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Rule

Medicare and State Health Care Programs: Fraud and Abuse; Revisions to Safe Harbors Under the Anti-Kickback Statute, and Civil Monetary Penalty Rules Regarding Beneficiary Inducements

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Start Preamble Start Printed Page 77684

AGENCY:

Office of Inspector General (OIG), Department of Health and Human Services (HHS).

ACTION:

Final rule.

SUMMARY:

This final rule amends the safe harbors to the Federal anti-kickback statute by adding new safe harbors and modifying existing safe harbors that protect certain payment practices and business arrangements from sanctions under the anti-kickback statute. This rule is issued in conjunction with the Department of Health and Human Services' (HHS's) Regulatory Sprint to Coordinated Care and focuses on care coordination and value-based care. This rule also amends the civil monetary penalty (CMP) rules by codifying a revision to the definition of “remuneration” added by the Bipartisan Budget Act of 2018 (Budget Act of 2018).

DATES:

These regulations are effective January 19, 2021.

Start Further Info

FOR FURTHER INFORMATION CONTACT:

Stewart Kameen or Samantha Flanzer, Office of Counsel to the Inspector General, (202) 619-0335.

End Further Info End Preamble Start Supplemental Information

SUPPLEMENTARY INFORMATION:

Social Security Act citationUnited States Code citation
1128B, 1128D, 1102, 1128A42 U.S.C. 1320a-7b, 42 U.S.C. 1320a-7d, 42 U.S.C. 1302, 42 U.S.C. 1320a-7a.

I. Executive Summary

A. Purpose of the Regulatory Action

The Secretary of HHS (the Secretary) has identified transforming the U.S. health care system to one that pays for value as a top priority. Unlike the traditional fee-for-service (FFS) payment system, which rewards providers for the volume of care delivered, a value-driven health care system is one that pays for health and outcomes. Delivering better value from the health care system will require the transformation of established practices and enhanced collaboration among providers and other individuals and entities. The purpose of this rulemaking is to finalize modifications to existing safe harbors to the Federal anti-kickback statute and finalize the addition of new safe harbors and a new exception to the civil monetary penalty provision prohibiting inducements to beneficiaries, “Beneficiary Inducements CMP,” to remove potential barriers to more effective coordination and management of patient care and delivery of value-based care.

The Department launched the Regulatory Sprint with the express purpose of removing potential regulatory barriers to care coordination and value-based care created by certain key health care laws and associated regulations, including the Federal anti-kickback statute and Beneficiary Inducements CMP.[1] Through the Regulatory Sprint, HHS aims to encourage and improve patients' experience of care, providers' coordination of care, and information sharing to facilitate efficient care and preserve and protect patients' access to data.

The Federal anti-kickback statute is an intent-based, criminal statute that prohibits intentional payments, whether monetary or in-kind, in exchange for referrals or other Federal health care program business. Safe harbor regulations describe various payment and business practices that, although they potentially implicate the Federal anti-kickback statute, are not treated as offenses under the statute. Compliance with a safe harbor is voluntary. The Beneficiary Inducements CMP is a civil, administrative statute that prohibits knowingly offering something of value to a Medicare or State health care program beneficiary to induce them to select a particular provider, practitioner, or supplier.

Stakeholders have raised concerns that these statutes have chilling effect on innovation and value-based care because arrangements in which providers and others coordinate the care of patients with other providers, share resources among themselves to facilitate better care coordination, share in the benefits of more efficient care delivery, and engage and support patients can implicate these statutes.

B. The Proposed Rule

On October 17, 2019, OIG published a notice of proposed rulemaking [2] (OIG Proposed Rule) to add or amend various regulatory protections under the Federal anti-kickback statute and Beneficiary Inducements CMP with the goal of proposing protections for certain value-based arrangements that would improve quality, outcomes, and efficiency. The proposals focused on arrangements to advance the coordination and management of patient care, with an aim to support innovative methods and novel arrangements, including the use of digital health technology such as remote patient monitoring and telehealth. We proposed safe harbors for value-based arrangements where the parties assume full financial risk, substantial downside financial risk, and no or lower risk. The proposed safe harbors offered more flexibility for arrangements where the parties assumed more financial risk. Consistent with OIG's law enforcement mission and section 1128D(a)(2)(I) of the Act, the proposals included safeguards tailored to protect Federal health care programs and beneficiaries from the risks of fraud and abuse associated with kickbacks, such as overutilization and inappropriate patient steering, as well as risks associated with risk-based payment mechanisms, such as stinting on care.

The OIG Proposed Rule proposed new terminology to define the universe of value-based arrangements that could qualify for the new safe harbors, proposing to require that providers, suppliers, practitioners, and others would form value-based enterprises (VBEs) to collaborate to achieve value-based purposes, such as coordinating and managing a target patient population, improving quality of care for a target patient population, and reducing costs. VBEs could be large or small. VBEs could be formal corporate structures or looser affiliations. Under the proposed definition, VBEs would be required to have an accountable body and transparent governance. We proposed that some types of entities would not be eligible to use the value-based safe harbors because of heightened fraud risk and because the entities did not play a central, frontline role in coordinating and managing patient care.Start Printed Page 77685

The OIG Proposed Rule proposed to modify existing safe harbors that advance coordinated care for patients, including information sharing. OIG proposed modifications to existing safe harbors for local transportation, electronic health records arrangements, and personal services and management contracts. Further, the OIG Proposed Rule proposed new protections for outcomes-based payments, cybersecurity technology and services arrangements, remuneration in connection with CMS-sponsored models (largely supplanting the need for separate OIG fraud and abuse waivers for these models), telehealth technologies for in-home dialysis patients (statutory), and Medicare Shared Savings Program ACO beneficiary incentives (statutory). For each new safe harbor or exception, OIG proposed a set of conditions designed to ensure that the safe harbor or exception protected beneficial arrangements and reduced risks of fraud and abuse.

Taken as a whole, the OIG Proposed Rule proposed significant new flexibilities for value-based arrangements and modernization of the safe harbor regulations to account for the ongoing evolution of the health care delivery system. OIG developed its proposals in coordination with the Centers for Medicare & Medicaid Services (CMS), which concurrently issued proposed regulations in connection with the Regulatory Sprint (CMS NPRM).[3] OIG solicited comments on the wide range of issues raised by the proposals. We received 337 timely comments, 327 of which were unique, from a broad range of stakeholders.

C. The Final Rule

We are finalizing the proposed new and modified anti-kickback statute safe harbors and exception to the Beneficiary Inducements CMP, with modifications and clarifications explained in the preamble to this rule. Stakeholder reaction was largely positive, although many commenters raised concerns and expressed preferences about specific provisions. Some commenters raised concerns about potential risks of fraud and impacts on competition.

In this final rule, we sought to strike the right balance between flexibility for beneficial innovation and better coordinated patient care with necessary safeguards to protect patients and Federal health care programs. Many beneficial arrangements do not implicate the anti-kickback statute and do not need protection. For example, the parties may be exchanging nothing of value between them or the arrangements might involve no Federal health care program patients or business. Other beneficial arrangements might implicate the statute (for example, the arrangement might involve parties that are exchanging something of value and are in a position to refer Federal health care program business between them) but will not fit in these or other available safe harbors. Arrangements are not necessarily unlawful because they do not fit in a safe harbor. Arrangements that do not fit in a safe harbor are analyzed for compliance with the Federal anti-kickback statute based on the totality of their facts and circumstances, including the intent of the parties. Some care coordination and value-based arrangements can be structured to fit in existing safe harbors.

Flexibilities to engage in new business, care delivery, and digital health technology arrangements with lowered compliance risk may assist industry stakeholders in their response to and recovery from the current public health emergency resulting from the novel coronavirus disease 2019 (COVID-19) pandemic. The final rule may also help providers and others develop sustainable value-based care delivery models for the future.

1. Final Anti-Kickback Statute Safe Harbors

We are finalizing the following regulations, as explained in section III of this preamble.

Terminology and Framework. We are finalizing, with modifications, the proposed terminology that describes VBEs and VBE participants eligible to use the value-based safe harbors and the tiered framework of three value-based safe harbors that vary based on the level of risk assumed by the parties, with more flexibility associated with assumption of more risk. See section III.2.1-2 for further discussion.

Safe Harbors for Value-Based Arrangements. We are finalizing, with modifications, three new safe harbors for remuneration exchanged between or among participants in a value-based arrangement (as further defined) that fosters better coordinated and managed patient care:

(i) Care coordination arrangements to improve quality, health outcomes, and efficiency (paragraph 1001.952(ee)) without requiring the parties to assume risk;

(ii) value-based arrangements with substantial downside financial risk (paragraph 1001.952(ff)); and,

(iii) value-based arrangements with full financial risk (paragraph 1001.952(gg)).

These safe harbors address a broad range of potential value-based arrangements for care coordination activities, including use of digital health technology. We discuss each safe harbor in more detail in section III.B.3-5. The value-based safe harbors vary, among other ways, by the types of remuneration protected (in-kind or in-kind and monetary), the types of entities eligible to rely on the safe harbors, the level of financial risk assumed by the parties, and the types of safeguards included as safe harbor conditions. By design, these safe harbors offer flexibility for innovation and customization of value-based arrangements to the size, resources, needs, and goals of the parties to them. The safe harbors allow for emerging arrangements that reflect up-to-date understandings in medicine, science, and technology.

These three new safe harbors are not the exclusive, available safe harbors for care coordination or value-based arrangements. All three value-based safe harbors offer protection for in-kind remuneration, such as technology or services. However, only the safe harbors for value-based arrangements with substantial assumption of risk (paragraphs 1001.952(ff) and (gg)) protect monetary remuneration. The care coordination arrangements safe harbor at paragraph 1001.952(ee), which requires little or no assumption of risk, does not. However, parties to arrangements involving monetary remuneration, such as shared savings or performance bonus payments, may be eligible for the new protection for outcomes-based payments at paragraph 1001.952(d)(2). Parties to arrangements under CMS-sponsored models may prefer to look to the new safe harbor specifically for those models at paragraph 1001.952(ii).

As explained at section III.B.2.e below, entities ineligible to use the value-based safe harbors are: Pharmaceutical manufacturers, distributors, and wholesalers; pharmacy benefit managers (PBMs); laboratory companies; pharmacies that primarily compound drugs or primarily dispense compounded drugs; manufacturers of devices or medical supplies; entities or individuals that sell or rent durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) (other than a pharmacy or a physician, provider, or other entity that primarily furnishes services); and medical device distributors and wholesalers. However, the care coordination arrangements safe harbor includes a separate pathway, with specific conditions, that protects digital technology arrangements (as Start Printed Page 77686defined at paragraph 1001.952(ee)(14)) involving manufacturers of devices or medical supplies and DMEPOS.

Patient Engagement and Support Safe Harbor. We are finalizing, with modifications, a new safe harbor (paragraph 1001.952(hh)) for patient engagement tools and supports furnished by a participant in a value-based enterprise to a patient in a target patient population (discussed in section III.B.6). This safe harbor uses the same ineligible entities list as the value-based safe harbors, above, but includes a pathway for manufacturers of devices or medical supplies to provide digital health technology.

CMS-Sponsored Models Safe Harbor. We are finalizing, with modifications, a new safe harbor (paragraph 1001.952(ii)) for CMS-sponsored model arrangements and CMS-sponsored model patient incentives that would require OIG fraud and abuse waivers. This safe harbor (discussed at section III.B.7) is intended to provide greater predictability model participants and uniformity across models. It will reduce the need for separate OIG fraud and abuse waivers for new CMS-sponsored models.

Cybersecurity Technology and Services Safe Harbor. We are finalizing, with modifications, a new safe harbor (paragraph 1001.952(jj)) for remuneration in the form of cybersecurity technology and services (discussed at section III.B.8). This safe harbor will facilitate improved cybersecurity in health care and is available to all types of individuals and entities.

Electronic Health Records Safe Harbor. We are finalizing our proposal to modify the existing safe harbor for electronic health records items and services (paragraph 1001.952(y)). We are finalizing, with modifications, changes to update and remove provisions regarding interoperability, remove the sunset provision and prohibition on donation of equivalent technology, and clarify protections for cybersecurity technology and services included in an electronic health records arrangement (discussed at section III.B.9).

Personal Services and Management Contracts and Outcomes-Based Payments. We are finalizing our proposal to modify the existing safe harbor for personal services and management contracts (paragraph 1001.952(d)(1)). We are finalizing, without modification, changes to increase flexibility for part-time or sporadic arrangements and arrangements for which aggregate compensation is not known in advance. We are also a finalizing, with modifications, new protection for outcomes-based payments (paragraph 1001.952(d)(2)). These changes are discussed at section III.B.10. The new safe harbor for outcomes-based payments protects payments tied to achieving measurable outcomes that improve patient or population health or appropriately reduce payor costs. It makes ineligible the same entities that are ineligible for the value-based safe harbors.

Warranties. We are finalizing our proposal to modify the existing safe harbor for warranties (paragraph 1001.952(g)). We are finalizing, without modification, revisions to the definition of “warranty” and to provide protection for warranties for one or more items and related services (discussed at section III.B.11). This safe harbor is available to any type of entity.

Local Transportation. We are finalizing our proposal to modify the existing safe harbor for local transportation furnished to beneficiaries (paragraph 1001.952(bb)). We are finalizing, with modifications, changes to expand mileage limits for rural areas (up to 75 miles) and eliminate mileage limits for transportation to convey patients discharged from the hospital to their place of residence (discussed at section III.B.12). We also clarify that the safe harbor is available for transportation provided through rideshare arrangements.

ACO Beneficiary Incentives. We are codifying, without modification to our proposal, the statutory exception to the definition of “remuneration” at section 1128B(b)(3)(K) of the Act related to ACO Beneficiary Incentive Programs for the Medicare Shared Savings Program (paragraph 1001.952(kk)) (discussed at section III.B.13).

2. Beneficiary Inducements CMP

The final rule amends the Beneficiary Inducements CMP regulations at 42 CFR 1003 as follows:

Telehealth Technologies for In-Home Dialysis Patients. We are codifying the statutory exception for “telehealth technologies” furnished to certain in-home dialysis patients, pursuant to section 50302(c) of the Budget Act of 2018 (discussed at section III.C.1). We are finalizing our proposal with modifications.

By operation of law, arrangements that fit in the new and modified Federal anti-kickback statute safe harbors for patient engagement and support, paragraph 1001.952(hh), and local transportation, paragraph 1001.952(bb), are also protected under the Beneficiary Inducements CMP.

II. Background

A. Purpose and Need for Regulatory Action

HHS's Regulatory Sprint aims to remove potential regulatory barriers to care coordination and value-based care created by four key health care laws and associated regulations: (i) The physician self-referral law, (ii) the Federal anti-kickback statute, (iii) the Health Insurance Portability and Accountability Act of 1996 (HIPAA),[4] and (iv) rules under 42 CFR part 2 related to substance use disorder treatment.

Through the Regulatory Sprint, HHS aims to encourage and improve:

  • A patient's ability to understand treatment plans and make empowered decisions;
  • providers' alignment on end-to-end treatment (i.e., coordination among providers along the patient's full care journey);
  • incentives for providers to coordinate, collaborate, and provide patients tools and supports to be more involved in their own care; and
  • information sharing among providers, facilities, and other stakeholders in a manner that facilitates efficient care while preserving and protecting patient access to data.

Since the enactment in 1972 of the Federal anti-kickback statute, there have been significant changes in the delivery of, and payment for, health care items and services both within the Medicare and Medicaid programs and also for non-Federal payors and patients. Such changes include modifications to traditional FFS Medicare (i.e., Medicare Parts A and B), Medicare Advantage, and States' Medicaid programs. The Department has a longstanding commitment to aligning Medicare payment with quality of care delivered to Federal health care program beneficiaries.

The Department identified the broad reach of the Federal anti-kickback statute [5] and the CMP law provision prohibiting inducements to beneficiaries, the “Beneficiary Inducements CMP” [6] as potentially inhibiting beneficial arrangements that would advance the transition to value-based care and improve the coordination of patient care among providers and across care settings in both the Federal health care programs and commercial sectors.

Start Printed Page 77687

B. Federal Anti-Kickback Statute and Safe Harbors

Section 1128B(b) of the Act, (42 U.S.C. 1320a-7b(b), the anti-kickback statute), provides for criminal penalties for whoever knowingly and willfully offers, pays, solicits, or receives remuneration to induce or reward the referral of business reimbursable under any of the Federal health care programs, as defined in section 1128B(f) of the Act (42 U.S.C. 1320a-7b(f)). The offense is classified as a felony and is punishable by fines of up to $100,000 and imprisonment for up to 10 years. Violations of the Federal anti-kickback statute also may result in the imposition of CMPs under section 1128A(a)(7) of the Act (42 U.S.C. 1320a-7a(a)(7)), program exclusion under section 1128(b)(7) of the Act (42 U.S.C. 1320a-7(b)(7)), and liability under the False Claims Act (31 U.S.C. 3729-33).

The types of remuneration covered specifically include, without limitation, kickbacks, bribes, and rebates, whether made directly or indirectly, overtly or covertly, in cash or in kind. In addition, prohibited conduct includes not only the payment of remuneration intended to induce or reward referrals of patients but also the payment of remuneration intended to induce or reward the purchasing, leasing, or ordering of, or arranging for or recommending the purchasing, leasing, or ordering of, any good, facility, service, or item reimbursable by any Federal health care program.

Because of the broad reach of the statute and concerns that some relatively innocuous business arrangements were covered by the statute and therefore potentially subject to criminal prosecution, Congress enacted section 14 of the Medicare and Medicaid Patient and Program Protection Act of 1987, Public Law 100-93 (note to section 1128B of the Act; 42 U.S.C. 1320a-7b). This provision specifically requires the development and promulgation of regulations, the so-called safe harbor provisions, that would specify various payment and business practices that would not be subject to sanctions under the anti-kickback statute, even though they potentially may be capable of inducing referrals of business for which payment may be made under a Federal health care program.

Section 205 of HIPAA established section 1128D of the Act (42 U.S.C. 1320a-7d), which includes criteria for modifying and establishing safe harbors. Specifically, section 1128D(a)(2) of the Act provides that, in modifying and establishing safe harbors, the Secretary may consider whether a specified payment practice may result in:

  • An increase or decrease in access to health care services;
  • an increase or decrease in the quality of health care services;
  • an increase or decrease in patient freedom of choice among health care providers;
  • an increase or decrease in competition among health care providers;
  • an increase or decrease in the ability of health care facilities to provide services in medically underserved areas or to medically underserved populations;
  • an increase or decrease in costs to Federal health care programs;
  • an increase or decrease in the potential overutilization of health care services;
  • the existence or nonexistence of any potential financial benefit to a health care professional or provider, which benefit may vary depending on whether the health care professional or provider decides to order a health care item or service or arranges for a referral of health care items or services to a particular practitioner or provider; or
  • any other factors the Secretary deems appropriate in the interest of preventing fraud and abuse in Federal health care programs.

In giving the Department the authority to protect certain arrangements and payment practices under the anti-kickback statute, Congress intended the safe harbor regulations to be updated periodically to reflect changing business practices and technologies in the health care industry.[7] Since July 29, 1991, there have been a series of final regulations published in the Federal Register establishing safe harbors in various areas.[8] These safe harbor provisions have been developed to limit the reach of the statute somewhat by permitting certain non-abusive arrangements, while encouraging beneficial or innocuous arrangements.[9]

Health care providers and others may voluntarily seek to comply with final safe harbors so that they have the assurance that their business practices would not be subject to any anti-kickback enforcement action. Compliance with an applicable safe harbor insulates an individual or entity from liability under the Federal anti-kickback statute and the Beneficiary Inducements CMP only; individuals and entities remain responsible for complying with all other laws, regulations, and guidance that apply to their businesses.

C. Civil Monetary Penalty Authorities

1. Overview of OIG Civil Monetary Penalty Authorities

In 1981, Congress enacted the CMP law, section 1128A of the Act, 42 U.S.C. 1320a-7a, as one of several administrative remedies to combat fraud and abuse in Medicare and Medicaid. The law authorized the Secretary to impose penalties and assessments on persons who defrauded Medicare or Medicaid or engaged in certain other wrongful conduct. The CMP law also authorized the Secretary to exclude persons from Federal health care programs (as defined in section 1128B(f) of the Act, 42 U.S.C. 1320a-7b(f)) and to direct the appropriate State agency to exclude the person from participating in any State health care programs (as defined in section 1128(h) of the Act, 42 U.S.C. 1320a-7(h)). Congress later expanded the CMP law and the scope of exclusion to apply to all Federal health care programs, but the CMP applicable to beneficiary inducements remains limited to Medicare and State health care program beneficiaries. Since 1981, Congress has created various other CMP authorities covering numerous types of fraud and abuse.

2. The Definition of “Remuneration”

Section 1128A(a)(5) of the Act, 42 U.S.C. 1320a-7a(a)(5), the “Beneficiary Inducements CMP,” provides for the Start Printed Page 77688imposition of civil monetary penalties against any person who offers or transfers remuneration to a Medicare or State health care program (including Medicaid) beneficiary that the benefactor knows or should know is likely to influence the beneficiary's selection of a particular provider, practitioner, or supplier of any item or service for which payment may be made, in whole or in part, by Medicare or a State health care program (including Medicaid). Section 1128A(i)(6) of the Act, 42 U.S.C. 1320a-7a(i)(6), defines “remuneration” for purposes of the Beneficiary Inducements CMP as including transfers of items or services for free or for other than fair market value. Section 1128A(i)(6) of the Act also includes a number of exceptions to the definition of “remuneration.”

Pursuant to section 1128A(i)(6)(B) of the Act, any practice permissible under the anti-kickback statute, whether through statutory exception or safe harbor regulations issued by the Secretary, is also excepted from the definition of “remuneration” for purposes of the Beneficiary Inducements CMP. However, no parallel exception exists in the anti-kickback statute. Thus, the exceptions in section 1128A(i)(6) of the Act apply only to the definition of “remuneration” applicable to section 1128A.

Relevant to this rulemaking, the Budget Act of 2018 created a new exception to the definition of “remuneration” for purposes of the Beneficiary Inducements CMP. This statutory exception applies to “telehealth technologies” provided on or after January 1, 2019, by a provider of services or a renal dialysis facility to an individual with end stage renal disease (ESRD) who is receiving home dialysis for which payment is being made under Medicare Part B.

D. Summary of the OIG Proposed Rule

On October 17, 2019, OIG published a proposed rule in the Federal Register (84 FR 55694) setting forth certain proposed amendments to the safe harbors under the anti-kickback statute and a proposed amendment to the Beneficiary Inducements CMP exceptions (the OIG Proposed Rule). With respect to the anti-kickback statute, we proposed seven new safe harbors and modifications to four existing safe harbors. Specifically, we proposed new protection for:

  • A safe harbor for care coordination arrangements to improve quality, health outcomes, and efficiency (1001.952(ee));
  • A safe harbor for value-based arrangements with substantial downside financial risk (1001.952(ff));
  • A safe harbor for value-based arrangements with full financial risk (1001.952(gg));
  • A safe harbor for arrangements for patient engagement and support to improve quality, health outcomes, and efficiency (1001.952(hh));
  • A safe harbor for CMS-sponsored model arrangements and CMS-sponsored model patient incentives (1001.952(ii));
  • A safe harbor for cybersecurity technology and related services (1001.952(jj)); and
  • A safe harbor that would codify the statutory exception to the definition of “remuneration” at section 1128B(b)(3)(K) of the Act related to ACO Beneficiary Incentive Programs for the Medicare Shared Savings Program (1001.952(kk)).
  • An exception to the Beneficiary Inducements CMP for telehealth technologies for in-home dialysis patients (1003.110).

We proposed to modify:

  • The safe harbor for personal services and management contracts and outcomes-based payment arrangements (1001.952(d));
  • The safe harbor for warranties (1001.952(g));
  • The safe harbor for electronic health records items and services (1001.952(y)); and
  • The safe harbor for local transportation (1001.952(bb)).

An overarching goal of our proposals was to develop final rules that protect low-risk, beneficial arrangements without opening the door to fraudulent or abusive conduct that increases Federal health care program costs or compromises quality of care for patients or patient choice. We solicited comments on our proposed policies to obtain the benefit of public input from affected stakeholders.

Our proposals are summarized in greater detail in section III of this preamble, organized by topic, along with summaries of the final decisions, and summaries of the related comments and our responses.

E. Summary of the Final Rulemaking

In this final rule, we modify existing as well as add new safe harbors pursuant to our authority under section 14 of the Medicare and Medicaid Patient and Program Protection Act of 1987 by specifying certain payment practices that will not be subject to prosecution under the anti-kickback statute. We intend to protect practices that pose a low risk to Federal health care programs and beneficiaries, as long as specified conditions are met. In doing so, we considered the factors cited by Congress in granting statutory authority to the Secretary under Section 1128D(a)(2) of the Social Security Act.[10] Specifically, the new and modified safe harbors are designed to further the goals of access, quality, patient choice, appropriate utilization, and competition, while protecting against increased costs, inappropriate steering of patients, and harms associated with inappropriate incentives tied to referrals. We also codify into our regulations a statutory safe harbor for patient incentives offered by accountable care organizations (ACOs) to assigned beneficiaries under ACO Beneficiary Incentive Programs and an exception to the definition of “remuneration” in 42 CFR 1003.110 for certain telehealth technologies for in-home dialysis.

To facilitate review of the new and modified safe harbors and exception in context, we summarize the proposals and final regulations by topic in section III.B below. The following are the safe harbors and the exception that we are finalizing, together with the citation to where they appear in our regulations and a reference to the preamble section of this final rule where they are discussed in greater detail:

  • Modifications to the existing safe harbor for personal services and management contracts, including outcomes-based payments, at paragraph 1001.952(d) (preamble section III.B.10);
  • modifications to the existing safe harbor for warranties at paragraph 1001.952(g) (preamble section III.B.11);
  • modifications to the existing safe harbor for electronic health records items and services at paragraph 1001.952(y) (preamble section III.B.9);
  • modifications to the existing safe harbor for local transportation at paragraph 1001.952(bb) (preamble section III.B.12)
  • a new safe harbor for care coordination arrangements to improve quality, health outcomes, and efficiency at paragraph 1001.952(ee) (preamble sections III.B.1, III.B.2, and III.B.3);
  • a new safe harbor for value-based arrangements with substantial downside financial risk at paragraph 1001.952(ff) (preamble sections III.B.1, III.B.2, and III.B.4);
  • a new safe harbor for value-based arrangements with full financial risk at paragraph 1001.952(gg) (preamble sections III.B.1, III.B.2, and III.B.5);
  • a new safe harbor for arrangements for patient engagement and support to improve quality, health outcomes, and Start Printed Page 77689efficiency at paragraph 1001.952(hh) (preamble section III.B.6);
  • a new safe harbor for CMS-sponsored model arrangements and CMS-sponsored model patient incentives at paragraph 1001.952(ii) (preamble section III.B.7);
  • a new safe harbor for cybersecurity technology and related services at paragraph 1001.952(jj) (preamble section III.B.8);
  • a new safe harbor for accountable care organization (ACO) beneficiary incentive program at paragraph 1001.952(kk) (preamble section III.B.13); and
  • an exception for telehealth technologies for in-home dialysis at paragraph 1003.110 (preamble section III.C.1)

III. Summary of Final Provisions, Public Comments, and OIG Responses

A. General

OIG received 337 comments, 327 of which were unique, in response to the OIG Proposed Rule. A range of individuals and entities submitted these comments, including: Physicians and other types of clinicians, hospitals and health systems, other health care providers (e.g., post-acute providers, laboratories, durable medical equipment suppliers, and dialysis providers), accountable care organizations, pharmaceutical and medical device manufacturers, health technology entities, pharmacies, third-party payors, trade associations, law firms, and consumer and patient advocacy groups.

As a general matter, most commenters strongly supported the proposed safe harbors and the need for regulatory reform to the safe harbors and exceptions to the definition of “remuneration” under the Beneficiary Inducements CMP. While the majority of commenters recommended various revisions to the proposed safe harbors to increase regulatory flexibility, some commenters acknowledged that increased regulatory flexibility could increase the risk of harms associated with fraud and abuse and recommended revisions to add or strengthen safeguards in the safe harbor proposals. A few did not support the proposed safe harbor protections for value-based arrangements as proposed in paragraphs 1001.952(ee), (ff), (gg), primarily citing fraud and abuse risks. We have considered these comments carefully in developing the final rule, as described in more detail in responses to comments.

1. Alignment With CMS

Several of the final safe harbors intersect with the physician self-referral law exceptions that CMS is finalizing as part of the Regulatory Sprint: The three new safe harbors for value-based arrangements at paragraphs 1001.952(ee), (ff), and (gg), the new cybersecurity safe harbor at paragraph 1001.952(jj), and the modifications to the electronic records safe harbor at paragraph 1001.952(y).

Comment: We received comments asking OIG and CMS to align our final rules in connection with the Regulatory Sprint to the greatest extent possible. Some commenters believed that the CMS and OIG proposals would perpetuate a dual regulatory environment (where, e.g., an arrangement could potentially violate one law but meet the requirements for protection under the other) and that a lack of consistency would make it more challenging for entities to navigate an already-complex regulatory framework. Some commenters suggested that the OIG Proposed Rule was too narrow compared to the CMS NPRM and requested that OIG protect what they described as a broader universe of arrangements that would be protected under the CMS proposals. Another commenter asked that OIG clarify in the final rule that compliance with the physician self-referral law would rebut any implication of intent under Federal anti-kickback statute.

Response: We are mindful of reducing burden on providers and other industry stakeholders, and we have sought to align value-based terminology and safe harbor conditions with those being adopted by CMS in its physician self-referral regulations as part of the Regulatory Sprint wherever possible (CMS Final Rule).[11] However, complete alignment is not feasible because of fundamental differences in statutory structures and sanctions across the two laws. As aforementioned, the Federal anti-kickback statute is an intent-based, criminal statute that covers all referrals of Federal health care program business (including, but not limited to, physician referrals). In contrast, the physician self-referral law is a civil, strict-liability statute that prohibits payment by CMS for a more limited set of services referred by physicians who have certain financial relationships with the entity furnishing the services. As a result, the value-based exceptions adopted by CMS do not need to contemplate the broad range of conduct that implicates the Federal anti-kickback statute.

Federal anti-kickback statute safe harbors and physician self-referral law exceptions also operate differently. Because the physician self-referral law is a strict-liability statute, when an arrangement implicates the law, compliance with an exception is the only option to avoid overpayment liability. In other words, the exceptions define the full universe of acceptable arrangements that implicate the physician self-referral law. Even minor or erroneous deviations from the specific terms of a physician self-referral law exception can result in non-compliance and, because of the statute's strict liability, overpayments. In contrast, compliance with an anti-kickback statute safe harbor is voluntary, and there are many arrangements that do not fit in a safe harbor that are lawful under the anti-kickback statute. Deviating from a safe harbor does not mean that an arrangement violates the anti-kickback statute. For arrangements that do not fit in a safe harbor, liability is determined based on the totality of facts and circumstances, including the intent of the parties.

Because the Federal anti-kickback statute is not a strict liability law, the value-based safe harbors we are adopting need not capture the full universe of value-based arrangements that are legal under the Federal anti-kickback statute in order to accomplish the goals of removing barriers to more effective coordination and management of patient care. Thus, in designing our safe harbors, rather than mirror CMS's exceptions, we have included safe harbor conditions designed to ensure that protected arrangements are not disguised kickback schemes. We recognize that, for purposes of those arrangements that implicate both the physician self-referral law and the Federal anti-kickback statute, the value-based safe harbors may therefore protect a narrower universe of such arrangements than CMS's exceptions.

