AHLA's Speaking of Health Law

Impact of Recent Changes to the Stark Law

April 03, 2020 AHLA Podcasts
AHLA's Speaking of Health Law
Impact of Recent Changes to the Stark Law
Show Notes Transcript

Craig Hunter, Senior Vice President, Coker Group, talks to Julie Kass, Shareholder, Baker Donelson, and Justin Chamblee, Senior Vice President, Coker Group, about their presentations at AHLA’s Physicians and Hospitals Law Institute held February 10-12, 2020 in Phoenix, AZ. The podcast also discusses the proposed changes to the Stark Law, including its effect on determination of fair market value, how entities have reacted in response to the changes, and implementing a value-based strategy. Sponsored by Coker Group.

To learn more about AHLA and the educational resources available to the health law community, visit americanhealthlaw.org.

Speaker 1:

Support for A H L A and the following message comes from KR Group, a national healthcare advisory firm working with hospitals and physician groups. KR group assists, healthcare providers and their pursuit for a sound business model and an enhanced patient experience. For more information, visit coca group.com.

Speaker 2:

Welcome to a HLA speaking of Health Law podcast series, and I'm Craig Hunter, your host for today's podcast, focusing on ALA's Physicians and Hospital Law Institute conference, which was recently held in Phoenix, Arizona. I'm excited to have with me today. Two of the speakers from the conference. Julie Cass, shareholder with Baker Donaldson from both their DC and Baltimore offices. Julie is co-chair of Baker Donaldson's Health Law Group and focuses her practice on assisting hospitals, health systems, and other healthcare providers with advice on key healthcare regulatory issues. Julie's session was titled, modernizing and Clarifying the Physician's Self-Referral Regulations. Big Changes Ahead. And also with us is Justin Chamblee, senior Vice President with Coker Group, a National National Healthcare Advisory firm, and Justin is based in their Atlanta office. Justin provides strategic and financial counsel to healthcare organizations, physicians practices, and healthcare attorneys throughout the country, dealing primarily with physician compensation and hospital physician transactions. Justin's session topic was Beyond Buzzwords, practical, legal, and Financial Considerations for Implementing Value-Based Strategies. Julian, Justin, thank you for taking time with us today.

Speaker 3:

Thank you. Thank

Speaker 2:

You. Okay, Julie, let's start with you as the program chair for the conference. How did the program committee organize the conference this year?

Speaker 3:

So, uh, we start our conference planning, um, almost a year ahead, but not quite. And we try to get topics that are gonna be cutting edge and of interest to both people in hospital settings as well as physician settings, uh, and how those two kinds of provider types interact with one another. The conference this year covered everything from fraud and abuse issues to payment issues, some coverage issues, what the DOJ enforcement is looking like, uh, a lot of stuff on fair market value and how to compensate physicians both internally in their own practices and how hospital and physician relationships are working, as well as things, uh, dealing with h i t issues. So it's a full panoply of issues to, you know, have a very broad reach and, and we look for that kind of broad breath each time we put this conference together.

Speaker 2:

Well, thanks, Julie. It's, it's always one of my favorite conferences. So I appreciate both of you taking some time with us today. Julie, your session was on physician self-referral. What are the potential changes that are likely to or going to occur, uh, that we need to be aware of?

Speaker 3:

