Defining Opportunity in the Sprint to Value: CMS and OIG Finalize Value-Based Definitions in Connection with New Stark Exceptions and Anti-Kickback Safe Harbors

On November 20, 2020, the Office of the Inspector General (“OIG”) and Centers for Medicare & Medicaid Services (“CMS”) issued final rules (the “Final Rules”) revising and expanding exceptions and safe harbors under the federal Stark Law (“Stark”) and Anti-Kickback Statute (“AKS”) as part of the Department of Health and Human Services’ “Regulatory Sprint to Coordinated Care.” Hall Render’s high-level overview of the Final Rules can be found here. The Final Rules provide much-needed protections for arrangements designed to promote care coordination, quality of care and cost containment and present new opportunities for parties across the health care continuum, including physicians and patients, to collaborate in value-based care.

In connection with the new value-based Stark exceptions and AKS safe harbors, CMS and OIG finalized a number of new definitions that will be critical to operationalizing the new value-based framework. This article will provide a reference table for the most important of the new value-based definitions, along with pertinent commentary, to assist in applying the exceptions and safe harbors. This article will be followed by additional Hall Render articles, which will further explore the requirements and application of the individual value-based exceptions and safe harbors.

It is important to note that nearly all of the changes included in the Final Rule will be effective on January 19, 2021; however, the effective date for certain modifications to the Stark group practice compensation distribution provisions was delayed until January 1, 2022.

