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HHS: Physician Self-Referral Law Hinders Value-Based Care

HHS stated that healthcare fraud prevention regulations, such as the physician self-referral law, prevent providers from full value-based care implementation.

Physician self-referral laws particularly impeded value-based care implementation, HHS stated

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- Some healthcare fraud prevention regulations many impede value-based care models that use financial incentives to encourage providers to improve care quality and reduce healthcare costs, the Department of Health and Human Services (HHS) recently reported.

“Although we expect that some arrangements may be structured to satisfy the requirements of an applicable exception to the physician self-referral law and not violate the Federal anti-kickback  statute, the fraud and abuse laws may serve as an impediment to robust, innovative programs that align providers by using financial incentives to achieve quality standards, generate cost savings, and reduce waste,” the federal department stated.

Healthcare fraud prevention laws designed in a fee-for-service reimbursement landscape do not necessarily translate to a value-based care environment, the report showed. HHS found that the physician self-referral law is particularly problematic for providers looking to implement value-based reimbursement models.

The physician self-referral regulation, or Stark law, forbids providers from making referrals for designated health services covered by Medicare to another provider who has a financial relationship with the referring provider. The law also prohibits the referral provider from filing claims for the designated health services performed as a result of an illegal referral.

For healthcare organizations that have  established gainsharing or incentive payment structures, the physician self-referral law may recognize value-based incentive payments to providers as a financial relationship. Therefore, referrals could be considered as physician self-referral violations.

The healthcare fraud prevention regulation also requires compensation structures to not take into account value or volume of services. In a fee-for-service reimbursement world, providers may have been incentivized to boost service volumes to reap more claims reimbursement revenue.

But many value-based reimbursement models rest on the concept that providers receive incentive payments for improving care quality, limiting unnecessary resource use, and decreasing healthcare costs.

“Because of the requirement in many exceptions to the physician self-referral law that compensation paid to a physician may not take into account the volume or value of a physician’s referrals or other business generated between the parties to a gainsharing or similar arrangement, the physician self-referral law presents a particularly difficult obstacle to structuring effective programs that do not run afoul of the fraud and abuse laws,” HHS stated.

The American Hospital Association (AHA) echoed similar concerns in July 2016 regarding healthcare prevention laws and the value-based care shift. The industry group emphasized how physician self-referral and anti-kickback regulations particularly impeded value-based care implementation.

Policymakers, including HHS officials and Congress members, should work to change healthcare prevention laws that prevent full value-based care participation, the AHA advised.

While the federal department did not recommend any policy changes to Congress, it did offer some examples of recent healthcare fraud prevention law exceptions that promoted value-based reimbursement participation.

HHS waived physician self-referral and anti-kickback regulations to implement the Medicare Shared Savings Program (MSSP). MSSP Accountable Care Organizations (ACOs) received several waivers so as to establish value-based incentive payment arrangements and allow ACO providers to keep patients within the network by referring to other providers in the ACO.

Many participants in CMS Innovation Center alternative payment models also benefit from several gainsharing and incentive compensation arrangement waivers.

The AHA, however, argued that the patchwork of waivers and exceptions actually imposes more burdens on providers.

“Hospitals and physicians should not have to spend hundreds of hours or thousands of dollars in hopes of stringing together components from the existing exceptions and safe harbors or developing inefficient work-arounds to achieve the goals of APMs [alternative payment models],” the AHA explained.

Additionally, HHS questioned if proposed policies that require healthcare organizations to track healthcare savings produced from gainsharing or incentive payment arrangements.

“Requiring providers who sponsor gainsharing and similar programs to track the savings attributable to the care of Medicare beneficiaries in order to share such savings with the Medicare program could present potential challenges with respect to the growth of and innovation in valuable programs that improve care, reduce waste, and increase efficiency,” wrote HHS.

However, the federal department supported a tracking requirement for Medicare. For example, hospitals that generate significant savings from a gainsharing program may see lower hospital costs, which are then reported to Medicare on the hospital’s cost report.

Using cost report data, CMS calculates future Medicare reimbursement rates for hospital services. Therefore, lower hospital costs detailed on the report could “result in changes in the amount of payment made to hospitals—and the potential to generate savings to the Medicare program—over time.”

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