So, um, as most people know, there is a sprint to coordinated care that HHS has put out, and in the context of that, both CMS and the OIG put out major regulations that they have proposed in doing two things. Uh, the C and OIG regulation, CMS and OIG regulations both dealt with value-based arrangements, which is some of what Justin was talking about in his session. But the, and, and those are really to try and coordinate care and take the general framework of our fraud and abuse laws that is, are seen as stumbling blocks to really the advancement of value-based arrangements and remove those stumbling blocks. Um, but Stark and CMS had a whole separate part of its regulation in the Stark regs dealing with, uh, modernizing and clarifying what's already in the regulations for all of those kinds of arrangements that are currently in place today, trying to modernize those, um, and trying to create some flexibility and clarity and guidance. And so because these rules were so big, uh, Lisa Wilson from cms, and I limited our discussion to those things that were not related to value-based arrangements and really focused on here's what you're doing today in your traditional financial arrangements among designated health service entities and physicians, and here's how some of these new rules might modernize stark in ways that could take things that would otherwise be seen as non-compliant, uh, but really weren't abusive relationships and take that non-compliance away in the regulations itself. CMS reported that there have been 1100 self-disclosure for non-compliant stark relationships since 2010, and yet almost none of them have actually raised any fraud or abuse concerns, but almost all of them have been non-compliant under Stark. And so that's what they're really trying to deal with in this new rule, and that's what Lisa and I were discussing.

Speaker 2:

Very good. I know you also addressed some terminology during your session. Is there any new or clarifying information about some of the terms that you feel would be important for our audience today to,

Speaker 4:

To hear?

Speaker 3:

So, most of the changes to the regulations is sort of fashioned in changing terminology and being able to see terminology in a way that, um, that really affects how the stark rules operate. So, um, for example, they've changed or proposed to change the definition of designated health service, um, when it refers to services furnished to inpatients by a hospital, um, a lot of issues occur because there is some inpatient service, which is a designated health service provided by one of the physicians of the care team. Um, and that is, there's a non-compliant relationship with that physician, but yet the entire D r G becomes at risk because of that, even if that physician's service has no impact on the amount of reimbursement the hospital would've gotten. So for example, if you have an elderly patient that broke their hip, their attending physician is an orthopedist, they had hip replacement surgery, but while they were in the hospital, there was fear that they were getting pneumonia from being in a bed. And so they call in a pulmonologist to do a consult, they look at the patient, they order an x-ray, uh, it doesn't change the D r G at all. They find that they can treat it with medication and the issue becomes a non-compliant relationship with that pulmonologist. What do you do? Does that affect everything? And the change in the definition they would make would say that wouldn't be a DHS service because it didn't change the D R g. So very helpful if that is actually, um, finalized. The three big changes that they really made in terms of definitions were to the definitions of volume and value, commercial reasonableness and fair market value. So for volume and value, they made changes so that, um, it was clear what volume and value meant and how to use it for fair market value and commercial reasonableness. I, I'm a lawyer, I'm not a evaluator, so I usually look to valuation folks to tell me what they mean. And my understanding is that the rules the way they are today are really very specific to healthcare, but they're not the generalized definitions that are used in the world outside of healthcare, and that's what they're trying to change it to. But Justin, maybe you as evaluator could add more to that, um, piece of this.

Speaker 4:

Yeah, sure. Julie, I, I, I think you, you captured it quite well, but I, I, I do think the, the changes are impactful and, uh, as with any change, uh, change creates uncertainty and, and thus, uh, in the valuation community, especially the healthcare valuation community, I think, uh, as these rules get finalized, we will be, uh, working to really determine how much it affects, uh, what we've done historically. But as, as you noted, uh, some of the, the, the key changes that were made are first and foremost the idea of separating the volume and value standard from the definition of fair market value. So the current definition of fair market value, uh, has volume and value built into it. And so, uh, that is being pulled out and, and, and being defined separately. The other key change is the separation and the, the separate defined definitions tied to fair market value and, uh, general market value and, and, uh, really trying to better correlate, uh, the definitions with how the overall industry defines market value. Uh, really how, how the, the commentary has has noted it is the framework value definition is really tied to a hypothetical transaction where the general market value is, is, uh, tied to an actual transaction. I think the term market value, which is really where a lot of the commentary focused, is a bit of a nebulous term that can take on a number of different meanings in the industry. And I think that's one of the, the key things that will be interesting to see how it plays out is, is how that that idea of market value, uh, changes and, and, uh, relates to what's going on in the healthcare community. Shifting gears for a moment to look at commercial reasonableness, I think the, the key, uh, change that is notable here is, is the clarification that the concept of profitability, um, or lack of profitability does not necessarily, uh, deem a arrangement to be commercially unreasonable. And, and that has been a core focus in the industry, especially with, uh, uh, employed physicians and the losses that may be sustained in the employed medical groups. Uh, the, the commentary specifically provided, uh, the idea that profitability and commercial reasonableness do not necessarily have to go hand in hand. And, and I think that is another key change that, uh, should help the industry, especially as we're pursuing, uh, meeting the needs of the community, pursuing value-based reimbursement initiatives, et cetera.