To protect Federal health care programs and beneficiaries, we believe that it is important for the Federal anti-kickback statute to serve as “backstop” protection against abusive arrangements that involve the exchange of remuneration intended to induce or reward referrals and that might be protected by the physician self-referral law exceptions. In this way, the OIG and CMS rules, operating together, create pathways for parties entering into value-based arrangements that are subject to both laws to develop and implement value-based arrangements that avoid strict liability for technical noncompliance, while ensuring that the Federal Government can pursue those parties engaging in arrangements that are intentional kickback schemes.Start Printed Page 77690

Further, many requirements of the final safe harbors and exceptions are consistent, particularly in the cybersecurity and electronic health records areas. In addition, the value-based terminology that describes the value-based enterprises and value-based arrangements that are eligible for protection under a value-based safe harbor under the anti-kickback statute or a value-based exception under the physician self-referral law are aligned in nearly all respects, except with respect to the definition of “value-based activities” and where slightly different language was required to integrate the new rules into the existing regulatory structures (points of difference are discussed later in this preamble). As a practical matter, this means that the same value-based enterprise or value-based arrangement can seek protection under both regulatory schemes, provided the relevant conditions of a safe harbor and an exception are satisfied.

In sum, because of statutory distinctions, compliance with a value-based safe harbor may require satisfaction of conditions additional to, or different from, those in a corresponding physician self-referral law exception. This is by design. We have endeavored to ensure that an arrangement that fits in a value-based safe harbor has a viable pathway for protection under a physician self-referral law exception. However, an arrangement that fits under a physician self-referral law exception might not fit in an anti-kickback statute safe harbor or might not fit unless additional features are added to the arrangement. That said, it is the Department's belief that compliance with one regulatory structure should not preclude compliance with the other.

We disagree that compliance with the physician self-referral law rebuts any implication of intent under the Federal anti-kickback statute. Indeed, it is possible, depending on the facts and circumstances, that an arrangement may comply with an exception to the physician self-referral law but violate the Federal anti-kickback statute. The fact that a party complies with the requirements of the physician self-referral law is not evidence that the party does or does not have the intent to induce or reward referrals for purposes of the Federal anti-kickback statute. Parties may achieve compliance with an applicable exception to the physician self-referral law regardless of the intent of the parties. In addition, other differences between the physician self-referral law and Federal anti-kickback statute could lead to compliance with the physician self-referral law but not with the Federal anti-kickback statute. For example, parties may conclude that there are no “referrals,” as that term is defined for purposes of the physician self-referral law, but such assessment is inconclusive with respect to whether there are referrals, or the requisite intent to induce or reward referrals, for purposes of the Federal anti-kickback statute.

2. Comments Outside the Scope of the Rulemaking

We received some comments that were outside the scope of this rulemaking. In some cases, comments (e.g., a request to update the physician self-referral law's in-office ancillary services exception) were outside the scope of our authority. Other comments and suggestions were outside the scope of this rulemaking but could be considered for future guidance or rulemaking. For example, some commenters urged OIG to modify existing safe harbors or develop entirely new safe harbors that were not related to the safe harbors and modifications proposed in the OIG Proposed Rule (e.g., an amendment to the referral services safe harbor, new safe harbors specific to Indian health care providers, and a new safe harbor specific to value-based contracting with manufacturers for the purchase of pharmaceutical products). Others requested sub-regulatory guidance outside the rule, such as a Frequently Asked Question feature to respond to specific questions or common scenarios from stakeholders. These or other topics that are outside the scope of this particular rulemaking are not summarized or discussed in detail in this final rule.

In the next sections of this preamble, we summarize each proposal from the OIG Proposed Rule (full detail of the proposals can be found at 84 FR 55694); summarize the final rule, including significant changes from the proposals; and respond to public comments.

B. Federal Anti-Kickback Statute Safe Harbors

1. Value-Based Framework for Value-Based Arrangements

Summary of OIG Proposed Rule: We proposed a set of value-based terminology, detailed in the next section, to describe the universe of value-based arrangements that would, as a threshold matter, be eligible to seek safe harbor protection under three safe harbors specific to value-based arrangements between VBEs and one or more of their VBE participants or between or among VBE participants: (i) The care coordination arrangements to improve quality, health outcomes, and efficiency safe harbor at 42 CFR 1001.952(ee), (ii) the value-based arrangements with substantial downside financial risk safe harbor at 42 CFR 1001.952(ff), (iii) and the full financial risk safe harbor at 42 CFR 1001.952(gg) (collectively referred to as the “value-based safe harbors”). The value-based safe harbors would offer greater flexibilities to parties as they assume more downside financial risk.

We proposed this tiered structure to support the transformation of industry payment systems and in recognition that arrangements involving higher levels of downside financial risk for those in a position to make referrals or order products or services could curb, at least to some degree, FFS incentives to order medically unnecessary or overly costly items and services.

Summary of Final Rule: We are finalizing the tiered value-based framework of three safe harbors that vary based on risk assumption of the parties. Modifications to specific value-based terminology are discussed in the next section.

Comment: Many commenters expressed support for our value-based framework. For example, a commenter stated that OIG had achieved a proper balance between flexibility for beneficial innovation and safeguards to protect patients and Federal health care programs against fraud and abuse risks. Others commended OIG for embracing the transition from no risk to downside financial risk as a central component of the value-based framework. In particular, commenters supported OIG's proposal under the care coordination arrangements safe harbor to afford protection to value-based arrangements in which parties had yet to take on downside financial risk.

Response: We have finalized the value-based framework of three safe harbors, as proposed. We have made modifications to some of the value-based terminology as discussed in Section III.B.2 below. We explain the specific reasons for the modifications to the value-based terminology in responses to comments in section III.B.2.

Comment: Several commenters expressed general support for the proposed value-based safe harbors, while also recommending that OIG proceed with caution. For example, a payor urged us to maintain in the final rule the level of rigor reflected in the proposed value-based safe harbor and not increase the leniency provided under the proposed regulations. Start Printed Page 77691Similarly, a trade association suggested that OIG take a limited “phased-in” approach to the safe harbors to facilitate identification of appropriate patient protection and program integrity guardrails. Another commenter recommended that, at least once every 3 years, OIG assess and report on the effects of the value-based safe harbors, e.g., review clinical benefits, analyze cost savings, and solicit stakeholder input. A commenter also cautioned that giving more flexible safe harbor protection to value-based arrangements that include greater risk may push providers into assuming risk before they are ready to do so.

Response: With this final rule, we have sought to find the appropriate balance between the policy goals of the Regulatory Sprint and the need to protect both patients and Federal health care programs. We decline to adopt the commenters' specific recommendations related to a potential phased-in approach or the regular publication of related reports, but we note that we may undertake future reviews of value-based arrangements in Federal health care programs as part of our oversight mission. We have included robust safeguards in the value-based safe harbors to address the commenters' concerns. We note that we are affording greater flexibilities under the substantial downside and full financial risk safe harbors in recognition of parties' assumption of the requisite level of downside financial risk. Others who may not be ready or willing to assume risk, or who are only ready or willing to assume risk at a level below that required by the substantial downside financial risk or full financial risk safe harbors, may look to the care coordination arrangements safe harbor, which does not require the assumption of risk, structure arrangements to fit in another safe harbor that might apply, or enter into arrangements that are not protected by a safe harbor, given that structuring an arrangement to satisfy a safe harbor is voluntary.

Comment: Other commenters expressed concerns about potential fraud and abuse, with several asserting that the value-based safe harbors would foster an environment vulnerable to fraud and anticompetitive effects. Commenters had varying rationales for their position, including, for example, that existing safe harbors would be sufficient to advance value-based models; evaluation was warranted before finalizing these safe harbors; and the care coordination focus of the value-based safe harbors would lead to further industry consolidation. A state health department broadly asserted that the proposals lacked sufficient detail and, if finalized, would pose enforcement challenges. That commenter requested that we add more detail in our rulemaking, rather than through sub-regulatory guidance, to assist the state with developing comprehensive policies to support the rule.

Several radiology trade associations expressed concern that the safe harbors omitted the guiding principle of fair market value and the restriction on determining the amount or nature of the remuneration based on the volume or value of referrals, and consequently, the value-based arrangements could be abused or used as a means for referring providers to pay less for radiology or imaging services. Generally, these commenters supported the creation of value-based safe harbors only to the extent parties to a value-based arrangement had assumed significant downside financial risk. They recommended that each value-based safe harbor include provisions prohibiting referring VBE participants from underpaying for radiology and imaging services within a VBE or otherwise leveraging their ability to direct referrals.

Response: The commenters raise important concerns about potential harms resulting from fraud and abuse; we considered these harms carefully in developing the final rule. In response to comments, throughout this final rule we have clarified regulatory text to minimize confusion; offered additional explanations in preamble to expound upon OIG's interpretation of provisions in the value-based safe harbors; and provided illustrative examples for the value-based terminology, which we believe will aid in both enforcement and compliance. Parties also may request an advisory opinion from OIG to determine whether an arrangement meets the conditions of a safe harbor or is otherwise sufficiently low risk under the Federal anti-kickback statute to receive prospective immunity from administrative sanctions by OIG.

This final rule aims to protect value-based arrangements that enhance patient care and deliver value, and we have included safeguards designed to preclude from protection arrangements that lead to medically unnecessary care, might involve coercive marketing, or limit clinical decision-making. These safeguards are described in greater detail below and throughout this preamble. In addition, certain entities that present heightened program integrity risk and are less likely to be at the front lines of care coordination are not eligible to rely on the value-based safe harbors or subject to additional safeguards. We believe the potential benefits of the final value-based safe harbors (e.g., facilitating the transition to value-based care and encouraging greater care coordination) outweigh the potential risks related to fraud and competition.

The value-based safe harbors, as finalized, do not include the traditional fraud and abuse safeguards of fair market value or a broad prohibition on taking into account the volume or value of any referrals. However, we have included other safeguards in each of the value-based safe harbors that are intended to address potential fraud and abuse risks, e.g., a prohibition on taking into account the volume or value of referrals outside the target patient population, limits on directed referrals, and others described elsewhere in this preamble. The risk sharing required by the substantial downside financial risk and full financial risk safe harbors reduces some fraud and abuse concerns associated with a traditional fee-for-service payment system. We also included safeguards specific to the care coordination arrangements safe harbor, e.g., a contribution requirement for recipients, in recognition, in part, of the fact that this value-based safe harbor does not require parties to assume financial risk or meet certain traditional safeguards, such as a fair market value requirement. The care coordination arrangements safe harbor does not protect monetary payments, including payments for services such as radiology or imaging. Nothing in the risk-based safe harbors prevents parties from negotiating fair market value arrangements for services or from using the personal services and management contracts and outcomes-based payments safe harbor at paragraph 1001.952(d), which includes fair market value requirements.

While existing safe harbors could protect many care coordination arrangements, comments we received in response to the OIG RFI reflected that existing safe harbors are insufficient to protect the range of care coordination arrangements envisioned by the Regulatory Sprint. For example, apart from employment, there is no existing safe harbor protection for the sharing of personnel or infrastructure at below-market-value rates. Thus, the value-based safe harbors will provide protection to a broader range of care coordination arrangements than is presently available under existing safe harbors. With respect to the commenter that suggested evaluation was warranted prior to implementing the value-based safe harbors, we solicited feedback on the anticipated approach for rulemaking Start Printed Page 77692in the RFI and solicited comments on specific safe harbors, an exception, and relevant considerations in the OIG Proposed Rule. We do not believe further evaluation is needed to inform the issuance of this final rule; indeed, further formal evaluation could delay regulatory flexibilities designed to facilitate innovative value-based care and care coordination arrangements.

With respect to concerns regarding industry consolidation, it is not the intent of this final rule to foster industry consolidation. The rule aims to increase options for parties to create a range of care coordination and value-based arrangements eligible for safe harbor protection, whether through employment, ownership, or contracts among otherwise unaffiliated, independent entities that wish to coordinate care. As explained elsewhere, the definition of a “value-based enterprise” is flexible, allowing for a broad range of participation and business structures. In addition, “value-based arrangements” are defined such that they can be among many participants or as few as two. The safe harbors are available to large and small systems and to rural and urban providers. We intend for this flexibility to ensure that smaller providers still have the opportunity to develop and enter into care coordination arrangements.

Comment: Several commenters highlighted the potential harms the proposed value-based safe harbors could pose to patients, e.g., cherry-picking, provision of medically unnecessary care, or stinting on care. Commenters also expressed concern that the safe harbors could negatively impact patient freedom of choice or impinge on the patient-physician relationship. To address these concerns, commenters had varying suggestions. For example, some commenters urged OIG to insert patient transparency requirements in the value-based safe harbor that would mirror similar requirements in the Medicare Shared Savings Program. One such commenter stated transparency is necessary to ensure public confidence that the benefits of a value-based arrangement would not be exclusive to those party to the agreement.

Response: We share the commenters' interests in protecting patients against cherry-picking, the provision of medically unnecessary care, stinting on care, patient steering, and any inappropriate infringement on the patient-doctor relationship. Accordingly, we have finalized safeguards in each of the three value-based safe harbors related to these issues. We did not propose patient transparency or notice requirements in the OIG Proposed Rule for the value-based safe harbors because we believed it potentially would impose undue administrative burden on providers, and we are not including any such condition in this final rule.

Comment: We received a number of comments stating that our approach to the value-based safe harbors was not bold enough and would act as a barrier to advancing the coordination and management of care. For example, a commenter stated that the proposals, as drafted, would not advance care coordination and better quality outcomes because the OIG sets too many limits and boundaries within the value-based safe harbors. In addition, several commenters asserted that our definitions of certain key terms, such as value-based enterprise and VBE participant, were overly prescriptive. Other commenters asserted that our view of financial risk was too narrow and failed to recognize, among other things, that providers are already at substantial financial risk under existing financial incentives and penalties created by payment structures.

Response: We disagree with those commenters who stated that our definitions are too narrow or prescriptive and that the proposed value-based safe harbors are not bold enough because they would impose limits on the types of arrangements that are protected.

As discussed in section III.B.2, we have defined the value-based terminology to allow for a wide range of individuals and entities to participate in value-based arrangements. The value-based safe harbors do not attempt to cover the entire universe of potentially beneficial arrangements, nor the entire universe of what may constitute risk. Indeed, we acknowledged in the OIG Proposed Rule, and confirm here, that we understood that participants in value-based arrangements might assume certain types of risk other than downside financial risk for items and services furnished to a target patient population (e.g., upside risk, clinical risk, operational risk, contractual risk, or investment risk).[12] We continue to believe our focus on downside financial risk is warranted because the assumption of downside financial risk incentivizes those making the referral and ordering decisions to control costs and deliver efficient care in a way the other types of risk may not.

Further, the care coordination arrangements safe harbor requires no assumption of downside risk by parties to a value-based arrangement. Accordingly, parties that do not meet the definition of taking on “substantial downside financial risk” or “full financial risk” may seek protection for certain value-based arrangements under the care coordination arrangements safe harbor. They may also look to the new safe harbor protection for outcomes-based payments at paragraph 1001.952(d)(2).

We have included parameters in the value-based safe harbors to protect against risks of fraud and abuse, such as overutilization, inappropriate patient steering, or stinting on care. Nothing in the rulemaking changes the premise of safe harbors themselves: They offer protection to certain arrangements that meet safe harbor conditions, but they do not purport to define all lawful arrangements. Parties with arrangements that do not fit in a value-based safe harbor may look to other safe harbors or the language of the statute itself. Parties also may request an advisory opinion from OIG to determine whether an arrangement meets the conditions of a safe harbor or is otherwise sufficiently low risk under the Federal anti-kickback statute to receive prospective immunity from administrative sanctions by OIG.

Comment: Multiple commenters recommended that, in lieu of a tiered approach to the value-based framework (i.e., three value-based safe harbors, based upon the level of risk assumed by parties), OIG should create a single value-based arrangements safe harbor. The commenters asserted that such an approach would reduce the complexity of the value-based safe harbors.

Response: We appreciate the commenters' suggestion regarding ways to reduce complexity; however, we disagree with the commenters' recommendations to develop a single value-based arrangements safe harbor. The tiered approach we are finalizing in this rule supports the policy goals of the Regulatory Sprint regarding the transformation to value and offers parties flexibility to undertake arrangements that suit their needs. We do not believe that a one-size-fits-all approach would be feasible or effective to promote the transformation to value because we recognize there are many dimensions of value in health care that may look different for various stakeholders. To support the transformation to value, reflect that program integrity vulnerabilities change as parties assume more risk, and prevent unscrupulous behavior, we have adopted a tiered approach where the safeguards included in each of the value-based safe harbors are tailored according to, among other things, the Start Printed Page 77693degree of downside financial risk assumed by the parties.

Comment: In response to our solicitation of comments on whether to define the term “value,” we received varying comments. Some commenters supported our proposal to use the term in a non-technical way, with one asserting the term “value” is not a one-size-fits-all term of art. Others suggested that we reference—in the final definitions or otherwise—financial arrangements under advanced alternative payment models (APMs) to make clear that value-based arrangements in CMS-sponsored programs would receive protection under the value-based safe harbors.

Response: We agree with those commenters that noted that “value” is not a one-size-fits all term. We decline to use or define the term “value” for the purposes of these safe harbors because we believe industry stakeholders and those participating in value-based arrangements potentially protected by these safe harbors are best-positioned to determine value. Notably, however, we define other terms critical to the value-based safe harbors, including “value-based purpose,” “value-based activity,” and “value-based arrangement.” These defined terms adequately capture the concept of value without prescriptively defining “value,” which could inhibit flexibility and innovation. We also are not adopting the commenters' suggestion to define any term by referencing financial arrangements under advanced APMs. Financial arrangements under CMS-sponsored APMs may satisfy the definition of “value-based arrangement” and may serve as one of many sources for considering value in the delivery of care. In addition, organizations already participating in CMS-sponsored models may wish to look to the new safe harbor for those models at paragraph 1001.952(ii).

Comment: Several commenters requested that we offer additional clarity on key terms and concepts used throughout the value-based framework. For example, some commenters encouraged OIG to issue sub-regulatory guidance with respect to the value-based safe harbors, while others requested specific examples of the types of value-based arrangements that could be protected. Another commenter suggested that, in order to avoid confusion, OIG more closely align its value-based safe harbors with the requirements in the Medicare Shared Savings Program fraud and abuse waivers (e.g., governing body approval of protected arrangements). Collectively, these commenters expressed concern that without further guidance from OIG, individuals and entities would remain too risk-averse to leverage the new safe harbors for value-based arrangements or would incur significant time and expense in creating a value-based enterprise that might not meet the required standards.

Response: Based on these comments, throughout this final rule, we have endeavored to provide additional clarity and examples of key terms and concepts. Parties also may use OIG's advisory opinion process to obtain a legal opinion on the application of OIG's fraud and abuse authorities to a particular arrangement. Regarding the request for greater alignment with the Medicare Shared Savings Program, we note that we drew from our experience with the waivers issued for the Medicare Shared Savings Program in drafting the value-based safe harbors, but we do not believe alignment with the waiver conditions would be appropriate for a number of reasons. First, CMS provides programmatic oversight of the Medicare Shared Savings Program that it would not provide to all value-based enterprises under this final rule. In addition, the waivers apply to certain remuneration related to one type of alternative payment model, whereas the safe harbors finalized in this final rule apply to a broader range of arrangements focused on value-based care. Finally, as discussed in more detail below, all individuals and entities can be VBE participants, whereas participation in the Medicare Shared Savings Program is more limited. Parties participating in CMS-sponsored models may wish to look at the new safe harbor for those models at paragraph 1001.952(ii), which is closely aligned with model requirements and takes into account CMS's oversight of those models and the Medicare Shared Savings Program.

Comment: Multiple commenters requested that OIG speak to the intersection of the proposed value-based safe-harbors with existing: (i) Financial arrangements that may not meet the four corners of the value-based safe harbors, despite otherwise being similar in concept; (ii) safe harbors; and (iii) state law and corporate practice of medicine requirements.

Response: By promulgating value-based safe harbors, we are not opining, directly or indirectly, on the legality of existing financial arrangements that may be similar in concept to value-based arrangements that may be protected under the new value-based safe harbors. Arrangements that do not meet all conditions of an applicable safe harbor are not protected by that safe harbor. Whether such an arrangement violates the Federal anti-kickback statute is a fact-specific inquiry. In addition, and as stated in the OIG Proposed Rule, parties to value-based arrangements may choose whether to protect such arrangements under existing safe harbors or under the new value-based safe harbors finalized in this final rule.

We have attempted to create significant flexibility under the Federal anti-kickback statute while recognizing that parties still must comply with applicable State laws. Nothing in these safe harbors preempts any applicable State law (unless such State law incorporates the Federal law by reference).

Comment: We received several comments that touched upon the applicability of the value-based safe harbors to commercial arrangements. For example, at least two commenters expressed support for extending the value-based safe harbor protections to participants in arrangements involving only commercial payor patients. Another commenter strongly recommended that OIG clarify in the final rule that the Federal anti-kickback statute is not implicated if a financial arrangement is strictly limited to commercial payor patients.

Response: Generally speaking, the Federal anti-kickback statute is not implicated for financial arrangements limited solely to patients who are not Federal health care program beneficiaries. However, to the extent the offer of remuneration pursuant to an arrangement involving only non-Federal health care program beneficiaries is intended to pull through referrals of Federal health care program beneficiaries or business, the Federal anti-kickback statute would be implicated and potentially violated. While nothing in the value-based safe harbors precludes financial arrangements limited solely to patients who are not Federal health care program beneficiaries, the parties would need to meet all requirements of the applicable value-based safe harbor, and a pull-through arrangement would not meet the requirement, in each value-based safe harbor found at (ee), (ff), and (gg), that the offeror of remuneration does not take into account the volume or value of, or condition the remuneration of referrals of, patients who are not part of the target patient population, or business not covered under the value-based arrangement.

Comment: A commenter recommended that OIG apply the value-based safe harbors retrospectively.

Response: As stated in the OIG Proposed Rule, the value-based safe Start Printed Page 77694harbors will be prospective only and will be effective as of 60 days from the date this rule is published in the Federal Register. It is neither feasible nor desirable to confer safe harbor protection retrospectively under a criminal statute. Conduct is evaluated under the statute and regulations in place at the time of the conduct.

Comment: A commenter supported OIG addressing value-based contracting and outcomes-based contracting for the purchase of pharmaceutical products in future rulemaking, including rules around medication adherence. Another commenter urged OIG to promulgate a safe harbor in this final rule specific to value-based arrangements with manufacturers for the purchase of pharmaceutical products (as well as medical devices and related services).

Response: We did not propose, and thus are not finalizing, a safe harbor specifically for value-based arrangements with manufacturers for the purchase of their products. We may consider this topic, along with value-based contracting and outcomes-based contracting, for future rulemaking.

Comment: Separate and apart from outcomes-based contracting, a handful of commenters requested that we create new safe harbors or issue certain guidance. For example, a hospital association urged us to create a safe harbor to facilitate non-CMS advanced payment models. Another commenter suggested we issue guidance affording parties additional regulatory flexibility to the extent their financial arrangements are consistent with the goals of the value-based safe harbors but do not otherwise satisfy all conditions.

Response: We did not propose and are not finalizing a safe harbor specific to non-CMS advanced payment models. However, we refer the commenter to our substantial downside financial risk safe harbor at paragraph 1001.952(ff), as remuneration exchanged by the parties to the advanced payment model arrangement may be eligible for protection under that safe harbor.

We likewise are not issuing guidance to provide parties with additional regulatory flexibility to protect financial arrangements that are consistent with the goals of, but do not meet the requirements of, a value-based safe harbor. An arrangement must meet all conditions of the applicable value-based safe harbor for remuneration exchanged pursuant to the arrangement to receive protection.

Comment: A commenter asserted that the value-based safe harbors do not satisfy the requirements set forth in section 1128D of the Act for the promulgation of new safe harbors. Specifically, the commenter asserted that the value-based safe harbors do not specify payment practices that are protected under the Federal anti-kickback statute, as required by section 1128D, because they only outline a set of general principles.

Response: We disagree with the commenter. Section 1128D of the Act requires the Secretary to publish a notice soliciting proposals for, among other things, additional safe harbors specifying payment practices that shall not be treated as a criminal offense under section 1128B(b) and shall not serve as the basis for an exclusion under section 1128(b)(7) and to publish proposed additional safe harbors, if appropriate, after considering such proposals. Consistent with that authority, the value-based safe harbors specify payment practices that will be protected if they meet a series of specific, enumerated requirements. Although a value-based safe harbor may protect remuneration exchanged pursuant to a diverse universe of value-based arrangements, all value-based arrangements within that universe share the features required by the applicable safe harbor.

For example, the payment practice specified in the care coordination arrangements safe harbor is the exchange of in-kind remuneration pursuant to value-based arrangement, where, among several other requirements, the parties establish legitimate outcome measures to advance the coordination and management of care for the target patient population; the arrangement is commercially reasonable; and the recipient contributes at least 15 percent of either the offeror's cost or the fair market value of the remuneration. If an arrangement fails to meet any one of the safe harbor's requirements, it cannot receive protection under the safe harbor. This approach is consistent with the approach taken in other safe harbors that are not specific as to the type of arrangement. For example, the personal services and management contracts safe harbor protects any payments from a principal to an agent, as long as a series of standards are met.

Comment: Numerous commenters requested that OIG and CMS seek greater alignment across their respective value-based rules. According to some of these commenters, further alignment would reduce administrative burden, confusion, and regulatory uncertainty. Commenters were generally in favor of OIG revising its proposed value-based safe harbors to more closely parallel CMS's proposed value-based exceptions to the physician self-referral law. Commenters suggested that CMS's proposed value-based exceptions would protect a broader universe of beneficial innovative arrangements, without greater fraud and abuse risk. Accordingly, commenters urged OIG to create a safe harbor for any value-based arrangement that otherwise met a physician self-referral law exception or, alternatively, state that compliance with the physician self-referral law would rebut any implication of intent under the Federal anti-kickback statute. Commenters also advocated that OIG adopt certain CMS proposed definitions, e.g., CMS's “volume or value” definition.

Response: As explained in more detail in section III.A.1 of this preamble, we are mindful of reducing burden on providers and other industry stakeholders, and we have sought to align value-based terminology and safe harbor conditions with those being adopted by CMS as part of the Regulatory Sprint wherever possible. However, complete alignment is not feasible because of fundamental differences in statutory structures and penalties across the two laws, as well as differences in how anti-kickback statute safe harbors and physician self-referral law exceptions operate. For example, the physician self-referral law applies to referrals by physicians for specified designated health services, whereas the anti-kickback statute applies to referrals by anyone of any Federal health care program business. Fitting in an exception to the physician self-referral law is mandatory, whereas using safe harbors is voluntary. In designing our safe harbors, we have included conditions designed to ensure that protected arrangements are not disguised kickback schemes, and we recognize that, for purposes of those arrangements that implicate both the physician self-referral law and the Federal anti-kickback statute, the value-based safe harbors may therefore protect a narrower universe of arrangements than CMS's exceptions.

We do not agree as a matter of law that compliance with the physician self-referral law would rebut any implication of intent under the Federal anti-kickback statute. We did not propose to, and do not, adopt CMS's proposed interpretation of the term “takes into account the volume or value of referrals or other business generated.” We have aligned terminology used in the value-based framework and set forth at paragraph 1001.952(ee) in our rule, as described below.

2. Value-Based Terminology (42 CFR 1001.952(ee))Start Printed Page 77695

We proposed to define at paragraph 1001.952(ee)(12) the following terms: “value-based enterprise” (“VBE”), “value-based arrangement,” “target patient population,” “value-based activity,” “VBE participant,” “value-based purpose,” and “coordination and management of patient care.” We summarize the proposal for each of these definitions and the final rule in turn below. These definitions are now located at paragraph 1001.952(ee)(14) of the final rule and cross-referenced in the safe harbors at paragraphs 1001.952(ff), (gg), and (hh). In this final rule, we have added definitions at paragraph 1001.952(ee)(14) for the following terms that are used in connection with determining eligibility of certain types of entities to use the safe harbors at paragraphs 1001.952(d)(2), (ee), (ff), (gg), and (hh): “limited technology participant,” “digital health technology,” and “manufacturer of a device or medical supply.” These definitions are discussed in section III.B.2.e.

a. Value-Based Enterprise (VBE)

Summary of OIG Proposed Rule: We proposed to define the term “value-based enterprise” or “VBE” as two or more VBE participants: (i) Collaborating to achieve at least one value-based purpose; (ii) each of which is a party to a value-based arrangement with the other or at least one other VBE participant in the value-based enterprise; (iii) that have an accountable body or person responsible for financial and operational oversight of the value-based enterprise; and (iv) that have a governing document that describes the value-based enterprise and how the VBE participants intend to achieve its value-based purpose(s).

Summary of Final Rule: We are finalizing, with modification, the definition of “value-based enterprise.”

i. General

Comment: Multiple commenters supported the definition of “value-based enterprise,” as proposed, and the flexibility the definition offers. A commenter appeared to ask OIG to revise the definitions of “value-based enterprise,” “value-based arrangement,” and “value-based activity” so that they do not incorporate and rely on other defined terms. Another commenter suggested a broader definition of “VBE” that would allow affiliates of a VBE to participate within the VBE without becoming VBE participants.

Response: The definition of “value-based enterprise” is intended to be broad and flexible to encompass a wide range of VBEs, from smaller VBEs comprised of only two or three parties to large VBEs, such as entities that function similar to ACOs. We decline to expand the definition further to allow affiliates of VBE participants to participate in a VBE without becoming VBE participants. We designed the value-based framework, including the requirement for parties to be either a VBE or a VBE participant, to ensure the remuneration that the safe harbors protect is exchanged pursuant to a value-based arrangement where all parties are striving to achieve value-based purposes. VBE participants can continue to enter into arrangements with affiliates and other non-VBE participants and may look to other available safe harbors for potential protection for those arrangements.

We also decline to revise the definitions of “value-based enterprise,” “value-based arrangement,” and “value-based activity” to omit references to other defined terms. The value-based terminology we are finalizing works in concert to explain the universe of value-based arrangements under which the exchange of remuneration may receive safe harbor protection. For example, because the terms “VBE participant,” “value-based purpose,” and “value-based arrangement” are fundamental to the definition of “value-based enterprise,” we are finalizing a definition of “value-based enterprise” that references those terms.

Comment: A commenter asked whether parties could prove collaboration to achieve one or more value-based purposes by measuring the amount of time a VBE participant has been taking part in a value-based activity.

Response: To accommodate a broad range of VBEs, from small to large, this final rule does not prescribe how VBE participants prove that they are collaborating to achieve at least one value-based purpose, as required by the definition of “value-based enterprise”; it is incumbent on the VBE participants to demonstrate that they are meeting this requirement. For example, time spent on value-based activities, records of collaboration between parties, and participation in applicable meetings, could all be relevant factors, depending on the unique nature and circumstance of the VBE and the arrangements among the VBE participants.

Comment: A commenter expressed concern that the costs of forming a VBE could be prohibitive for small and rural providers and providers serving underserved populations, and it appeared to ask OIG to create an online portal that parties could use to create VBEs. Another commenter asked OIG to state expressly that a VBE may add individual physicians and other clinicians as VBE participants on an ongoing basis and still meet the definition of “VBE.”

