Sutter Health Issues Comment on Medicare Program: Modernizing, Clarifying Physician Self-Referral Regulations
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On behalf of
Who We Are
Healthcare Delivery in
Critically, however, under either of these models, providers are permitted to accept risk only for the services for which the providers are licensed. In other words, physicians may accept financial risk only for professional services and hospitals may accept risk only for institutional services. This is because under
Proposed Value-Based Exceptions
Full Financial Risk
CMS proposes an exception that permits certain arrangements if the value based enterprise is at "full financial risk," defined to mean the value-based enterprise is financially responsible on a prospective basis for the cost of "all patient care items and services" covered by the applicable payer for each patient in the target patient population for a specified period of time.
However, it might not be possible to satisfy this standard in
A secondary issue in this definition is the phrase "all patient care" which potentially forecloses the possibility of excluding certain high-cost or specialty services. It is very common, even in the most advanced value-based arrangements, for provider-organized value-based arrangements to forgo financial responsibility for selected services (e.g., organ transplant or pharmacy benefits). In other words, the "full financial risk" exception unreasonably limits the range of "at risk" arrangements that it protects.
As an alternative to the current wording,
If a value-based enterprise is collectively at risk for substantially all services furnished to the target patient population, there still would be little risk of program or patient abuse. If a hospital is at risk for hospital services, it has an enormous stake in a value-based enterprise, as all of its potential revenue is at risk. There is no need to have the hospital take risk for services furnished by professionals. Also, being at risk for 75% or more of services should be viewed as "substantially all" by CMS, consistent with prior interpretations, such as used by CMS in the definition of group practice at 42 CFR Sec. 411.352(d) and (h).
In addition, an arrangement should qualify for the full risk exception if the value-based enterprise or its participants are at full financial risk for the items and services to which the protected remuneration relates.
CMS should consider adding a value-based risk-sharing exception comparable in scope to the current risk-sharing exception, such as:
"Compensation pursuant to a risk-sharing exception (including but not limited to, withholds, bonuses, and risk pools), between a value-based enterprise at full financial risk (either directly or indirectly, through its participants, acting collectively) and a physician (either directly or indirectly through a subcontractor) in connection with items or services provided to patients who are part of a target patient populations."
Meaningful Downside Risk
Value-Based Arrangements
CMS should finalize the "Value-Based Arrangements" (no financial risk required) exception as proposed. Maintaining the option for physicians and other providers to begin participating in value-based care without accepting significant financial risk is essential to spur the shift to value-based payment models across the spectrum of hospitals and communities.
- The exception should not be limited to nonmonetary remuneration. It would preclude commonplace structures, such as financial incentives to adhere to care protocols and shared savings models.
- lt should not require 15% (or other) cost sharing by valued-based arrangement participants. The requirement would preclude a host of innovative value-based arrangements and take a disproportionate toll on small and rural physician practices, which are a key component in successfully improving care across patient populations.
- It should not require that "performance or quality standards must be designed to drive meaningful improvements in physician performance, quality, health outcomes, or efficiencies in care delivery." This alternative presents too ambiguous a standard, not consistent with the bright line test for which the agency strives.
Regulatory Simplification
We understand that CMS hopes to lower regulatory barriers while also encouraging entities to take on greater levels of financial risk, but it is uncertain whether the rule will accomplish those goals. The Proposed Rule makes great strides in fulfilling CMS's longstanding goal of giving stakeholders bright-line rules. However, we are concerned that the new exceptions for value-based arrangements are complicated and may be difficult to comply with. Further, they may create new opportunities for technical violations of the Stark Law.
ln place of the typical requirements related to fair market value, the prohibition on payment based on the volume and value of referrals, or commercial reasonableness, CMS has introduced financial risk requirements and additional contracting requirements. While some health care systems immediately may be able to take advantage of new exceptions introduced under the Proposed Rule, many others will not find them useful in the short-term as their physician partners and other entities may not be willing or able to share in financial risk to the degree required by the CMS proposals. For example, a value-based enterprise (VBE) will need to create a document that describes the VBE and how the participants intend to achieve its value-based purpose.
Generally, this requirement does not appear to be burdensome in that most valuebased entities or parties entering into value-based arrangements will generally document their arrangement in writing either through a contract or operating agreement. Yet there are some value-based arrangements between parties that are not always documented, such as the granting of data analytics tools within a network. Assuming that these regulations are finalized as proposed, the writing requirements will increase the risk of inadvertent noncompliance. Also, for many arrangements within a clinically integrated network, operating costs will continue to increase as all arrangements will need to meet the strict documentation requirements set forth by CMS.
Another area of concern is the proposed requirement to monitor value-based activities and terminate the arrangement within 60 days if the goals of the arrangement will not be achieved. Efforts to improve quality and value do not always show immediate or sustained improvements, but may nevertheless be beneficial in the long term. For example, many Medicare Shared Savings ACOs were not immediately successful, but after four to five years of practice and experimentation were able to improve quality while reducing costs. As written, the proposed rules imply that an arrangement could move in and out of compliance with the exception as performance changes from month to month, and could lead to premature termination of arrangements that would have been successful if given more time. CMS should permit VBEs to determine the appropriate monitoring schedule and any time limits for achieving a value-based purpose based on what is reasonable for the scope and complexity of a value-based arrangement.
