News & Insights


November 23, 2020

Health Headlines – November 23, 2020

HHS Issues Final Rules Implementing Stark Law and Anti-Kickback Statute Reforms –  On Friday of last week, HHS published two long-awaited final rules implementing significant changes to the regulations under the Stark Law and Anti-Kickback Statute (AKS). The two final rules are: (i) Revisions to the Safe Harbors Under the Anti-Kickback Statute and Civil Monetary Penalty Rules Regarding Beneficiary Inducements (AKS Final Rule), issued by OIG; and  (ii) Modernizing and Clarifying the Physician Self-Referral Regulations (Stark Law Final Rule), issued by CMS.

As part of the Regulatory Sprint to Coordinated Care, these updates are intended to facilitate financial arrangements among providers engaged in care coordination and activities to improve quality of care for shared patients.  In addition to implementing new rules to address value-based care arrangements, the AKS Final Rule includes new protections for certain patient engagement activities.  In addition, the Stark Law Final Rule modifies some key requirements in exceptions for compensation arrangements (such as fair market value), eases restrictions in the interpretation of  some existing exceptions, and adds a few new exceptions, all aimed at clarifying and modernizing the interpretation of this law as healthcare moves away from a fee-for-service environment to value-based reimbursement.

Set forth below is a high-level overview of these changes.  Please stay tuned in the coming days for a King & Spalding Client Alert with a more detailed analysis of these changes and their implications for providers.

AKS Final Rule

The principal changes codified in the AKS Final Rule are as follows:

  • The addition of three new AKS safe harbors designed to protect certain arrangements entered into with, or by, a value-based enterprise (VBE) and its eligible participants for a number of value-based network arrangements: 
  • Care coordination arrangements to improve quality, health outcomes, and efficiency, without requiring assumption of risk, where in-kind renumeration such as technology or services are exchanged between VBE participants used to engage in value-based activities directly connected to care coordination for target patient population. 
  • Value-based arrangements involving both monetary and in-kind renumeration between a VBE and VBE participants where the VBE assumes “substantial downside financial risk” for providing or arranging for the provision of items and services for the target patient population, and the VBE participants assume a “meaningful share” of that risk. 
  • Value-based arrangements involving both monetary and in-kind renumeration between a VBE and VBE participants where the VBE assumes “full financial risk” for all items and services covered by a payor for each patient in the target population for a term of one year.
  • The terms of these safe harbors vary by the type of remuneration protected, the type of entities eligible to rely on the safe harbors, and the types of safeguards included as safe harbor conditions.  The value-based safe harbors exclude pharmaceutical manufacturers, distributors, and wholesalers; PBMs; pharmacies that primarily compound or dispense compounded drugs; laboratories; medical device and supply manufacturers; medical device distributors and wholesalers; DMEPOS suppliers; and physician-owned medical device companies.  The care coordination safe harbor can be accessed by medical device and DMEPOS manufacturers to protect digital technology arrangements under certain conditions. 
  • A new safe harbor added for patient engagement tools and supports to improve care quality, outcomes and efficiency, furnished by a VBE participant or “eligible agent” to a patient in a “target patient population,” subject to a $500 annual cap, with an inflation adjuster.  This safe harbor includes the same general exclusions as outlined above but allows medical device and supply manufacturers to provide some digital health technology. 
  • A new safe harbor is added for CMS-sponsored model arrangements and CMS-sponsored model patient incentives that is expected to reduce the need for separate fraud and abuse waivers for new CMS-sponsored models.
  • A new safe harbor is added to protect non-monetary donations of certain cybersecurity technology, including both software and hardware, and related services.  This safe harbor permits the donation of cybersecurity technology to physician groups or other providers so long as the technology is “necessary and used predominantly to implement, maintain, or reestablish cybersecurity.”  The safe harbor limits donors from making donation decisions considering volume or value of referrals or other business generated between the parties.
  • Certain existing safe harbors are modified:
    • The electronic health records (EHR) safe harbor will be modified to update provisions regarding interoperability, remove the prohibition on donation of equivalent technology, and provide clarification to protections for cybersecurity technology and services included in an electronic health records arrangement.  The existing sunset provision will also be removed.
    • The personal services and management contracts safe harbor will be modified to increase flexibility for part-time or unpredictable compensation arrangements, and to provide new protection for outcome-based payment arrangements, with the same entity-exclusions that are applied to the new value-based safe harbors.
    • The warranty safe harbor is modified to revise to definition of “warranty” and provide protection for warranties for one or more items and related services.
    • The OIG is also modifying an existing safe harbor for local transportation to increase mileage limits from 50 to 75 miles for rural areas, and to eliminate distance limitations for transporting patients discharged home from an inpatient or observation setting.
  • The Final Rule will also add new exceptions to the civil monetary penalty provision prohibiting inducements to beneficiaries codified at 42 U.S.C. § 1320a-7a(a)(5) (Beneficiary Inducements CMP) based on some of the new and modified safe harbors –   the arrangements that fit into the new safe harbors for patient engagement and support, and modified local transportation safe harbor.  The new rule also will implement a statutory exception to the Beneficiary Inducement CMP for “telehealth technologies” furnished to certain in-home dialysis patients.