Response: The definition of “VBE” is intended to be both broad and flexible to accommodate providers, suppliers, and other entities of varying sizes and financial means seeking to participate in value-based arrangements. The definition, as finalized, will allow small and rural providers and providers serving underserved populations to form VBEs that correspond in scope and design with the VBE participants' resources. For example, we anticipate that parties could form a VBE with a single value-based arrangement, and a VBE could be comprised of only two VBE participants. We did not propose to create an online portal for the creation of VBEs, and we are therefore not establishing an online portal in this final rule. We also confirm that VBE participants may join and leave a VBE throughout the existence of the VBE, but we note that a VBE always must have two or more VBE participants to meet the definition of “value-based enterprise.”

Comment: A commenter recommended that we require a value-based enterprise to utilize electronic health records so that each entity participating in the value-based enterprise has a strong data platform to track and evaluate the VBE's inputs and outcomes. According to the commenter, data from the EHR systems is critical to care delivery and care coordination.

Response: We agree that EHR systems can help individuals and entities within the VBE facilitate the coordination and management of care but did not propose to require, and thus are not requiring, VBEs or VBE participants to use them. Moreover, we intend for entities of varying sizes and with different levels of funding and access to technology to be able to utilize the value-based safe harbors. While we continue to support the Department's goal of continued adoption and use of interoperable EHR technology that benefits patient care, we are concerned that requiring utilization of EHR may unduly limit the ability of some entities to form a VBE. Donations of EHR by VBEs to VBE participants can be protected by the value-based safe harbors if all conditions are met. Alternatively, VBE and VBE participants may use the EHR safe harbor that this final rule makes permanent.

Comment: Commenters asked how the definition of “value-based enterprise” would apply to integrated delivery systems, with a commenter specifically inquiring as to how entities within a Start Printed Page 77696larger integrated delivery system that enter into arrangements with a payor for shared savings and losses could subsequently share such savings or losses with downstream contracted or employed physicians. The commenter asked whether each party offering or receiving remuneration would be required to be a party to an agreement with the payor or if separate agreements between the downstream entities would suffice. Another commenter asked OIG to confirm whether an already existing integrated delivery system, ACO, or similar entity could meet the requirements of a VBE or whether that entity must establish a new value-based enterprise to use the value-based safe harbors. A commenter asserted that the value-based definitions and safe harbors should include integrated delivery systems, accountable care, team-based care, coordinated care (including for dual eligible beneficiaries), bundled payments, payments linked to quality or outcomes, Medicaid waiver programs, and Medicare managed care, value-based, or delivery system reform directed payments. A commenter recommended that the final rule deem an existing ACO to be compliant with the requirements of an applicable safe harbor to help retain ACOs as a central organizational structure, reduce regulatory burden, reduce risk of whistleblower or regulatory challenges, and minimize the need for creation of arrangements outside the ACOs. For each value-based safe harbor the commenter made specific suggestions: That OIG deem ACO outcome measures to meet the outcome measures requirement for care coordination arrangements; and for the substantial downside financial risk and full financial risk safe harbors, that all safe harbor conditions would be deemed met if the requisite level of downside financial risk were present.

Response: The final rule, including the value-based terminology, value-based safe harbors, and other safe harbors we are finalizing, offers several potential pathways for protection for the types of arrangements noted by the commenters, provided all applicable definitions and safe harbor conditions are satisfied. An existing integrated delivery system, ACO, or comparable entity could potentially qualify as a “value-based enterprise” and meet all of the requirements of the definition to use the value-based safe harbors we are finalizing. Arrangements for shared savings or losses and certain bundled payments could be protected under the substantial downside and full financial risk safe harbors, which protect in-kind and monetary remuneration exchanged between a VBE and a VBE participant. Under these safe harbors, a hospital that is a VBE participant could enter into a value-based arrangement with a VBE, pursuant to which the VBE shares savings or losses with the hospital VBE participant. However, this arrangement could not be protected under the care coordination arrangements safe harbor, which does not protect the exchange of monetary remuneration. Monetary remuneration, including payments linked to outcomes, could qualify for protection under the safe harbor for personal services and management contracts and outcomes-based payments at paragraph 1001.952(d)(2). Neither the substantial downside financial risk safe harbor nor the full financial risk safe harbor protects the exchange of remuneration between entities downstream of the VBE (i.e., between VBE participants, a VBE participant and a downstream contractor, or downstream contractors). Apart from the value-based safe harbors, some managed care arrangements could be structured to fit in the existing managed care safe harbors at paragraphs 1001.952(t) and 1001.952(u). ACOs and others in CMS-sponsored models could use the new safe harbor at paragraph 1001.952(ii).

We did not propose and are not adopting a deeming provision for ACOs, as recommended by the commenter. Under the final value-based safe harbors, ACOs would need to meet all applicable safe harbor conditions. We have designed the value-based terminology and safe harbors to be flexible to accommodate a range of VBE types, structures, and arrangements, including ACOs. Moreover, when participating in a CMS-sponsored model, an ACO might rely on an existing fraud and abuse waiver or the new safe harbor for CMS-sponsored models at paragraph 1001.952(ii), rather than a value-based safe harbor.

To the commenter's question regarding separate agreements, although the substantial downside financial risk and full financial risk safe harbors would not protect any shared savings or losses (or other remuneration) between the hospital VBE participant and its downstream employed or contracted physicians, the VBE could enter into value-based arrangements directly with physicians who are VBE participants in order to share savings or losses with the physicians. We note, however, that, consistent with all other safe harbors, compliance with the value-based safe harbors is not compulsory. Parties may enter into lawful arrangements for value-based care that do not meet a safe harbor. Other safe harbors may be relevant to protect remuneration exchanged in a value-based arrangement, such as the personal services and management contracts safe harbor or a managed care safe harbor, depending on the circumstances. The OIG advisory opinion process also remains available.

Comment: A commenter asked whether VBEs must undergo a formal process to receive protection under the new safe harbors.

Response: All safe harbors to the Federal anti-kickback statute, including the new safe harbors we are finalizing in this final rule, are voluntary, and parties do not need to undergo any process or receive any affirmation from the Federal Government in order to receive protection. We note that qualifying as a value-based enterprise is not sufficient to obtain protection under the value-based safe harbors. To be protected, the remuneration exchanged between or among parties to the VBE must squarely meet all conditions of an available safe harbor. Parties that wish for OIG to opine on whether an arrangement satisfies the criteria of a safe harbor may submit an advisory opinion request.

Comment: A commenter stated that an entity that qualifies as a VBE should be deemed to meet the Federal Trade Commission (FTC) and Department of Justice (DOJ) requirements for clinical integration.

Response: Whether a value-based enterprise meets the FTC and DOJ requirements for clinical integration is outside the scope of this rulemaking and thus the issue raised by the commenter is not addressed in this rule.

Comment: Several commenters asked OIG to include references to free clinics, charitable clinics, and charitable pharmacies in the definition of “value-based enterprise,” stating that hospitals otherwise will remain risk averse to establishing or continuing partnerships with such entities. Another commenter asked OIG to confirm that the terms “value-based enterprise,” “value-based arrangement,” and “value-based activity” apply exclusively to the new safe harbors and not in other contexts, such as state Medicaid programs, to ensure the new value-based terminology does not disrupt the administration of existing value-based arrangements.

Response: We do not believe it is necessary to include references to any specific entities in the definition of “value-based enterprise.” While the commenter requested that we reference these entities in the definition of “VBE,” we note that under this final rule all individuals and entities are eligible to Start Printed Page 77697be VBE participants (other than a patient acting in their capacity as a patient). The definitions we are finalizing for the value-based terminology, including the terms “value-based enterprise,” “value-based arrangement,” and “value-based activity,” do not apply outside of the safe harbors being finalized in this rule. Given OIG's limited authority in the context of this rulemaking, we do not purport to define these terms for other purposes, including for State Medicaid programs; however, the safe harbors could protect remuneration resulting from value-based arrangements involving Medicaid beneficiaries (to the extent that all applicable safe harbor conditions are satisfied). CMS is using the same terminology for its new value-based exceptions under the physician self-referral law.

Comment: A commenter asserted that the proposed definitions of “value-based enterprise,” “value-based arrangement,” “value-based activity,” and “VBE participant” apply only to the care coordination arrangements safe harbor and not to the substantial downside financial risk safe harbor or the full financial risk safe harbor.

Response: The commenter's apparent confusion arises from the language in proposed paragraph 1001.952(ee) that states, “[f]or purposes of this paragraph (ee), the following definitions apply.” Notwithstanding this language, the substantial downside financial risk safe harbor and the full financial risk safe harbor expressly incorporate the definitions of “value-based enterprise,” “value-based arrangement,” “value-based activity,” and “VBE participant” set forth in paragraph 1001.952(ee).

Comment: While supporting the proposed definition of “value-based enterprise,” several commenters requested that OIG and CMS align any modifications to the final definition of “VBE.” According to the commenter, identical definitions would allow stakeholders to place more focus on the delivery of value-based care because they would not need to navigate different legal frameworks under the Federal anti-kickback statute and the physician self-referral law.

Response: We are finalizing a definition of “value-based enterprise” that remains aligned with the definition finalized by CMS.

Comment: Some commenters asserted that Indian health programs should be deemed to meet the definition of “value-based enterprise” even if they do not meet each requirement of the definition because Tribes, as sovereign governments, do not enter into agreements in which another entity has governing authority or control over any part of the Tribe. In addition, they explained that Indian health programs have several features of the proposed definition (e.g., Indian health programs are held accountable by the governing body of the Tribe or the United States Congress, in the case of IHS-run programs). Such commenters asserted that requiring Indian health programs to meet any additional requirements would exclude or unnecessarily burden those programs.

Similarly, several commenters requested that OIG address whether Indian health programs could be a VBE participant and recommended that the definition expressly state that Indian health programs may be VBE participants. Another commenter expressed concern that Indian health programs may not meet the proposed definition of VBE participant because Tribes are sovereign nations that will not enter into agreements with another entity with authority over the Tribe.

Response: Indian health programs, as well as other individuals and entities, may themselves constitute VBEs or may form VBEs if they meet all requirements in the definition of such term. We are not promulgating any exceptions to the requirement that parties form a VBE in order to use one of the value-based safe harbors or the patient engagement and support safe harbor because we believe the definition of “value-based enterprise” is sufficiently broad and flexible to allow Indian health programs to qualify as or form VBEs.

In addition, under our revised definition of a “VBE participant,” all types of entities can be VBE participants, including Indian health programs and Indian health care providers that engage in at least one value-based activity as part of a VBE.

ii. Accountable Body

Comment: Multiple commenters supported the proposed requirement that a VBE have an accountable body that is responsible for financial and operational oversight of the VBE, while some expressed concerns regarding the requirement. For example, some commenters asserted that parties would incur significant legal expenses to create an accountable body, which could discourage participation in VBEs, and questioned whether small or rural practices have the resources necessary to implement an accountable body. A commenter suggested OIG exempt smaller VBEs from the requirement to have an accountable body, particularly where the VBE is comprised only of individuals or small physician practices. Another noted that the requirement to have an accountable body could create tension between VBE participants when determining who will assume such role.

Response: We do not believe the requirement for a VBE to have an accountable body or responsible person places an undue financial or administrative burden on VBEs or VBE participants, particularly because the definition of “value-based enterprise” affords parties the flexibility to create VBEs and accountable bodies that range in scope and complexity. We are not exempting small or other VBEs from the requirement to have an accountable body or responsible person. We do not expect that small VBEs would have the same resources as larger VBEs for this function or would structure the function in the same way. A VBE should have an accountable body or responsible person that is appropriate for its size and resource and is capable of carrying out the associated responsibilities. Any potential for conflict among VBE participants is a matter for the parties to address in their private contractual or other arrangements and does not warrant an exception to the accountable body requirement, which serves an important oversight and accountability function in the VBE.

Comment: Commenters generally supported the flexibility for parties to tailor the accountable body to the complexity and sophistication of the VBE. Multiple commenters requested additional clarification on the nature and composition of the accountable body, including how and by whom the accountable body would be organized and whether the accountable body must be comprised of at least one representative from each VBE participant.

A commenter asked OIG to clarify whether ACOs that already have governing bodies in place need to establish an additional accountable body or responsible person to meet the definition of “VBE.” Another commenter asked whether the safe harbor conditions applicable to accountable bodies are at least as rigorous as the conditions applicable to governing bodies in the fraud and abuse waivers issued for purposes of the Medicare Shared Savings Program.

Response: We are not prescribing how VBE participants or VBEs form or otherwise designate an accountable body or responsible person in order to give parties flexibility to do so in a manner conducive to the scope and objectives of the VBE and its resources. For instance, a representative from each VBE participant in a VBE could, but is not required to, be part of the VBE's Start Printed Page 77698accountable body. Where parties already have a governing body that constitutes an accountable body or responsible person, such parties are not required to form a new accountable body or designate a responsible person for purposes of creating a VBE. While the requirements for the accountable body or responsible person are not as stringent as the requirements for an ACO's governing body in the fraud and abuse waivers issued for purposes of the Medicare Shared Savings Program, we have concluded that the safe harbor requirements for the accountable body strike the right balance between allowing for needed flexibility for parties wanting to form and operate VBEs and providing for appropriate VBE oversight and accountability.

Comment: Multiple commenters supported a range of additional requirements for VBE participants related to the accountable body, including requirements to: (i) Recognize the oversight role of the accountable body affirmatively; (ii) agree in writing to cooperate with the accountable body's oversight efforts; and (iii) report data to the accountable body to enable it to access and verify VBE participant data related to performance under value-based arrangements. Another commenter opposed additional requirements on VBE participants, stating that they would be unnecessary formalities that would constrain use of the value-based safe harbors for existing arrangements that might otherwise meet a value-based safe harbor's terms. Other commenters also asked what, if any, oversight OIG would expect from VBE participants, themselves, in addition to the oversight conducted by the accountable body.

Response: It is important for the parties to a value-based arrangement to support and cooperate with the accountable body or responsible person. However, we are not finalizing requirements for VBE participants to recognize affirmatively the oversight role of the accountable body, agree in writing to cooperate with its oversight efforts, or report data. On balance, such requirements would introduce a level of unnecessary administrative detail and impose unnecessary administrative burden on many VBEs, particularly small or rural entities. Parties can themselves establish mechanisms to ensure the ability of the accountable body or responsible person to fulfill its obligations through, by way of example only, a term in arrangements between the VBE and its VBE participants that requires VBE participants to cooperate with the accountable body or responsible person's oversight efforts.

Whether VBE participants must conduct additional oversight depends on the applicable safe harbor. Parties relying on safe harbor protection may want to ensure all applicable safe harbor requirements, including those related to oversight, are met because failure to satisfy these requirements would result in the loss of safe harbor protection for the remuneration at issue. Notwithstanding this fact, where a VBE participant or VBE has done everything that it reasonably could to comply with the safe harbor requirements applicable to that party but the remuneration exchanged loses safe harbor protection as a result of another party's noncompliance, the compliant party's efforts to take all reasonable steps would be relevant in a determination of whether such party had the requisite intent to violate the Federal anti-kickback statute.

Comment: We received support for, and opposition to, a requirement for the accountable body to have more specific responsibilities for overseeing certain aspects of the VBE, including utilization of items and services; cost; quality of care; patient experience; adoption of technology; and quality, integrity, privacy, and accuracy of data related to each value-based arrangement. However, several commenters cautioned against overly prescriptive oversight obligations, with many commenters noting that the appropriate scope, methodology, and risk areas for monitoring and oversight will vary significantly based on the activities an entity is undertaking. According to several commenters, the program integrity benefits of any additional requirements on the accountable body would be outweighed by increased administrative burden.

Response: We are not requiring more specific oversight responsibilities for the accountable body. The type of data the accountable body should monitor and assess could vary by VBE and by value-based arrangement, and therefore we are not imposing more prescriptive requirements on the accountable body with respect to its oversight responsibilities. However, in the full financial risk safe harbor, we are finalizing a requirement that the VBE provide or arrange for a quality assurance program for services furnished to the target patient population that protects against underutilization and assesses the quality of care furnished to the target patient population.

Comment: Multiple commenters supported a requirement for VBEs to institute a compliance program to facilitate the accountable body's or responsible person's obligation to identify program integrity issues, with some also favoring requirements for periodic review of patient medical records to ensure compliance with clinical standards or for the designation of a compliance officer to oversee the VBE and its value-based arrangements. One commenter recommended that VBE participants agree to a code of ethics related to compliance oversight.

In contrast, multiple commenters opposed a requirement for the VBE to have a compliance program. Some asserted it would create an additional burden on VBEs without substantially reducing the risk of fraud and abuse. Commenters expressed concern that a compliance program requirement could result in inconsistent policies or duplicative administrative obligations if VBE participants already have compliance programs in place. Another commenter stated that such a requirement is unnecessary because VBEs are independently at risk for safe harbor compliance. A commenter recommended that, if OIG requires a VBE to have a compliance program, OIG should permit the VBE to meet such a requirement by: (i) Developing a compliance program specific to the VBE and its VBE participants, (ii) adopting an existing compliance program held by one of the VBE participants, or (iii) requiring an attestation from each VBE participant that it has a compliance program and conducts annual compliance reviews. Another commenter recommended that OIG provide model compliance provisions that could be included in agreements between parties in a VBE.

Response: For purposes of these safe harbors, we are not requiring the VBE or its accountable body or responsible person to have a compliance program or to review patient medical records periodically. We also are not requiring an attestation or other agreements from each VBE participant that it has a compliance program and conducts annual compliance reviews. Compliance programs are an important tool for, among other things, monitoring arrangements, identifying fraud and abuse risks, and, where necessary, implementing corrective action plans. While it is our view that robust compliance programs are a best practice for all VBEs and VBE participants, we are not including specific compliance program requirements or providing model compliance provisions because VBEs of varying sizes and scopes may have and need different types of compliance programs. We anticipate many VBE participants already have compliance programs and may want to Start Printed Page 77699consider updating these programs to reflect any new arrangements entered into as part of the VBE.

A compliance program requirement for VBEs would necessitate that we articulate specific compliance program criteria, which we do not believe would be feasible or desirable, particularly in light of the expected variation of VBEs. We also are not requiring the VBE to designate an individual to serve as a compliance officer. For purposes of this rule, the accountable body or responsible person acts as an oversight body that performs a compliance function. In this respect, and as we stated in the OIG Proposed Rule, we believe the accountable body or responsible person would be well-positioned to identify program integrity issues and to initiate action to address them, as necessary and appropriate. VBEs may elect to have designated compliance officers if they so wish.

Comment: A commenter asked whether the accountable body and VBE participants should expect a higher degree of auditing and oversight from OIG than entities not involved in a value-based enterprise.

Response: OIG provides independent and objective oversight of the programs and operations of the Department. We anticipate that individuals and entities that are part of a value-based enterprise will be subject to OIG's program integrity and oversight activities to the same extent as other individuals and entities that receive Federal health care program funds or treat Federal health care program beneficiaries.

Comment: Some commenters supported a requirement for the accountable body or responsible person to have a duty of loyalty to the VBE, particularly for accountable bodies serving larger VBEs. The commenters asserted that a duty of loyalty would be appropriate given the lack of programmatic oversight as compared to CMS-sponsored models and would help reduce certain risks (e.g., stinting on care or providing medically unnecessary care). Other commenters suggested that the accountable body should have a duty of loyalty to the patients within the VBE.

Multiple commenters opposed requiring the accountable body or responsible person to have a duty of loyalty to the VBE, stating that it would create conflicts of interest for accountable body members that are, or are employed by, a VBE participant. Some commenters asserted that a duty of loyalty would necessitate the use of a third-party entity to serve as the accountable body, which could be cost prohibitive for small and rural providers, while others noted that large VBE participants may be unwilling to cede oversight responsibilities to an independent third party. A commenter proposed an alternative requirement for the accountable body or responsible person to act in furtherance of the VBE's value-based purpose(s).

Response: We are not requiring the accountable body or responsible person to have a duty of loyalty to the VBE because we agree with commenters that a duty of loyalty often could create conflicts of interest for VBE participants and employees of VBE participants who otherwise would serve as members of the accountable body. We also agree that a duty of loyalty requirement could necessitate the use of independent third parties to serve as the accountable body, which could be cost prohibitive for smaller VBEs. While we are not implementing a requirement for the accountable body or responsible person to have a duty of loyalty or to act in furtherance of the VBE's value-based purpose(s), we believe the accountable body or responsible person necessarily must act in furtherance of the VBE's value-based purpose(s) to fulfill its oversight responsibilities. Parties are free to include this duty in their contractual arrangements.

Comment: A commenter asked OIG to require the accountable body to submit data to the Department to demonstrate continued compliance with the applicable safe harbor and progress in improving outcomes and reducing costs. A commenter also asserted that OIG should require the accountable body or responsible person to implement a process for patients to express concerns and for the VBE to resolve such concerns, and others recommended that OIG ensure that VBE participants secure informed consent for each patient treated within a VBE.

Response: We are not requiring accountable bodies or responsible persons to submit data to the Department for purposes of safe harbor compliance because we do not think the program integrity benefits of requiring data submission for safe harbor compliance would outweigh the administrative burden on both the government and the individuals and entities serving as accountable bodies or responsible persons. Notwithstanding the foregoing, we remind readers that OIG provides independent, objective oversight of HHS programs. Nothing in this rule changes OIG's authorities to request data for its oversight purposes. In addition, and as explained further below in section III.3.n.v, OIG will continue to evaluate whether to modify the care coordination arrangements safe harbor in the future to include a requirement that the VBE affirmatively submit certain data or information.

Due to administrative burden concerns, we are not requiring the accountable body or responsible person to implement a process for patients to express concerns or ensure that VBE participants secure informed consent for each patient treated within a VBE. Such requirements may be useful processes for VBEs to consider in ensuring safe harbor compliance.

iii. Governing Document

Comment: Commenters expressed general support for a governing document requirement. Some commenters asked whether the written document forming the value-based arrangement could also constitute the governing document, and another commenter questioned whether an existing payor contract could serve as a governing document. Another commenter requested that OIG permit a collection of documents to constitute a governing document.

Response: A single document could constitute both the VBE's governing document and the writing required for a value-based arrangement so long as it includes all of the requisite requirements for each writing. In addition, an existing payor contract could qualify as a governing document so long as it describes the value-based enterprise and how the VBE participants intend to achieve the VBE's value-based purpose(s). However, we decline to permit a governing document for a VBE to be set forth in multiple writings. We permit the writing requirement in each new value-based safe harbor to be satisfied by a collection of writings because each party to a value-based arrangement must sign the writing; in contrast, the governing document of the VBE does not require any signatures. Creation of one governing document, that may be amended over time as the value-based activities, VBE participants, or other features of the VBE evolve, will help ensure that there is a clearly identifiable governance structure for the VBE.

Comment: Some commenters expressed concern that the requirement for a VBE to have a governing document could be burdensome, particularly for small and rural practices and practices serving underserved areas. Another commenter requested a checklist or model terms for a governing document, and another commenter asked for clarification of requirements for the document.

Response: We appreciate commenters' concerns regarding the burden that Start Printed Page 77700developing a governing document may place on certain individuals or entities. We are finalizing the proposed definition of “value-based enterprise,” which does not prescribe a specific format or content for the governing document, other than it must describe the VBE and how the VBE participants intend to achieve its value-based purpose(s). This definition is designed to be flexible so that small and rural practices and practices serving underserved areas wishing to establish VBEs can craft governing documents appropriate to their size and the nature of their VBE. We anticipate that VBEs of different sizes and purposes will have different types of governing documents with different terms. The core requirement is that the governing document must describe the value-based enterprise and how the VBE participants intend to achieve the VBE's value-based purpose(s), regardless of the format of the document. This definition offers parties significant flexibility to craft a value-based enterprise and a governing document commensurate with the scope and sophistication of the VBE.

As we stated in the preamble to the OIG Proposed Rule, the governing document requirement provides transparency regarding the structure of the VBE, the VBE's value-based purpose(s), and the VBE participants' roadmap for achieving the purpose(s). We do not believe a checklist for creating a governing document is necessary because the requirements for the governing document are set forth in the definition of “value-based enterprise,” itself. In addition, we decline to provide model terms because they could inhibit parties from developing terms that appropriately reflect the unique nature and circumstances of their value-based enterprises.

b. Value-Based Arrangement

Summary of OIG Proposed Rule: We proposed to define the term “value-based arrangement” to mean an arrangement for the provision of at least one value-based activity for a target patient population between or among: (i) The value-based enterprise and one or more of its VBE participants; or (ii) VBE participants in the same value-based enterprise. This proposed definition reflected our intent to ensure that each value-based arrangement is aligned with the VBE's value-based purpose(s) and is subject to its financial and operational oversight. It further reflected our intent for the value-based arrangement's value-based activities to be undertaken with respect to a target patient population.

We noted in the OIG Proposed Rule that we were considering whether to address a concern about potentially abusive practices that could be characterized as the coordination and management of care by precluding some or all protection under the proposed value-based safe harbors for arrangements between entities that have common ownership, either through refinements to the definition of “value-based arrangement” or by adding restrictions on common ownership to one or more of the proposed safe harbors at paragraphs 1001.952(ee), (ff), or (hh).

Summary of Final Rule: We are finalizing, with modification, the definition of “value-based arrangement.” We are modifying the regulatory text to clarify that only the value-based enterprise and one or more of its VBE participants, or VBE participants in the same value-based enterprise, may be parties to a value-based arrangement. We are not precluding protection for arrangements between entities that have common ownership in the definition of “value-based arrangement,” nor in the individual safe harbors.

Comment: Many commenters supported the proposed definition of “value-based arrangement” and, in particular, appreciated the flexibility afforded by the definition, which the commenters posited will allow parties to design a range of arrangements that may qualify for protection under the value-based safe harbors, including arrangements between two providers that include only a single value-based activity. Commenters also supported our proposal in the OIG Proposed Rule that the definition covers commercial and private insurer arrangements.

Response: We reiterate in this final rule that the definition of “value-based arrangement” is broad enough to capture commercial and private insurer arrangements. The definition is intended to afford parties significant flexibility. In addition, in response to comments, we are modifying the definition text to clarify our intent that “value-based arrangement” capture arrangements for care coordination and certain other value-based activities among VBE participants within the same VBE, as indicated in the OIG Proposed Rule,[13] by revising the definition so that the value-based arrangement may only be between: (i) The value-based enterprise and one or more of its VBE participants; or (ii) VBE participants in the same value-based enterprise.

We emphasize that qualification as a value-based arrangement is necessary, but not sufficient, to protect remuneration exchanged pursuant to that arrangement; all conditions of an applicable safe harbor must be met.

Comment: A commenter opposed the definition of “value-based arrangement,” expressing concern that it is too broad and vague and could be used as a mechanism to force the exclusive use of a particular product or particular provider. In addition, the commenter believed the definition could allow health care entities to engage in abusive practices by using a value-based safe harbor to funnel remuneration under the guise of a value-based arrangement.

Response: We have addressed the commenter's concern with respect to exclusive use through a condition in the care coordination arrangements safe harbor at paragraph 1001.952(ee). We acknowledge and agree with the commenter's concern that parties might engage in abusive practices under the guise of a value-based arrangement; to that end, we have included robust safeguards in each value-based safe harbor to mitigate these concerns.

Comment: A commenter requested clarification as to whether current arrangements would be affected and would need to be restructured to meet the definition of a “value-based arrangement.”

Response: There is nothing in this final rule that requires parties to an existing arrangement to restructure that arrangement to meet the new definition of a “value-based arrangement.” Parties to an existing arrangement that wish to rely on the protection of one of the value-based safe harbors may want to review their arrangement to assess whether it fully meets the definition of a “value-based arrangement” and, thus, could be eligible for protection under a value-based safe harbor if all safe harbor conditions are met.

Comment: Several commenters requested clarification regarding the statement in the OIG Proposed Rule that the definition of “value-based arrangement” is intended to capture arrangements for care coordination and certain other value-based activities among VBE participants within the same VBE.[14] Specifically, commenters requested clarification regarding how this statement corresponds with the requirement in each proposed value-based safe harbor that the value-based arrangement have as a value-based Start Printed Page 77701purpose the coordination and management of care.

Response: The definition of “value-based arrangement” and the requirements for protection under the value-based safe harbors are consistent when read together. The term “value-based arrangement” means an arrangement for the provision of at least one “value-based activity” for a target patient population. The definition does not specify which value-based purpose(s) the value-based activity (or activities) must be designed to achieve. In this respect, the definition of “value-based arrangement” is broader than the requirements of some of the value-based safe harbors.

Value-based arrangements are not de facto safe harbor protected. Rather, an arrangement that meets the definition of a “value-based arrangement” is eligible to seek protection in a value-based safe harbor. For safe harbor protection, it must squarely satisfy all safe harbor conditions. For reasons explained elsewhere in this preamble, the care coordination arrangements safe harbor requires a direct connection to the first value-based purpose, the coordination and management of patient care, which is a central focus of this rulemaking. The substantial downside financial risk arrangements safe harbor requires a direct connection to any one of the first three value-based purposes, and the full financial risk arrangements safe harbor requires a connection to any one of the four value-based purposes, in recognition of the parties' assumption of risk and the lower risk of traditional fee-for-service fraud. The substantial downside financial risk safe harbor and the full financial risk safe harbor, as finalized, do not require a direct connection to the coordination and management of care for the target patient population.

In addition, the definition of “value-based arrangement” is consistent with the definition used in CMS's final rule. We anticipate this alignment may ease compliance burden for parties.

Comment: A commenter asserted that neither VBEs nor VBE participants should be prohibited from entering into non-disclosure agreements with parties to a value-based arrangement because otherwise parties could use information learned in an arrangement against another party in an anticompetitive manner.

Response: Neither the definition of “value-based arrangement” nor other safe harbor provisions in this final rule preclude parties to a value-based arrangement from entering into non-disclosure agreements.

Comment: Most commenters opposed our proposal to preclude entities under common ownership from protecting remuneration that they exchange under the value-based safe harbors, whether through a change to the definition of “value-based arrangement” or by adding restrictions to one or more of the value-based safe harbors. Commenters asserted that entities under common ownership (e.g., through an integrated delivery system) are often best positioned to improve health outcomes and lower costs through coordinated care. Several commenters also asserted that such a requirement may preclude protection for entities participating in large value-based models, like clinically integrated networks or accountable care organizations. Some commenters also explained that rural and Indian health care providers are frequently operated through common ownership models. Others noted that hospitals in states that restrict direct physician employment often have arrangements with medical groups under common ownership, and another commenter raised concerns about the impact on physician-owned hospitals.

Response: We appreciate commenters' responses. To address commenters' concerns, we are not limiting protection for entities under common ownership in this final rule. We continue to be concerned that there is potential for entities under common ownership to use value-based arrangements to effectuate payment-for-referral schemes, but we also believe that the combinations of safeguards we are adopting in the safe harbors should mitigate these risks. For example, the requirement in the care coordination arrangements safe harbor that the value-based arrangement is commercially reasonable, considering both the arrangement itself and all value-based arrangements within the VBE, helps to ensure that the arrangements, taken as a whole, are calibrated to achieve the parties' legitimate business purposes.

Comment: A commenter raised concerns about the timing of VBE participants entering into value-based arrangements and recommended that VBE participants not be prevented from providing value-based care to patients before a formal value-based arrangement has been executed. The same commenter recommended that we adopt a 90-day grace period for situations of technical non-compliance related to the timing of VBE participants entering into value-based arrangements.