Term	Definitions	Commentary
*Value-Based Enterprise or VBE* AKS: 42 CFR §1001.952(ee)(14)(viii) Stark: 42 CFR §411.351	Two or more VBE participants: (A) Collaborating to achieve at least one value-based purpose; (B) Each of which is a party to a value-based arrangement with the other or at least one other VBE participant in the value-based enterprise; (C) That have an accountable body or person responsible for financial and operational oversight of the value-based enterprise; and (D) That have a governing document that describes the value-based enterprise and how the VBE participants intend to achieve its value-based purpose(s).	AKS OIG intends for the definition of VBE to be broad and flexible in order to encompass a wide range of VBEs. VBEs can be as small as a VBE formed with a single value-based arrangement and/or comprised of only two VBE participants.
Stark CMS emphasized that its definition of VBE is similarly flexible. CMS noted that a VBE could be a distinct legal entity, such as an ACO, or an informal affiliation of two or more parties to a value-based arrangement. Regardless of size or structure, a VBE is essentially a network of participants that collaborate to achieve one or more value‑based purposes of the VBE.
*Value-Based Enterprise Participant or VBE Participant* AKS: 42 CFR §1001.952(ee)(14)(ix) Stark: 42 CFR §411.351	An individual or entity that engages in at least one value-based activity as part of a value-based enterprise, other than a patient acting in their capacity as a patient.	AKS The finalized definition provides that all types of individuals (other than patients) and entities may be VBE participants. There are, however, ineligible entity lists for certain activities under each of the value-based safe harbors.
Stark CMS did not exclude any specific persons, entities, or organizations from this definition. CMS will, however, continue to monitor to ensure that including all types of providers and suppliers does not create program integrity risk.
*Value-Based Arrangement* AKS: 42 CFR §1001.952(ee)(14)(vii) Stark: 42 CFR §411.351	An arrangement for the provision of at least one value‑based activity for a target patient population to which the only parties are: (A) The value-based enterprise and one or more of its VBE participants; or (B) VBE participants in the same value-based enterprise.	AKS Value-based arrangements are not de facto safe harbor protected. Rather, an arrangement that meets the definition of a “value-based arrangement” is eligible to seek protection in a value-based safe harbor.
Stark CMS clarified that all parties to the value‑based arrangement must be VBE participants in the same value-based enterprise.
*Value-Based Activity* AKS: 42 CFR §1001.952(14)(ee)(vi) Stark: 42 CFR §411.351	Any of the following activities, provided that the activity is reasonably designed to achieve at least one value-based purpose of the value-based enterprise: (A) The provision of an item or service; (B) The taking of an action; or (C) The refraining from taking an action; and (D) Does not include the making of a referral.	AKS OIG provided the following example of an activity that fits within this definition: Where a VBE participant offeror provides a type of health technology under a value-based arrangement for the recipient to use to track patient data in order to spot trends in health care needs and to improve patient care planning, both the provision of the health technology by the offeror and the use of the health technology by the recipient to track patient data would constitute value-based activities.
Stark CMS indicated that whether a value-based activity is reasonably designed to achieve at least one value-based purpose is a fact‑specific determination. The parties must have a good faith belief that the value-based activity will achieve or lead to the achievement of at least one value-based purpose of the VBE.
*Coordination and Management of Care* *(or Coordinating and Managing Care)* AKS only: 42 CFR §1001.952(ee)(14)(i)	The deliberate organization of patient care activities and sharing of information between two or more VBE participants, one or more VBE participants and the VBE, or one or more VBE participants and patients that is designed to achieve safer, more effective or more efficient care to improve the health outcomes of the target patient population.	AKS This final definition clarifies that the organization of patient care activities and sharing of information does not require actual and constant achievement of improved health outcomes. Rather, the organization and sharing must be designed to achieve safer, more effective or more efficient care to improve the health outcomes of the target patient population.
*Target Patient Population* AKS: 42 CFR §1001.952(ee)(14)(v) Stark: 42 CFR §411.351	An identified patient population selected by the VBE or its VBE participants using legitimate and verifiable criteria that: (A) Are set out in writing in advance of the commencement of the value-based arrangement; and (B) Further the value-based enterprise’s value-based purpose(s).	Both OIG and CMS noted that the “legitimate and verifiable criteria” standard is intended to allow greater flexibility in determining a target patient population. A target patient population could include an entire patient population or a specific zip code. This standard, however, does not extend to criteria designed to attract healthier or more adherent patients or to avoid complex or high-cost patients.
*Value-Based Purpose* AKS: 42 CFR §1001.952(ee)(14)(x) Stark: 42 CFR §411.351	(A) Coordinating and managing the care of a target patient population; (B) Improving the quality of care for a target patient population; (C) Appropriately reducing the costs to or growth in expenditures of payors without reducing the quality of care for a target patient population; or (D) Transitioning from health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for a target patient population.	AKS OIG acknowledged that transitioning from a volume to value-based purpose may require certain infrastructure changes that will take time. The commentary indicates that “during this phase-in period, the parties may have, as a value-based purpose, the purpose of transitioning from health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for a target patient population, and the parties may exchange, among other things, remuneration necessary to enable the VBE to transition to the assumption of full financial risk.”
*Substantial Downside Financial Risk* AKS only: 42 CFR §1001.952(ff)(9)(i)	(A) Financial risk equal to at least 30% of any loss, where losses and savings are calculated by comparing current expenditures for all items and services that are covered by the applicable payor and furnished to the target patient population to a bona fide benchmark designed to approximate the expected total cost of such care; (B) Financial risk equal to at least 20% of any loss, where: (1) Losses and savings are calculated by comparing current expenditures for all items and services furnished to the target patient population pursuant to a defined clinical episode of care that are covered by the applicable payor to a bona fide benchmark designed to approximate the expected total cost of such care for the defined clinical episode of care; and (2) The parties design the clinical episode of care to cover items and services collectively furnished in more than one care setting; or (C) The VBE receives from the payor a prospective, per patient payment that is: (1) Designed to produce material savings; and (2) Paid on a monthly, quarterly, or annual basis for a predefined set of items and services furnished to the target patient population, designed to approximate the expected total cost of expenditures for the predefined set of items and services.	AKS While VBEs must assume substantial downside financial risk for protection under this safe harbor, this does not preclude the VBE from assuming other types of risk from the payor (e.g., investment risk, contractual risk and clinical risk). If other such risks are assumed, however, each may result in an exchange of remuneration that implicates AKS and must be separately considered for compliance with the statute.
*Meaningful Share* AKS only: 42 CFR §1001.952(ff)(9)(ii)	The VBE participant: (A) Assumes two-sided risk for at least 5% of the losses and savings, as applicable, realized by the VBE pursuant to its assumption of substantial downside financial risk; or (B) Receives from the VBE a prospective, per-patient payment on a monthly, quarterly, or annual basis for a predefined set of items and services furnished to the target patient population, designed to approximate the expected total cost of expenditures for the predefined set of items and services, and does not claim payment in any form from the payor for the predefined items and services.	In the final AKS meaningful share definition, OIG reduced the proposed level of required financial risk from 8% to 5%.
*Meaningful Downside Financial Risk* Stark only: 42 CFR §411.356(aa)(2)(ix)	A physician is responsible to repay or forgo no less than 10% of the total value of the remuneration the physician receives under the value-based arrangement.	Stark CMS clarified that meaningful downside financial risk under Stark is not parallel to the AKS definition of substantial downside financial risk, nor to the AKS definition of meaningful share. Rather, meaningful downside financial risk under Stark is focused on the risk assumed by the individual physician under the value-based arrangement.
*Full Financial Risk* AKS: 42 CFR §1001.952(gg)(10)(i) Stark: 42 CFR §411.356(aa)(1)(vii)	The VBE is financially responsible on a prospective basis for the cost of all items and services covered by the applicable payor for each patient in the target patient population for a term of at least 1 year.	AKS Since a VBE is a collection of two or more VBE participants, some or all of the VBE participants can combine their respective risk to satisfy the definition of “full financial risk” as long as the VBE participants’ collective risk amounts to risk for all items and services covered by the applicable payor for the target patient population.
Stark Based on commenter input, CMS extended the pre-risk period from 6 to 12 months in order to allow parties sufficient time to work together in preparation for taking on full financial risk.
*Prospective Basis* AKS: 42 CFR §1001.952(gg)(10)(ii) Stark: 42 CFR §411.356(aa)(1)(vii)	The VBE has assumed financial responsibility for the cost of all items and services covered by the applicable payor prior to the provision of items and services to patients in the target patient population.