Speaker 2:

That's very good. Uh, Julie, uh, what are the biggest takeaways related to recalibrating the scope and application of the regulations and clarifying proposals?

Speaker 3:

So I think there's, um, some key takeaways that are overall arching for both the value-based and the, the clarification in the rules. What CMS makes clear is that, and we all know this, that the stark rules are an a payment rule, and when you violate the stark rules and have a non-compliant relationship, it's an overpayment, whereas the, the kickback statute is really the criminal statute. And so they have divided these so that for the stark purposes, they say, look, we're a payment rule, so we're gonna deal with these as payment issues and then use the kickback statute as it has been as a stop gap. Now, they've always said, both CMS and the oig, that these are separate rules and you need to meet them, but I think a lot of us have looked at it and said, well, if it's not, uh, fraudulent or abusive under one, how can you say it's fraudulent or abusive under the other, this new, um, recalibration where they're looking at these and saying, look, it is separate and we intend them to be separate and we're going to make life easier under the Stark regulations, but beware that the kickback statute is still there is something that we should all pay attention to. Um, they also took out from some of the stark exceptions, the need to qualify for a kickback safe harbor, or not to qualify for it, but not to violate the kickback statute. And a lot of people had argued that Stark is a strict liability statute, and thus if you add as any one of the criteria for a stark exception, that it couldn't violate the kickback statute where the kickback statute is intent-based, that you were putting intent into Stark. And so they have stripped that, but they have said, beware, you need to meet both. And I think if you are looking at the value-based stuff, it will be interesting because the, while they have different levels of risk that you can enter into, and there are things that you will be able to meet a stark exception and be very comfortable, and that will be good, but you might not have a parallel safe harbor or be able to meet a safe harbor on the kickback side. And so I've been telling folks it may be when these get finalized that you're gonna have to get comfortable being uncomfortable, comfortable that you're meeting Stark, but then really doing that case by case analysis on the kickback side.

Speaker 2:

Yeah, and I guess that's kind of the, the big question then both you and Justin have kind of alluded to it, when, when it's finalized, when, when, from an attorney's perspective, when do you think these changes will be finalized so that we can begin to use them?

Speaker 3:

So, uh, it's anybody's guess really, uh, when they'll be finalized. I know that they're working steadily towards them. Certainly the administration is very interested in getting them out, um, and having this coordinated sprint. I think one of the key signs is, um, once there's a new administration and a new Congress, um, anything that was finalized 60 days or less than a new legislative session, those rules can be rescinded by the new Congress. And so most administrations want to get their rules finalized before that happens. There's no specific date because it's legislative days and things, so it's hard to tell exactly what the date would be, but certainly they're trying to get it done before that. I have heard about it around August as a date, but, um, it's, it's anyone's guess when they'll really come out and with the current coronavirus, um, public health emergency, I think it may take longer than we might have otherwise expected.

Speaker 2:

Yeah, I think you're probably right about that. Okay. Let's shift gears a little bit, Justin, to your session, which focused on the, uh, uh, the actual implementation of value-based strategies. Uh, what were the key takeaways from your presentation, Justin?