Response: First, we remind readers that failure to comply with a safe harbor provision (or any attendant, defined term) does not mean that an arrangement is per se illegal. Consequently, the value-based safe harbors do not prevent a physician, clinician, or other VBE participant from providing value-based care to patients prior to entering into a value-based arrangement, or at any other time. In addition, the Federal anti-kickback statute, which focuses on the knowing and willful offer, solicitation, payment, or receipt of remuneration in exchange for Federal health care program business, likely would not be implicated by the provision of only clinical care to patients. OIG appreciates that many physicians and others currently furnish value-based care to patients, and nothing in this rule changes their ability to do so. Stakeholders should assess whether arrangements that do not satisfy the definition of “value-based arrangement,” as defined in paragraph 1001.952(ee), implicate the statute. Any arrangements that are not value-based arrangements, as defined, would not qualify for protection under the value-based safe harbors, but could qualify under other safe harbors, depending on the facts and circumstances, or they might not need safe harbor protection. As finalized in this rule, a provider or other individual or entity furnishing value-based care may also become a VBE participant, but the value-based arrangements in which it participates might not need safe harbor protection if they do not implicate the statute.

We are not adopting a 90-day grace period to execute value-based arrangements because it is our belief that it is not necessary. When a VBE participant must execute a value-based arrangement to receive safe harbor protection is based on the writing requirements of each safe harbor. For example, in the care coordination arrangements safe harbor as finalized at paragraph 1001.952(ee), the writing that documents the value-based arrangement must be set forth in advance of, or contemporaneous with, the commencement of the value-based arrangement and any material change to the value-based arrangement. Additionally, the writing may be a collection of documents. These flexibilities allow VBE participants to document their participation in a value-based arrangement with minimal burden. A VBE can add a new VBE participant to an existing arrangement in a separate document that becomes part of the collection of documents for that value-based arrangement.

c. Target Patient Population

Summary of OIG Proposed Rule: We proposed to define “target patient population” as an identified patient Start Printed Page 77702population selected by the VBE or its VBE participants using legitimate and verifiable criteria that: (i) Are set out in writing in advance of the commencement of the value-based arrangement; and (ii) further the value-based enterprise's value-based purpose(s). The proposal would protect only those value-based arrangements that serve an identifiable patient population for whom the value-based activities likely would improve health outcomes or lower costs (or both). In the OIG Proposed Rule, we noted that the definition was not limited to Federal health care program beneficiaries but could encompass, for example, all patients with a particular disease state.

Summary of Final Rule: We are finalizing, without modification, the definition of “target patient population.”

Comment: Many commenters supported our proposed definition of “target patient population,” including our requirement that the identified patient population be selected by the VBE or its VBE participants using “legitimate and verifiable criteria.” However, we received numerous comments about the use of the term “legitimate” to describe the criteria used to identify the target patient population in the proposed regulatory text, as well as the alternative proposal in the preamble to use the term “evidence-based.” Some commenters expressed support for the legitimate criteria standard and stated, for example, that it facilitated a holistic focus on patients' health. This category of commenters generally expressed opposition to the alternative evidence-based standard, arguing that it is too restrictive and would chill innovative value-based arrangements.

Other commenters opposed the use of the term “legitimate,” stating that the term is ambiguous. Another commenter suggested that OIG enumerate the types of specific behavior that it wishes to preclude in lieu of using the term “legitimate”; as an example, the commenter recommended that we state expressly in the definition of “target patient population” that it would preclude selection criteria designed to avoid costly or non-compliant patients. Multiple commenters requested that OIG provide additional clarification on the scope and application of the term, such as whether it could encompass criteria based on social determinants of health.

Response: We are finalizing the definition of “target patient population,” as proposed, including the “legitimate and verifiable criteria” standard. As stated in the OIG Proposed Rule, we used this standard, and in particular, the term “legitimate,” to ensure the target patient population selection process is based upon bona fide criteria that further a value-based arrangement's value-based purpose(s), and we confirm that, depending on the facts and circumstances, legitimate criteria could be based on social determinants of health, such as safe housing or transportation needs. We are not including an exhaustive list of legitimate or non-legitimate selection criteria because there are various types of criteria that parties could use to select a target patient population; moreover, some criteria may be legitimate for some value-based arrangements but not for others. For example, as we stated in the OIG Proposed Rule, VBE participants seeking to enhance access to, and usage of, primary care services for patients concentrated in a certain geographic region might base the target patient population on ZIP Code or county of residence. In contrast, a value-based arrangement focused on enhancing care coordination for patients with a particular chronic disease might identify the target patient population based on patients who have been diagnosed with that disease. Other VBE participants, such as a social service organization working in conjunction with a pediatric practice, may identify their target patient population using income and age criteria, e.g., pediatric patients who have a household income below 200 percent of the Federal poverty level and who are below the age of 18, in an effort to boost pediatric vaccination rates in a given community.

We are adopting the proposed “legitimate and verifiable” standard in lieu of the alternative we proposed, which would have required the use of “evidence based” criteria, because we believe requiring “legitimate and verifiable” criteria will afford parties comparatively greater flexibility in determining the target patient population and aligns with CMS's definition of the same term.

Comment: We received at least two comments requesting that we expressly state in regulatory text that establishing criteria in a manner that leads to cherry-picking or lemon-dropping would not constitute “legitimate and verifiable” selection criteria. These commenters expressed concern that the mere promise by VBE participants not to engage in such behavior would be sufficient to meet the definition of “target patient population” and receive safe harbor protection. Another commenter urged that OIG clarify the regulatory language to directly address concerns about cherry-picking or lemon-dropping certain patient populations, in order to avoid unnecessary litigation and legal expense.

Response: In response to the commenters' concerns, we confirm that if VBE participants establish criteria to target particularly lucrative patients (“cherry-picking”) or avoid high-cost or unprofitable patients (“lemon-dropping”), such criteria would not be legitimate for purposes of the target patient population definition. As we stated in the OIG Proposed Rule, if VBE participants selectively include patients in a target patient population for purposes inconsistent with the objectives of a properly structured value-based arrangement, we would not consider such a selection process to be based on legitimate and verifiable criteria that further the VBE's value-based purposes, as required by the definition.[15] We are not adopting further modifications to the proposed definition because the definition's requirement that the criteria be legitimate and verifiable is clear and would not include VBE participants that establish criteria to cherry-pick or lemon-drop patients.

Comment: The vast majority of commenters on this topic opposed our statement in the OIG Proposed Rule that we were considering narrowing the definition of “target patient population” to patients with a chronic condition, patients with a shared disease state, or both. Commenters stated that such an approach would restrict the ability of value-based arrangements to adapt to different communities and patient needs and would ignore the importance of preventive care interventions. For example, a commenter highlighted the fact that many underserved and at-risk patient populations are defined not by chronic conditions or shared disease states but instead are identified by socio-economic, geographic, and other demographic parameters that are synonymous with need, poor outcomes, or increased cost.

Response: We are retaining our proposed definition of “target patient population” and are not narrowing the definition to include only individuals with chronic conditions or shared disease states. We agree with commenters that were we to narrow the definition, we might exclude underserved and at-risk patient populations who would likely benefit from care coordination and management activities. We also recognize and acknowledge that finalizing our proposed definition will allow for Start Printed Page 77703value-based arrangements that focus on important preventive care interventions.

Comment: We received a variety of comments on the role of payors in identifying or selecting a target patient population. While some commenters supported requiring payors to select the target patient population, the majority of commenters urged OIG to make their involvement optional. For example, a commenter expressed concern that if OIG were to make payor involvement a requirement, it would impede collaboration between payors and providers. Others expressed uncertainty as to how a requirement that payors select or approve the target patient population would be implemented for Medicare fee-for-service patients and questioned whether CMS would need to affirmatively approve each VBE's or value-based arrangement's target patient population selection criteria.

Response: We are persuaded by commenters that it would not be operationally feasible to require payor involvement in the target patient population selection process. Not all value-based enterprises will include a payor as a VBE participant. Accordingly, while we encourage payor involvement in the target patient population selection process, it is not a requirement in this final rule. It is a requirement that the target patient population be selected by a VBE or its VBE participant.

Comment: We received comments requesting wholesale changes to our proposed definition. For example, a commenter recommended that “target patient population” be defined as any set or subset of patients in which the accountable party of a VBE takes significant or full downside risk and is focusing efforts to improve their health and well-being. Another suggested that we eliminate the “target patient population” definition altogether and make the value-based safe harbors provider-, not patient-population-, specific.

Response: We are not adopting the commenter's alternative definition of “target patient population,” which we did not propose and which would be too narrow to address the use of the term across all of our value-based safe harbors, one of which does not require the VBE participants to take on, or meaningfully share in, any risk. We are also not eliminating the “target patient population” definition in favor of making the value-based safe harbors provider-, not patient-population-, specific because orienting the value-based safe harbors around patients is consistent with the goals of value-based care.

Comment: At least two commenters requested that the definition of “target patient population” afford parties the flexibility to modify the target patient population over time. Another commenter sought clarification that the definition could include patients retroactively attributed to the target patient population. Another commenter urged OIG to adopt a flexible definition but suggested that if OIG narrows its definition, the term should include underserved patients, such as uninsured and low-income patients; patients with social risk factors; and those with limited English proficiency.

Response: The definition of “target patient population” requires, among other criteria, that parties identify a patient population using legitimate and verifiable criteria in advance of the commencement of the value-based arrangement. The selection criteria—not the individual patients—must be identified in advance. Whereas parties seeking to modify their selection criteria may only make such modifications prospectively (and upon amending their existing value-based arrangement), no amendment would be required to attribute patients retroactively to the target patient population, provided such patients meet the selection criteria established prior to the commencement of the value-based arrangement.

Comment: Several commenters sought clarification as to whether a VBE participant's entire patient population could meet the definition of “target patient population.”

Response: Nothing in the definition precludes the parties to a value-based arrangement from identifying the target patient population as the entire patient population that a VBE participant serves. We recognize that, in limited cases, such broad selection criteria may be appropriate. For example, a VBE may identify all patients in a ZIP Code in order to address an identified population health need specific to that ZIP Code, and it may be that a practice also draws most or all patients from that ZIP Code. Certain specialists, such as geriatricians, might also identify all or most of their patients as needing improved care coordination and management due to their multiple comorbidities and complex care needs. In circumstances where a VBE has assumed full financial risk, as defined in paragraph 1001.952(gg), a VBE might select an even broader target patient population comprised of all patients served by its VBE participants in an effort to more meaningfully control payor costs.

However, we caution that, depending on the value-based arrangement, selecting a target patient population by selecting the parties' entire patient population would need to be closely scrutinized for compliance with the definition to ensure that such broad selection criteria is “legitimate” and necessary to achieve the arrangement's value-based purpose.

Comment: Multiple commenters requested that OIG address whether specific categories of patients would be covered by the definition of “target patient population” or provide examples of permissible target patient populations. For example, commenters requested confirmation that a target patient population could include all patients covered by a certain payor, such as Medicare. Another commenter expressed concern that transient patient populations who may have different providers in different geographic locations would not be covered by the definition.

Response: As described above, a target patient population based on patients who have been diagnosed with a particular disease could, based on the specific selection criteria, be a permissible target patient population. Whether a particular patient population, including transient patient populations with different providers in different geographic locations, meets the definition of “target patient population” is a fact-specific determination that turns on whether the VBE participants used legitimate and verifiable selection criteria and met the other requirements set forth in the definition. While there may be circumstances, e.g., the assumption of full financial risk (as defined in paragraph 1001.952(gg)), where a VBE identifies all of the patients of a particular payor as the target patient population, we caution that relying on this criterion, without sufficient justification for such a broad approach, could raise questions regarding whether it is legitimate or, instead, is a way to capture referrals of, for example, Medicare business.

d. Value-Based Activity

Summary of OIG Proposed Rule: We proposed to define “value-based activity” as any of the following activities, provided that the activity is reasonably designed to achieve at least one value-based purpose of the value-based enterprise: (i) The provision of an item or service; (ii) the taking of an action; or (iii) the refraining from taking an action. We further proposed that the making of a referral is not a value-based activity.

Summary of Final Rule: We are finalizing, without modification, the definition of “value-based activity.” Start Printed Page 77704OIG's final definition of “value-based activity” differs from the definition in the CMS Final Rule because CMS does not specify that the making of a referral is not a value-based activity. As explained in CMS's final rule, CMS has not included a comparable restriction because of the physician self-referral law's separate definition of referral.

Comment: Many commenters supported the definition of “value-based activity,” as proposed. Several commenters asked OIG to clarify the definition of “value-based activity” further by specifying what activities would or would not qualify as value-based; how VBEs would demonstrate that the activities they select are reasonably designed to achieve a value-based purpose; and what it means to refrain from taking an action. A few commenters asked whether providing services to patients constitutes a value-based activity.

Response: The term “value-based activity” is intended to be broad and to include the actions parties take or refrain from taking pursuant to a value-based arrangement and in furtherance of a value-based purpose. By way of example, where a VBE participant offeror provides a type of health technology under a value-based arrangement for the recipient to use to track patient data in order to spot trends in health care needs and to improve patient care planning, the provision of the health technology by the offeror would constitute a value-based activity, and the use of the health technology by the recipient to track patient data would constitute a value-based activity. If the remuneration a VBE participant offeror provides is care coordination services, a value-based activity might be the recipient working with a care coordinator provided by the offeror to help transition certain patients between care settings. Giving something of value to patients, such as a fitness tracker, also may constitute a value-based activity if doing so is reasonably designed to achieve a value-based purpose. However, we note that, where VBE participants exchange remuneration that the recipient VBE participant then transfers to its patients (for example, where one VBE participant provides fitness trackers to another VBE participant, who in turn furnishes the fitness tracker to the patient), the care coordination arrangements safe harbor would be available only to protect the remuneration exchanged between the VBE participants. The parties may look to the patient engagement and support safe harbor to protect the remuneration from the VBE participant to the patient. An inaction that constitutes a value-based activity might be refraining from ordering certain items or services in accordance with a medically appropriate care protocol that reduces the number of required steps in a given procedure. This final rule does not prescribe how parties prove that a particular action or inaction constitutes a value-based activity. Similarly, it is incumbent on the parties to demonstrate that they selected value-based activities that are reasonably designed to achieve a value-based purpose. Both of these analyses would be fact-specific determinations.

Comment: A commenter asked whether this definition could be combined with the definition of “value-based purpose” to reduce administrative complexity. Another commenter asserted that the definition of “value-based activity” should recognize the importance of maintaining patient care and outcomes at an acceptable level.

Response: We are finalizing the definition of “value-based activity,” as proposed, and are not combining it with the definition of value-based purpose. In our view, separate definitions do not increase administrative complexity, and we have coordinated terminology with CMS to reduce complexity. We are not changing the definition of “value-based activity” to include the maintenance of patient care and outcomes at an acceptable level because the definition of “value-based activity” is tied to the definition of “value-based purpose,” which sets forth four purposes toward which parties may be striving pursuant to value-based arrangements. While maintaining patient care and outcomes at an acceptable level is clearly desirable, we note that doing so, without more, is not one of the four value-based purposes needed to establish a VBE for this rulemaking.

Comment: Many commenters supported the alternate proposal to expressly exclude any activity that results in information blocking from the definition of “value-based activity.” A commenter recommended that, if OIG expressly excludes information blocking from the definition of “value-based activity,” OIG should do so by referencing only statutory definitions and requirements in the Cures Act and not those set forth in ONC's proposed rule, whereas another commenter noted that, as an alternative to expressly excluding information blocking activities in the definition of “value-based activity,” OIG could assume that information blocking will no longer be tolerated and leave the enforcement of information blocking restrictions to the regulation finalized in 45 CFR part 171.

Response: The final rule does not include the proposed language regarding information blocking. Regardless of whether parties seek safe harbor protection, if parties to value-based arrangement are subject to the regulations prohibiting information blocking, they must comply with those regulations. This final rule does not change the individuals and entities subject to the information blocking prohibition in 45 CFR part 171.

Comment: A commenter expressed concern that the definition of “value-based activity” is too broad and vague and that VBE participants will characterize abusive remuneration-for-referral arrangements as value-based activities. The commenter suggested requiring that an activity achieve a value-based purpose, as opposed to requiring that an activity be reasonably designed to achieve a value-based purpose.

Comments varied regarding how to interpret whether an activity is “reasonably designed” to achieve a value-based purpose. While a commenter supported interpreting “reasonably designed” to mean that the value-based activities are expected to further one or more value-based purposes, another commenter suggested that such a determination be based on all relevant facts and circumstances. Other commenters recommended establishing a rebuttable presumption that value-based activities are reasonably designed to meet their stated value-based purpose. Another commenter urged OIG to require that value-based activities be directly connected to and directly further the coordination and management of care; not interfere with the professional judgment of health care providers; not induce stinting on care; and not incentivize cherry-picking lucrative or adherent patients or lemon-dropping costly or noncompliant patients.

Lastly, while at least one commenter supported a requirement for parties to use an evidence-based process to design value-based activities, several commenters opposed this requirement, stating that such a standard would be too rigorous and would restrict innovative activities.

Response: We are finalizing our definition as proposed. We intentionally crafted a broad definition of “value-based activity” to encourage parties to innovate when developing these activities. For that reason, we are not requiring that an activity achieve a value-based purpose but rather are requiring that a value-based activity be reasonably designed to achieve a value-based purpose. By “reasonably Start Printed Page 77705designed,” we mean that parties should fully expect the value-based activities they develop to further one or more value-based purposes. Because any such determination would be fact specific, we do not believe it is appropriate to establish a rebuttable presumption that value-based activities are reasonably designed to meet their stated value-based purpose, as suggested by a commenter.

We note that, while this definition offers parties significant flexibility, it is not intended to facilitate parties' attempts to mask fraudulent referral schemes presented under the guise of a value-based activity. We highlight that the definition provides that merely making a referral, without more, is not a value-based activity for purposes of this rule.

Lastly, we do not intend for the value-based safe harbors to protect activities that inappropriately influence clinical decision-making, induce stinting on care, or lead to targeting particularly lucrative patients or avoiding high-cost or unprofitable patients. We have incorporated a range of safeguards in the safe harbors that are designed to guard against these abusive practices. In light of these safeguards, we do not believe that revisions to the definition of “value-based activity” are necessary.

Comment: Several commenters asked OIG to clarify what differentiates care coordination services from inappropriate referrals and to modify the definition to make clear that a referral could be one part of a broader value-based activity. Some commenters expressed concern that the definition of “value-based activity” prohibits safe harbor protection for value-based arrangements in which payments or other remuneration depend, in part, on referrals made within a preferred provider network. A commenter asked whether documenting that a referral was made and the reason for the referral would constitute a “value-based activity.”

Response: Making referrals, or documenting reasons for referrals, would not constitute value-based activities. Parties to a value-based arrangement may make referrals and document the reasons for the referrals as part of a value-based arrangement without losing safe harbor protection under an applicable safe harbor, but the parties also must be performing one or more value-based activities. Thus, making referrals or documenting reasons for referrals, without also engaging in a value-based activity, would not be sufficient to meet the requirements of the definition because making referrals is not itself a value-based activity. Absent at least one value-based activity, parties would not have a viable value-based arrangement and would thus not be eligible for any of the value-based safe harbors.

The provision excluding referrals from the scope of value-based activities is not intended to interfere with preferred provider networks; rather, we intend to require parties to engage in activities other than making referrals, such as coordinating care plans across providers for a target patient population, to be eligible for safe harbor protection.

e. VBE Participant

Summary of OIG Proposed Rule: We proposed to define “value-based enterprise participant” or “VBE participant” as an individual or entity that engages in at least one value-based activity as part of a value-based enterprise. Based on historical concerns regarding fraud and abuse risk and our understanding that certain types of entities were less critical to coordinated care, we proposed that the term “VBE participant” would not include a pharmaceutical manufacturer; a manufacturer, distributor, or supplier of durable medical equipment, prosthetics, orthotics, or supplies; or a laboratory. We stated that we were considering and thus seeking comments as to whether other types of entities should also be ineligible, including pharmacies (including compounding pharmacies), PBMs, wholesalers, distributors, and medical device manufacturers. As a result of this proposed definition, these entities would not be able to participate in VBEs or seek protection under the value-based safe harbors or the patient engagement and support safe harbor.

We stated our intent to offer safe harbor protection for remuneration exchanged by companies that offer digital technologies to physicians, hospitals, patients, and others for the coordination and management of patients and their health care. We recognized that companies providing these technologies may be new entrants to the health care marketplace or may be existing companies such as medical device manufacturers. We explained that we would consider for the final rule several ways to effectuate our desire to ensure safe harbor protection for remuneration exchanged by health technology companies, including through modifications to the value-based terminology; distinctions drawn among entities based on product-types or other characteristics; or modifications to the safe harbors themselves.

In the OIG Proposed Rule, we considered and solicited comments on potential additional safeguards to incorporate into the value-based safe harbors to mitigate risks of abuse that might be presented should a broader range of entities be eligible to enter into value-based arrangements, including restrictions on the parties' use of exclusivity and minimum purchase requirements.

For additional background and rationale for our proposals, we refer readers to the discussion of the definition of “VBE participant” in the OIG Proposed Rule.[16]

Summary of Final Rule: We are finalizing, with modifications, the definition of “VBE participant.” We are finalizing our proposed policy that a “VBE participant” is an individual or entity that engages in at least one value-based activity as part of a value-based enterprise. We are not finalizing our proposed regulatory text to make certain entity types ineligible under the definition of “VBE participant.” However, we are finalizing our proposed policy to make certain entities ineligible for safe harbor protection under the value-based safe harbors and the patient engagement and support safe harbor (see section III.B.e.ii for details). We are also finalizing our proposed policy to protect some arrangements involving digital health technologies provided by certain entities that would otherwise be ineligible for safe harbor protection (see section III.B.e.iii).

To effectuate these objectives, we are finalizing a different approach to the definition of “VBE participant” in the following four respects.

First, we are revising the definition of “VBE participant” to allow all types of individuals (other than patients) and entities to be VBE participants. This revision makes our definition more similar to CMS's corresponding definition and removes a potential impediment to existing organizations that wish to qualify as VBEs but may include types of entities we proposed to disallow as VBE participants. We now define the term “VBE participant” to mean an individual or entity that engages in at least one value-based activity as part of a value-based enterprise, other than a patient when acting in their capacity as a patient. This does not, however, mean that every VBE participant will receive protection under the applicable safe harbors; it is intended to avoid a barrier to the formation and operation of the VBE itself. The new definition also makes clear that patients cannot be VBE participants, consistent with our intent in the OIG Proposed Rule. Entities seeking safe harbor protection for Start Printed Page 77706remuneration provided to patients should look to the patient engagement and support safe harbor for protection, not to the value-based safe harbors.

Second, rather than making certain entities ineligible under the definition of “VBE participant,” as described in the OIG Proposed Rule, the final rule takes a different approach to achieve the proposed policy to make some entities ineligible for safe harbor protections. In the final rule, within each value-based safe harbor (and the patient engagement and support safe harbor, as discussed further at section III.B.6), we identify entities that are not eligible to rely on the safe harbor to protect remuneration exchanged with a VBE or other VBE participants. Specifically, the value-based safe harbors each include an ineligible entity list. Remuneration exchanged by entities on the list in each safe harbor is not eligible for protection under the safe harbor.

The following entities are included on the ineligible entity lists in all of the value-based safe harbors: (i) Pharmaceutical manufacturers, distributors, and wholesalers (referred to generally throughout this preamble as “pharmaceutical companies”); (ii) PBMs; (iii) laboratory companies; (iv) pharmacies that primarily compound drugs or primarily dispense compounded drugs (sometimes referred to generally in this rule as “compounding pharmacies”); (v) manufacturers of devices or medical supplies; (vi) entities or individuals that sell or rent DMEPOS, other than a pharmacy or a physician, provider, or other entity that primarily furnishes services, all of which remain eligible (referred to generally throughout this preamble as “DMEPOS companies”); and (vii) medical device distributors or wholesalers that are not otherwise manufacturers of devices or medical supplies (for example, some physician-owned distributors).

Third, we proposed to address safe harbor protection for technology companies by considering how and whether they could fit in the definition of a VBE participant. In the final rule, we instead focus on safe harbor protection for the remuneration exchanged with or by them. Specifically, the care coordination arrangements safe harbor at paragraph 1001.952(ee) permits protected remuneration in the form of digital health technology (or other technologies) exchanged between VBE participants eligible to use the safe harbor. To address protection under this safe harbor for arrangements with manufacturers of devices and medical supplies and DMEPOS companies that involve digital health technology, we have taken a tailored, risk-based approach. Manufacturers of devices and medical supplies and DMEPOS companies that are otherwise ineligible for the value-based safe harbors are nonetheless eligible to rely on the care coordination arrangements safe harbor for digital health technology arrangements that meet all safe harbor conditions, including an additional one. Under this pathway, we define “limited technology participant” to include, as further discussed below, a manufacturer of a device or medical supply or a DMEPOS company that is a VBE participant that exchanges digital health technology with another VBE participant or a VBE.

Our revised approach effectively divides the universe of VBE participants into three categories: (i) VBE participants that are eligible to rely on the value-based safe harbors for all types of arrangements that meet safe harbor conditions; (ii) limited technology participants that are only eligible to rely on the care coordination arrangements safe harbor for arrangements involving digital health technology; and (iii) VBE participants that are ineligible to rely on any of the value-based safe harbors for any types of arrangements. The first category is the default category, capturing all entities and individuals who are not expressly included in the second and third categories. For a discussion of ineligible entities and the treatment of digital health technology under the patient engagement and support safe harbor, see the discussion in section III.B.6.b and f. For a discussion of ineligible entities under the personal services and management contracts and outcomes-based payments safe harbor, see sections III.B.10.c and d.

Fourth, to address heightened risk of fraud and abuse and to help ensure that protected remuneration meets the policy goals of this rulemaking, we require that the exchange of digital health technology by a limited technology participant is not conditioned on any recipient's exclusive use of, or minimum purchase of, any item or service manufactured, distributed, or sold by the limited technology participant. Rather than finalizing this condition in the definition of a VBE participant as contemplated in the OIG Proposed Rule, this is now a separate condition at paragraph 1001.952(ee)(8).

i. Approach To Defining “VBE Participant”

Comment: While we received some support for our proposed definition of “VBE participant,” many commenters expressed concerns regarding the proposed categorical exclusion of certain entities. Several commenters asserted that no entities should be precluded from participating in value-based arrangements, and many encouraged us to adopt an alternative approach based on product type, company structure, fraud risk, the legitimacy of the party's objectives and deliverables, or other features. Commenters also noted that many existing value-based arrangements include entities that we were considering making ineligible to be a VBE participant. Another commenter asserted that allowing entities to participate as VBE participants will incentivize them to understand and expand cost mitigation strategies, which will help lower the cost of care. Others emphasized that the health care industry is highly dynamic, with frequent corporate transactions. They expressed concern that an entire value-based arrangement may inadvertently fall out of compliance with a safe harbor because one VBE participant acquires an entity that is not eligible to be a VBE participant. Other commenters supported placing exclusions directly in the safe harbor, rather than in the definition, to create greater flexibility. A commenter recommended that OIG create a new defined term, “VBE partner,” to designate individuals and entities that provide social determinants of health support and services at the direction of a VBE or VBE participant but are not themselves part of the VBE. According to the commenter, this would allow many services providers, such as rideshare companies, social service organizations, and foodbanks that already have direct partnerships with a VBE participant to participate in protected arrangements without having to become full participants in a VBE.

Response: We recognize that there may be benefits to allowing all entities to participate as VBE participants, and we also appreciate the concerns raised by these commenters. In response to comments, our revised approach, in which any individual (other than a patient) or entity is eligible to be a VBE participant, will alleviate many of them.

In the OIG Proposed Rule, we described several approaches we were considering for determining entities that could be VBE participants in the final rule and, as such, able to rely on the value-based safe harbors. We are adopting the approach of making entities ineligible under the value-based safe harbors rather than through the definition of “VBE participant.” This approach allows for closer alignment with CMS's terminology, addresses concerns about unintended impacts of Start Printed Page 77707otherwise ineligible VBE participants on the makeup of a VBE, and does not impede VBEs from engaging in a wide range of value-based payment and delivery arrangements, regardless of whether those arrangements qualify for safe harbor protection. By addressing eligibility in specific safe harbors rather than through the VBE participant definition, the final rule creates flexibility for all health care stakeholders to be part of a VBE and reduces any need for parties to form VBEs structured solely for purposes of using the new safe harbors. This approach also facilities our final policy on providing safe harbor protection for digital health technology arrangements with limited technology participants (described in more detail later).

While all entities are eligible to be VBE participants, each value-based safe harbor and the patient engagement and support safe harbor incorporates a list of entities that are ineligible for safe harbor protection. As discussed in greater detail below, we determined which entities should be ineligible based on multiple factors, including the extent to which the entities are involved in front line care coordination and program integrity concerns.

Under this final rule, a VBE will not cease to meet the definition of a “VBE” solely because a VBE participant merges with or acquires a different type of entity or develops a new business line. Nor would a VBE participant necessarily cease to be eligible to use a value-based safe harbor solely because it acquires an entity that is not eligible. To the extent a transaction causes a VBE participant to become an ineligible entity, the safe harbor would no longer be available to protect any remuneration exchanged by that entity under a value-based arrangement.

Consistent with the OIG Proposed Rule discussion of alternatives for determining which entities are eligible and ineligible for safe harbor protection, we have adopted a risk-based, policy-focused approach to determine the scope and applicability of the final safe harbors. With respect to the ineligible entities in the value-based safe harbors, those entities are identified based on a number of attributes, including the products and services they offer, how they structure their business, and the extent to which they are on the front line of care coordination and treatment decisions. In the care coordination arrangements safe harbor, we further distinguish among entities in part on the basis of product or arrangement type. These considerations are directly related to the goals of the Regulatory Sprint and the design of the conditions in each safe harbor to protect against fraud and abuse.

With respect to the recommendation that we create a new category of “VBE partners,” we are not adopting this suggestion. The proposed and final value-based safe harbors were and are designed for value-based arrangements between VBEs and one or more of their VBE participants or between or among VBE participants in the same VBE. The ability to determine with specificity which individuals and entities are in a VBE and which are not enhances transparency, certainty, and accountability for arrangements seeking safe harbor protection. Social services agencies, rideshare companies, foodbanks, and others are eligible to be VBE participants if they wish for their arrangements to be eligible for protection under the value-based safe harbors. If for any reason they do not wish to be VBE participants or cannot become VBE participants, nothing in this rule would prevent them from engaging in care coordination or other arrangements that do not fit in these new safe harbors. In some cases, the arrangements might fit in other safe harbors, such as the local transportation safe harbor (e.g., for rideshare arrangements). For other arrangements, the parties would need to review the specific facts of the arrangement, including the intent of the parties, to ensure compliance with the Federal anti-kickback statute.

Notably, if there is nothing of value given by a social services agency or foodbank, for example, to an individual or entity in exchange for or to induce or reward referrals of items or services for which payment may be made under a Federal health care program, the statute would not be implicated. We would expect this to be the case for many social services agencies, foodbanks, and other entities that provide social services, food, or other supports to patients and (1) do not bill Federal health care programs and (2) do not refer Federal health care patients to health care providers for reimbursable services or otherwise recommend or arrange for such services.

Comment: Several commenters requested that we either confirm in the preamble, or revise the definition of “VBE participant” to state expressly, that certain types of entities or providers, such as retail health clinics, charitable clinics and pharmacies, federally qualified health centers, credentialed orthotists and prosthetists, payors, physician shareholders and employees of medical groups, and non-traditional health care entities, among others, qualify as VBE participants.

