New proposed rules were issued on October 9th, 2019 to provide more flexibility to healthcare providers entering into value-based payment arrangements.
The Department of Health and Human Services (HHS) along with the Office of Inspector General (OIG), governing the Anti-kickback Statue and Civil Monetary Penalty, and the Centers for Medicare and Medicaid Services (CMS), governing the Stark Law, were the agencies responsible for taking major steps to transform provider alignment models. These agencies are seeking comments to facilitate the healthcare industry’s movement from fee for service to value-based care. In the combined 719 pages of discussion, Fair Market Value (FMV) is mentioned 186 times! New potential definitions and parameters around how both FMV and commercially reasonable and determined are discussed at length.
Redefining the healthcare industry’s rules for how FMV is established at this point in history makes a lot of sense. The old rules prohibited, in many ways, collaboration. This limits the success for coordinated care which is paramount to lowering cost and improving quality. Since aligning physicians is critical to coordinating care, a shift in acceptable payment arrangements, and how physicians interact with other parts of a patient’s continuum of care must change. Meanwhile, payments must still be FMV to prevent fraud and abuse related to directing referrals.
The previous regulatory guidelines made innovative strategies seem risky and administratively burdensome. Further, the government defined FMV and CR in ways that could be roadblocks to coordinated care. Therefore, some of their historical guidelines fundamentally make the move to value-based care challenging, which has been the catalyst for these new proposed rules. Although, anyone who has substantial experience in the healthcare industry understands proposed rules are just that – proposed.
That said, many of these concepts will stick. Numerous comments specifically address Safe Harbors which are a provision that provides protection, or may reduce liability or penalty, under specific situations. The following are a few of the more likely changes related to FMV that could fundamentally change how healthcare executives pursue new alignment strategies and their FMV policies.
- Care Coordination - Protecting remuneration to be used to facilitate the coordination and management of care for patient populations. The agency is soliciting comments from stakeholders for guidelines that may help distinguish payments which support legitimate care coordination activities, versus payment-for-referral schemes that do not serve, and may be contrary to, the goals of coordinated care and the shift to value.
- Agreement Structure - Substituting the requirement that the methodology (not a fixed payment) for determining the compensation be set in advance. Currently, payments to physicians are to be set in advance to help meet a Safe Harbor. Changing the rule to the methodology would offer broader protection for certain outcomes-based payment arrangements, allowing various FMV payments, depending on the outcome.
- Downside Risk - Providing increased flexibility for arrangements that take on substantial downside financial risk. The agency notes potentially removing the requirement that it must be consistent with FMV in arm’s-length transactions when material financial risk is taken.
- Valuing Quality - Soliciting comments on how parties would determine that a payment for quality outcomes is consistent with FMV. The agency is looking for guidance and are proposing to require the parties to an arrangement establish one or more specific evidence-based outcome to receive payment.
- Benchmarking Quality - Acknowledging that payment for the maintenance of high quality may be risky. There is concern that arrangements rewarding the status quo are more likely to be payments for referrals. Although high performing arrangements (i.e.: ACOs that already have high quality and low costs) may be low risk, the agency inquires how to approve such arrangements in the final rule without protecting arrangements that are not legitimate. They also recommend measures are re-based periodically.
The OIG anticipates the industry will evolve and adapt to properly assess FMV for value-based arrangements. They also state that any Safe Harbors would continue to require that the compensation reflect FMV and be commercially reasonable, without the intent to induce referrals. Therefore, the general parameters for payments to physicians will not change.
Bottom Line
The aggressive movement by CMS for coordinated care, and the rapid growth in innovative physician alignment strategies to lower costs and improve quality are happening. Providers need more flexibility in creating new models, and the government needs costs savings and better outcomes – it’s a win-win. Portions of existing regulations impede this movement, and the proposed rules would allow physicians and other healthcare providers to develop cutting-edge value-based alignment models without being fearful of violating current laws.
Much more to come, stay tuned for further updates and guidance.