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Our Take: CMS reverses course, issues final rule to update Stark Law

Dec 07, 2020

When CMS originally proposed reforms to the Physician Self-Referral Law, commonly referred to as the Stark Law, in October 2019, the rule was to be finalized on Aug. 31. But shortly before that deadline rolled around, the agency pushed it back a year, saying it needed more time to work through “the complexity of the issues raised by comments received on the proposed rule.”

Now, though, CMS has gone ahead and finalized the rule.

The Stark Law prohibits physician self-referrals — i.e., physicians cannot refer patients to an entity with which they have a financial relationship. The law was enacted in 1989, when the U.S. health system functioned almost entirely on a fee-for-service basis. As the transition toward value-based care has gained momentum over the last decade and a half or so, hospital groups and other provider organizations have asked the federal government to revise the law, saying it interferes with care coordination and frequently deters providers from entering into value-based payment arrangements.

Broadly, the final rule establishes new, permanent exceptions to the Stark Law for value-based arrangements. The exceptions will give physicians and other providers more flexibility to enter into such arrangements “without fear that legitimate activities to coordinate and improve the quality of care for patients and lower costs would violate” the law.

It also provides additional guidance on key requirements of the exceptions, to help providers make sure they are complying with the law. Further, it offers protection for “non-abusive, beneficial arrangements” that apply whether the parties involved are operating within a fee-for-service or value-based reimbursement structure. An example, CMS said in a press statement, would be donations of cybersecurity technology to safeguard the integrity of a health care ecosystem.

The changes will take effect on Jan. 19, 2021.

Our Take: As we said back when the proposed rule was issued, the Stark Law clearly needed to be updated.

So far, reception to the final rule has been mixed. In a special bulletin, the American Hospital Association (AHA) applauded the changes, saying they “should help to replace numerous waivers of these same regulations needed to experiment with collaborative and innovative care and remove ‘impediments to robust, innovative programs’ noted in a 2016 report from [the Department of Health and Human Services] to Congress.”

But in a separate post, the AHA said it was “disappointed that the [HHS] Office of Inspector General’s AKS approach across its new safe harbors does not keep pace with the robust protection provided under the Stark regulations.”

That comment referred to another final rule issued at the same time setting forth changes to the anti-kickback statute. The OIG implemented several new safe harbors in that rule, including safe harbors for care coordination arrangements, for value-based arrangements with varying levels of downside risk, and others that are applicable to beneficiary incentives.

These safe harbors will make it possible for additional businesses, such as medical device manufacturers and durable medical equipment companies, to participate in value-based arrangements — but only those involving “digital health technologies.”

The Medical Group Management Association (MGMA) said in a statement that it appreciated the efforts to update and simplify the regulations, and that it supposed the new value-based arrangement exception to the Stark Law in particular, as it “will provide some group practices with greater protection when entering into care coordination arrangements.” But the organization said HHS could have gone further in the final rule “to reduce the overall complexity and regulatory intrusion into group practice operations.”

MGMA said “the regulatory scheme has grown in complexity to the point where it is beyond comprehension to the average physician or practice administrator,” and the organization still believes there is “a significant need for Congressional action.”

In light of what Congress is already facing, it’s unlikely that the Stark Law or the anti-kickback statute will be getting any serious legislative attention anytime soon. For now, it looks like the final rules will have to suffice.

What else you need to know
The FDA issued emergency use authorizations (EUAs) to two treatments for COVID-19 and a new test that measures SARS-CoV-2 antibody levels. One of the EUAs was for an antibody cocktail developed by Regeneron Pharmaceuticals; that treatment consists of casirivimab and imdevimab, which are to be administered together intravenously. It is authorized for patients ages 12 or older with mild to moderate COVID-19 who test positive for the SARS-CoV-2 virus and are at high risk for progressing to a more severe stage of the disease. The other drug to receive an EUA is Eli Lilly’s Olumiant (baricitinib), which is approved as a treatment for rheumatoid arthritis. The FDA authorized Olumiant in combination with Gilead Sciences’ Veklury (remdesivir) for the treatment of suspected or lab-confirmed COVID-19 in patients ages 2 or older who are hospitalized and require oxygen support. The test that received an EUA is Roche’s Elecsys Anti-SARS-CoV-2 S test, which can measure the level of antibodies in people who have been exposed to the SARS-CoV-2 virus. “Antibody tests like these will play a critical role in measuring a person’s vaccine-induced immune response,” said Thomas Schinecker, CEO of Roche Diagnostics, in a press release.