Response: Under our revised definition of a “VBE participant,” all types of entities can be VBE participants. Entities would need to refer to the specific safe harbors to determine whether they are eligible to rely on the safe harbor.

Comment: Some commenters noted that CMS's proposed value-based terminology does not make any entities ineligible to be a VBE participant.

Response: Our final definition of “VBE participant” is aligned with CMS's definition, with the exception of a detail around the use of the term “individual” in our rule and “person” in CMS's rule and our policy that patients may not be VBE participants. The “individual” versus “person” verbiage relates to the difference in language used elsewhere in the two regulatory schemes and promotes overall consistency across safe harbors for OIG and exceptions for CMS.

For clarity, we have included an express statement in regulatory text, not included in CMS's definition, carving patients out of the definition of “VBE participant.” This carve out would extend to the patient's family members or others acting on the patient's behalf, consistent with the approach we take elsewhere in this final rule with respect to the coordination and management of care with patients. The context and framework of the value-based provisions in the OIG Proposed Rule made clear that we did not intend patients to be VBE participants who could engage in value-based arrangements under the value-based safe harbors. In the proposed regulations, we described VBE participants as engaging in at least one value-based activity as part of a VBE and being part of at least one value-based arrangement to provide at least one value-based activity for a target patient population. The role of VBE participants in health care business activities of VBEs is not a role assumed by patients and families, who play a critical role in patient care in other ways. Our modification in the final rule clarifies this point.

Under our proposed rule and this final rule, VBE participants providing remuneration to patients would look to the patient engagement and support safe harbor for protection, not to the value-based safe harbors. Our reference to “individuals” in the proposed definition was meant to capture physicians, nurses, and other practitioners, providers, and suppliers in the health care ecosystem involved in caring for patients. Our revised regulatory text recognizes that all individuals will likely be a patient at one point or another and that our carve-Start Printed Page 77708out of patients is limited to patients when acting in their capacity as patients. In other words, a physician remains eligible to be a VBE participant even if he or she is also sometimes a patient.

Comment: Several commenters encouraged us to consider requiring additional safeguards within each safe harbor to address concerns regarding particular types of entities, rather than categorical exclusions from the definition of “VBE participant.” Others opposed applying additional safeguards, believing the existing safeguards in the OIG Proposed Rule were sufficient for all types of entities.

Response: For reasons noted above, including input from comments, we are not adopting categorical exclusions from the definition of “VBE participant.” Instead, relying on factors such as fraud and abuse risk and level of participation in front line care of patients, we identify certain entities as ineligible for protection in specified safe harbors, and include a tailored additional condition for certain high-risk entities engaged in arrangements involving digital health technology. The entities that are ineligible for protection and the rationale for carving them out are addressed in greater detail below in response to comments specific to these entities. We also provide greater detail below regarding the entity-specific safeguard we are adopting in the care coordination arrangements safe harbor for arrangements involving digital health technology.

Comment: Several commenters challenged OIG's assertion that its history of law enforcement activities involving certain types of entities should form the basis for whether entities are entitled to protection under the value-based safe harbors. Some of these commenters noted that many other types of parties, including hospitals and physicians, have likewise been the subject of enforcement actions. Others asserted that the past bad acts of a few should not dictate the future compliance risks of the many, particularly where many of the historic enforcement actions resulted in settlements without admission of guilt, rather than actual convictions.

Response: We agree with the commenters that the bad acts of the few should not dictate the compliance risks of the many. We proposed and are finalizing new safe harbors intended to aid the majority of stakeholders that are honest and trying to do the right thing for patients and the health care system. The fact that an entity type is categorically ineligible for safe harbor protection does not mean that all entities in the category are bad actors. In crafting the value-based safe harbors, we have balanced new flexibility under a criminal statute with protections where we identified elevated risk of fraud and abuse. Our experience investigating fraud and enforcing the anti-kickback statute necessarily informs our approach to establishing safe harbors for specific payment practices consistent with the criteria set forth at section 1128D(a)(2) of the Act (safe harbor authority under the Federal anti-kickback statute). Our enforcement and oversight work offer insights into common fraud schemes, trends, and methods used by bad actors to circumvent rules. In bringing this experience to bear, we considered multiple types of entities and arrangements that have been the subject of our work. The risk of fraud and abuse is one factor in determining the types of entities eligible for protection under the safe harbors. Others include, for example, the degree of participation of the entity type in the care coordination arrangements that are central to this rulemaking and the level of need for the entity type to have safe harbor protection to effectuate the policy goals of the Regulatory Sprint. We acknowledged in the OIG Proposed Rule and reiterate here that the new safe harbors do not address all beneficial value-based arrangements.

Comment: A commenter requested confirmation that the definition of “VBE participant” would not bar an integrated delivery system from creating a value-based arrangement within its own system.

Response: There is nothing in the definition of “VBE participant” that would preclude an integrated delivery system from creating a value-based arrangement within its own system.

Comment: A commenter requested that OIG make clear that the safe harbors do not preclude entities that are ineligible to be VBE participants from contributing to value-based activities or contracting with VBEs.

Response: We believe our revised approach, where all entities are eligible to be a VBE participant, addresses the commenter's concern. We wish to clarify further that the value-based safe harbors do not prohibit the VBE from entering into contractual arrangements with any type of entity, including an entity that is not a VBE participant. However, an entity that is not a VBE participant will not be eligible for safe harbor protection. Remuneration exchanged by certain types of entities, including non-VBE participants and VBE participants on the carve-out list, will not be protected by a value-based safe harbor, and parties would need to look to other safe harbors to the extent they want to protect it.

Comment: A commenter supported the fact that the proposed definition of “VBE participant” did not require VBE participants to be equity owners of the VBE.

Response: We did not propose requirements related to equity ownership of VBEs. However, we note that the value-based safe harbors do not protect remuneration in the form of ownership interests or returns on those interests.

Comment: A commenter recommended that, if OIG finalizes the definition of “VBE participant” as proposed, it also modify the advisory opinion process so that opinions may be relied upon by parties other than just the requesting party.

Response: Modifying the OIG advisory opinion process is beyond the scope of this rulemaking.

ii. Entities Ineligible for Safe Harbor Protection

The value-based safe harbors deem certain entities ineligible for safe harbor protection. Those entities are: Pharmaceutical companies; PBMs; laboratory companies; compounding pharmacies; manufacturers of devices or medical supplies; DMEPOS companies; and medical device distributors and wholesalers. Notwithstanding, under the care coordination arrangements safe harbor (paragraph 1001.952(ee)), manufacturers of devices and medical supplies and DMEPOS companies are eligible as limited technology participants to protect certain digital health technology arrangements to allow them to participate in such arrangements, along with other types of eligible VBE participants. As explained in more detail below, these distinctions are rooted in a functional approach focusing on the items, services, and products furnished by the different entity types and their roles in care coordination, along with assessment of program integrity risk based on enforcement experience. We aim to balance flexibility to achieve the Regulatory Sprint goals with protection against fraud and abuse.

This preamble section responds to comments about each of these entity types in turn. The outcomes-based payments safe harbor at paragraph (d)(2) and the patient engagement and support safe harbor at paragraph 1001.952(hh) reference these same entities and rely on the same definitions when doing so.Start Printed Page 77709

(a) Pharmaceutical Manufacturers, Wholesalers, and Distributors

Comment: Many commenters agreed with our proposal not to include pharmaceutical manufacturers in the definition of “VBE participant.” These commenters articulated a variety of supporting rationales, including that manufacturers are less involved in care coordination and present an increased risk of abusive arrangements. Many other commenters encouraged OIG to allow pharmaceutical manufacturers to participate as VBE participants, arguing, among other things, that manufacturers are well-positioned to contribute to value-based arrangements and that their participation is essential given the role of medications in improving care. For example, commenters noted that manufacturers can leverage data analytics and technology to improve both outcomes measurement and care management. Several commenters also emphasized that manufacturers can provide a variety of services relating to medication adherence, which may play a central role in value-based arrangements by managing care and reducing costs. Commenters also emphasized that manufacturers often know their product best and are thus in an ideal position to bring value through continued involvement.

Response: Under the revised framework we are adopting in this final rule, pharmaceutical companies can be VBE participants, and existing VBEs that include pharmaceutical companies do not need to be restructured for purposes of this rulemaking. However, we are effectuating our intent that pharmaceutical companies would not be eligible to use the value-based safe harbors by including pharmaceutical companies on the ineligible entity list in each safe harbor. We agree with the commenters that pharmaceutical manufacturers are not as likely as other entities to be involved with front line care coordination, and we remain concerned, as noted in the OIG Proposed Rule, about the potential for pharmaceutical manufacturers to use the value-based safe harbors to protect arrangements that are intended to market their products or inappropriately tether clinicians to the use of a particular product rather than as a means to create value by improving the coordination and management of patient care. As a result, protection under the value-based safe harbors does not extend to remuneration that pharmaceutical manufacturers exchange with other VBE participants.

We recognize that pharmaceutical manufacturers can play important roles in delivering efficient, high quality care to patients, including, for example, through medication adherence programs and data sharing. However, like any arrangement that does not qualify for a safe harbor, such arrangements would need to be analyzed for compliance with the anti-kickback statute based on their specific facts, including the intent of the parties. They are not eligible for protection under these new safe harbors.

As noted in the OIG Proposed Rule, we continue to consider the role of pharmaceutical manufacturers in coordinating and managing care as well as how to address value-based contracting and outcomes-based contracting for pharmaceutical products and medical devices, including devices that do not meet the definition of “digital health technology” under this rule.

Comment: Many commenters encouraged OIG to allow pharmaceutical manufacturers to participate in value-based contracting arrangements where they take on financial risk. Several of these commenters specifically supported arrangements where payment for prescription drugs is tied to clinical endpoints or patient outcomes, such as where a manufacturer agrees to provide a full or partial refund on a product if a course of treatment fails to achieve the desired outcome. Other commenters expressed skepticism about value-based contracting and encouraged OIG to adopt safeguards to protect against potentially abusive arrangements. Another commenter suggested that OIG adopt manufacturer-specific safe harbors with a sliding scale of risk. Among commenters who supported protecting value-based contracting, many raised concerns that existing best price requirements in the Medicaid Drug Rebate Program operate as an actual or perceived impediment to these types of arrangements and encouraged OIG to work with CMS to resolve these issues.

Response: We did not propose either a value-based contracting safe harbor or pharmaceutical manufacturer-specific safe harbors with a sliding scale of risk in this rulemaking. With respect to commenters' concerns regarding the potential impact of value-based contracting on Medicaid best price reporting obligations, those issues are outside the scope of this rulemaking.

Comment: A trade association representing pharmaceutical manufacturers requested that OIG clarify that any exclusion of pharmaceutical manufacturers from the value-based safe harbors is not intended to discourage manufacturers from participating in arrangements for value-based care. Another commenter asserted that pharmaceutical manufacturers' participation in care coordination may be necessary with the advancement of therapies like personalized cell therapies, which use a modified version of the patient's own cells to treat disease. A commenter recommended that a nonprofit generic drug company that addresses drug shortages in the marketplace be permitted to participate as a VBE participant, even if pharmaceutical manufacturers are not eligible.

Response: Nothing in this final rule is intended to discourage pharmaceutical manufacturers from participating in arrangements for value-based care. Under this rule as finalized, a pharmaceutical company can be a VBE participant collaborating with others in a VBE. Nothing prevents a pharmaceutical company (or any other type of entity) from participating in care coordination arrangements, but remuneration exchanged by the pharmaceutical company under those arrangements would not qualify for protection under the value-based safe harbors. For example, we appreciate that pharmaceutical companies can work to address shortages in the marketplace and could enter into arrangements with a VBE and VBE participants to address those issues. Those arrangements would need to be analyzed based on their specific facts for compliance with the anti-kickback statute. The failure to fit in a safe harbor does not mean an arrangement is unlawful under the anti-kickback statute. Moreover, safe harbor protection is irrelevant to the extent that an arrangement does not implicate the anti-kickback statute. We reiterate that parties may structure arrangements to meet other safe harbors, such as the safe harbor for personal services arrangements or the warranties safe harbor and may also use OIG's advisory opinion process to the extent they want prospective protection for arrangements they wish to undertake.

Comment: Commenters were divided on whether pharmaceutical wholesalers and distributors should be eligible to be VBE participants. Some stated that these entities present the same types of risks and concerns that manufacturers present (e.g., inappropriately increased costs to Federal health care programs) and should be ineligible for the same reasons. Many commenters who supported allowing manufacturers to be VBE participants also supported allowing wholesalers and distributors to be VBE participants.Start Printed Page 77710

Response: All entities are permitted to be VBE participants under this final rule. However, remuneration exchanged by pharmaceutical companies, including distributors and wholesalers, is not protected by the value-based safe harbors, consistent with our proposal to make them ineligible. We adopt this policy for reasons comparable to those for making manufacturers ineligible, including that wholesalers and distributors are less likely to have a direct role in front line patient care coordination. We are not persuaded that pharmaceutical distributors' and wholesalers' indirect role in support of coordinating care warrants protection under the value-based safe harbors.

(b) Pharmacy Benefit Managers

Comment: In response to our consideration in the OIG Proposed Rule related to PBMs, several commenters urged us to make PBMs ineligible to be VBE participants. A few of these commenters supported making PBMs ineligible based on concerns about potentially abusive PBM practices that they believe affect drug prices and limit treatment options for patients. Other reasons that commenters provided include that PBMs are not front-line health providers and protecting arrangements involving PBMs in the value-based safe harbors may inappropriately affect treatment decisions by health care practitioners. A commenter also suggested we require VBEs that establish relationships with PBMs to include information regarding such relationships in relevant VBE documents and reports.

Conversely, many commenters urged us to allow PBMs to be eligible to be VBE participants. Commenters asserted that PBMs are engaged in a number of activities that relate to care coordination and the value-based purposes we proposed, including, for example, developing formularies to select drugs based on relative value, leveraging health information technology to assist in coordinating care and managing benefits, and operating a variety of care coordination programs, such as medication adherence, medication therapy management, and chronic condition education. Commenters emphasized the role that PBMs play with respect to controlling pharmaceutical costs and promoting quality by ensuring clinical efficacy. Several commenters sought to distinguish PBMs from pharmaceutical manufacturers, noting that pharmacy benefit managers have no connection to any particular drug product and do not rely on prescriptions or referrals for any particular product. Another commenter asserted that PBMs are well-suited to enter into risk bearing arrangements because their business model already involves helping their clients manage insurance risk.

Response: As described above, all types of entities are eligible to be VBE participants under this final rule. However, we are finalizing our proposal for PBMs to be ineligible to rely on the value-based safe harbors to protect remuneration.

PBMs are less likely to be on the front line of care coordination and treatment decisions in the same way as other types of VBE participants eligible to use the value-based safe harbors. We recognize and appreciate the information that commenters provided on the role that PBMs serve in supporting value-based care and coordinating care, for example, by designing formularies based on relative value, using their expertise to improve medication adherence, and managing insurance risk. However, we are not persuaded that PBM's indirect role in support of coordinating care or managing risk warrants protection under the value-based safe harbors, which focus significantly on the coordination and management of patient care. PBMs play a unique role in establishing benefit networks and associated management services connected to payors, pharmaceutical manufacturers, and pharmacies. As a result, PBM arrangements raise different program integrity issues from the types of value-based arrangements contemplated by this rulemaking and would likely require different safeguards.

Under the final rule, PBMs, as with all individuals (except for patients) and entities, are eligible to be VBE Participants. This will allow PBMs to continue supporting value-based care, even though they are not eligible to rely on the value-based care safe harbors. We note that some PBMs' value-based activities may not implicate the Federal anti-kickback statute, depending on the specific facts and circumstances of each arrangement. Parties may also use OIG's advisory opinion process to the extent they want prospective protection for arrangements involving the exchange of remuneration with PBMs.

In response to the suggestion that VBEs that have relationships with PBMs be required to document and disclose such relationships, the value-based definitions have relevant documentation and oversight conditions, including a requirement that the VBE governing documentation describe how the VBE participants intend to achieve the VBE's value-based purpose(s).

We recognize that many PBMs are owned, affiliated with, or under common ownership structures with other entities, particularly payors and health benefit plans. Considering the role that payors have in the substantial downside risk and full financial risk safe harbors, it is important to note that payors would be eligible for safe harbor protection even if they own, are affiliated with, or are under common ownership with a PBM. Additionally, a payor would be eligible for safe harbor protection if it does not contract out its pharmacy benefit management services and instead performs those functions as part of its administration of a health benefit plan more broadly. We would consider the PBM functions, in that context, to be ancillary to the payor's predominant or core business, which is administering a health benefit plan. Thus, such a payor would not be considered to be a PBM for purposes of eligibility for protection under the value-based safe harbors, notwithstanding the fact that it performs some PBM activities. See the discussion at section III.B.2.e.5, below regarding entities with multiple lines of business for further details regarding the predominant or core business standard.

(c) Laboratory Companies

Comment: While some commenters supported our proposal to make clinical laboratories ineligible to be VBE participants or suggested that we only allow them to be VBE participants if we included additional safeguards, many commenters urged OIG to include clinical laboratories as VBE participants. Several commenters noted that laboratories are increasingly providing precision diagnostic services and posited that this type of personalized medicine is the future of both preventive medicine and modern oncology care. Commenters expressed concern that making laboratories ineligible to be VBE participants may inhibit integration of these types of diagnostic services into practice. Others asserted that existing safeguards are sufficient to protect against any risk of fraud and abuse.

Commenters provided various examples of value-based arrangements involving laboratories. A commenter provided one example of a laboratory that entered into an arrangement with a payor under which it reviewed historical test results for a patient population to identify those likely to have a condition such as diabetes or chronic kidney disease so as to facilitate patients' enrollment in a disease management program.Start Printed Page 77711

Response: Under this final rule, laboratory companies may be VBE participants in a VBE and collaborate with other VBE participants without affecting the ability of other VBE participants to be eligible for safe harbor protection. However, laboratory companies are included on the list of carved out entities for which protection is not available under value-based safe harbors. As a result, any remuneration exchanged by a laboratory company will not be protected by a value-based safe harbor. We expressed our intent in the OIG Proposed Rule to make clinical laboratories ineligible for safe harbor protection because of heightened risk of fraud and abuse based on historical enforcement experience and because they are, like pharmaceutical companies and DMEPOS companies, heavily dependent on practitioner prescriptions and referrals. We were, and remain, concerned that these entities might misuse the value-based safe harbors as a means of offering remuneration primarily to market their products rather than as a means to create value for patients, providers, and payors by improving the coordination and management of patient care, reducing inefficiencies, or lowering costs. We also continue to believe that offering protection for remuneration exchanged by a laboratory company under the value-based safe harbors is unnecessary to effectuate the goals of the Regulatory Sprint because, as compared to other types of entities such as hospitals, physicians, and remote patient monitoring companies, laboratory companies are not on the front lines of care coordination.

We appreciate the input from commenters who pointed out various ways in which laboratories may be participating in care coordination. We are not persuaded that these examples warrant revisiting our policy. However, we want to be clear that nothing in this rulemaking is intended to discourage or prevent a laboratory from participating in care coordination arrangements such as those described by the commenters so long as the arrangements comply with the anti-kickback statute. A laboratory may look to other safe harbors, such as the personal services and management contracts safe harbor, as modified in this rule, to protect remuneration, and the advisory opinion process also remains available.

Comment: Several commenters requested that OIG clarify how clinical laboratories that are owned and operated by entities with other regulatory classifications, including hospitals, physician group, and medical device manufacturers, would be treated.

Response: We do not intend for the ineligibility of laboratory companies to extend to clinical laboratories that are owned and operated through other types of entities, such as hospitals and physician practices. Other types of entities, such as hospitals and physician practices, that operate clinical laboratories that are not the entity's predominant or core line of business are eligible to use the value-based safe harbors. This approach ensures that hospitals, physicians, and other entities with core care coordination roles are not precluded from using the safe harbors because they happen to provide some laboratory services, which we understand to be common in the industry. We also believe that this approach would preclude any suggestion that entities which have a predominant or core line of business other than a clinical laboratory (or other ineligible entity), such as a hospital, need to restructure their operations or corporate structure or otherwise need to modify the manner in which these entities operate.

In this final rule, we use the term “laboratory companies” to describe the intended category of ineligible entities, rather than the term “clinical laboratory” that was proposed, because the term “laboratory company” better describes the types of entities we intend to make ineligible to rely on the value-based safe harbors. We have long used the same terminology in the electronic health records safe harbor at paragraph 1001.952(y), and we intend for the term to have the same meaning here. Specifically, it describes independent companies that operate clinical laboratories and bill for the laboratory services they furnish through their own billing numbers. Thus, for example, if a hospital furnishes laboratory services through a laboratory that is a department of the hospital for Medicare purposes (including cost reporting) and the laboratory services are billed through the hospital's provider number, then the hospital would not be considered a laboratory company for purposes of determining eligibility to rely on a value-based safe harbor. In contrast, a hospital affiliated or hospital-owned laboratory company with its own supplier number that furnishes laboratory services that are billed using a billing number assigned to the company and not the hospital would not be eligible for safe harbor protection. This approach is consistent with the approach we describe in the discussion on entities with multiple business lines, below, in that it focuses on both the corporate structure and the predominant or core business function of an entity.

(d) Medical Device Manufacturers, Distributors, and Wholesalers

Comment: Many commenters encouraged OIG to allow medical device manufacturers, distributors, and wholesalers to be VBE participants, emphasizing, among other things, the role that these entities play in collecting, aggregating, analyzing, and sharing data to assist clinicians with care coordination and management. Others disagreed with our characterization of medical device manufacturers as not being on the front line of care coordination.

Another commenter asserted that our concerns that manufacturers may use value-based arrangements to tether clinicians or patients to a particular product are misplaced and disregard the improved cost and clinical outcomes that derive from standardizing the use of a superior product. Similarly, a commenter objected to the suggestion that manufacturers' participation in value-based arrangements is driven by marketing objectives. An integrated delivery system described existing value-based partnerships with medical device companies that it believes foster value by optimizing care pathways, improving patient experience, and sharing accountability for the results; according to this commenter, the medical device companies have been responsible, effective, and essential in providing high quality care at a low cost.

Response: We appreciate commenters' perspectives, and we recognize that manufacturers of devices and medical supplies may play an important role in some value-based arrangements, including by offering digital health technologies that can improve coordination and management of care. However, we continue to believe, as a general matter, that they are not as directly engaged in care coordination as other entities, such as providers and clinicians. We continue to have concerns, as described in the OIG Proposed Rule, based on our historical law enforcement experience, that manufacturers of devices and medical supplies could misuse the flexibilities afforded by the value-based safe harbors to offer kickbacks under the guise of care coordination activities or to tether a clinician to a particular product. Further, we believe there is a risk that these arrangements could result in providers selecting products that may not be clinically appropriate for, or in the best interest of, a patient. Based on our enforcement experience, these Start Printed Page 77712concerns are heightened with respect to implantable devices used in a hospital or ambulatory surgical care setting, for which there is an elevated risk for patients undergoing implant surgery if devices are selected because of financial incentives rather than patients' best interests.

As discussed at section III.B.2.e.iii, we are adopting a pathway to protect the exchange of digital health technologies by manufacturers of devices and medical supplies under the care coordination arrangements safe harbor, which addresses some of the commenters' concerns. This pathway, which imposes an additional safeguard that applies only to manufacturers of devices and medical supplies and DMEPOS companies, balances our program integrity concerns with our interest in facilitating the deployment of health technologies for care coordination.

Comment: Many commenters encouraged OIG not to include device manufacturers, distributors, and wholesalers as VBE participants. Several of these commenters asserted that medical device manufacturers are not on the front line of care coordination. Another commenter asserted that, while larger companies may be well-positioned to engage in data-driven care coordination activities, most device manufacturers do not offer these types of services. The commenter was concerned that allowing medical device manufacturers to engage as VBE participants would unfairly advantage large manufacturers over smaller manufacturers, with larger companies using their size and scale to leverage their care coordination capabilities in a manner that disincentivizes purchasers from considering competing products. The commenter expressed concern that this dynamic may suppress medical innovation by smaller companies and encouraged OIG to consider a pilot program to assess potential impacts on smaller manufacturers.

Response: We appreciate the concerns raised by commenters, and, as we have explained, we share some of them. However, we also believe that digital health technologies hold great promise for improving coordination and management of care and achieving the goals of the Regulatory Sprint, and we believe that many of these promising technologies are either currently being developed, or will in the future be developed, by manufacturers of devices and medical supplies. We also believe that there will be instances where these digital health technologies are inextricably linked to a medical device. To that end, we are affording safe harbor protection to the exchange of digital health technologies by manufacturers of medical devices under the care coordination arrangements safe harbor.

With respect to the commenter's concerns about potential anticompetitive effects from allowing manufacturers of devices and medical supplies to participate, we are adopting a safeguard in the care coordination arrangements safe harbor that applies to manufacturers of devices and medical supplies, as limited technology participants, that prohibits exclusivity provisions and minimum purchase requirements. We designed this condition to prevent limited technology participants from locking-in use of their digital health technology, which may have beneficial effects for competition. For example, VBE participants may have increased opportunities to use multiple of types of digital health technology that best fits their needs.

In response to the commenter's concern about competition between large manufacturers and small manufacturers, nothing in this safe harbor is intended to favor large entities over small entities. We recognize that large manufacturers are likely to have additional resources to assess arrangements and determine whether they meet this safe harbor. We have strived to limit potential administrative burden as much as possible, while also including necessary safeguards against fraud and abuse. We believe that this safe harbor and the limited technology participant pathway will not require significant resources to ensure an arrangement meets all applicable conditions. Furthermore, use of these safe harbors and associated compliance is only one factor that may affect competition and innovation. There are several other factors that impact competition and innovation, but are not subject to the Federal anti-kickback statute and thus are outside the scope of this rulemaking.

Comment: With respect to adopting a definition for purposes of identifying the category of entities not eligible to be VBE participants, several commenters cautioned that it would be virtually impossible to define device manufacturers in a manner that would not preclude the types of digital health technologies that we stated we wished to include. Some commenters recommended that any definition that OIG adopts be limited to devices that are separately reimbursed by Medicare and not include companies that incorporate medical devices as part of their service offerings.

Many commenters encouraged us not to adopt a new definition, but instead to rely on existing definitions adopted by other divisions within the Department of Health and Human Services. However, a commenter asserted that OIG should not use CMS's definition of “applicable manufacturer” in 42 CFR 403.902, which relates to the Open Payments provisions of the Patient Protection and Affordable Care Act [17] (ACA), because that definition would not include manufacturers that do not have operations in the United States and reliance on this definition would be confusing because it includes manufacturers of durable medical equipment, which we proposed not to include in the definition of “VBE participant.”

Response: Notwithstanding the changes to the definition of “VBE participant,” it remains necessary for us to adopt a definition of “manufacturer of a device or medical supply” to identify entities that are limited technology participants for purposes of the care coordination arrangements safe harbor.

The definition we are adopting at paragraph 1001.952(ee)(14)(iv) provides that “manufacturer of a device or medical supply” means an entity that meets the definition of applicable manufacturer in 42 CFR 403.902 because it is engaged in the production, preparation, propagation, compounding, or conversion of a device or medical supply that meets the definition of covered drug, device, biological, or medical supply in 42 CFR 403.902, but not including entities under common ownership with such entity. For purposes of this definition, we incorporate and adopt all of the related terminology in 42 CFR 403.902. We opted to rely on the “applicable manufacturer” terminology described in the Open Payments program and its implementing regulations because it effectively captures the universe of entities we designate as limited technology participants and those that will otherwise be carved out of safe harbor protection. Similarly, we opted to rely on this terminology because relying on an existing regulatory definition promotes consistency across the Department and minimizes additional potential regulatory burden. We are not adopting the alternative proposed definition that would include any entity that manufacturers any item that requires premarket approval by, or premarket notification to, the FDA, or that is classified by the FDA as a medical device because we believe the Start Printed Page 77713“applicable manufacturer” terminology used in the Open Payments program provides a more fulsome definition that addresses not only the nature of the product (i.e., whether it is regulated by the FDA as a device) but also the nature of the entity's functions vis a vis that product (e.g., production, preparation, propagation, compounding, or conversion). We also intend to include medical device distributors or wholesalers on the list of ineligible entities because they are less likely to have a direct role in front line patient care coordination, and the “applicable manufacturer” definition at 42 CFR 403.902 includes distributors and wholesalers that hold title to the device or medical supply. Thus, it is a more comprehensive definition that aligns with our objectives. In order to capture distributors and wholesalers that do not hold title to the device or medical supply on the ineligible entity list, the ineligible entity list in each value-based safe harbor includes a separate category for “a medical device distributor or wholesaler that is not otherwise a manufacturer of a device or medical supplies.”

With respect to the commenter who cautioned that reliance on the definitions from the Open Payments program would not include manufacturers that do not have operations in the United States, we refer the commenter to CMS regulations and guidance regarding how foreign companies can become subject to reporting obligations under section 1128G of the Act.

Comment: Many commenters shared our concerns regarding physician-owned distributorships and encouraged us to make them ineligible to be VBE participants. A commenter suggested that an entity that generates more than forty percent of its business from its physician owners should be not be eligible to be a VBE participant. Another commenter suggested that we require all VBE participants—regardless of whether or not they meet the definition of “applicable manufacturer”—to meet the reporting obligations under section 1128G of the Act.

Response: We are adopting our proposed policy that physician-owned distributorships would not be eligible for safe harbor protection. Physician-owned distributors will be captured by one of two categories on the ineligible entity lists in each of the value-based safe harbors: Manufacturers of devices or medical supplies or medical device distributors or wholesalers that are not otherwise manufacturers of devices or medical supplies. As described above, the term “manufacturer of devices or medical supplies” is defined in paragraph 1001.952(ee).

As we stated in the OIG Proposed rule, physician-owned distributorships are inherently suspect under the anti-kickback statute because the financial incentives these companies offer their physician owners may induce physician owners to perform more procedures (or more extensive procedures) and to use the devices the physician-owned distributorships sell in lieu of other, potentially more clinically appropriate devices. Therefore, as described in greater detail below, physician-owned distributorships are also ineligible to rely on the care coordination arrangements safe harbor to protect digital health technology arrangements, even if they otherwise fit the definition of a manufacturer of a device or medical supply.

With respect to the commenter that suggested that we require all VBE participants to meet the reporting obligations under section 1128G of the Act, such a requirement is outside the scope of this rulemaking.

(e) DMEPOS Companies

Comment: Many commenters encouraged us to include DMEPOS companies in the definition of “VBE participant.” Commenters asserted that DMEPOS companies are on the front line of care coordination. Many commenters highlighted, for example, the role of DMEPOS companies in supporting care coordination through home infusion, home respiratory, and diabetes management services; others stated that DMEPOS companies engage directly with patients in a variety of ways, including visiting patients in their home. Commenters emphasized that DMEPOS companies are particularly critical in facilitating transitions from one care setting to another. Commenters also noted that the expansion of remote monitoring technologies has enhanced the role that DMEPOS companies play in care coordination and that device manufacturers are increasingly integrating digital technologies into medical devices that are classified as DMEPOS. With respect to these and other technologies, commenters noted that DMEPOS companies may provide useful data to support care coordination. Other commenters encouraged us to make DMEPOS companies ineligible for protection under the value-based safe harbors because they are not involved in front line patient care coordination. Others encouraged us to adopt additional safeguards specific to DMEPOS companies.