The AKS Final Rule will become effective January 19, 2021.

Stark Law Final Rule

The principal changes codified in the Stark Law Final Rule are as follows:

  • New exceptions for value-based arrangements are added at §411.357(aa) to permit value-based arrangements that satisfy certain requirements based on the level of financial risk undertaken (full financial risk, meaningful downside financial risk, or no risk).
  • A new definition of “commercially reasonable” is added to §411.351, which requires that an arrangement “furthers a legitimate business purpose of the parties to the arrangement and is sensible, considering the characteristics of the parties, including their size, type, scope, and specialty” and clarifies that an arrangement may be commercially reasonable even if it does not result in a profit for one or more of the parties.
  • New “taking into account” rules are added at §411.354(d)(5)–(6), which specify that compensation will be considered to take into account the volume or value of a physician’s referrals or other business generated if the formula used to calculate compensation includes referrals or other business generated as a variable.
  • The definition of “indirect compensation arrangement” is revised at §411.354(c)(2)(ii) to apply when aggregate compensation to the physician varies with the volume or value of referrals or other business generated, and the individual unit of compensation to the physician either (i) is not fair market value; or (ii) includes the physician’s referrals or other business generated as a variable.
  • The definition of “designated health services” at §411.351 is revised to remove inpatient hospital services ordered by a physician who was not the referring physician.
  • The definitions of “fair market value” and “general market value” at §411.351 are revised to eliminate references to the “volume or value” standard.
  • The rule at §411.354(d)(4), which sets forth the conditions under which an employed physician can be required to make referrals to a particular provider, practitioner, or supplier, is modified to prohibit conditioning the existence of a compensation arrangement or the amount of compensation on the number or value of the physician’s referrals.
  • A new rule is added at §411.354(e)(4), which codifies a longstanding policy that electronic signatures are valid for purposes of the signature requirement in various exceptions.
  • The exceptions at §411.357(a)–(b) for rental of office space and equipment are revised to clarify that multiple lessees are allowed.
  • The recruitment exception at §411.357(e) is revised to provide that the signature requirement does not apply to a practice that does not financially benefit from a hospital–physician recruitment arrangement.
  • The exception for fair market value compensation at §411.357(l) is revised to permit using the exception to protect arrangements for rental of office space.
  • The EHR exception at §411.357(w) is revised in a manner largely consistent with the revisions to the EHR safe harbor under the AKS Final Rule.  These changes include permitting certain donations of replacement EHR technology and cybersecurity software, clarifying that physicians’ required contribution payments can be collected at reasonable intervals, and removing the sunset provision, making the exception permanent.
  • The exception at §411.357(x) for assistance to compensate a nonphysician practitioner (NPP) is revised to clarify certain timing issues.
  • A new exception is added at §411.358(bb) to protect non-monetary donations to physician groups or other providers of certain cybersecurity technology, substantially similar to the new AKS safe harbor described above.
  • A new exception is added at §411.357(z) to permit certain arrangements involving limited remuneration to a physician that does not exceed $5,000 per calendar year, which does not impose any requirement to have contemporaneous documentation.

The regulations in the Stark Law Final Rule will become effective January 19, 2021. Certain provisions relating to value-based care arrangements will not be effective until January 1, 2022.