Speaker 4:

Yeah, Greg, we, we touched on a lot of different things, but I think the big picture is the need for a comprehensive of strategy. Uh, we, we spoke a lot about all the different activity in the value-based space. Uh, and, and I think what we can all agree upon is it can quickly become overwhelming. And, and what we see in, in our actual work is a lot of organizations diving into value-based activities solely because they feel the need to do something, because that's, that's what all the talk is in the, the industry. And in reality, we see most organizations needing to step back and, and, and really develop a comprehensive strategy to first look at what makes sense relative to the market where they're in. Meaning certain markets are much more aggressive than others relative to, right? What, what is going on from a value-based standpoint? Uh, number two, they, they need to look at what they need to do in response to value-based activities that they're being forced into, such as MIPS or, uh, you know, perhaps an apm. And then thirdly, they need to look at how they mobilize their provider base to drive the strategies. And, and on this last point, uh, which is where I spend a lot of, of my time, it's key. And what we've seen in the industry really over the last decade is there's been tons of, uh, provider consolidation, which, uh, has created aligned medical groups, but from our vantage point alignment does not necessarily equal integrated and, and integration. And I'm not, not necessarily talking about the true definition of clinical, clinical integration here, I'm talking more about the functional integration of the medical group, and I see that being key to, to organizations thriving in this value-based space, meaning that the provider groups need to have a clear purpose and, and be working together to achieve that purpose.

Speaker 2:

Yeah, and it actually does tie specifically back to the strategy component. So I, I appreciate that. When you start looking at connecting concepts with reality though, where do these organizations typically struggle the most in implementing their value-based strategy?

Speaker 4:

Yeah, so I, I, I think the struggles really, uh, uh, are, are all across the board, but, uh, focusing where I spend a lot of my time, and that is on provider compensation strategy and valuation, I see a lot of, of struggle here. Uh, where, where the struggle exists is really incorporating those value-based components into the compensation model, which, um, at best is, is challenging. And, uh, I like to, to say it follows the 80 20 rule wherein when you're, when you're designing a compensation strategy, you'll spend at least 80% of your time focusing on no more than 20% of the compensation model, meaning that value-based component. Uh, and that just speaks to the complexity involved in this. Uh, you know, when you're deal dealing with the volume-based component, it's, it's not simple by any means, but it's a lot cleaner because you're, you're dealing with one driver, ie. Productivity, whether that's measured in work, VUS or professional collections, whatever it may be. And when you get into the, the value-based space, they're all whole host of, of metrics and measures that you could be focusing on. And so the core struggles really involve, among other things, connecting the measures to the overall organizational strategy, getting the data, uh, getting provider buy-in, which is, is quite challenging. And then the economic considerations, meaning how does this affect how much we're paying physicians, uh, do we have the funds to afford? So should this be a increase in compensation or a reallocation of existing compensation? All of those things, um, come into play. And, and, and then the, the struggles also, which, uh, Julie, I, I'd definitely be interested in you commenting on this, is how you connect this to the le legal ramifications of all of the, the value-based components in play, meaning the existing waivers and laws, as well as the contemplated waivers that, that, uh, are in play.

Speaker 3:

Yeah, well, certainly under Stark, which is where this comes up, existing waivers for things like the shared savings aco, um, help with those, because if you're within those parameters, the stark rule doesn't apply in terms of, um, new models where there might not be explicit waivers, but you're gonna need to meet stark exception. The new rules that CMS is proposing actually go and change the group practice definition to allow dollars that come in through a value-based arrangement that meets one of the criteria and one of the exceptions to be distributed to physicians directly and not to worry about the referrals or the generating business part. So that will be very helpful to these value-based arrangements if it's finalized. Um, you know, group practices are always, uh, difficult in how they distribute designated health services revenues. Um, in addition to coming up with the exception for value-based arrangements, they did in this one area actually pull back a little bit in the clarifying part of the regulations, uh, about how you distribute designated health service revenues for group practices. Um, saying that, while it may not be clear in their current regulations, they have always meant that you have to distribute all of the DHS revenue in the same way. Um, and, and so folks previously had been distributing potentially different lines of DHS revenue, x-ray to one group of physicians, right lab to a different group of physicians, and now they're saying all of that DHS revenue has to be distributed to all of the physicians, or at least a group of five physicians has to take all of their DHS revenue and distribute it all in the same way. So that is one of the places that they've pulled back that Justin May be a, a new challenge for you as you're coming up with these comp systems?