Response: We are persuaded by commenters that DMEPOS companies may have an important role in value-based arrangements, particularly in the context of post-acute care, and that they provide an array of health technology services, such as remote patient monitoring, that may facilitate the coordination and management of patient care. We believe that we must balance the role of these DMEPOS companies with our continued concerns, informed by our historical law enforcement experience, that some of these entities might misuse the protections afforded in the value-based safe harbors as a way to offer kickbacks under the guise of care coordination.

Given our stated interest in the deployment of digital health technologies to enhance coordination and management of care and consistent with the OIG Proposed Rule as explained elsewhere, we have defined the term limited technology participant to include manufacturers of medical supplies and entities or individuals that sell or rent DMEPOS. Limited technology participants, such as DMEPOS companies, may rely on the care coordination arrangements safe harbor to protect digital health technologies that they exchange with another VBE participant or the VBE, provided the arrangement satisfies an additional safe harbor condition that does not apply to other VBE participants, discussed in greater detail below. Our approach to DMEPOS in the final rule strikes a balance between encouraging the use of beneficial digital health technology, which may be offered by DMEPOS companies, for care coordination and protecting programs from potential fraud and abuse.

Comment: Some commenters asserted that DMEPOS companies would be willing to enter into risk-based arrangements and encouraged OIG to provide safe harbor protection for these types of arrangements.

Response: We believe the commenter is inquiring as to whether risk-based arrangements involving DMEPOS companies could satisfy the conditions of a value-based safe harbor. For the reasons described above and in the OIG Proposed Rule, DMEPOS companies are not eligible to rely on the value-based safe harbors, except under the limited technology participant pathway we have created in the care coordination arrangements safe harbor.

Comment: A commenter recommended that “distribution vendors” not be considered DMEPOS companies for purpose of any exclusion. The commenter argued that these vendors are needed to deploy digital medicine programs effectively by directly supporting patients through Start Printed Page 77714home delivery of digital medical program items.

Response: All entities can be VBE participants under our revised approach, but entities that sell or rent covered DMEPOS are included in the ineligible entity lists in each value-based safe harbor and are thus ineligible to rely on those safe harbors, except under the limited technology participant pathway in the care coordination arrangements safe harbor. In the OIG Proposed Rule we listed manufacturer, distributor, or supplier of DMEPOS as an ineligible entity type. The final rule instead lists an entity or individual that sells or rents DMEPOS as ineligible for safe harbor protection (except that a limited technology participant is eligible under the care coordination arrangements safe harbor). The language in the final rule focuses on the nature of an entity's business—selling and renting DMEPOS—to better capture the higher risk entities that cannot use the safe harbors, and avoids potentially broad terms, such as “supplier,” that are defined elsewhere in Medicare regulations for different purposes. The language “sells or rents” is derived from a CMS definition of DMEPOS supplier.[18]

We removed the reference to DMEPOS manufacturers because entities that manufacture DMEPOS would fall under the final rule's definition of “manufacturer of a device or medical supply,” and it would have been duplicative to include these entities under both definitions. Some DMEPOS distributors will also be captured by the definition of “manufacturer of a device or medical supply” and would similarly be ineligible on that basis. We believe that the universe of entities that we intended to capture under the “manufacturer, distributor, or supplier of DMEPOS” terminology used in the OIG Proposed Rule will now be captured by one or both of the categories “manufacturer of a device or medical supply” and “an entity that sells or rents [DMEPOS].”

Comment: Several commenters noted that many types of providers and entities, including physician practices, dentists, hospitals, and pharmacies, may be enrolled in the Medicare program as DMEPOS suppliers and questioned how an exclusion of DMEPOS companies, or requirements specific to DMEPOS companies, would apply to them. A commenter suggested that OIG should distinguish DMEPOS companies who derive only a small portion of their revenues from furnishing DMEPOS.

Response: In the final rule, the carve-out for DMEPOS companies in each of the value-based safe harbors does not apply to a pharmacy or to a physician, provider, or other entity that primarily furnishes services. In the OIG Proposed Rule, we sought comments on how to ensure that these types of entities would remain eligible for safe harbor protection even if they own or operate an entity that is ineligible, such as a DMEPOS company.[19] By specifically carving these entities out of the definition of DMEPOS companies, we ensure that these entities will not become ineligible for safe harbor protection. These entities and individuals are likewise not treated as “limited technology participants.” Thus, physicians, dentists, physician practices, and other providers (including, for example, hospitals), who primarily furnish services, as well as pharmacies, would not be considered DMEPOS companies for purposes of either the ineligible entities list or the “limited technology participant” definition. These parties are therefore able to rely on the three value-based safe harbors to the same extent as all other eligible VBE participants (including for arrangements involving digital health technologies), and they are not required to satisfy the additional condition that applies only to limited technology participants.

(f) Compounding Pharmacies

Comment: Several commenters responded to our solicitation of comments regarding the treatment of compounding pharmacies in the rule. Some commenters encouraged OIG not to distinguish between retail pharmacies, specialty pharmacies, and compounding pharmacies. One commenter expressed concern about generally offering protections to all compounding pharmacies, stating that ongoing vigilance for fraud and abuse is warranted for the compounding pharmacy industry. The commenter added that a more nuanced approach that screens for and offers protections in value-based arrangements for demonstrably good actors may further access to customized treatments, particularly for patients with rare diseases as well as pediatric patients. The commenter also described the risks of compounding without rigorous safety and quality practices. The commenter suggested that, to address quality, safety, and program integrity concerns with compounding pharmacies, OIG could limit participation to compounding pharmacies that exemplify good compounding practices through adherence to the U.S. Pharmacopeia (USP) Chapter 795 and attainment of Pharmacy Compounding Accreditation Board (PCAB) accreditation from the Accreditation Commission for Health Care (ACHC).

Other commenters believed that compounding is an essential part of patient care, including for specialty pharmacies such as infusion pharmacies that treat patients with severe conditions. Commenters suggested that pharmacists at compounding pharmacies may play a key role in helping coordinate individualized patient care. Commenters urged OIG to not exclude pharmacies from the proposed safe harbor based on the compounding services they provide. Some commenters raised concerns that excluding compounding pharmacies from the value-based safe harbors would expose the pharmacies to liability under the Federal anti-kickback statute for any remuneration they receive for providing prescription compounded medications or pharmacist-approved care services.

Some commenters explained their understanding that compounding is the preparation of a specific medication to meet the prescriber's exact specifications and to be dispensed directly to an individual patient, pursuant to a valid prescription for that patient. Such drugs are prescribed when commercially available products do not meet patient needs. Commenters noted that compounding should not be confused with manufacturing or the mass production of drug products, nor should it be confused with making copies of commercially available drug products, which is not allowed by law under section 503A(b)(1)(D) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 353a(b)(1)(D)).

Response: We agree that pharmacists, including pharmacists at compounding pharmacies, can play important roles in coordinating and managing patient care and as members of care teams, including for patients with rare and serious conditions. Under the final rule, all pharmacies and pharmacists can participate in VBEs. As explained further below, most pharmacies and pharmacists will be eligible to rely on the value-based safe harbors to protect remuneration, even if the pharmacy engages in some compounding of drugs.

However, under the final rule, for reasons explained below, pharmacies that primarily compound drugs or primarily dispense compounded drugs are ineligible to protect remuneration under the value-based safe harbors, as well as the safe harbor protections for patient engagement tools and supports Start Printed Page 77715(paragraph 1001.952(hh)) and outcomes-based payments (amended paragraph 1001.952(d)). When we refer to compounded drugs in this rule, we refer to the common industry understanding of them as drugs that are specifically combined, mixed, or altered and prepared for individual patients, or that purport to be such drugs. As noted by the commenters, compounded drugs are often prescribed or dispensed for patients for whom commercially available products are not clinically suitable.[20] We are not defining “compounding” or “compounded drugs” in regulatory text in this rule. For purposes of this rule, compounding pharmacies include entities that primarily compound drugs or primarily dispense compounded drugs, such as topical pain creams, with or without licensure or valid prescriptions. Accordingly, we are not adopting the narrower definitional suggestions made by commenters.

We explained in the OIG Proposed Rule that we were considering whether specific types of pharmacies, such as compounding pharmacies, should be carved out of safe harbor protection even if others, such as retail and community pharmacies, are eligible for safe harbor protection. The OIG Proposed Rule states that pharmacies that specialize in compounding pharmaceuticals may pose a heightened risk of fraud and abuse, as evidenced by our enforcement experience, and may not play a direct role in patient care coordination.[21] We remain deeply concerned about fraud and abuse in the compounding pharmacy industry.

Our recent criminal, civil, and administrative enforcement history shows an increasing number of fraud allegations, investigations, and cases related to compounded drugs, including topical compounded drugs such as creams, gels, and ointments to relieve pain.[22] OIG's oversight experience also has found that Medicare Part D spending for compounded topical drugs was 24 times higher in 2016 than it was in 2010, which raises concerns about fraud and abuse.[23] According to the FDA, there are also safety and effectiveness concerns related to compounded drugs, which are not FDA approved.[24] This is also an area of significant growth in Medicare Part D spending; spending for compounded topical drugs was 24 times higher in 2016 than it was in 2010, some of which may be attributed to suspect billing practices. In 2016, OIG found that about 550 pharmacies had engaged in questionable Part D billing practices for compounded topical drugs and warranted further scrutiny. Each pharmacy billed extremely high amounts for at least one of five measures that OIG has developed as indicators of possible fraud, waste, and abuse.[25] In light of this enforcement and oversight experience, we conclude that the risks of allowing pharmacies that primarily compound drugs or primarily dispense compounded drugs to rely on the value-based arrangements, patient engagement tools and supports, and outcomes-based payments safe harbors outweigh the potential benefits. As explained further below, other pharmacies are eligible to rely on the safe harbors. As with other entities ineligible for protection under the value-based, patient engagement tools and supports, and outcomes-based payments safe harbors, compounding pharmacies can still be VBE participants.

We recognize that many pharmacies may dispense some compounded drugs. For purposes of this rule, a pharmacy is only considered to be a compounding pharmacy (and ineligible for protection under certain safe harbors) if it primarily compounds drugs or primarily dispenses compounded drugs. We anticipate that most retail pharmacies and community pharmacies that offer care coordination and management services will not be covered by this category and will be eligible to rely on the safe harbors.

We are not adopting the commenters' suggestions to provide safe harbor protection for remuneration exchanged by compounding pharmacies that demonstrate that they are good actors or that exemplify good compounding practices through adherence to USP Chapter 795 and attainment of PCAB accreditation from ACHC. We believe the suggested approaches would introduce additional complexity and uncertainty into the safe harbors by further attempting to distinguish among different types of compounding pharmacies.

We do not prescribe a specific standard or test for assessing whether a pharmacy primarily compounds drugs or primarily dispenses compounded drugs. Entities may use a variety of different methodologies, depending on their circumstances. We expect parties to use a reasonable methodology, which they may wish to document. If an entity has multiple lines of business, with one line of business being a compounding pharmacy, the entity should use the multiple lines of business test as laid out in section III.B.2.e.v of this preamble to determine whether it is eligible to rely on the safe harbors or a compounding pharmacy ineligible to rely on the safe harbors.

Entities seeking safe harbor protection that are uncertain as to whether they are eligible to rely on the value-based safe harbors or any other safe harbor for a particular arrangement may wish to use the OIG advisory opinion process.

Finally, we want to clarify that nothing in this rulemaking should affect patients' access to medically necessary compounded drugs. The dispensing of compounded drugs pursuant to applicable coverage and billing rules does not implicate the Federal anti-kickback statute. Nor does this rule speak to the pricing of such products. With respect to remuneration paid to compounding pharmacies or pharmacists for services furnished to patients, whether such payments implicate the statute is a case-by-case determination and the safe harbors for employment and personal services and management contracts remain available. As noted elsewhere, with respect to value-based contracting with pharmaceutical manufacturers, we may consider safe harbor protection for such arrangements in future rulemaking.

iii. Digital Health Technologies and Limited Technology Participants

As explained in more detail below, the final rule includes a pathway for protection of “digital health technology” arrangements involving “limited technology participants,” as those terms are defined under the care coordination arrangements safe harbor. Start Printed Page 77716This pathway responds to comments supporting protection of digital technology arrangements involving medical device manufacturers and DMEPOS companies. VBE participants that are not on the ineligible entity list may exchange digital health technologies (and any other technologies) under the care coordination arrangements safe harbor, and they are not subject to the additional safe harbor condition that applies to limited technology participants. Further, the pathway for limited technology participants does not apply to the substantial downside risk and full financial risk safe harbors. The care coordination arrangements safe harbor is available for digital health technology arrangements between limited technology participants and VBE participants in risk-based arrangements.

For purposes of the pathway for limited technology participants, we are defining the term “limited technology participant” at paragraph 1001.952(ee)(14)(iii) to mean a VBE participant that exchanges digital health technology with another VBE participant or a VBE and that is: (A) A manufacturer of a device or medical supply, but not including a manufacturer of a device or medical supply that was obligated under 42 CFR 403.906 to report one or more ownership or investment interests held by a physician or an immediate family member during the preceding calendar year, or that reasonably anticipates that it will be obligated to report one or more ownership or investment interests held by a physician or an immediate family member during the present calendar year (for purposes of this paragraph, the terms “ownership or investment interest,” “physician,” and “immediate family member” have the same meaning as set forth in 42 CFR 403.902); or (B) an entity or individual that sells or rents durable medical equipment, prosthetics, orthotics, or supplies covered by a Federal health care program (other than a pharmacy or a physician, provider, or other entity that primarily furnishes services). In short, many manufacturers of medical devices and supplies (but not physician-owned distributors) and DMEPOS companies are eligible to be limited technology participants if they fit in this definition.

We are defining “digital health technology” at paragraph 1001.952(ee)(14)(ii) broadly to mean hardware, software, or services that electronically capture, transmit, aggregate, or analyze data and that are used for the purpose of coordinating and managing care; such term includes any internet or other connectivity service that is necessary and used to enable the operation of the item or service for that purpose. Importantly, this definition specifies the types of technology a limited technology participant can exchange under the safe harbor. It does not constrain the types of technology that can be exchanged by other VBE participants eligible to use the safe harbor.

Comment: Several commenters emphasized the importance of allowing health technology companies to participate as VBE participants and asserted that making medical device manufacturers ineligible to be VBE participants may impact the availability of digital technologies for purposes of coordinating and managing care because no meaningful line can be drawn between medical device companies and health technology companies. For example, a commenter explained that they offer both traditional medical devices and other digital health technologies, the latter of which includes clinical decision support tools and artificial intelligence-assisted diagnostic support tools. Another commenter noted that manufacturers of implantable devices often pair their products with software solutions to support patient diagnosis and treatment. A trade association representing device manufacturers described a program where a manufacturer of automated external defibrillators and cardiac monitoring devices with transmitting capabilities offers a device-agnostic software solution that permits coordination between EMS providers and hospitals. According to the commenter, the software enables receiving hospitals to access cardiac data in real time so they can have advance notice of patients en route and provide consultation back to EMS personnel to direct the patient to the appropriate treatment location (e.g., community hospital, hospital with specialized services). Another commenter explained how digital health technology is integrated with medical devices used by patients to provide data to patients and providers for patient engagement and treatment adherence purposes. Other commenters emphasized the difficulty of clearly distinguishing between device manufacturers and digital health technology companies, and that both may provide a mix of traditional medical devices and digital health technology. Commenters supported an approach that would not unintentionally exclude beneficial digital health technology from protection under the safe harbor.

Response: In the OIG Proposed Rule, we expressed interest in protecting remuneration in the form of a wide range of mobile and digital technologies for the coordination and management of patient care, including, by way of example, remote monitoring, predictive analytics, data analytics, care consultations, patient portals, telehealth and other communications, and software and applications that support services to coordinate and monitor patient care and health outcomes (for individuals and populations). We noted diabetes management services that leverage devices and cloud storage services to monitor blood sugar levels and transmit data as an example.

While recognizing the promise that digital health technologies have for improving care coordination and health outcomes, in the OIG Proposed Rule we also raised fraud and abuse concerns associated with medical device manufacturers based on our historical law enforcement experience. Section III.B.2.e.d. explains those concerns in more detail. Recognizing these factors, we solicited comments generally on how best to protect beneficial digital technologies and mitigate fraud and abuse risks. This included requesting comment on definitions and factors to consider for specific types of entities that would protect digital technology and not be too narrow or broad.

Consistent with this request for comments, the intent in the OIG Proposed Rule, and to address comments received, we define the term “digital health technology” at paragraph 1001.952(ee)(14)(ii) and we define “limited technology participant” at paragraph 1001.952(ee)(14)(iii). These definitions balance the interests we raised in the OIG Proposed Rule by protecting beneficial digital health technology and mitigating the fraud and abuse risks by specifying the types of technology that limited technology participants can furnish under the care coordination arrangements safe harbor. This approach also addresses concerns raised by commenters regarding unintentionally excluding beneficial digital health technology from safe harbor protection. We discuss each definition in more detail below in this section.

Digital health technology is defined as hardware, software, or services that electronically capture, transmit, aggregate, or analyze data and that are used for the purpose of coordinating and managing care; such term includes any internet or other connectivity service that is necessary and used to Start Printed Page 77717enable the operation of the item or service for that purpose. We intend for this term to encompass a wide range of digital health technologies, including technologies that are not yet developed or available. It also includes associated internet or other connectivity services, including dial-up, that are necessary and used to enable the operation of the item or service for the purpose of coordinating and managing care. The term “digital health technology” includes, for example, the software solution described by the commenter that enables hospitals to access data from cardiac devices used by EMS providers in the field so that they can coordinate and manage the care of patients undergoing a cardiac emergency, including connectivity services, such as mobile hotspots and plans, necessary to enable the EMS providers to transmit data from the field to the hospital.

Only limited technology participants are limited to the types of technology set out in the definition of “digital health technology.” Other VBE participants eligible for the safe harbor may provide additional types of technology so long as the value-based arrangement squarely meets all safe harbor conditions.

We share commenters' views regarding the desirability of enabling VBE and VBE participants to leverage digital health tools to support the coordination and management of care. All individuals (except for patients) and entities are eligible to be VBE Participants, and this includes health technology companies, including those that are not traditionally involved in health care or may be new entrants to health care. Except as otherwise provided in the safe harbor regulations, health technology companies are eligible to rely on the protection of the safe harbors for value-based arrangements with other VBE participants, provided that their arrangements squarely meet all applicable safe harbor conditions.

The question arose in the OIG Proposed Rule, and remains relevant here, whether manufacturers of devices and medical supplies and DMEPOS companies are health technology companies. For most purposes, as described above, these entities are carved out of the value-based safe harbors and are ineligible to rely on them. However, we are creating a pathway to enable these entities to deploy digital health technologies under the care coordination arrangements safe harbor at paragraph 1001.952(ee). For purposes of this safe harbor, manufacturers of devices or medical supplies (as defined in paragraph 1001.952(ee)) and DMEPOS companies (i.e., entities or individuals that sell or rent covered DMEPOS, not including physicians or providers that primarily furnish services and pharmacies) that exchange digital health technologies with another VBE participant or the VBE are collectively termed “limited technology participants” in paragraph 1001.952(ee).

Limited technology participants may use the care coordination arrangements safe harbor to protect the exchange of digital health technologies with other VBE participants or the VBE if the arrangement meets an additional safe harbor condition, described below. Limited technology participants may not, by definition, rely on the care coordination arrangements safe harbor to exchange other forms of remuneration. All other entities eligible to use the safe harbor can also exchange remuneration in the form of digital health technology, and they do not have to meet the additional safe harbor conditions that apply only to limited technology participants at paragraph 1001.952(ee)(8). For example, physicians and providers that primarily furnish services are not treated as limited technology participants and are therefore not obligated to meet the additional conditions that apply to limited technology participants.

In short, remuneration in the form of digital health technology may be exchanged under the care coordination arrangements safe harbor by all entities that are not carved out of the safe harbor, as well as limited technology participants.

Consistent with our statements in the OIG Proposed Rule reflecting our intent that physician-owned distributorships not be eligible to rely on the value-based safe harbors, we do not intend for physician-owned distributorships to be able to use the limited technology participant pathway in the care coordination arrangements safe harbor. To foreclose this possibility, we clarify in paragraph 1001.952(ee)(14) that the term “limited technology participant” does not include manufacturers of devices or medical supplies that were obligated under 42 CFR 403.906 to report one or more ownership or investment interests held by a physician or an immediate family member during the preceding calendar year, or that reasonably anticipate that they will be obligated to report one or more ownership or investment interests held by a physician or an immediate family member during the present calendar year. For purposes of this definition, the term “manufacturer of a device or medical supply” has the meaning set forth in paragraph 1001.952(ee)(14), and the terms “ownership or investment interest,” “physician,” and “immediate family member” have the meaning set forth in 42 CFR 403.902. We take this opportunity to make clear that this regulatory provision should not be construed as an official definition of unlawful physician-owned distributorships or physician-owned entities more broadly. This regulation does not alter our long-standing guidance regarding physician-owned distributorships, and we specifically reaffirm the guidance in our 2013 Special Fraud Alert on Physician-Owned Entities.[26]

iv. Pharmacies Other Than Compounding Pharmacies

Comment: The overwhelming majority of commenters on this topic supported allowing pharmacies to be VBE participants. Commenters cited a wide range of reasons, including that pharmacies and pharmacists are already involved in many aspects of care coordination and management and that they are on the front line of care coordination because they often serve as the key point of contact between patients and the health care system due to their geographic proximity to patients. Commenters emphasized that pharmacies provide many services to patients, not just items. A commenter also noted that an ACO may be a VBE and that a number of ACOs currently integrate pharmacists for medication management and other services. Conversely, another commenter suggested that pharmacies should not be eligible because they present many of the same concerns as pharmaceutical manufacturers, wholesalers, and distributors.

Response: With the exception of compounding pharmacies (as explained in section III.2.e.ii.f of this preamble), pharmacies can utilize each of the final value-based safe harbors for value-based arrangements and are not subject to any pharmacy-specific restrictions or limitations. Pharmacies other than compounding pharmacies also are eligible for safe harbor protection under the safe harbors for patient engagement tools and supports (paragraph 1001.952(hh)) and outcomes-based payments (amended paragraph 1001.952(d)). We are persuaded that many pharmacies and pharmacists have the potential to facilitate coordination and management of care for patients and Start Printed Page 77718that their participation in value-based arrangements may further the purposes of this final rulemaking. Except in the case of compounding pharmacies, these potential benefits outweigh our program integrity concerns, which are adequately addressed by the requirements of the value-based safe harbors.

v. Entities With Multiple Business Lines

Comment: We received several comments seeking guidance on how entities with multiple business lines or with multiple regulatory classifications would be viewed for purposes of safe harbor eligibility. Some commenters requested clarification on how the eligibility standards would be impacted by corporate affiliations or shared ownership. Another commenter noted that some health systems are involved in device and technology development.

Some questioned how OIG would view an entity that operates both eligible and ineligible business lines through separate business units, with certain commenters suggesting that it would be impossible to distinguish between types of entities because the health care industry is not siloed in this manner. Others asserted that the fact that many companies have multiple business lines is reason enough for OIG not to make any types of business lines ineligible to be VBE participants. Another commenter requested that clinical quality improvement and data registries be eligible to be VBE participants, regardless of their ownership or other status.

Response: Under the final rule, the question of whether a particular entity is eligible to rely on a safe harbor, or whether an entity fits the definition of a limited technology participant, is assessed at the corporate entity level by considering the corporate entity's predominant or core line of business. We did not propose, and we are not finalizing, standards relating to common ownership or corporate affiliation. Corporate affiliation, whether by majority ownership, common ownership, or another structure, has no bearing on eligibility.

For example, a pharmacy (other than a compounding pharmacy as explained in section III.2.e.ii.f) that is under common ownership with a PBM would be eligible to rely on the value-based safe harbors, notwithstanding the fact that the pharmacy is related to a PBM, which is ineligible to rely on those safe harbors. Likewise, within a health system that is comprised of multiple corporate entities, the fact that one or more of those entities might engage in activities that make it a manufacturer of devices or medical supplies would not impact the availability of the safe harbor to other corporate entities in the health system that do not engage in such activities.

Where a single corporate entity operates multiple business lines, eligibility turns on the entity's predominant or core business. For example, a pharmacy that is operated within the same corporate entity as a pharmaceutical manufacturer would not be eligible to rely on these safe harbors to the extent the corporate entity's core function is the manufacturing of pharmaceuticals and the pharmacy operation merely supports the manufacturing line of business. Similarly, where a single corporate entity manufactures both pharmaceuticals and medical devices, the question of eligibility would focus on which line of business is the predominant or core line of business of that corporate entity. For example, if a corporation's predominant function is the manufacturing of devices (including, for example, preparation, propagation, assembly, and processing of devices) and it also manufactures a pharmaceutical product that is incorporated into and integral to a medical device (for example, a drug-eluting medical device), the entity would be treated as a manufacturer of devices or medical supplies because that remains its core business and function. The question of whether a quality improvement or data registry will be eligible will similarly turn on whether it is housed within a corporate entity whose predominant function places it on the carve-out list.

Large corporations that are organized with multiple business lines within a single corporate entity will need to assess whether they have a predominant or core business. We do not prescribe a specific standard or test for assessing an entity's predominant or core business function, and we expect that entities may use a variety of different methodologies, depending on their circumstances. We would expect parties to use a reasonable methodology, which they may wish to document. For example, share of revenues may be a relevant metric for some entities, but for others where one or more products are still in development, revenues may not be an appropriate metric. Entities seeking safe harbor protection that are uncertain as to whether they are eligible to rely on the value-based safe harbors for a particular arrangement may wish to use the OIG advisory opinion process.

Parties seeking protection under the safe harbors may first need to assess the regulatory text for ineligible entities in the specific safe harbor of interest. For example, where an entity's business includes the sale or rental of DMEPOS covered by a Federal health care program, the question of eligibility is addressed by the regulatory text, which specifies that the ineligibility of DMEPOS companies does not apply to a pharmacy or a physician, provider, or other entity that primarily furnishes services. Thus, for example, a disease management company that primarily furnishes a suite of disease management services (e.g., wellness coaching, patient education, health technology tools to promote medication adherence) and also sells or rents DMEPOS in support of these services would be eligible to rely on the value-based safe harbors and would not be subject to the constraints imposed on limited technology participants. Conversely, an entity that sells or rents covered DMEPOS and does not primarily furnish services would be ineligible, except as a potential limited technology participant under the care coordination arrangements safe harbor.

We also note that, wholly apart from any value-based arrangement, transfers of remuneration from one entity to another may implicate the Federal anti-kickback statute if those transfers of remuneration are intended to induce or reward referrals for items and services covered by a Federal health care program. This potential liability arises even where the recipient subsequently uses the remuneration in a manner that is protected by a safe harbor. Thus, for example, if an ineligible entity transferred remuneration to a VBE participant in order for the recipient VBE participant to induce or reward referrals back to the ineligible entity, the initial transfer may result in liability under the Federal anti-kickback statute, even if the recipient VBE participant's subsequent transfer of the remuneration to other VBE participants or to patients is protected under a safe harbor.

Comment: Several commenters noted that many providers, including hospitals and health systems, often own or operate pharmacies and questioned how an exclusion of pharmacies would apply to them.

Response: Other than pharmacies that primarily compound drugs or primarily dispense compounded drugs, pharmacies are not subject to any limitations or restrictions under this final rule, and thus ownership or operation of many pharmacies by another provider would have no impact on eligibility. Should a compounding pharmacy exist within a health system that is comprised of multiple corporate entities, the fact that one of the entities may be a pharmacy that primarily compounds drugs or primarily Start Printed Page 77719dispenses compounded drugs would not impact the availability of the safe harbor to other corporate entities in the health system. Moreover, should a compounding pharmacy exist within a single entity that also furnishes other services, such as health clinic that furnishes physician services, the entity would apply the multiple lines of business test to determine whether or not the entity would be characterized as a compounding pharmacy.

Comment: Some commenters described companies that are regulated as both CLIA laboratories and manufacturers of devices or medical supplies because they perform their own FDA-regulated in-vitro diagnostic tests at their own CLIA-certified laboratories and sought clarification regarding how they would be viewed.

Response: We have replaced the term “clinical laboratory” with the term “laboratory company” in this final rule to clarify the type of entities that we intend to make ineligible to rely on the value-based safe harbors. The term “laboratory company” refers to independent companies that operate clinical laboratories and bill for the laboratory services they furnish through their own billing numbers. Consistent with the approach described above, the entity would need to consider what its predominant or core business function is—manufacturing (e.g., preparation, propagation, assembly, processing) a medical device or furnishing laboratory services. Without further details regarding the commenters' specific business operations, we are unable to provide a precise response here.

Comment: A commenter noted that a pharmacy is included as a “laboratory” under CLIA. Other commenters noted that pharmacies may be co-located with health clinics or owned and operated by other types of providers. The commenters sought guidance on how these relationships between entity types would impact eligibility for protection under the safe harbors.

Response: As discussed above, and based upon the comments, we have revised the terminology in this final rule to refer to laboratory companies rather than clinical laboratories, and we intend for “laboratory companies” to mean independent companies that operate clinical laboratories and bill for the laboratory services they furnish through their own billing numbers. Consistent with the approach set forth above, because a pharmacy's predominant or core business function is to provide pharmacy services, not laboratory services, we would not consider the fact that pharmacies are treated as laboratories for other regulatory purposes to impact their eligibility to rely on the value-based safe harbors. As noted previously, pharmacies that primarily compound drugs or primarily dispense compounded drugs would not be eligible for safe harbor protection.

vi. New Safe Harbor Conditions

Comment: With respect to potential additional safeguards for VBE participants generally, commenters suggested a wide range of options, some of which we stated that we were considering in the OIG Proposed Rule (e.g., prohibitions on exclusivity, required data reporting or monitoring). Some commenters also recommended that we implement these additional safeguards for certain types of entities (e.g., medical device manufacturers).

Response: Consistent with the proposal within the OIG Proposed Rule, we are adopting an additional safeguard in the care coordination arrangements safe harbor targeted to manufacturers of devices and medical supplies and DMEPOS companies that exchange digital health technologies to mitigate the increased risk of abuse presented by allowing these entities to use this safe harbor.

As discussed above, we have created a new category of VBE participants, “limited technology participants,” which is comprised of manufacturers of devices and medical supplies and DMEPOS companies that exchange digital health technology with another VBE participant or the VBE. Consistent with our proposal in the OIG Proposed Rule, we are adopting a requirement in the care coordination arrangements safe harbor that the exchange of digital health technologies by limited technology participants may not be conditioned on any recipient's exclusive use, or minimum purchase, of any item or service manufactured, distributed, or sold by the limited technology participant. This additional safeguard addresses the specific program integrity concerns presented by manufacturers of devices and medical supplies and DMEPOS companies, which are heavily dependent on practitioner referrals and who might use value-based arrangements to tether clinicians to their products or to secure guaranteed referral streams.

Comment: Some commenters suggested that applying safeguards to specific types of entities, and not others, might deter those entities from participating in value-based arrangements.

Response: First, we note that we have not imposed any additional conditions on specific types of entities in the substantial downside financial risk safe harbor or the full financial risk safe harbor. Second, we do not concur with the commenter's assertion that the limited technology participant pathway will disincentivize participation in value-based arrangements; this framework allows manufacturers of devices and medical supplies and DMEPOS companies to participate in value-based arrangements involving digital health technology and benefit from protection under the care coordination arrangements safe harbor if they satisfy all safe harbor conditions.