A press release from HHS announcing the Final Rules is available here. Please click here for the full text of the AKS Final Rule and here for a copy of the Stark Law Final Rule.  These Final Rules are set for publication on December 2, 2020, and when published, will be available in official form through these same links.

Reporters, J. Gardner Armsby, Atlanta, +1 404 572 2760,, and Jonathan Shin, Los Angeles, +1 213 443 4334,

King & Spalding Client Alert:  Options for Healthcare Providers to File Insurance Claims for COVID-19 Related Business Interruption Losses – The COVID-19 pandemic has wreaked havoc on hospitals, healthcare systems, and other healthcare providers who have found themselves at the center of the pandemic.  The harmful conditions created by the spread of the novel coronavirus in indoor environments, coupled with continued government restrictions on the ability of some providers to perform elective procedures during the pandemic, have damaged the balance sheets of many healthcare providers.

Most healthcare providers maintain commercial property policies that provide coverage for business interruption losses caused by physical loss of or damage to property.  Many healthcare providers initially held back from filing claims because of the urgent need to focus on patient care, as well as efforts by some insurance companies to argue that coverage might not exist for this situation. However, all healthcare providers should take a close look at their insurance policies to avoid leaving valuable insurance coverage on the table and lean toward tendering business interruption claims to their carriers that may be covered.

To learn more about this process and how your company could purse interruption losses, click here for a Client Alert issued by the King & Spalding Healthcare team.

OIG Issues Warning About Speaker Programs Sponsored by Drug and Device Companies – On November 16, 2020, OIG issued a significant Special Fraud Alert that warns about certain “inherent” fraud and abuse risks raised by speaker programs sponsored by pharmaceutical and medical device companies. OIG expressed deep skepticism about the educational value of such programs, cautioned that parties involved in speaker programs may be subject to increased scrutiny, and provided a list of suspect characteristics that may indicate a speaker program arrangement could violate the Federal Anti-Kickback Statute (the AKS). OIG also urged companies to reassess the need to resume in-person programs following the COVID-19 pandemic.

Pharmaceutical and medical device companies frequently sponsor speaker programs to educate health care providers (HCPs) about products and related disease states. At a typical event, a physician or other HCP who is not an employee of the sponsoring company makes a speech or presentation to an audience of other HCPs. The sponsoring company generally pays the speaker an honorarium and attendees receive remuneration in the form of meals and beverages. Information reported to CMS’s Open Payments website indicates drug and device companies have paid nearly $2 billion to HCPs for speaker-related services in the last three years.

In recent years, OIG and DOJ have investigated and resolved many cases involving allegations that remuneration offered and paid through speaker programs violated the AKS. In these cases, the government has alleged that the companies sponsored speaker programs with the intent to induce HCPs to recommend, prescribe, or order the company’s products. The companies are often alleged to have rewarded high-prescribers with speaking engagements, conditioned remuneration on meeting sales targets, held programs in a manner or place not conducive to the presentation of educational information, provided lavish meals and alcohol, and/or invited HCPs who had previously attended the same program or others who lacked a legitimate reason for attending.

OIG is skeptical about the educational value of speaker programs and believes there are many alternative ways for HCPs to obtain information about products and disease states that do not involve receiving remuneration from companies. For example, the agency believes HCPs can access the same or similar information through online resources, package inserts, third-party educational conferences, and medical journals. From the agency’s perspective, the availability of this information through alternative channels that do not involve remuneration to HCPs suggests that at least one purpose of speaker program remuneration is to induce or reward ordering or prescribing items paid for by Federal health care programs.  

OIG cautioned that any party involved in speaker programs may be subject to increased scrutiny. The agency directed this warning not only to drug and device companies but also to HCPs who either speak at or attend such programs and who receive remuneration from the companies, such as in the form of an honorarium or free food and drink.