Speaker 4:

Absolutely. It, it, uh, trying, trying to figure out how the waivers work into the overall economic arrangements, I think will be a, a big challenge.

Speaker 2:

Very good. And Justin, I guess one last question for you. Uh, looking forward, how is the industry being impacted by the, the concepts that are presented in your session?

Speaker 4:

Yeah, I, I, I think it, it goes without saying that value-based reimbursement is here to stay. Um, I think the forms of value-based reimbursement may continue to morph, which is what we've really seen over the last, uh, uh, five to 10 years, meaning, uh, the, the, the government, which, uh, is, it's so interesting. The government is at the forefront of pushing us towards value-based reimbursement, which is not always the case in terms of the, the government being out, uh, um, and, and in innovating like they are in this instance. But I think the government continues to, uh, tweak what they're trying to do and see what, uh, is effective. And I think that will continue to, to occur, and we will continue to see the balancing with respect to volume-based reimbursement, trying to find that happy medium between the two. Meaning where do we land between volume-based and value-based care or reimbursement? Sure. So if organizations put their head in the sand and do nothing, I think they will eventually fall behind and suffer from it. So, so everybody has to be reacting and responding to this. And ultimately, organizations, uh, need to take stock of their specific market, look at the overall industry and develop a plan to evolve. But looking at this, I, I guess a little bit broader, the changes, uh, are affecting every aspect of healthcare providers. Uh, when I say providers in this instance, I'm talking about both physicians, hospitals, other providers of healthcare are having to rethink how they deliver care. So how do they have to tweak their operations to, um, to, to, to deliver care that that responds to value-based reimbursement versus solely being focused on volume. Payers are continuing to shift risk to providers and patients, uh, uh, looking at new, new forms of, of reimbursement models that they extend out to, to healthcare providers. Uh, patients are having to react to this shift in risk. Uh, and, and you know, what, what's so interesting is they're having to make informed decisions as to where they get care with seemingly still very limited data, meaning we're pushing towards value-based reimbursement, but the ability for consumers or patients to make informed choices relative to quality of care as well as cost of care is still very limited. And then, uh, I'm sure Julie would agree the changes are affecting healthcare professionals like, like us who, who focus, uh, in a consultative capacity in the valuation or the he the healthcare space. Um, you know, we're continuing to try to stay up to speed with respect to what's going on in the market, how it affects the historical, um, advice we've given clients and continuing to, to, uh, help that advice evolve so that, uh, clients are well informed relative to, to how they go about delivering their services in the future.

Speaker 2:

Yeah. That's great. I guess finally, um, either of you, I really appreciate your time. Do you have any closing comments or thoughts, uh, that we probably should have covered from either the overall conference in general or either of your sessions, but we didn't today?

Speaker 3:

I, I would just say in closing that things are pretty complex. They may get a little bit more complex before they become, um, more routine with everybody understanding how to do value-based arrangements and how to navigate stark in the kickback statute. But I think, uh, with these new regulations, at least that we were talking about in my session, you're we're moving in the right direction to really take away these stumbling blocks that will hopefully get us, um, on a path to more coordinated care and have folks able to experiment more in, in how to change things in our healthcare system.

Speaker 4:

I agree completely. Julie,

Speaker 2:

Well, Julie, Cass, um, with, uh, baker Donaldson and Justin Shamley with Coca Group, we really appreciate you taking time today to join us on the ALA's speaking of Health Law podcast. Listen to this and others speaking of Health law podcast at HLAs website, health leaders.org under the podcast tab, and we'll see you next time. Thank you.