Comment: In response to our proposal to include a safeguard that prohibits exclusivity provisions, many commenters expressed support for such a safeguard. Others cautioned that exclusivity provisions in contractual arrangements can be appropriate in certain situations, such as where substantial financial investments are required or where exclusivity is consistent with intellectual property rights and protections. Some commenters encouraged us to investigate the pros and cons of prohibiting exclusivity provisions before adopting this safeguard. At least two commenters opposed any potential prohibition of exclusivity requirements. One commenter asserted that no manufacturer has the capability or resources to ensure that all of its value-based arrangement offerings always operate as a “plug and play,” always interchangeable, product agnostic system. Another commenter stated that parties to value-based arrangements should have flexibility to require use of a medical device where clinical evidence dictates that a particular practice not currently in use would vastly improve outcomes.

Response: We are adopting our proposal to preclude protection for the exchange of remuneration conditioned on a recipient's exclusive use, or minimum purchase, of any item or service manufactured, distributed, or sold by a limited technology participant in the care coordination arrangements safe harbor. We are only applying this condition to remuneration exchanged by limited technology participants; it does not apply to any other VBE participants. We are only adopting this condition in the care coordination arrangements safe harbor, not the other value-based safe harbors. We recognize that exclusivity provisions may be appropriate business terms in certain contexts. However, precluding safe harbor protection for arrangements that include exclusivity provisions tied to products offered by limited technology participants is an important safeguard. This safeguard mitigates risk that these entities, which Start Printed Page 77720are heavily dependent on practitioner referrals to sell their products, will attempt to use the care coordination arrangements safe harbor to protect arrangements intended to generate product sales or arrangements that lock practitioners and patients into using products that may not be in the patients' best interests in the clinical judgment of the practitioners.

The safe harbor requirement that remuneration exchanged by limited technology participants may not be conditioned on any recipient's exclusive use or minimum purchase of the limited technology participant's products does not prevent use of products based on clinical best evidence. Nor does it prevent requirements in value-based arrangements that providers use products based on clinical evidence showing improved outcomes, when those products are in a patient's best interests in the judgment of their practitioners. Nor does the provision require that all value-based arrangements be product-agnostic or that the digital technology provided under such an arrangement be fully interchangeable with other products. The provision does mean that, where remuneration is exchanged by a limited technology participant, the VBE participants will not be entitled to safe harbor protection under the care coordination arrangements safe harbor if the limited technology participant conditions the remuneration on the exclusive use of its product or a minimum purchase amount. This safe harbor requirement does not apply to remuneration exchanged by VBE participants that are not limited technology participants.

f. Value-Based Purpose

Summary of OIG Proposed Rule: We proposed to define a ”value-based purpose” as: (i) Coordinating and managing the care of a target patient population; (ii) improving the quality of care for a target patient population; (iii) appropriately reducing the costs to, or growth in expenditures of, payors without reducing the quality of care for a target patient population; or (iv) transitioning from health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for a target patient population.

Summary of Final Rule: We are finalizing, without modification, our definition of “value-based purpose.”

Comment: While several commenters expressed support for our proposed definition of “value-based purpose” as drafted, the majority of commenters sought clarification on the term. For example, commenters sought clarification on how quality would be defined and measured under the value-based purpose and, more specifically, whether certain measures would be seen as reducing quality. Another commenter requested that OIG address how parties to a value-based arrangement would need to document that the arrangement met a value-based purpose. Other commenters sought confirmation that the definition of “value-based purpose” does not require parties to succeed in achieving the applicable purpose.

Response: As a threshold matter, the definition of “value-based purpose” was crafted to provide parties with flexibility to develop innovative care arrangements and strategies specific to the needs of their target patient populations. We are not prescribing how parties define and measure quality to qualify for the definition or how parties document the ways in which they intend to achieve the VBE's value-based purpose(s). Whether certain measures reduce quality is a fact-specific inquiry. Further, neither the definition of “value-based purpose” nor the value-based safe harbors requires parties to achieve the VBE's value-based purpose(s); rather, the definition of “value-based purpose” should be read in conjunction with the definition of “value-based activity,” which requires value-based activities to be reasonably designed to achieve the VBE's value-based purpose(s). Documentation requirements are specified in individual safe harbors.

Comment: Multiple commenters requested further guidance on the fourth value-based purpose of transitioning from health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for a target patient population.

Response: We are finalizing the fourth value-based purpose in recognition that parties transitioning to value-based care may need to provide infrastructure and perform other activities necessary to transition to the assumption of downside financial risk. For example, as discussed in section III.B.5 below, parties to value-based arrangements that meet the requirements of the full financial risk safe harbor may exchange remuneration during a twelve-month phase-in period, where the VBE is contractually obligated to assume full financial risk in the next 12 months but has not yet assumed such risk. During this phase-in period, the parties may have, as a value-based purpose, the purpose of transitioning from health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for a target patient population, and the parties may exchange, among other things, remuneration necessary to enable the VBE to transition to the assumption of full financial risk.

Comment: Other commenters advocated for revisions to the definition of “value-based purpose.” These comments generally focused on two issues related to the value-based purpose of appropriately reducing the costs to, or growth in expenditures of, payors without reducing the quality of care for a target patient population: Whether the definition of “value-based purpose” should protect: (i) Cost-reduction efforts more broadly, rather than only to the benefit of payors; and (ii) cost-reduction efforts only when paired with improved quality or maintenance of already-improved quality of care.

With respect to the first issue, commenters generally were in favor of expanding the third purpose to cover all cost-reduction efforts, not just those that benefit payors. At least two commenters asserted that this expansion would be necessary to protect gainsharing arrangements.

Commenters' opinions varied on the second issue, related to our proposal that reducing costs to, or the growth in expenditures of, payors must be accomplished without reducing the quality of care for the target patient population, with some expressing support and others opposition. Many commenters opined on our alternative proposal to include the reduction of costs to, or growth in expenditures of, payors in the definition of “value-based purpose” only where there is also an improvement in patient quality of care or the parties are maintaining an improved level of care. On the one hand, certain commenters believed this alternative standard would be overly prescriptive and difficult to measure; others expressed support, with one stating that a reduction in costs alone is not true value and that the improvement of care should be the first priority.

Response: We are finalizing this portion of the definition, as proposed. A goal of this rulemaking is to support quality improvements and cost efficiencies achieved through better care coordination that benefit patients and the health care delivery system. In our view, arrangements that do not result in a reduction in costs to, or growth in expenditures of, payors—such as reductions in surgical suite costs for a Start Printed Page 77721hospital—do not further this goal sufficiently to warrant protection under the third value-based purpose definition. The definition of “value-based purpose” that we are finalizing is not intended to foreclose internal-cost savings arrangements, such as gainsharing, in their entirety; however, parties must consider whether such arrangements would further other purposes in the “value-based purpose” definition and the conditions of the applicable value-based safe harbor. We also do not believe a higher standard of improving or maintaining already improved quality of care is necessary. We are persuaded that preventing reductions in quality of care, paired with the safeguards in each of the value-based safe harbors, provides both flexibility and sufficient protection against the potential for patient harm.

Comment: A commenter asserted that VBEs should have at least one value-based purpose related to patient care improvement and expressed concern that allowing VBEs to focus solely on cost reduction would compromise patient care and have a disproportionate impact on patients with rare conditions.

Response: While a VBE or value-based arrangement may, but is not required to, have as a value-based purpose improving the quality of care for a target patient population, none of the value-based purposes protect value-based arrangements that compromise patient quality of care. Of the two value-based purposes that incorporate cost control or cost reduction concepts, one requires the appropriate reduction in costs to, or growth in expenditures of, payors without reducing the quality of care for a target patient population; the other requires the transition of health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care to payors for a target patient population. Both of these value-based purposes emphasize the importance of ensuring patient quality of care.

We further highlight that each of the value-based safe harbors includes a safeguard precluding safe harbor protection for value-based arrangements that stint on medically necessary patient care; this safeguard provides that the value-based arrangement may not induce parties to furnish medically unnecessary items or services or reduce or limit medically necessary items or services furnished to any patient.

Comment: A commenter expressed concern that the “value-based purpose” definition may lead to patient harm, fails to protect adequately against abusive cycling of patients for financial gain, and potentially impinges on the professional judgment of health care professionals.

Response: We share the commenter's concerns about patient harm, abusive cycling of patients for financial gain and compromised professional judgment. We have addressed these concerns through various safeguards and requirements of the value-based safe harbors and the patient engagement and support safe harbor. We note that compliance with the value-based purpose definition does not necessarily qualify parties or arrangements for safe harbor protection.

g. Coordination and Management of Care

Summary of OIG Proposed Rule: We proposed to define “coordination and management of care,” the first of the four value-based purposes, as the deliberate organization of patient care activities and sharing of information between two or more VBE participants or VBE participants and patients, tailored to improving the health outcomes of the target patient population, in order to achieve safer and more effective care for the target patient population. In defining this term, we sought to distinguish between referral arrangements, which would not be protected, and legitimate care coordination arrangements, which naturally involve referrals across provider settings but also include beneficial activities beyond the mere referral of a patient or ordering of an item or service. We expressed particular concern about distinguishing between coordinating and managing patient care transitions for the purpose of improving the quality of patient care or appropriately reducing costs, on one hand, and churning patients through care settings to capitalize on a reimbursement scheme or otherwise generate revenue. We proposed in preamble that we would not consider the provision of billing or administrative services to be the coordination and management of patient care.

Summary of Final Rule: We are finalizing, with modifications, the definition of “care coordination and management.” First, we have revised the definition to clarify that the deliberate organization of patient care activities and sharing of information must occur between two or more VBE participants, one or more VBE participants and the VBE, or one or more VBE participants and patients. Second, in response to comments, we have revised the description of the required goals to state that the parties' efforts (i.e., the deliberate organization of patient care activities and sharing of information) must be designed to achieve safer, more effective, or more efficient care to improve the health outcomes of the target patient population. These two changes clarify the regulatory language with respect to the parties that engage in the care coordination and management to include the VBE itself, which can be party to a value-based arrangement, and make clear that efforts to improve efficiency can be part of coordination and management of care. Third, also in response to comments, we have revised the definition to clarify that the term does not require achievement of the stated goals, but rather that the efforts must be designed to achieve such goals.

Comment: Commenters on this topic varied in their responses to our proposed definition of “coordinating and managing care.” While we received some comments expressing support, others asserted that the definition was superfluous. A commenter highlighted that existing CMS programs already rely on similar terminology and encouraged OIG to align its definition.

Response: For the reasons stated in the OIG Proposed Rule, we are finalizing a definition of “coordination and management of care.” Among other things, this definition helps ensure that protected arrangements serve patients and the goals of coordinated care. Further, given the importance of this value-based purpose in the safe harbors, the definition provides a standard against which safe harbor compliance can be measured. This is intended to help providers seeking to comply with the safe harbors. As noted in the OIG Proposed Rule, we considered other agency definitions in crafting ours.[27]

Although other laws and regulations, including the physician self-referral law and associated regulations, may utilize the same or similar terminology, the definition and interpretations we are adopting in this rule would not affect CMS's (or any other governmental agency's) interpretation or ability to interpret such term.

Comment: At least two commenters opposed our proposed definition because they believe it would require Start Printed Page 77722constant achievement. As an alternative, these commenters proposed revising the definition of “coordination and management of care” from the deliberate organization of patient care activities and sharing of information in order to improve health outcomes, to the deliberate organization of patient care activities and sharing of information in an attempt to improve health outcomes.

Response: We thank commenters for highlighting this issue. It was not our intent for the definition of “coordination and management of care” to require constant achievement of improved health outcomes. To address the issue raised by the commenters and reduce the potential for confusion, we have revised the definition to clarify that the organization of patient care activities and the sharing of information must be designed to achieve safer, more effective, or more efficient care to improve the health outcomes of the target patient population. Actual achievement of safer, more effective, or more efficient care that improves health outcomes is not required. However, the parties must ensure that their efforts (i.e., deliberate organization of patient care activities and sharing of information) are designed to achieve these goals.

Comment: Several commenters questioned whether: (i) Patient monitoring, patient diagnostic activities, patient treatment, and communication related to such patient activities; or (ii) predictive analytics, would constitute the coordination and management of care.

Response: Depending on the facts and circumstances, each of the actions listed above could qualify as the coordination and management of care. We intend for the coordination and management of care to require beneficial activities beyond the mere referral of a patient or ordering of an item or service. Coordination and management of care requires some additional, deliberate effort and sharing of information, across two or more parties, that is designed to augment care delivery to achieve safer, more effective, or more efficient care to improve health outcomes.[28] For example, the ordering of a diagnostic test, such as an imaging study, by a provider and the sharing of the test results back to the ordering provider would not, without additional beneficial activities, constitute the coordination and management of care under the finalized definition. If, however, the ordering of the imaging study and the sharing of results was part of a more deliberate, organized effort between or among the parties to achieve safer and more effective care and improve health outcomes, such as by implementing protocols to reduce the number of redundant tests or ensuring that test results are readily shared with and available to the patient and all members of the patient's caregiver team and used to inform care decisions, then the arrangement may constitute coordination and management of care. We also emphasize that the definition requires not only the deliberate organization of patient care activities, but also the sharing of information between (or among) the parties who are coordinating and managing care. This information sharing must be part of a design to achieve safer, more effective, or more efficient care to improve the health outcomes of the target patient population.

Our final rule endeavors to encompass a wide range of beneficial care coordination activities, with limitations. As described in the OIG Proposed Rule, coordination might occur between hospitals and post-acute care providers, specialists and primary care providers, or hospitals and physician practices and patients. It could involve using care managers, providing care or medication management, creating a patient-centered medical home, helping with effective transitions of care, sharing and using health data to improve outcomes, or sharing accountability for the care of a patient across the continuum of care. These arrangements often naturally involve referrals across provider settings but include beneficial activities beyond the mere referral of a patient or ordering of an item or service. We see a clear distinction between coordinating and managing patient care transitions for the purpose of improving the quality of care or improving efficiencies, which would fit in the definition, and churning patients through care settings to capitalize on a reimbursement scheme or otherwise generate revenue, which would not fit in the definition. The OIG Proposed Rule cites a relevant example of cycling patients through skilled nursing facilities (SNFs) to maximize revenue as the kind of arrangement we do not intend to fit in the definition or receive protection under any safe harbor.

Comment: In response to OIG's solicitation of comments on the intersection of coordination and management of care and cybersecurity, a commenter stated that cybersecurity items or services should meet the definition of “coordination and management of care.” According to the commenter, cybersecurity items or services may be needed to share information between or among VBE participants, and the commenter expressed concern that parties would overlook opportunities to work with small practices that cannot afford proper cybersecurity tools.

Response: We appreciate the commenters' input; however, we respectfully disagree with their recommendation. As a general matter, the use or sharing of cybersecurity items and services alone would not meet the definition of “coordination and management of care.” Having reviewed the comments and upon further consideration of the issue, we view the use or sharing of such items and services to be focused on ensuring the security of patient care items and related information exchange, rather than the deliberate organization of patient care activities and sharing of information, as required by the definition of “coordination and management of care.” That being said, an arrangement involving the exchange of health information technology that incorporates cybersecurity items and services could meet the definition of “coordination and management of care.” For example, where a VBE participant provides data analytics software to another VBE participant to facilitate the VBE participants' coordination and management of care, security features to control access to data included within that software would not preclude the data analytics software from meeting the definition of “coordination and management of care.” However, we note that meeting the definition of “coordination and management of care” does not, de facto, afford safe harbor protection; for safe harbor protection, the remuneration exchanged must squarely satisfy all safe harbor conditions.

The use or sharing of cybersecurity items and services alone may meet other value-based purposes, and such remuneration may be eligible for protection under the substantial downside financial risk safe harbor (paragraph 1001.952(ff)) or full financial risk safe harbor (paragraph 1001.952(gg)). The cybersecurity technology and related services safe Start Printed Page 77723harbor, paragraph 1001.952(jj), also is available to protect the exchange of cybersecurity items and services, provided all safe harbor requirements are met.

Comment: In lieu of making the coordination and management of patient care a requirement specific to the value-based safe harbors and arrangements for patient engagement and support safe harbor, a commenter requested that OIG revise the definition of “value-based purpose” to reflect that one of the value-based purposes must be the coordination and management of patient care.

Response: We appreciate the commenter's input; however, we decline to adopt the commenter's suggestion for two reasons. First, the current structure facilitates alignment between OIG's and CMS's value-based terminology to ease burden on providers and others working to comply with both sets of rules. In addition, as finalized, the substantial downside financial risk and full financial risk safe harbors already provide parties with additional flexibility to identify value-based purposes other than the coordination and management of care, in defined circumstances.

Comment: A commenter requested clarification as to the types of activities that constitute the provision of billing or administrative services. This commenter asserted certain administrative services, such as the more effective management of patient records, could improve the coordination and management of patient care and should be not be excluded from the definition of “value-based purpose.”

Response: Administrative services, depending on the facts and circumstances, may meet the definition of “coordination and management of care.” We are clarifying our statement in the OIG Proposed Rule that we would not consider the provision of billing or administrative services to be the management of patient care [29] to make clear that we view any billing or financial management services arrangement that is characterized as facilitating the coordination and management of patient care to be outside the scope of this definition for purposes of this rule. By financial management services, we mean services such as bookkeeping operations, contract management, revenue cycle management, or other similar activities. These activities might complement the organization of patient care activities, but they are not the type of care coordination activities contemplated in our proposed rule or covered by the final definition.

We also are mindful that, in certain situations, the remuneration exchanged by the parties might incidentally assist the recipient with performing certain of these administrative functions. However, we believe that any benefit that the remuneration has on the administrative activities of the recipient should be incidental, at most. This approach helps ensure that value-based arrangements eligible for safe harbor protection focus on the delivery of care to patients. Arrangements that focus on billing and financial management services arrangements may be structured to fit in another safe harbor, such as the safe harbor for personal services and management contracts, which includes protections such as a fair market value requirement. The value-based safe harbors are not intended to protect billing and financial management services arrangements, even those that might help support care coordination and management, that are not fair market value under the guise of a value-based arrangement.

We address this issue through a new provision in the care coordination arrangements safe harbor at paragraph 1001.952(ee)(1)(iii)(A), which provides that the remuneration exchanged pursuant to a value-based arrangement may not be exchanged or used more than incidentally by the recipient for the recipient's billing or financial management services. We are not adopting parallel provisions in the substantial downside financial risk or full financial risk safe harbors because there are circumstances in which billing and financial management services could be included in the remuneration that is protected by those safe harbors. For this same reason, we are not incorporating this limitation into the definition of coordination and management of care, which applies across all of the value-based safe harbors.

Comment: A commenter suggested that we revise this term to require the “coordination or management of care” instead of the “coordination and management of care.”

Response: We appreciate the commenter's input; however, we are not adopting the commenter's suggestion. The coordination and management of care reflects an integrated set of activities for patients, as set out in the definition we are finalizing in this rule. We are concerned that management activities, standing alone, would not be appropriately patient-focused to achieve the intent of the value-based safe harbors.

Comment: A commenter appeared to request that OIG revise its definition of “coordination and management of care” to provide that the deliberate organization of patient care activities and sharing of information may be between VBE participants and patients' family members or caregivers, in addition to those activities being conducted between VBE participants and patients.

Response: We would consider the deliberate organization of patient care activities and sharing of information between VBE participants and patients' family members or others acting on the patients' behalf to meet the definition of “coordination and management of care.” This may include, for example, intervening caregivers, and family members, such as for patients who are children. We note that an arrangement that is solely between a VBE participant and a patient might constitute the coordination and management of care, but it would not fit in the value-based safe harbors because those safe harbors do not protect the exchange of remuneration with patients. Other safe harbors may protect the exchange of remuneration with patients, including the patient engagement and support safe harbor at paragraph 1001.952(hh). Arrangements between VBEs and one or more of their VBE participants or between or among VBE participants that engage patients in efforts to coordinate and manage care could qualify under the value-based safe harbors with respect to remuneration flowing between a VBE and VBE participant or between VBE participants if all safe harbor conditions are met. For purposes of the care coordination arrangements safe harbor, parties exchanging remuneration pursuant to the value-based arrangement would need to be part of the coordination and management of care of the target patient population in some fashion, although levels of involvement in care coordination may differ among VBE participants, depending on the scope and nature of the arrangement.

3. Care Coordination Arrangements To Improve Quality, Health Outcomes, and Efficiency Safe Harbor (42 CFR 1001.952(ee))

a. General Comments

Summary of OIG Proposed Rule: We proposed a new safe harbor at proposed paragraph 1001.952(ee) to protect in-kind remuneration exchanged between qualifying VBE participants with value-based arrangements that squarely satisfy all of the proposed safe harbor's requirements. We developed this safe Start Printed Page 77724harbor to facilitate value-based care and improved care coordination for patients by providers and others that may be assuming no or less than substantial downside financial risk.

Proposed conditions included commercial reasonableness (proposed paragraph 1001.952(ee)(2)), written documentation (proposed paragraph 1001.952(ee)(3)), record retention (proposed paragraph 1001.952(ee)(11)), and establishment and monitoring of outcomes measures (proposed paragraph 1001.952(ee)(1)). We proposed that protected remuneration would be used primarily to engage in value-based activities that are directly connected to the coordination and management of patient care for the target patient population (proposed paragraph 1001.952(ee)(4)(ii)). We further proposed that arrangements could not induce VBE participants to furnish medically unnecessary care or reduce or limit medically necessary care (proposed paragraph 1001.952(ee)(4)(iii)); could not be funded by outside sources (proposed paragraph 1001.952(ee)(4)(iv)); could not limit medical decision-making or patient freedom of choice (proposed paragraphs 1001.952(ee)(7)(ii)-(iii)); could not take into account the volume or value of business outside the value-based arrangement (proposed paragraph 1001.952(ee)(5)); and could not include marketing of items or services to patients or patient recruitment activities (proposed paragraph 1001.952(ee)(7)(iv)). We proposed a requirement that the recipient of the remuneration would pay at least 15 percent of the offeror's cost of the remuneration (proposed paragraph 1001.952(ee)(6)). We also proposed a requirement that arrangements be terminated within 60 days if the VBE's accountable body or person determined that the arrangements were unlikely to further coordination and management of care, were not achieving the value-based purpose or were resulted in material deficiencies in quality of care (proposed paragraph 1001.952(ee)(9)). In addition, we proposed that an exchange of remuneration would not be protected under the care coordination arrangements safe harbor if the offeror knows or should know that the remuneration is likely to be diverted, resold, or used by the recipient for an unlawful purpose (proposed paragraph 1001.952(ee)(10)). These conditions were proposed to minimize risks of traditional fee-for-service fraud and abuse and pay-for-referral schemes, particularly in arrangements where the parties are not assuming downside risk.

Summary of Final Rule: We are finalizing, with modifications, this safe harbor. The safe harbor continues to protect in-kind remuneration exchanged between a VBE and VBE participant or between VBE participants pursuant to a value-based arrangement that squarely satisfies all of the proposed safe harbor's requirements. We have modified and clarified many of the safe harbor requirements in response to public comments, as described below. The safe harbor includes conditions related to commercial reasonableness, outcomes measures, written documentation, record retention, monitoring, termination, marketing and patient recruitment, and diversion and reselling of remuneration. The safe harbor requires that protected remuneration be used predominately to engage in value-based activities that are directly connected to the coordination and management of care for the target patient population. Protected arrangements cannot induce VBE participants to furnish medically unnecessary care or reduce or limit medically necessary care; cannot limit medical decision-making or patient freedom of choice; and cannot take into account the volume or value of business outside the value-based arrangement. Under the final rule, all recipients must pay 15 percent of the offeror's cost or 15 percent of the fair market value of the remuneration. We are not finalizing the proposed condition related to outside funding of the remuneration.

As detailed in section III.B.2.e and III.B.2.g of this preamble relating to the VBE participant definition, we are carving out patients and certain entities from the safe harbor; those entities are listed at paragraph 1001.952(ee)(13). We are finalizing a limited pathway for safe harbor protection in the care coordination arrangements safe harbor for manufacturers of devices and medical supplies and DMEPOS companies participating in digital health technology arrangements at paragraph 1001.952(ee)(13). As discussed in section III.B.2.e.vi of this preamble, we are finalizing a condition in the care coordination arrangements safe harbor that restricts those entities from conditioning the exchange of remuneration on any recipient's exclusive use, or minimum purchase, of any item or service manufactured, distributed, or sold by those entities.

This safe harbor protects in-kind remuneration only. Some monetary compensation associated with care coordination or value-based activities may be protected under other safe harbors, such as the other value-based safe harbors or the safe harbor for personal services and management contracts and outcomes-based payments at paragraph 1001.952(d).

Comment: Many commenters expressed support for the care coordination arrangements safe harbor and the existence of a value-based safe harbor that did not mandate the assumption of downside financial risk. These commenters stated the safe harbor would facilitate innovative arrangements to improve care coordination and facilitate community partnerships. Other commenters, while generally supportive of the safe harbor, asserted that it included too many burdensome, complex, and subjective conditions; these commenters urged OIG to reduce the number of requirements in the safe harbor. Conversely, some commenters opposed the safe harbor, with their concerns largely falling into two categories: (i) The potential for fraud and abuse because the safe harbor does not require the parties to assume downside risk or that there are not strong enough program integrity guardrails; and (ii) negative effects on competition, i.e., unduly benefiting larger providers.

Response: We thank commenters for their feedback. The safe harbor is intended to protect arrangements by parties who are transitioning to higher levels of risk or who are engaging in care coordination that improves quality and efficiency, without assuming risk. We agree with commenters that there could be increased risk of fraudulent or abusive behavior (e.g., overutilization) where providers who order items or services are not at substantial downside financial risk. We structured the care coordination arrangements safe harbor to reflect and mitigate that increased risk. The safe harbor includes requirements tailored to ensure that arrangements protected by the safe harbor—which could apply to remuneration exchanged between parties who refer Federal health care program business to each other and where both parties are paid by Federal health care programs on a fee-for-service basis—do not result in the traditional FFS fraud and abuse risks. As described in the OIG Proposed Rule, traditional FFS fraud and abuse risks include inappropriately increased costs to the Federal health care programs or patients, corruption of practitioners' medical judgment, overutilization, inappropriate patient steering, unfair competition, or poor-quality care.[30]

We aimed to finalize a safe harbor that is not administratively burdensome, overly complex, or subjective, but we Start Printed Page 77725acknowledge that parties must satisfy a number of criteria to receive safe harbor protection and that some parties may find the safe harbor administratively burdensome, overly complex, and subjective with respect to their particular arrangements. However, we believe that these conditions, taken together, ensure the safe harbor protects legitimate value-based arrangements, fosters improved care coordination, allows for innovation, adequately addresses the traditional FFS risks described above, and limits potentially problematic referral schemes. We acknowledge that larger entities may be better positioned to afford some types of investments required by value-based activities, but we have intentionally crafted this safe harbor for a wide range of care coordination arrangements, including arrangements between small entities, providers serving rural and underserved communities, or both, that might not require substantial investment. As we describe elsewhere, many of the conditions are flexible (i.e., not one-size-fits-all) and can be satisfied in ways that take into account the size of, and resources available to, VBE participants.

Comment: A commenter proposed that, in lieu of the care coordination arrangements safe harbor, OIG enumerate acceptable value-based arrangements that are of minimal monetary value to the referral source.

Response: We did not propose to adopt a list of acceptable value-based arrangements of minimal monetary value in lieu of the care coordination arrangements safe harbor, and we are not adopting any such list as part of this final rule.

Comment: A primary care provider requested that we address whether or not it would be permissible to waive cost-sharing amounts for select services under the care coordination arrangements safe harbor.

Response: As a threshold matter, whether cost-sharing is owed for a particular service covered by Medicare or Medicaid is programmatic policy under the auspices of CMS and state Medicaid programs. If cost-sharing is owed by the beneficiary under the applicable programmatic rules and a provider or supplier waives any such obligations, then a question arises about whether any benefit stemming from the waiver of the beneficiary's cost-sharing obligations implicates the Federal anti-kickback statute or the Beneficiary Inducements CMP.

Cost-sharing waivers furnished to patients would not qualify for protection under the care coordination arrangements safe harbor. First, cost-sharing waivers are not in-kind remuneration, and the care coordination arrangements safe harbor is limited to exchanges of in-kind remuneration. Second, as explained further in section III.2.e.i of this preamble, the context and framework of the value-based provisions in the OIG Proposed Rule made clear that we did not intend patients to be VBE participants who could engage in value-based arrangements under the value-based safe harbors. We are finalizing, as proposed, that the care coordination arrangements safe harbor is available to protect only the exchange of in-kind remuneration between parties to a value-based arrangement, not remuneration exchanged with patients. In response to comments and for clarity, we have: (i) Revised the definition of “VBE participant” to expressly exclude patients; and (ii) revised the introductory language of the paragraph to expressly limit protection to exchanges of remuneration between a VBE and VBE participant or between VBE participants.

In some cases, other existing protections may be available for some cost-sharing waivers, including cost-sharing waivers by certain entities that are not offered as part of any advertisement or solicitation; are not routine; and are made following an individual determination of financial need.[31]

Comment: A hospital association requested that the care coordination arrangements safe harbor include a 12-month preparation period that would be analogous to the ”phase-in” periods in the substantial downside financial risk and full financial risk safe harbors. Similarly, at least two commenters requested that OIG protect initial investments in value-based arrangements or activities by parties exploring the creation of a VBE, with a commenter requesting that OIG protect such remuneration prior to any terms being set forth in a written agreement.

Response: We are not adopting the suggestion for a preparation or “phase-in” period for the care coordination arrangements safe harbor. There may be practical or operational reasons for parties to engage in financial arrangements or make “phase-in” investments as they explore creating a VBE or before committing to a particular value-based arrangement with partners. On balance, however, these considerations do not outweigh the heightened risk of fraud or abuse during a “phase-in” period in advance of the commencement of a value-based arrangement, particularly in situations where parties have not yet created a VBE with its attendant accountability and transparency protections. Moreover, it is OIG's belief that the need for a “phase-in” period is lower in the context of this safe harbor compared to the risk-based safe harbors because this safe harbor is limited to in-kind remuneration and does not require the assumption of risk. We allow for a preparation or “phase-in” period in the two risk-based safe harbors because we recognize that parties to a value-based arrangement may need to exchange remuneration during a period of time before the VBE formally takes on downside financial risk in order to prepare the VBE and the VBE participants for that assumption of risk. The same context does not exist for the care coordination arrangements safe harbor because it does not require the assumption of risk. We note, however, that parties may be able to structure some preparatory arrangements to fit in this safe harbor, provided that a proper VBE and value-based arrangement have been established and all other safe harbor requirements are met, including the requirement that any exchange of remuneration be used predominantly to engage in value-based activities. Parties may also look to other potentially available safe harbors for preparatory arrangements.

Comment: Multiple commenters requested clarification on, and examples regarding, the types of entities and activities that could qualify for protection under the care coordination arrangements safe harbor. For example, a commenter requested that OIG expressly protect income guarantees for physicians transitioning from traditional compensation schemes to value-based models.

Response: With respect to the question regarding income guarantees, income guarantees are not in-kind remuneration and would therefore not qualify for protection under the care coordination arrangements safe harbor. While neither exhaustive nor sufficiently detailed to allow for a comprehensive analysis of the arrangement under the Federal anti-kickback statute and the care coordination arrangements safe harbor, we provide the following high-level examples to illustrate arrangements that could be structured to satisfy the conditions of the care coordination arrangements safe harbor.

