By Alan M. Schlein
Senior Wire 

Better care? Lower costs? Better value?

Medicare and caregivers are moving on it (maybe)


December 1, 2019

The Trump administration has proposed to overhaul decades-old Medicare rules that were originally meant to counter self-dealing and financial kickbacks among medical providers such as hospitals, clinics and doctors. But the administration says these anti-kickback rules are now serving as a roadblock to coordinating better care for patients.

The Centers for Medicare & Medicaid Services (CMS) wants to encourage primary care physicians and other clinicians to spend more time coordinating care for their patients including social issues, patients sticking to their treatment regimens, and improving the continuity of care.

The current rules are now seen as an obstacle to progress, potentially having a chilling effect on hospitals and doctors working together, officials say. Medicare has recently been pushing to improve follow-up care for patients after they are discharged from hospitals and to try to hold hospitals more accountable.

The proposal is supposed to help doctors, hospitals and other medical providers transition from fee-for-services payments to value-based payments, which reward physicians for outcomes instead of the volume of services provided. But critics worry the broad and vague changes proposed by the Trump administration could engender more fraud and abuse than there already is. The big concern is that everyone has a different definition of “value.” That leaves regulators to determine whether providers are acting in good faith to coordinate care or if they are using “value-based care” as a cover to control patient referrals and enrich themselves.

The existing rules have steep penalties if they are violated and HHS argues the current statute is preventing doctors from trying to find better ways to work together. A hospital, for example, could run afoul of the law it if offers incentive payments to physicians for providing more efficient and cost-effective care, they argue. Officials say they are concerned the current law prevents coordination of care.

These new rules – almost 800 pages long – will now face intense analysis from lawyers in all aspects of health care, since billions of dollars are at stake. Patient advocates are concerned that the new regulations could weaken consumer protections. But HHS officials say ultimately the patient will benefit when the process is finished because it will help them avoid foreseeable problems after hospitalization.

The biggest changes among these new rules involve two huge, key laws – self- referrals and the anti-kickback statute.


Under current law, there is a rule that prevents clinicians from referring patients to facilities in which they have a financial interest. This rule, known as the federal self-referral prohibition, was approved by Congress in 1989 and was sponsored by former Democratic Congressman Pete Stark, D-Calif. The Stark Law was intended to stop potential conflicts of interest when doctors referred patients to clinical labs under Medicare, such as orthopedists referring patients to get x-rays at clinics the same physician also owns. Often these financially-motivated unnecessary tests had little to do with patient care.

Penalties for violating the law can include $15,000 for each medical service and three times the amount of Medicare payments received for services.

But opponents of the Stark Law, particularly hospitals, say the law is behind the times and has mutated into a minefield for the healthcare industry. Medicine has since evolved to emphasize “value-based care” with bundled services, which can mean including the imaging that a doctor needs to evaluate and treat the patient.

The administration argues that current law presents obstacles for doctors to enter into innovative payment arrangements, and that the Stark Law is unnecessary because the Federal Anti-kickback laws already give the federal government a way to make sure that referrals are not affected by financial conflicts of interest.

Anti-kickback rules

The administration also proposes to change the anti-kickback statute, which prohibits payments for recommending products or services to patients covered by Medicare or Medicaid. It was implemented to protect against fraud and abuse. Penalties under the anti-kickback statute are stiff – up to $25,000 and a potential five-year prison sentence per violation in addition to $50,000 in civil penalties per violation and three times the amount of government overpayment.

The anti-kickback statute is stifling innovation – especially for doctors who work in different medical groups, who want to experiment with new ways to pay for health care. The problem is that Medicare could interpret those innovations as a kickback. The new rules would apply mainly to federal programs like Medicare and Medicaid, but their impact is actually felt across the entire health care system.

Health and Human Services secretary Alex Azar argues the current system is out of date. He says it discourages hospitals, doctors and other service providers from entering into formal value-base arrangements in which they collaborate to improve care for patients and commit to delivering measurable results. For example, a hospital can now send a kidney patient home with technology to monitor critical health indicators and automatically transmit back any signs of problems. But under the existing rules, that arrangement could be interpreted as the hospital providing the patient an illegal “inducement” to continue using its services.

To make these changes work, the Department of Health and Human Services would create new exemptions for both the physician self-referral law and the federal anti-kickback statues. Under the new proposal, hospitals, doctors, nursing homes and other entities would be able to create value-base arrangements – including exchanging bonuses or other types of “remuneration” – without running afoul of referral laws. Under this proposal, a hospital could provide a nursing home with a behavioral health nurse for certain discharged patients, or a hospital could donate cybersecurity technology to a physician’s office. Or a doctor could give patients free “smart pillboxes” which let the physician and caregivers know when a patient misses a dose.

To protect the doctors and hospitals, the new proposal includes “safe harbor” exceptions that gives them the green light to conduct business in ways they previously feared would get them in trouble. The proposed regulations include safe harbor for all innovative payment models sponsored by the Centers for Medicare and Medicaid Services (CMS) which would replace the separate waiver system currently in place. Doctors could also use telemedicine, allowing in-home dialysis providers to use telehealth technology, or perhaps pay for food and transportation to patients in need. It might even allow doctors to provide Apple watches or other technology that helps patients monitor their health.

Medicare Administrator Seema Verma says a safe harbor exemption needs to be made for cyber-security technology. She wants to let hospitals share such technology with medical practices that they deal with, and thereby improve protections across the health care system. Another safe

harbor exemption proposed is for donating electronic health records. That law is set to expire and this proposal would make it permanent.

What remains unclear is how much money these new revised rules would actually save. It all depends on which hospitals and other services providers voluntarily use these new protected arrangements and then whether the new way of doing business turns out to be cost effective.

Also contributing to this story were: AP; Bloomberg; Modern Healthcare; Axios; Kaiser Health News and CNBC.


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