CMS should simplify the value-based safe harbors and exceptions as much as possible to support their stated goal of having a wide range of individuals and organizations participating in value-based care. Complex requirements for VBE exceptions are likely to result in only the largest and most legally and technically sophisticated organizations pursuing these arrangements. Even though
Cybersecurity Donations
Cybersecurity events in the healthcare environment can directly impact patient safety. With that in mind,
The definition of cybersecurity should be broad and industry-neutral to allow for flexibility for future changes, adaptions, and variations in the dynamic world of cybersecurity. As physicians and other providers seek to address social determinants of health, they will collaborate more often with non-traditional participants in healthcare, such as technology companies or social services agencies. These new relationships will require different approaches to protecting patients' PHI. Using a broader definition would allow the proposed Stark exception to stay relevant as the cybersecurity landscape and needs of the healthcare delivery system change.
CMS should define protected technology to include software, hardware, and an array of services used predominantly to implement, maintain, and reestablish cybersecurity.
The categories proposed for cybersecurity related services also should be broad and varied, so long as the donated services substantially further the interests of strengthening cybersecurity for the end user. Such services may include training on how to use cybersecurity technology, sharing information about known threats, assisting with responding to threats, performing risk assessments and analysis, services from consultants that provide cybersecurity identification gaps and recommendations, and any cybersecurity services that reasonably help to mitigate cyber threats and limit the impact of privacy and information security breaches on patients and provider organizations.
As CMS suggests, donors should have the discretion to choose the level of cybersecurity technology and services they donate to physicians (or other healthcare providers) based on a risk assessment of the potential recipient, or based on the risks associated with the type of interface between the parties. Those responsible for health care operations involving shared patient data are in the best position to know the level of cybersecurity needed to support a healthy cybersecurity posture in a specific relationship. On the other hand, requiring a one-size-fits-all cybersecurity donation for every potential recipient could waste resources and increase the obstacles to interoperability.
Commercially Reasonable (Sec.411.351)
However, we do not think the last sentence of the proposed definition, which states that an arrangement "may be commercially reasonable even if it does not result in profit for one or more of the parties," fully reflects that discussion. CMS should finalize the proposed definition of "commercially reasonable" with one modification. The last sentence should state that "Commercial reasonableness is unrelated to the profitability of the arrangement to one or more of the parties." Given the degree of confusion related to this term and the severe consequences if a court concludes there has been a violation, CMS should leave no room for anyone to attempt to make a connection to profit.
The "commercially reasonable" requirement is frequently coupled with, "even if no referrals were made between the parties" or, in the case of the employment compensation exception, "even if no referrals were made to the employer." To eliminate the potential for confusion, we ask that CMS expressly confirm that "referral" has the meaning ascribed to it by regulation at Sec. 411.351.
The Volume or Value Standard and the Other Business Generated Standard (Sec.411.354(d)(5) and (6))
Proposed "Volume or Value" Definitions
We welcome CMS's proposed "volume or value" definitions at 411.354(d)(5) & (6), clearing up much of the ambiguity that has rnade the "volume or value" standard so challenging for hospitals and health systems to interpret and apply.
In addition, to avoid confusing CMS's proposed "volume or value" definitions with
"Referrals"
The term "referrals" is used throughout the Stark regulations. While it is a term defined by regulation, it is not always clear based on the context in which the term appears that CMS intends for "referrals" to have the meaning ascribed to it by regulation at Sec. 411.351. The precise meaning of the term is critically important. For example, if "referrals" as used at 411.354(d)(4) is not limited in its meaning to the regulatory definition of "referrals," the proposed inclusion of 411.354(d)(4) as an element of the employment and other personal services exceptions has the effect of introducing an allpayer volume or value standard into these exceptions. Accordingly, we ask that CMS expressly clarify in commentary that, unless otherwise noted, when "referrals" appears in the regulations it has the meaning ascribed to it by regulation.