Recognizing the lawfulness of any arrangement under the AKS will depend on the facts, circumstances, and intent of the parties, OIG provided a non-exhaustive list of suspect characteristics, the presence of which may indicate a speaker program arrangement violates the AKS:

  • Little or no substantive information is presented at the speaker programs.
  • Alcohol is available or a meal exceeding modest value is provided to attendees (the concern is heightened when the alcohol is free).
  • The program is held at a location that is not conducive to the exchange of educational information (e.g., restaurants or entertainment or sports venues).
  • Large numbers of programs on the same or substantially the same topic or product, especially where there is no recent substantive change in relevant information.
  • There has been a significant period of time with no new medical or scientific information nor a new FDA-approved or cleared indication for the product.
  • HCPs attend programs on the same or substantially the same topics more than once (as either a repeat attendee or as an attendee after being a speaker on the same or substantially the same topic).
  • Attendees include persons who lack a legitimate business reason to attend the program (e.g., friends, significant others, or family members of the speaker or HCP attendee; employees or professionals from the speaker’s medical practice; staff of facilities for which the speaker is a medical director).
  • The company’s sales or marketing business units influence the selection of speakers or the company selects speakers or attendees based on past or expected revenue that the individuals have or will generate by prescribing or ordering the company’s product(s) (e.g., participants are chosen based on an ROI analysis).
  • The company pays HCP speakers more than FMV for the speaking service or pays compensation that takes into account the volume or value of past—or potential future—business generated by the HCPs.

Social distancing requirements relating to the COVID-19 pandemic have reduced many in-person activities, including speaker programs. However, OIG cautioned that risks remain whenever companies offer or provide remuneration to HCPs who generate Federal health care program business. During the pandemic, many companies have pivoted to online educational platforms, and OIG’s commentary suggests that even remote speaker programs that involve remuneration may attract government scrutiny. OIG also urged companies to reassess the need for in-person programs following the pandemic, warning that the risks of such programs “will become more pronounced if companies resume in-person speaker programs or increase speaker program-related remuneration to HCPs.”

Although OIG emphasized that it does not intend to “discourage meaningful training and education,” the Special Fraud Alert places the drug and device industry on notice that sponsors of speaker programs may face intense government scrutiny. 

The Special Fraud Alert is available here.

Reporter, Kyle Gotchy, Sacramento, +1 916 321 4809,

HHS Releases New Frequently Asked Questions Regarding CARES Act Provider Relief Funds – Last week, HHS released new Frequently Asked Questions (FAQs) regarding payments distributed to providers via the CARES Act Provider Relief Fund.  Importantly, the new FAQs explain that expenses for capital equipment and inventory, as well as expenses for capital facilities, may be fully expensed when the purchase was directly related to preventing, preparing for, and responding to the coronavirus.

The new FAQs also explain that providers who use accrual or cash basis accounting may report the relevant depreciation amount based on the equipment useful life, purchase price, and depreciation methodology otherwise applied. Providers may report an expense for items purchased with a useful life of 12 months or less if in accordance with their existing accounting policies.

The complete FAQ document is available on the HHS website here.

Reporter, Ahsin Azim, Washington, D.C., +1 202 626 9262,

OIG Announces Resumption of Medicare Inpatient Short Stay Audits  –  In its November 2020 Work Plan update, OIG announced it will begin auditing short stay inpatient hospital claims under the Two Midnight Rule, and when appropriate, recommend overpayment collections. OIG does not specify the dates of service it plans to review, so it is possible that OIG could review short stay claims with dates of service prior to November 2020.  Previously, OIG had stated that the agency would not audit short stays after the implementation of the Two Midnight Rule, effective October 1, 2013.

OIG’s previous position of not auditing short stay inpatient hospital claims after October 1, 2013 was consistent with CMS’s limited review of such claims under the Two Midnight Rule. However, effective November 2020, OIG will resume audits of short stay claims under the Two Midnight Rule to determine whether inpatient claims with short lengths of stay were incorrectly billed as inpatient and should have been billed as outpatient or outpatient with observation. OIG also plans to review policies and procedures for enforcing the Two Midnight Rule at the administrative level and contractor level. In the announcement, OIG noted that prior agency audits, such as OIG Medicare Compliance Reviews, identified millions of dollars in overpayments for inpatient claims with short lengths of stay which should have been billed as outpatient claims.

The OIG Workplan announcement is available here.

Reporter,  Lauren S. Gennett, Atlanta, + 1 404 572 3592,  

CMS Finalizes Changes to Organ Procurement Organization Conditions for Coverage – On November 20, 2020, CMS issued a final rule (the Final Rule) strengthening the Organ Procurement Organization (OPO) Conditions for Coverage.  The new Conditions of Coverage will subject OPOs to greater scrutiny with the intent of improving OPO performance, thereby increasing the number of organs available for transplant.