Term

Definitions

Commentary

Value-Based Enterprise or VBE

AKS:

42 CFR §1001.952(ee)(14)(viii)

Stark:

42 CFR §411.351

Two or more VBE participants:

(A) Collaborating to achieve at least one value-based purpose;

(B) Each of which is a party to a value-based arrangement with the other or at least one other VBE participant in the value-based enterprise;

(C) That have an accountable body or person responsible for financial and operational oversight of the value-based enterprise; and

(D) That have a governing document that describes the value-based enterprise and how the VBE participants intend to achieve its value-based purpose(s).

AKS

OIG intends for the definition of VBE to be broad and flexible in order to encompass a wide range of VBEs. VBEs can be as small as a VBE formed with a single value-based arrangement and/or comprised of only two VBE participants.

Stark

CMS emphasized that its definition of VBE is similarly flexible. CMS noted that a VBE could be a distinct legal entity, such as an ACO, or an informal affiliation of two or more parties to a value-based arrangement. Regardless of size or structure, a VBE is essentially a network of participants that collaborate to achieve one or more value‑based purposes of the VBE.

Value-Based Enterprise Participant or VBE Participant

AKS:

42 CFR §1001.952(ee)(14)(ix)

Stark:

42 CFR §411.351

An individual or entity that engages in at least one value-based activity as part of a value-based enterprise, other than a patient acting in their capacity as a patient.

AKS

The finalized definition provides that all types of individuals (other than patients) and entities may be VBE participants. There are, however, ineligible entity lists for certain activities under each of the value-based safe harbors.

Stark

CMS did not exclude any specific persons, entities, or organizations from this definition. CMS will, however, continue to monitor to ensure that including all types of providers and suppliers does not create program integrity risk.

Value-Based Arrangement

AKS:

42 CFR §1001.952(ee)(14)(vii)

Stark:

42 CFR §411.351

An arrangement for the provision of at least one value‑based activity for a target patient population to which the only parties are:

(A) The value-based enterprise and one or more of its VBE participants; or

(B) VBE participants in the same value-based enterprise.

AKS

Value-based arrangements are not de facto safe harbor protected. Rather, an arrangement that meets the definition of a “value-based arrangement” is eligible to seek protection in a value-based safe harbor.

Stark

CMS clarified that all parties to the value‑based arrangement must be VBE participants in the same value-based enterprise.

Value-Based Activity

AKS:

42 CFR §1001.952(14)(ee)(vi)

Stark:

42 CFR §411.351

Any of the following activities, provided that the activity is reasonably designed to achieve at least one value-based purpose of the value-based enterprise:

(A) The provision of an item or service;

(B) The taking of an action; or

(D) Does not include the making of a referral.