Meanwhile, Moderna filed for EUA for its COVID-19 vaccine last Monday based on clinical trial results demonstrating 94.1% efficacy. Of the 196 trial participants who developed COVID-19 (out of 30,000 enrollees), 185 received placebo and 11 received the vaccine. The FDA’s vaccine committee has set a meeting on Dec. 17 to discuss the EUA request. The committee will meet on Dec. 10 to discuss Pfizer and BioNTech’s request for EUA of their vaccine, which just received an EUA in the U.K. last Wednesday — making it the first COVID-19 vaccine to be authorized for use in the Western world and the world’s first mRNA vaccine to be authorized. Moderna’s vaccine is also based on mRNA technology.

CMS launched a new program called Acute Hospital Care At Home that gives hospitals more flexibility to provide hospital-level care to patients in their home during the pandemic. As part of the Hospitals Without Walls initiative that CMS announced in March, the new program is intended to expand hospitals’ capacity to provide acute care for patients during the anticipated COVID-19 surges. An in-person evaluation by a physician is required before home care begins; after that, a registered nurse will evaluate the patient daily (either remotely or in person), and a registered nurse or paramedic will conduct an in-person visit twice a day. CMS said in a press release that more than 60 acute conditions (e.g., asthma, congestive heart failure, pneumonia, and chronic obstructive pulmonary disease) can be safely treated in the home setting. Initially, six health systems with extensive experience in providing acute care at home were approved as program participants via an expedited process. Less-experienced hospitals will need to go through a more detailed waiver request.

CarepathRx plans to buy part of UPMC’s Chartwell pharmacy subsidiary. CarepathRx, a pharmacy and medication management solutions company based in Washington, announced last Tuesday that it will acquire the management services organization responsible for the operational and strategic management of Chartwell for $400 million. Chartwell is UPMC’s home infusion and specialty pharmacy company. As part of the agreement, UPMC will become a strategic investor in CarepathRx. The transaction is expected to close within 30 days.

Brown & Toland Physicians is officially a subsidiary of Clinical Services. Altais, a health care services company that Blue Shield of California launched last year, said in a blog post that the two organizations have completed the affiliation plan they announced in April. Brown & Toland Physicians, a network of more than 2,700 physicians based in the Bay Area, will continue to operate under its established brand and will still service all payers. Through the affiliation with Altais Clinical Services, physicians in the network will have access to additional capital and other resources to help their independent practices operate under a value-based model.

The Center for Medicare and Medicaid Innovation released a list of the 916 primary care practices that will participate in the Primary Care First Model starting in January. Practices participating in the alternative payment model can receive an upside adjustment (up to 50% of revenue) for achieving targeted improvements in patient outcomes and are subject to a downside adjustment (10% of revenue) if they fail to meet the targets. Thirty-seven payers, including Medicare Advantage plans, commercial health plans, and state Medicaid agencies, will participate in the model as well. They have agreed to align their payment structure and quality measurements with the CMS model.

Merck entered into a definitive agreement to acquire OncoImmune, a privately held biopharmaceutical firm based in Rockville, Md., for $425 million in cash and potential milestone payments. In September, OncoImmune released positive results of an interim analysis from a late-stage clinical trial of its lead therapeutic candidate, CD24Fc, an IV drug that is being evaluated as a potential treatment for patients with severe and critical cases of COVID-19. In a press release, CD24Fc was described as a first-in-class recombinant fusion protein that targets the innate immune system. OncoImmune agreed to spin off certain rights and assets to a new entity owned by the company’s existing shareholders, and Merck will invest $50 million in the new entity after the acquisition is completed. The deal is subject to regulatory approvals and other customary closing conditions and is expected to close before year-end.

President-elect Joe Biden has begun choosing the people he wants to spearhead his administration’s response to the COVID-19 pandemic. Dr. Vivek Murthy, who served as U.S. Surgeon General under President Barack Obama, has been asked to resume that role in a broader capacity when Biden takes office. Dr. Anthony Fauci has accepted the offer to serve as Biden’s chief medical adviser. Jeff Zients, another former Obama administration official, has been selected as the White House’s COVID-19 coordinator, and Dr. Marcella Nunez-Smith will focus on addressing pandemic-related racial disparities.

Sanford Health and Intermountain Healthcare have suspended merger talks, following the departure of long-time Sanford president and CEO Kelby Krabbenhoft. Sanford’s Board of Trustees last week appointed Bill Gassen as president and CEO. “With this leadership change, it’s an important time to refocus our efforts internally as we assess the future direction of our organization,” Gassen said. Intermountain president and CEO Marc Harrison said that “We are disappointed but understand the recent leadership change at Sanford Health has influenced their priorities.”


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