor is disappointing. Nevertheless, there are many “wins” to glean from the value-based final rules that would not have been possible without the brilliant work of AdvaMed’s members—wins for America’s patients and caregivers who experience firsthand the powerful lifesaving and life enhancing solutions innovative medtech delivers everyday.
- First, on a broader level, the release of the value-based final framework represents an important advance in our health care delivery and payment system: abandoning volume-based payment models in favor of those that focus on paying for quality, outcomes, and efficiencies. Since even before the launch of HHS’ Regulatory Sprint to Coordinated Care, AdvaMed has consistently advocated for modernization of the AKS to facilitate this transition.Thanks in large part to those efforts, regulators have responded.
- Second, on a granular level, unlike many other entities ineligible to use each AKS value-based safe harbor (including pharmaceutical manufacturers and physician-owned distributors), manufacturers of traditional devices and DMEPOS companies have limited access to safe harbor protection under the new value-based framework through digital health technology-related pathways.
This result would not have been possible without the numerous real-life examples provided by our members demonstrating how medtech manufacturers are health technology companies, which OIG and CMS described in the proposed rules as integral to value-based health care.
- Third, most medical technology companies are small entities, developing bold innovative technologies premised on substantial data, science and study. But it can be challenging for small companies to access decisionmakers. These companies may find the modernized warranty safe harbor especially beneficial. This safe harbor expands access and opportunities: by leveraging their data and science to structure clinical warranties, small companies can devise new business models and accelerate access to patients and providers.
- Last, in the preamble to the AKS final rule, as well as in responses to submitted comments, OIG repeatedly acknowledged that a value-based health care arrangement outside the scope of one of the new value-based safe harbors does not automatically render it per se violative of the AKS. By reviewing the finalized conditions to the new AKS safe harbors, Value Based Enterprise participants have an opportunity to determine what, if any, changes can be made to reduce the risk profile of a value-based arrangement.
For all the above reasons and more, I’m immensely proud of the progress that AdvaMed’s members have accomplished to date, and I remain awed by tremendous potential of medtech innovation and optimistic about the potential for continued progress.
Looking Ahead to Continued Reform
As President-elect Biden maps out his health care policy agenda, additional reforms to the AKS should be at the top of the list. Technology, data analytics and innovation advance at unprecedented rates and medtech companies are uniquely positioned to partner with providers to achieve the full potential of value-based health care. Medtech should be fully included in the new value-based framework. America’s patients deserve no less.
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