AKS

OIG provided the following example of an activity that fits within this definition: Where a VBE participant offeror provides a type of health technology under a value-based arrangement for the recipient to use to track patient data in order to spot trends in health care needs and to improve patient care planning, both the provision of the health technology by the offeror and the use of the health technology by the recipient to track patient data would constitute value-based activities.

Stark

CMS indicated that whether a value-based activity is reasonably designed to achieve at least one value-based purpose is a fact‑specific determination. The parties must have a good faith belief that the value-based activity will achieve or lead to the achievement of at least one value-based purpose of the VBE.

Coordination and Management of Care (or Coordinating and Managing Care)

AKS only:

42 CFR §1001.952(ee)(14)(i)

The deliberate organization of patient care activities and sharing of information between two or more VBE participants, one or more VBE participants and the VBE, or one or more VBE participants and patients that is designed to achieve safer, more effective or more efficient care to improve the health outcomes of the target patient population.

AKS

This final definition clarifies that the organization of patient care activities and sharing of information does not require actual and constant achievement of improved health outcomes. Rather, the organization and sharing must be designed to achieve safer, more effective or more efficient care to improve the health outcomes of the target patient population.

Target Patient Population

AKS:

42 CFR §1001.952(ee)(14)(v)

Stark:

42 CFR §411.351

An identified patient population selected by the VBE or its VBE participants using legitimate and verifiable criteria that:

(A) Are set out in writing in advance of the commencement of the value-based arrangement; and

(B) Further the value-based enterprise’s value-based purpose(s).

Both OIG and CMS noted that the “legitimate and verifiable criteria” standard is intended to allow greater flexibility in determining a target patient population. A target patient population could include an entire patient population or a specific zip code. This standard, however, does not extend to criteria designed to attract healthier or more adherent patients or to avoid complex or high-cost patients.

Value-Based Purpose

AKS:

42 CFR §1001.952(ee)(14)(x)

Stark:

42 CFR §411.351

(A) Coordinating and managing the care of a target patient population;

(B) Improving the quality of care for a target patient population;

(C) Appropriately reducing the costs to or growth in expenditures of payors without reducing the quality of care for a target patient population; or

(D) Transitioning from health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for a target patient population.

AKS

OIG acknowledged that transitioning from a volume to value-based purpose may require certain infrastructure changes that will take time. The commentary indicates that “during this phase-in period, the parties may have, as a value-based purpose, the purpose of transitioning from health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for a target patient population, and the parties may exchange, among other things, remuneration necessary to enable the VBE to transition to the assumption of full financial risk.”

Substantial Downside Financial Risk

AKS only:

42 CFR §1001.952(ff)(9)(i)

(A) Financial risk equal to at least 30% of any loss, where losses and savings are calculated by comparing current expenditures for all items and services that are covered by the applicable payor and furnished to the target patient population to a bona fide benchmark designed to approximate the expected total cost of such care;

(B) Financial risk equal to at least 20% of any loss, where:

(1) Losses and savings are calculated by comparing current expenditures for all items and services furnished to the target patient population pursuant to a defined clinical episode of care that are covered by the applicable payor to a bona fide benchmark designed to approximate the expected total cost of such care for the defined clinical episode of care; and

(2) The parties design the clinical episode of care to cover items and services collectively furnished in more than one care setting; or

(1) Designed to produce material savings; and

(2) Paid on a monthly, quarterly, or annual basis for a predefined set of items and services furnished to the target patient population, designed to approximate the expected total cost of expenditures for the predefined set of items and services.

AKS

While VBEs must assume substantial downside financial risk for protection under this safe harbor, this does not preclude the VBE from assuming other types of risk from the payor (e.g., investment risk, contractual risk and clinical risk). If other such risks are assumed, however, each may result in an exchange of remuneration that implicates AKS and must be separately considered for compliance with the statute.