"Other Business Generated"
We recommend that CMS strike "other business generated" from the Stark regulations. The notion of "other business generated" has always been foreign in the context of the Stark Law as its prohibitions are expressly limited to Medicare DHS referrals and claims and there is no indication that
However, extending the "volume or value" standard of the Stark compensation exceptions to "other business generated" has effectively broadened the law's prohibitions and narrowed the law's exceptions, effectively putting CMS in the business of regulating referrals for services and items covered by private health insurance. We recognize that OIG includes "other business generated" in its safe harbors, having concerns about the "pull-through" effect that compensation to a physician can have on federal health care program referrals when the compensation is contingent on referrals for services and items not payable by a federal health care program. However, as CMS well knows, the Stark compensation exceptions having substantially different purposes and functions than anti-kickback safe harbors and, importantly. failing the "other business generated" prong of a Stark exception is far more consequential, legally, than failing the "other business generated" prong of an OIG safe harbor. Further, as noted above, a key challenge most hospitals and other
"Varies With" and "Anticipated Referrals"
We support CMS's decision to strike "varies with" from the second and third elements of the "indirect compensation arrangement definition at Sec. 411.354(c)(2)(ii)-(iii). This is consistent with CMS's express intent for the "volume or value" standard to have the same meaning wherever it occurs in the regulations. In this regard, however, we ask CMS to strike "actual or anticipated referrals" from the "volume or value" standard of the physician recruitment exception because the concept of compensation accounting for "anticipated referrals" appears nowhere else in the Stark regulations and is inconsistent with CMS's proposed "volume or value" definitions. CMS's proposed "volume or value" definitions are satisfied only by compensation that takes into account actual referrals. "Directed Referral" Provisions and the "Volume or Value" Standard As CMS evaluates compliance with this requirement, we recommend that CMS make a policy determination of what balance the Agency wishes to achieve between unlimited patient choice and quality of care. For example, if there is a desire to institute a VBA that will lead to efficiency and improved quality of care, then there also must be increased guidance to beneficiaries on their choice of providers for post-acute care or other services.
As hospitals develop preferred provider networks, CMS should provide further guidance on patient choice regulations (i.e., the hospital discharge planning Conditions of Participation) so that physicians and hospitals can direct patients to high-quality performers. For example, hospitals should be allowed to share a list of their preferred provider network as opposed to a list of every post-acute provider in the community, some which may have very low quality ratings. A preferred provider list would consist of facilities that are high performers on CMS quality metrics, such as star ratinas, readmission rates and unscheduled returns to the emergency department.
CMS clarifies on page 55796 of the proposed rule that Sec. 411.354(d)(4) applies to both the situation where the compensation arrangement is contingent on the physician's required referrals and the situation where the compensation amount is contingent on the physician's required referrals. CMS also proposes to make Sec. 411.354(d)(4) an element of the employment and other Stark exceptions for arrangements that commonly involve "directed referral" provisions in a contract or policy. CMS indicates that the reason for this proposal is that it is concerned that, based on its new "volume or value" definitions, Sec. 411.354(d)(4) will apply in few, if any, cases, and CMS wants to assure that patient choice is protected. We do not oppose CMS's proposals, but need CMS guidance on the precise function of the special rule Sec. 411.354(d)(4) in light of CMS's proposed new "volume or value" definitions.
Fair Market Value (Sec.411.351)
"Fair Market Value" Safe Harbor or Rebuttable Presumption
No matter how CMS defines "fair market value," hospitals and health systems are not valuators. Thus, the Stark Law presents them with the difficult choice of either obtaining an independent third-party valuation for every compensation arrangement they have with a referring physician or using their best judgment and hope that, if challenged, the organization's valuation expert supports the compensation paid. Both alternatives have a substantial cost to them in either time and money or risk assumed. Hospitals and health systems need a "fair market value" safe harbor or other relief from the cost and burden of valuations and the risk of not getting a supporting valuation, at least for arrangements where physicians are not able to bill and collect for their professional services, including but not limited to employment arrangements. No safe harbor or other relief will please every stakeholder, but we ask CMS to consider the following as part of its efforts to reduce the Stark Law's burdens without risk of program or patient abuse:
(a) A fair market value "deeming" provision (i.e. "safe harbor") or, alternatively, a rebuttable presumption of fair market value for cash compensation that is not higher than the 75th percentile of the reported total cash compensation for the physician's medical specialty, and not higher than the 90th percentile of the reported total cash compensation for the physician's medical specialty for facilities located in an MUA or HPSA, based on an average of specified physician compensation surveys; and
(b) A fair market value "deeming" provision or, alternatively, a rebuttable presumption of fair market value for compensation per work RVU that is not higher than the 65th percentile of the reported compensation per work RVU for the physician's medical specialty, and not higher than the 8091 percentile of the reported compensation per work RVU for the physician's medical specialty for facilities located in an MUA or HPSA, based on an average of specified physician compensation surveys.
Determining whether compensation to a physician is "fair market value" is not a straightforward exercise for either the enforcement community or the hospital industry. Qualified and experienced valuators, in exercising professional judgment, often disagree, and well-intentioned hospitals and health systems acting in good faith can easily find themselves in protracted and costly Stark/
We support CMS's proposal to carve out of the Stark definition of "designated health services" inpatient hospital services that do not affect the Medicare MS-DRG payment under the Inpatient PPS.
Exception for Remuneration Unrelated to the Provision of
CMS asked whether they should limit what they consider to be "remuneration related to the provision of designated health services" to remuneration paid explicitly for a physician's provision of designated health services to a hospital's patients.
Restoring the utility of the "payments by a physician" and "remuneration unrelated to
Limited Remuneration to a Physician (Proposed Sec.411,357(z))
The "Signed Writing" and "Set in Advance"
Sincerely,
Hilary lsacson, JD, MPH
Registered In-House Counsel
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The proposed rule can be viewed at: https://beta.regulations.gov/document/CMS-2018-0082-0394
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