OPOs are non-profit organizations that are responsible for the procurement of organs for transplantation.  There are approximately 58 OPOs operating in the United States with each assigned to their own donation service area.  CMS is responsible for conducting surveys of OPOs and re-certifying them every four years based on whether they meet Conditions of Coverage, which include outcome and process measures.  Under current rules, OPOs must meet minimum thresholds for at least two of three outcome measures: (1) the donation rate of eligible donors, (2) the observed – or actual – donation rate, and (3) donor yield (meaning the number of procured organs donated per donor).  See 42 C.F.R. § 486.318.  The existing outcome measures are calculated using data self-reported from OPOs.

Overall, CMS’s changes are intended to increase OPO performance and transparency, and foster competition among OPOs.  The key provisions in the Final Rule include:

  • Donation Rate Measure – CMS is changing the OPO donation rate measure to encourage OPOs to pursue all potential donors, even those who are only able to donate one organ. 
  • Transplantation Rate Measure - OPOs will no longer receive credit for simply procuring an organ – it must be actually transplanted to count. This change is intended to incentivize OPOs to procure and match all viable organs with recipients.
  • Increased Transparency - CMS is making outcome measure performance public to increase transparency.
  • 12-Month Review Periods – CMS is increasing the number of reviews conducted.  CMS will begin reviewing OPO performance every 12 months throughout the four-year recertification cycle.
  • Performance Benchmark – The performance rates that OPOs will be encouraged to meet for the donation and transplantation rates will be established by the lowest rates of the top 25 percent of OPOs from the previous 12-month period.  OPOs with performance rates that are below the top 25 percent will be required to take action to improve their rates through a quality assurance and performance improvement (QAPI) program.
  • Performance Tiers – At the end of each re-certification cycle, each OPO will be assigned a tier ranking based on its performance for both the donation rate and transplantation rate measures and its performance on the re-certification survey.
  • Increased Competition – Under the Final Rule, underperforming OPOs will be required to compete for their organizational contracts – which are necessary for them to function as OPOs – and the lowest performing OPOs will be unable to renew their contracts.
  • Objective Data – CMS is no longer accepting self-reported data from OPOs and will instead calculate outcome measures using death certificate data.

The new outcome measures will be implemented during the next OPO survey cycle, which is scheduled to begin in 2022.  OPOs will be held accountable for the new measures for certification purposes in 2026. 

CMS’s fact sheet is available here.  The Final Rule is available here.

Reporter, Isabella E. Wood, Atlanta, + 1 404 572 3527,


He Actually Did It: Trump Administration Implements Medicare Part B “Most Favored Nation” Drug Pricing Reform -- On November 20, 2020, 60 days before the end of his Administration, President Trump announced a series of major drug pricing regulations. This Alert summarizes the Most Favored Nation Model (MFN Model) for Medicare Part B Payment to be implemented by the Centers for Medicare & Medicaid Services (CMS) Innovation Center.

Click here to read the full Client Alert from King & Spalding’s FDA and Life Sciences Team.

King & Spalding Webinar–COVID-19’s Impact on the Senior Care Industry: A Discussion on Crisis Management in the Face of Litigation and Enforcement Activity – On December 9, 2020, from 1:30 – 2:30 p.m. ET, King & Spalding partners Sally Yates (former Acting Attorney General and Deputy Attorney General), Jim Boswell (Team Leader of the national Healthcare Team) and Geoffrey Drake (a leader of the Mass Torts Litigation practice) will lead a discussion on crisis management in the face of the COVID-related compliance, liability and enforcement landscape for senior care and other long-term-care facilities.

Topics of discussion will include:

  • Public relations, community outreach and external communications;
  • Interface with government agencies, regulators and Congress;
  • Coordinating and developing strategies for wrongful death litigation targeting post-acute providers;
  • Immunity protections on the state and federal levels for COVID-related care;
  • Insurance limitations and challenges;
  • Congressional inquiries into post-acute providers and their handling of the COVID-19 pandemic; and
  • Increased oversight of post-acute providers by the OIG, CMS, and State Survey Agencies.

Registration for the event is free. Click here to sign up.