On October 22, 2019, CMS and OIG (Office of Inspector General) released new proposed rules regarding Stark Law Exceptions and Anti-Kickback Safe Harbors in response to what has universally been christened as the “Regulatory Sprint to Coordinated Care”, first announced by HHS in June of 2018.

As background, please remember that, although the Anti-Kickback Safe Harbors and the Stark Law Exceptions are confusingly similar with respect to their intended purpose, they serve the following different functions:

  1. The Stark Act prohibits physicians from referring only the Stark “designated health services” to healthcare entities with which they have financial relationships.


  1. The Anti-Kickback statute prohibits anyone from paying, receiving, soliciting or offering any kind of remuneration in exchange for the referral of any Medicare or governmental health covered service.


The regulators have provided “Stark Law Exceptions” and “Anti-Kickback Safe Harbors” which are remarkably similar but apply in the different context described above.

In general, the new Safe Harbors and Exceptions cover three major areas:


  1. Coordinated Care and Value-Based Enterprises.


  1. Extension of the EHR Safe Harbor sunset.


  1. Revising the definition of fair market value that applies to both the Stark Law Exceptions and the Anti-Kickback Safe Harbors (AKS).


This article is intended to cover the “new kid on the block”, i.e. the value-based enterprises.  The new definitions for the Stark Act and the AKS are each attached as Exhibit A and Exhibit B respectively.  A value-based enterprise is essentially defined as two or more VBE participants collaborating to achieve at least one value-based purpose as parties to a value-based arrangement, which arrangement has an accountable body or person responsible for management and a governing document describing its purpose.  That is a rather circular definition, and the specific definitions for both the Anti-Kickback Safe Harbor and the Stark Exceptions are attached.

In order to provide a sense of the vagueness of the intended scope of these arrangements, I have inserted the two following quotes from the regulatory announcements:

Evolution of Healthcare Landscape

“The health care landscape when the physician self-referral law was enacted bears little resemblance to the landscape of today.  As some CMS RFI commenters highlighted, the physician self-referral law was enacted at a time when the goals of the various components of the health care system were not merely unaligned but often in conflict, which each component competing for a bigger share of the health care dollar without regard to the inefficiencies that resulted for the system as a whole–in other words, a volume–based system.  According to several commenters, the current physician self-referral regulations–intended to combat overutilization in a volume-based world–are outmoded because, by their nature, integrated care models protect against overutilization by aligning clinical and economic performance as the benchmarks for value.  And, in general, the greater the economic risk that providers assume, the greater the economic disincentive to overutilize services.  According to more than one of these commenters, the current prohibitions are even antithetical to the stated goals of policy makers both in the Congress and within HHS for health care delivery and payment reform.  Although we agree in concept, we continue to operate substantially in a volume-based payment system.  Thus, we must proceed with caution, even as we propose the significant changes outlined in this proposed rule.”

The government regulators are late to the game in recognizing the ambiguity and the absence of reality regarding the existing regulations.  The regulatory philosophy has long been to make everything illegal and then work their way backwards granting Exceptions and Safe Harbors, precisely because actually “describing” an acceptable arrangement is extremely difficult, especially when the violation could be based upon the intent of the individuals.  That lack of clarity has always created a great deal of potential risk for participants.

VBE Description

“We intend the definition of “value-based enterprise” to include only organized groups of health care providers, suppliers, and other components of the health care system collaborating to achieve the goals of a value-based health care system.  An “enterprise” may be distinct legal entity–such as an ACO–with a formal governing body, operating agreement or bylaws, and the ability to receive payment on behalf of its affiliated health care providers.  An “enterprise” may also consist only of the two parties to a value-based arrangement with the written documentation recording the arrangement serving as the required governing document that describes the enterprise and how the parties intend to achieve its value-based purpose(s).  Whatever its size and structure, a value-based enterprise is essentially a network of participants (such as clinicians, providers, and suppliers) that have agreed to collaborate with regard to a target patient population to put the patient at the center of care through care coordination, increase efficiencies in the delivery of care, and improve outcomes for patients.  We have proposed our definition of “value-based enterprise” in terms of the functions of the enterprise as it is not our intention to dictate or limit the appropriate legal structure for qualifying as a value-based enterprise.”

Should be accountable care organizations for the first attempt to provide exceptions for organized healthcare enterprises.  Accountable health care organizations were created by the Accountable Care Act of 2010.  A standing joke for legal presenters discussing ACOs was to ask the audience what an ACO was called before it was called an ACO.  The answer is:  a felony!

These ideas are new and the general intent is to protect legitimate value-based enterprises from the Anti-Kickback or the self-referral prohibitions.  However, at this stage, they are obviously quite vague.  This calls to mind Justice Potter Stewart’s quote regarding pornography:

“I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description, and perhaps I could never succeed in intelligibly doing so.  But I know when I see it . . .”.  Jacobellis v. Ohio (U.S. Supreme Ct. 1964).

Since these proposed regulations are brand new, fairly short in the way of explanation, fairly broad in the terms of coverage and without any actual examples of what does and doesn’t work, you should be very cautious when you first participate in any VBE design to take advantage of these situations.