Meaningful Share

AKS only:

42 CFR §1001.952(ff)(9)(ii)

The VBE participant:

(A) Assumes two-sided risk for at least 5% of the losses and savings, as applicable, realized by the VBE pursuant to its assumption of substantial downside financial risk; or

(B) Receives from the VBE a prospective, per-patient payment on a monthly, quarterly, or annual basis for a predefined set of items and services furnished to the target patient population, designed to approximate the expected total cost of expenditures for the predefined set of items and services, and does not claim payment in any form from the payor for the predefined items and services.

In the final AKS meaningful share definition, OIG reduced the proposed level of required financial risk from 8% to 5%.

Meaningful Downside Financial Risk

Stark only:

42 CFR §411.356(aa)(2)(ix)

A physician is responsible to repay or forgo no less than 10% of the total value of the remuneration the physician receives under the value-based arrangement.

Stark

CMS clarified that meaningful downside financial risk under Stark is not parallel to the AKS definition of substantial downside financial risk, nor to the AKS definition of meaningful share. Rather, meaningful downside financial risk under Stark is focused on the risk assumed by the individual physician under the value-based arrangement.

Full Financial Risk

AKS:

42 CFR §1001.952(gg)(10)(i)

Stark:

42 CFR §411.356(aa)(1)(vii)

The VBE is financially responsible on a prospective basis for the cost of all items and services covered by the applicable payor for each patient in the target patient population for a term of at least 1 year.

AKS

Since a VBE is a collection of two or more VBE participants, some or all of the VBE participants can combine their respective risk to satisfy the definition of “full financial risk” as long as the VBE participants’ collective risk amounts to risk for all items and services covered by the applicable payor for the target patient population.

Stark

Based on commenter input, CMS extended the pre-risk period from 6 to 12 months in order to allow parties sufficient time to work together in preparation for taking on full financial risk.

Prospective Basis

AKS:

42 CFR §1001.952(gg)(10)(ii)

Stark:

42 CFR §411.356(aa)(1)(vii)

The VBE has assumed financial responsibility for the cost of all items and services covered by the applicable payor prior to the provision of items and services to patients in the target patient population.

Practical Takeaways

These definitions will be integral to applying the new Stark exceptions and AKS safe harbors effective January 19, 2021. CMS and OIG have emphasized, however, that meeting the value-based definitions should be viewed only as a gateway to Stark and AKS protections; an arrangement that meets all of the value-based enterprise definitions must still comply with all other requirements of the applicable exception or safe harbor.
The final definitions are intended to be broad enough to allow flexibility for individuals and entities wishing to enter into value-based arrangements. If Stark or AKS protection is desired, however, the parties must exercise ongoing diligence in ensuring that each arrangement is conducted in a manner that continually meets the relevant regulatory requirements.
The commentary for both Final Rules emphasizes that the value-based safe harbors, exceptions and applicable definitions are not intended to protect activities that inappropriately influence clinical decision-making, induce restrictions of medically necessary care or lead to targeting particularly lucrative patients or avoiding high-cost or unprofitable patients.
Each value-based exception and safe harbor includes additional definitions integral to the application of the individual exception or safe harbor. The definitions in this alert are more broadly applicable and are intended to provide a basis for understanding the new value-based exceptions and safe harbors as a whole.

The Final Rules demonstrate the ongoing commitment of CMS and OIG to transitioning health care reimbursement from volume to value. Effective January 19, 2021, the Final Rules can be relied upon to protect properly structured arrangements. As health care organizations evaluate current value-based arrangements and consider the opportunities now available for structuring innovative new arrangements, they should consider the definitions discussed above and the new-value based exceptions and safe harbors in their planning processes.

If you have any questions or would like additional information about this topic, please contact:

Jennifer Skeels at (317) 977-1497 or jskeels@wp.hallrender.com;
Gregg Wallander at (317) 977-1431 or gwally@wp.hallrender.com;
Joe Wolfe at (414) 721-0482 or jwolfe@wp.hallrender.com;
Keith Dugger at (214) 615-2051 or kdugger@wp.hallrender.com;
Alyssa James at (317) 429-3640 or ajames@wp.hallrender.com;
Brian Betner at (317) 977-1466 or bbetner@wp.hallrender.com;
Amy Mackin at (919) 447-4963 or amackin@wp.hallrender.com;
Megan Culp at (317) 429-3644 or mculp@wp.hallrender.com; or
Your primary Hall Render contact.

Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer specific questions that would be legal advice.