First, to coordinate care and better manage the care of their shared patients, Start Printed Page 77726a specialty physician practice may wish to provide data analytics items (e.g., software designed to present certain data) and services (e.g., conducting data analysis) to the primary care physician practice with which it works closely and from which it receives referrals for consultations and federally reimbursable items and services. The data analytics items and services could, for example, identify practice patterns that deviate from evidence-based protocols or confirm whether followup care recommended by the specialty physician practice is being sought by patients or furnished by the primary care physician group. This provision of data analytics items and services could be structured to satisfy the care coordination arrangements safe harbor.

Second, hospitals and physicians could work together in new ways to coordinate and manage care for patients being discharged from the hospital. The hospital might provide a physician group with care managers (who identify the physician group's high-risk patients and help manage patients' care transitions, medications, and home-based care) to ensure patients receive appropriate followup care post-discharge; data analytics systems to help the group's physicians ensure that their patients are achieving better health outcomes; and remote monitoring technology to alert the group's physicians when a patient needs a health care intervention to prevent unnecessary emergency room visits and readmissions.

Third, a medical technology company could partner with physician practices, to better coordinate and manage care for patients discharged from a hospital with digitally-equipped devices that collect and transmit data to the physicians to help monitor the patients' recovery and flag the need to intervene in real time (e.g., a device that monitors range of motion that could inform what an appropriate physical therapy intervention may be). The technology company could provide the physician group with necessary digital health technology that improves the physician group's ability to observe recovery and intervene, as necessary.

We remind parties seeking to structure an arrangement to satisfy the care coordination arrangements safe harbor that compliance with the safe harbor requires a fact-specific assessment. In addition, we remind stakeholders that the advisory opinion process remains available for parties seeking to determine whether a particular arrangement satisfies the care coordination arrangements safe harbor or for parties that would like to request prospective protection for an arrangement that does not squarely satisfy the terms of the safe harbor.

Comment: A commenter appeared to believe that the statement in the OIG Proposed Rule that “each offer of remuneration must be analyzed separately for compliance with the safe harbor” [32] requires each value-based arrangement to be reviewed by the Department, with the potential for the Department to deny safe harbor protection for any proposal.

Response: If there are multiple streams of remuneration flowing under a single value-based arrangement, the parties would need to evaluate each such stream separately to assess compliance with the safe harbor (or, as appropriate, other available safe harbors). In the context of an enforcement action, the government would likewise analyze each such stream separately, and consider the totality of the arrangement, to assess potential liability under the Federal anti-kickback statute. The care coordination arrangements safe harbor does not require, nor do any of our other value-based safe harbors require, the submission of the value-based arrangement to the Department for review.

Comment: Many commenters urged OIG to align the care coordination arrangements safe harbor with CMS's value-based exception to the physician self-referral law, with some asserting that the different requirements in each would increase regulatory complexity and pose a barrier to the advancement of value-based care. To facilitate alignment, commenters suggested that OIG permit monetary remuneration, remove any contribution requirement, or adopt CMS's definition of “commercial reasonableness.” A commenter appeared to request that OIG and CMS both include a provision requiring a signed agreement.

Response: We aligned our safe harbors with the exceptions being adopted by CMS as part of the Regulatory Sprint wherever possible. For the reasons discussed in greater detail in section III.A.1, complete alignment is not appropriate, including with respect to most of the provisions of the care coordination arrangements safe harbor referenced by commenters. In particular, the contribution and exclusion of monetary remuneration serve to reduce risk of intentional kickback schemes for reasons explained more fully in the preamble discussions of each requirement, sections III.B.3.g (contribution requirement) and III.B.3.e.i (in-kind remuneration). Specific to the recommended expansion of the safe harbor to protect monetary remuneration, we continue to believe that providing safe harbor protection for monetary remuneration presents heightened fraud and abuse risks that outweigh the potential benefits to Federal health care programs and patients. This is particularly true where remuneration is exchanged between parties that are not required to assume substantial financial risk, and the protected remuneration is not required to be fair market value and may take into account the volume or value of referrals for the target patient population. Consistent with this concern, the new safe harbor for outcomes-based payments at paragraph 1001.952(d)(2), which is available for monetary remuneration, includes a fair market value requirement and a limitation on directly taking into account the volume or value of referrals. With respect to the commenter's request that OIG and CMS align their respective signed writing requirements, we are finalizing a requirement that the terms of the value-based arrangement must be set forth in writing and signed by the parties, and we make clear that the writing requirement can be satisfied by a collection of documents, which aligns with the writing requirement in CMS's value-based exception.

b. Outcome Measures

Summary of OIG Proposed Rule: We proposed to provide flexibility in selecting outcome measures given the range of arrangements that may be covered by the proposed safe harbor. We proposed in proposed paragraph 1001.952(ee)(1) to require parties to establish one or more specific evidence-based, valid outcome measures to serve as benchmarks for assessing the recipient's performance under the value-based arrangement and advancement toward achieving the coordination and management of care for the target population. The measures would not include patient satisfaction or convenience measures. We expressed our view that outcome measures should reflect more than maintenance of the status quo and considered requiring that outcomes measures drive meaningful improvements in quality, health outcomes, or efficiencies, whether by driving improvements that are measurable or that are more than nominal in nature. We indicated that we were considering for the final rule and solicited comment on whether we should require rebasing of the outcome Start Printed Page 77727measure (e.g., resetting the benchmark).[33]

Summary of Final Rule: We are finalizing, with modifications, the outcome measures requirement at paragraph 1001.952(ee)(4). The modifications are based on public comments. The final rule requires that the parties to a value-based arrangement establish one or more legitimate outcome or process measures that the parties reasonably anticipate will advance the coordination and management of care for the target patient population based on clinical evidence or credible medical or health science support. The measure(s) must: (i) Include one or more benchmarks related to improving, or maintaining improvement, in the coordination and management of care for the target patient population; (ii) relate to the remuneration exchanged under the value-based arrangement; and (iii) not be based solely on patient satisfaction or patient convenience. The outcome or process measure and its benchmark must be monitored, periodically assessed, and prospectively revised, as necessary, so that working towards the measure continues to advance the coordination and management of care of the target patient population.

Comment: Commenters generally supported the outcome measures requirement, as proposed. However, some commenters opposed requiring the parties to establish outcome measures against which a party would be measured under a value-based arrangement. For example, the commenters asserted that requiring the establishment of outcome measures would be administratively burdensome, would be confusing, and would not reflect the lack of valid outcome measures for many specialty practices. Some commenters asked OIG for an exception to the requirement for small and rural-based VBE participants and Indian health care providers. A commenter representing Indian health care providers requested that they be carved out from the outcome measures requirement because of a concern that the outcome measures would not be aligned with already reported Tribal outcome measures and would become an unnecessary administrative burden on understaffed Indian health care providers. Other commenters suggested that OIG should not finalize the outcome measures requirement because the writing requirement in the care coordination arrangements safe harbor is sufficient to protect against fraud and abuse.

Response: As noted in the OIG Proposed Rule, inclusion of a meaningful outcome measure in a protected value-based arrangement will help ensure that the arrangement is designed to advance care coordination and serves the needs of the target patient population. As explained below, we have revised the requirement in the final rule to increase flexibility, broaden options for meeting the requirement, and reduce administrative burden, including on rural and small providers and on Indian health care providers. Our revised approach also addresses the comment regarding lack of standards for specialty practices because we are not requiring use of industry standard measures. Specialty practices may create measures using a range of data, information, and sources, including internally generated data and information, provided that, among other requirements, the measures are based on clinical evidence, credible medical support, or credible health science support, include an appropriate benchmark, and relate to the remuneration being provided under the arrangement. This last requirement helps ensure, as we explained in the OIG Proposed Rule, that the measure bears a close nexus to the value-based activities in the value-based arrangement and the needs of the target patient population.

We are not aware of any impediment to Indian health care providers using existing outcomes measures that they are already required to report; nothing in the safe harbor requires development of new measures if existing measures meet the final rule requirements.

We do not agree that a writing requirement is a sufficient safeguard against fraud or abuse based on our enforcement experience. While documentation is important for transparency and compliance verification, it does not prevent fraud or abuse or ensure that arrangements are carried out in accordance with their terms or serve their intended purposes.

Comment: Commenters varied in their responses to the terminology we proposed in the outcome measures requirement (“specific evidenced-based, valid outcome measures”). For example, commenters asked OIG to define “outcome measure” and “evidence-based.” A commenter supported the concept of “evidence-based” outcome measures, stating that OIG's proposal would provide needed flexibility to allow both clinical and non-clinical outcome measures and to allow participants to select up-to-date outcome measures, such as measures related to social determinants of health. Other commenters pointed out the significant time and resources needed, particularly for smaller VBEs and VBE participants, to undertake studies or gather and document evidence for novel interventions and to develop, implement, and monitor evidence-based measures. Some commenters explained that using “evidence-based” as the standard would chill innovation by precluding innovative models for which evidence does not already exist or value-based arrangements that are currently pilots or demonstrations intended to develop evidence. A commenter expressed concern that conditioning safe harbor protection on “valid” outcome measures was too subjective and recommended the outcome measures be “clinically meaningful,” which could be based on measurable data or real-world evidence.

Response: We have reconsidered our use of the term “evidence-based” in this rule. Our use of the term may have indicated a level of scientific rigor and resource investment beyond what we intended for purposes of this safe harbor, which is intended to be available for experienced and new entrants into value-based care, including those not yet ready to assume financial risk, and to promote innovation in care delivery. We intended to include a standard that captured clinical and non-clinical measures (including measures related to quality of care, process improvements, efficiency in care delivery, and social determinants of health), while also allowing for innovation. We did not intend to require that protected arrangements be grounded in experimental research, randomized clinical trials, best available evidence, or other similar characteristics often associated with the term “evidence-based” in common definitions. We did not intend to be overly restrictive or to require strict scientific evidence of the utility of an outcome measure. Having considered the comments, common definitions, and input from Department experts, we are persuaded that the term “evidence-based” was overly restrictive and not the best term to describe the outcome measures we envisioned for purposes of this rule.

We have likewise reconsidered our use of the terms “valid” and “specific” in the OIG Proposed Rule. These terms dovetailed with our use of “evidence-based” and were intended to convey that the selected outcome measures needed to be grounded in legitimate, verifiable data, or other information. That is, we intended that selected measures be legitimate and not sham measures used to justify an illegitimate Start Printed Page 77728exchange of remuneration. Our intent is that selected measures be credible and appropriate for the care coordination and management purpose of the arrangement. Upon further consideration, the term “legitimate”—and its common sense meaning—better effectuates our intent, and we use that term in the final rule.

Accordingly, in this final rule, we are revising the requirement that parties establish one or more specific evidence-based, valid outcome measures. Under the final rule, the parties to a value-based arrangement must establish one or more legitimate outcome or process measures that the parties reasonably anticipate will advance the coordination and management of care for the target patient population based on clinical evidence or credible medical or health science support. The terms “clinical evidence or credible medical or health science support,” better reflect our intent to have a reasonable, flexible standard applicable to a wide range of arrangements and to allow selection of measures based on scientific, clinical, medical, social science, or industry quality standards, or other legitimate, verifiable data or information, whether internal to the VBE or externally generated. By use of the term “health science” we intend to include public health, health informatics, research and development, and sciences that look at the treatment and prevention of diseases. Unlike the new protection provided within the personal services and management contracts safe harbor for outcomes-based payments, in this safe harbor parties may rely on credible health science as well as credible medical support, reflecting that this safe harbor covers a wider variety of care coordination arrangements (including remuneration in the form of health technology) and protects only in-kind remuneration, rather than monetary payments, presenting relatively lower overall risk.

The revised requirement continues to encompass both clinical and non-clinical measures, and internal or externally generated measures, and will allow participants to select up-to-date outcome or process measures over time. Under the final rule, parties will be required to document the measures they select and the clinical evidence, credible medical support, or credible health science support upon which they relied in making the selection by providing a description of the measures in a signed writing.

Comment: Some commenters requested clarification from OIG regarding how parties should select outcome measures, and others asked for additional flexibility in the selection of outcome measures. For example, parties asked OIG to permit both internally developed measures, i.e., measures that do not require validation in a medical journal or by another third-party source, and process-based measures, such as providing or not providing a specific treatment to improve patient outcomes or safety. A commenter asserted that outcome measures should be anticipated to advance the coordination or management of care of the target patient population rather than the coordination and management of care of individual patients. Another commenter opposed the requirement for outcome measures to advance the coordination and management of care altogether, stating that care coordination is process-based, not outcomes-based.

Other commenters expressed concern that too much flexibility for parties to select outcome measures could lead parties to use subjective measures that do not improve patient outcomes or are otherwise abusive. A commenter suggested OIG require that: (i) Value-based arrangements advance the coordination and management of care for the target patient population; and (ii) in any dispute concerning the applicability of this safe harbor, the VBE will bear the burden of proving, based upon objective evidence, that the value-based arrangement advanced the coordination and management of care of the target patient population. Some commenters asked OIG to include an express requirement in the final rule that outcome measures be designed to drive meaningful improvements in quality, health outcomes, or efficiencies in care delivery. Others supported a requirement for parties to establish more than one outcome measure or only measures reflecting the outcomes most important to patients.

A commenter recommended that parties be able to assess performance toward achieving outcome measures with respect to the entire patient population of an integrated delivery system instead of a subset of that population. A commenter asked OIG to address issues regarding individual physician participant measurement compared to group measurement. The commenter expressed concern that individual physicians may not have sufficient influence on the development of outcome measures for their target patient population and that physician-level measures can be challenging to develop (including because of small sample size and appropriate accountability of individual physicians).

Response: We are modifying the requirement to clarify that parties must select one or more legitimate outcome or process measures based on clinical evidence, credible medical support, or credible health science support. Parties must reasonably anticipate that the measures they select will advance the coordination and management of the care of the target patient population, which is the focus of this safe harbor. The revised measure selection standard offers greater flexibility and opportunities for innovation over time. The final rule permits clinical and non-clinical measures, internally or externally developed.

Under the final rule, the outcome or process measures do not need to be independently validated by a medical or other journal or another third-party source. They can be process-based, such as, for example, a measurement of the number of patients with diabetes that had their blood pressure tested, and we are modifying the regulatory text to clarify this. Unlike the new protection under the personal services and management contracts safe harbor for outcomes-based payments, which requires parties to achieve an outcome measure to receive payment (the outcome measure may have a process component), the care coordination arrangements safe harbor measure requirement offers greater flexibility. It is broader in recognition that the safe harbor: (i) Protects only in-kind remuneration, such as health technology, for which process measures may be the most legitimate and useful type of measure; and (ii) is available to VBE participants that are not taking on risk for achieving outcomes.

In response to the assertion that outcome measures should be anticipated to advance the coordination or management of care of the target patient population rather than the coordination and management of care, we addressed, and rejected, a similar suggestion in section III.2.B.g regarding changing “and” to “or” in the definition of coordination and management of care. Because the condition requiring parties to establish outcome measures incorporates the definition of “coordination and management of care”, it is appropriate to use that defined term, which, for the reasons offered above, includes an “and” rather than an “or.”

Where available, use of measures validated by a credible third party would be a prudent practice, but this is not required. We confirm that parties can select a measure applicable to the entire target patient population or select a different outcome or process measures for different segments of the target patient population (e.g., the measure for Start Printed Page 77729organ transplant patients within a target patient population may differ from the appropriate measure for a non-transplant patient). In such circumstances, the parties must (among other criteria) reasonably anticipate that all such measures collectively will advance the coordination and management of care for the entire target patient population. With respect to selecting the target patient population, we refer readers to that section of this preamble, section III.B.2.c.

We are further modifying our proposed rule to respond to the comments and our own concerns regarding parties selecting measures in a way that does not improve patient care or that could be abusive. In the OIG Proposed Rule, we considered requiring that outcome measures drive meaningful improvements in quality, health outcomes, or efficiencies, whether by driving improvements that are measurable or that are more than nominal in nature. We expressed concern about measures that merely reflected the status quo. Arrangements that merely drive nominal change or reflect only the status quo could be less likely to serve the care coordination aims of this rulemaking and more likely to be vehicles to reward referrals than arrangements in which parties receive remuneration designed to drive meaningful, more than nominal, change in patient care.

Accordingly, under the final rule, the outcome or process measures must include one or more benchmarks related to improvements in, or the maintenance of improvements in, the coordination and management of care for the target patient population. The measures must relate to the remuneration exchanged under the value-based arrangement so that there is a close nexus between the value-based activities under the arrangement and what the parties are measuring. Further, the measures cannot be based solely on patient satisfaction or patient convenience, both of which can be subjective, uninformative with respect to quality or efficiency of care, and gamed with relative ease, including through use of rewards or incentives to patients. On this last point, we are aware that some legitimate patient satisfaction or patient convenience measurement tools provide valuable information to providers and others managing patient care. This safe harbor does not preclude use of such tools (or any other form of measurement) as parties to value-based arrangements see fit and find useful. But patient satisfaction or patient convenience cannot be the only measure for purposes of satisfying the safe harbor. Lastly, we are finalizing a requirement for monitoring, periodically assessing, and prospectively revising an outcome or process measure and its benchmark, as necessary, as described below. This suite of requirements, taken together, is intended to reduce the likelihood of abuses and ensure that the selected measures relate to the protected remuneration and aim to foster meaningful advancements in the coordination and management of care.

Our revisions to the outcomes measure provision should address the concerns raised regarding measurement at the individual or group levels. This rule provides flexibility for parties to design legitimate measures appropriate to the arrangement, using internal or external data, and to account for characteristics such as available sample size and ability of individual physicians to effect change. It is up to the parties to determine which individual or entity that is a party to the arrangement, e.g., a VBE participant, is accountable for assessing progress on measures.

We are not prescribing how many measures parties must use; while we anticipate value-based arrangements often would have more than one outcome or process measure (or measures that include process measures as a component of an outcome measure), some arrangements may lend themselves to only one measure. Additionally, we are not requiring that parties use only measures related to those outcomes or processes most important to patients or that value-based arrangements must, in fact, successfully advance the coordination and management of care for the target patient population. The standard we are finalizing is designed to encourage the selection of outcome and process measures that will result in improved care for patients. To the comment about the VBE's burden of proof in matters of dispute about the safe harbor, as with all safe harbors in the criminal Federal anti-kickback statute, any party seeking to avail themselves of the protection of a safe harbor generally bears the burden of proof that they meet the requirements of the safe harbor.

Comment: Some commenters expressed concern regarding whether parties must meet the outcome measures in order to have safe harbor protection, with a few commenters stating such a requirement would disadvantage providers treating higher-risk patient populations who may be less likely to meet outcome measures.

Response: We clarify that under the final rule, for purposes of this safe harbor, parties need not successfully achieve the outcome or process measure they select to qualify for safe harbor protection (and if they select more than one, they need not meet any of them). However, parties will need to monitor and periodically assess their arrangements and potentially revise measures and benchmarks, as described below. This will ensure that the selected measures remain a meaningful tool to advance care coordination goals. Without the requirement to establish and track progress toward achieving measures, the risk increases that parties could abuse the care coordination arrangements safe harbor to inappropriately drive referrals rather than patient care improvement.

We recognize that, despite best efforts, parties to a value-based arrangement may not always achieve their selected measures due to a variety of factors, such as uncertainty of patient behavior, lack of control of results by a VBE participant, or misjudgments.

We note a key distinction between this safe harbor and the protection of outcomes-based payments under the personal services and management contracts safe harbor. The personal services and management contracts safe harbor requires that agents achieve the outcome measure established for their payments in order to receive those payments. This is in keeping with a core purpose of the outcomes measure, which is to be the basis for a party to receive a protected outcomes-based payment.

Comment: A commenter supported adding a requirement for parties to make information regarding any outcome measures they establish transparent to the public.

Response: We are not requiring that the outcomes or process measures for value-based arrangements be made public under this safe harbor, although parties are free to do so. We did not propose a public transparency requirement and do not finalize one here. We recognize transparency serves important accountability and integrity goals. Consequently, we have included other conditions in the final safe harbor intended to foster transparency while balancing the potential burden on the parties seeking safe harbor protection. With respect to outcome or process measures, we are finalizing the requirement that parties include a description of the measures in a signed writing and make available to the Secretary, upon request, all materials and records sufficient to establish compliance with the conditions of the care coordination arrangements safe harbor.

Comment: Several commenters stated that OIG should not require the use of Start Printed Page 77730measures from CMS's Quality Payment Program (QPP) in the outcome measure requirement, arguing that existing QPP measures are inadequate for many specialties. Some commenters suggested OIG could encourage, but not require, participants to utilize the criteria for the QPP measures as a framework for establishing outcome measures. Alternatively, some commenters requested that OIG require the use of certain measures, such as measures promulgated by the National Quality Forum, or require all quality and cost measures to be independently assessed and approved by a third-party, multi-stakeholder organization.

Response: To provide flexibility and avoid triggering concerns that any specified measures may be inadequate or inappropriate for certain types of individuals or entities (e.g., specialists), we are not requiring parties to utilize QPP measures or measures developed by any particular organizations or to receive third-party approval for the measures. Parties may use these measures at their discretion for purposes of this safe harbor.

Comment: Several commenters encouraged OIG to allow patient satisfaction and experience of care measures, such as timeliness of care, to qualify as outcome measures under the care coordination arrangements safe harbor. Along these same lines, a commenter suggested that OIG include patient satisfaction and efficiency of care measures, such as creating systems that prevent visits to the emergency room (for example, rapid outpatient testing and evaluation services) that would improve outcomes and reduce costs. This commenter observed that satisfied patients are more likely to keep follow up appointments and be compliant with care. Some commenters asserted that patient satisfaction and experience measures reflect quality of care and noted that CMS recognizes patient satisfaction as a quality measure that affects reimbursement. Other commenters supported using convenience measures, such as the availability of treatment times or timeliness of patient's access to care, as outcome measures because they asserted that patient adherence to treatment improves when care is convenient. Another commenter stated that, while convenience, alone, may not be a valid measure, OIG should permit parties to use convenience measures when they are tied to other measures, such as utilization. On the other hand, some commenters did not consider patient satisfaction or convenience to be a valid outcome measure, noting a lack of evidence tying patient satisfaction to better clinical outcomes.

Response: The commenters variously describe efficiency of care, patient satisfaction, patient convenience, and patient experience of care measures. As explained elsewhere, we have modified the outcomes measures requirement to include process measures, which addresses the commenters' suggestions regarding experience of care and efficiency of care measures, such as rapid access to outpatient testing and evaluation services. To assist commenters in appropriately categorizing their outcome or process measures, we provide additional clarification on patient satisfaction, patient convenience, and patient experience measures. For purposes of this rulemaking, patient satisfaction is about whether a patient's expectations for a health care encounter were met, e.g., a patient's assessment of the responsiveness of hospital staff. Different patients with different expectations can experience the exact same care but report different degrees of satisfaction.34 Patient convenience could include measures that assess patient access to care and accessibility of care, or the factors involved in arranging for the provision of care, e.g., the distance or proximity to a site of care or the hours during which care can be obtained.

In applying our regulation, patient experience can involve finding out whether something that should happen in a health care setting happened, for example, whether all hospital discharge planning protocols were followed for certain patients. Patient experience measures can overlap with patient satisfaction or convenience measures; in particular, patient satisfaction or patient convenience could be a sub-part of a patient experience measure. Accordingly, whereas patient satisfaction or patient convenience cannot be the sole measure for purposes of the care coordination arrangements safe harbor, the same may not be true for patient experience measures, depending on the facts and circumstances.

As stated in the OIG Proposed Rule, we are concerned that patient satisfaction and patient convenience measures may not reflect actual improvement in the quality of patient care, health outcomes, or efficiency in the delivery of care. In some cases, such measures can be subjective, uninformative with respect to quality or efficiency of care, and potentially gamed with relative ease, including through use of rewards or incentives to patients. That said, some patient satisfaction or patient convenience measurement tools provide valuable information to government programs, providers, and others managing patient care. This safe harbor does not preclude use of such tools (or any other form of measurement) as parties to value-based arrangements see fit and find useful. As noted previously, while patient satisfaction or patient convenience cannot be the sole measure for purposes of the care coordination arrangements safe harbor, patient satisfaction or patient convenience can be tied to other legitimate measures or can exist alongside such other measures.

Comment: Several commenters encouraged OIG not to require regular rebasing of outcome measures, and in particular, they opposed specific timing for when parties must rebase these measures. These commenters asserted that any timing requirement would be arbitrary, might discourage participation in value-based arrangements, or may not be clinically appropriate in all circumstances. A commenter expressed concern that requiring rebased outcome measures could lead to the unintended consequence of providers abandoning proven care coordination programs once they have achieved a maximized performance level. On the other hand, some commenters supported this requirement; for example, a commenter supported rebasing pursuant to a specified timeframe, such as every year, as long as the VBE participants determined that rebasing is feasible.

Response: In the OIG Proposed Rule, we considered whether to require parties to rebase outcomes measures (i.e., reset benchmarks used to determine whether the outcome measure was achieved) where rebasing is feasible. We indicated our intent to consider specifying a timeline for rebasing or requiring that it be done periodically. We solicited comments on whether rebasing should depend on the type of outcome measure or the nature of the arrangement. We also explained in the preamble to the OIG Proposed Rule that revisions to outcomes measures (i.e., modification of outcomes measures) would need to continue to incentivize the recipient of the remuneration to make meaningful improvements. We expressed concern that retrospective revisions could obscure a lack of meaningful improvement.

Upon further consideration of the terminology in the OIG Proposed Rule, we conclude that we can best express our intended policy by using the term “revise” rather than “rebase” in the final rule. The term “revise” has a broader common meaning and better reflects the goal that measures be Start Printed Page 77731changed or updated to advance improvements in care coordination. In addition, we view “rebase” as a subcategory of “revise”; in other words, we recognize that the rebasing of benchmarks may be the best way to “revise” the measure. Because we intended for parties to have the flexibility to either “revise” measures, i.e., modify or update measures to advance improvements in care coordination, or “rebase” benchmarks, and because “revise” could serve as an umbrella term which would include “rebase,” we believe “revise” encapsulates our intent.

In practice, parties can meet the requirement by revising the measure itself or by rebasing the benchmarks for the measure. We recognize that rebasing may not be necessary for all legitimate outcome or process measures that advance the coordination and management of care for a target patient population. For the final rule, measures must be monitored, periodically assessed, and prospectively revised as necessary to ensure that the measure and its benchmark continues to advance the coordination and management of care of the target patient population. We emphasize that any revisions must be prospective, not retrospective.

We are requiring a periodic assessment and, as necessary based on such assessment, revision of outcome or process measures and benchmarks. Recognizing that different measures should be assessed on different timelines, we are not implementing a specific timeframe for assessing or revising measures, as in some cases, outcome measures could be reviewed annually, whereas for others significant benefits to patients could reasonably take 2 to 3 years to achieve.

As evidenced by the above discussion, we are also finalizing a requirement for parties to a care coordination arrangement to have one or more benchmarks for each outcome or process measure that are related to improving or maintaining improvements in the coordination and management of care of the target patient population. Benchmarks help ensure that the remuneration exchanged pursuant to the value-based arrangement continues to drive meaningful improvements, or the maintenance of improvements, in the coordination and management of care for the target patient population.

Comment: Some commenters opposed a requirement for payors to identify outcome measures, positing that such a top-down approach would limit providers that are best situated to identify value-driving activities and may be impractical when payors are not parties to a value-based arrangement. Another commenter suggested that the adoption of payor-identified outcome measures by a VBE should be a favorable factor when evaluating a value-based arrangement for compliance with the proposed safe harbor. According to the commenter, payors have unique capabilities to: (i) Give providers the information they need to identify patient populations that may benefit most from management and care coordination interventions; and (ii) recommend benchmarks based on experience and access to data that are used to assess outcome measures.

Response: The final rule allows, but does not require, the use of payor-driven or developed outcome measures. Parties are free to use payor measures if they find them useful or if doing so is required by a payor.

Comment: We solicited comments on using a different outcomes measures standard for information technology than for other care coordination arrangements. Commenters were generally supportive of an alternative standard, such as an adoption and use standard, stating that it would allow more flexibility, which is important for arrangements that are centered on an ever-changing and developing industry. At least one commenter suggested language for this alternative standard, namely, “the parties determine in good faith that the technology is expected to meaningfully advance achievement of the targeted health outcomes, patient care quality improvements, or the appropriate reduction in costs . . . [etc.],” while another commenter suggested that VBE participants should have the option, but not be required, to designate utilization and adoption measures in IT arrangements as alternatives to outcome measures. A commenter who supported the use of alternative measures for IT advocated against OIG's proposal to implement a time frame after which the recipient of IT would be required to pay fair market value for continued use of the IT, stating that suddenly requiring fair market value payments may unnecessarily cause drastic and costly changes to an entire system and could disrupt continuity of care.

Response: The final rule for establishing the required outcomes or process measures is flexible enough to address information technology arrangements. Legitimate process measures (including use and adoption) or performance measures can be used so long as the parties reasonably anticipate that the measures will advance the coordination and management of care of the target patient population and the benchmark and other requirements are met. No separate outcome measures requirement is needed for information technology arrangements. We are not finalizing our proposal that outcomes measures be evidence-based, which we acknowledged could have been a difficult standard for some information technology arrangements. Measures must be selected based on clinical evidence or credible medical or health science support. This support may be based on external sources or generated internally. The specific addition of health science as a basis for selection reflects our intent, among other things, to allow remuneration in the form of information technology under the care coordination safe harbor. Since we are not including an IT-specific standard, we are not placing a time limit on the use of IT-related remuneration in care coordination arrangements. In light of our modifications to the measurement standard and other safeguards against fraud and abuse in the safe harbor, adopting the additional requirements we considered in the OIG Proposed Rule related to outcomes measures for the exchange of health information technology is not necessary.

c. Commercial Reasonableness

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(ee)(2) to require that the value-based arrangement pursuant to which the remuneration is exchanged be commercially reasonable, considering both the arrangement itself and all value-based arrangements within the VBE. We indicated that we were considering for the final rule whether to define a “commercially reasonable arrangement” as an arrangement that would make commercial sense if entered into by reasonable entities of a similar type and size, even without the potential for referrals. We solicited comments on the need for a definition of a “commercially reasonable arrangement.”

Summary of Final Rule: We are finalizing, without modification, our proposed requirement at paragraph 1001.952(ee)(2). We are not defining a “commercially reasonable arrangement” in the final rule.

Comment: Some commenters supported a commercial reasonableness requirement while others opposed it. Several commenters noted that this requirement is inconsistent with the value-based arrangements exception to the physician self-referral law, which does not require that the value-based arrangement be commercially reasonable. Others emphasized that the Start Printed Page 77732standard introduces complexity and uncertainty that may require parties to consult with legal counsel, with some of these commenters asserting that this burden could have a disproportionate impact on small and rural providers.

Response: In the context of care coordination arrangements where parties are not required to take on financial risk, the remuneration does not need to be consistent with fair market value, and the remuneration may take into account the volume of patients in the target patient population or the value of referrals or other business generated between the parties resulting from referrals of the target patient population, we believe requiring the value-based arrangement to be commercially reasonable is an important safeguard to ensure that safe harbor protection is limited to remuneration exchanged pursuant to value-based arrangements that are designed and implemented to achieve legitimate objectives rather than merely to induce or reward referrals.

The commercial reasonableness requirement focuses on ensuring that parties structure the terms of their value-based arrangement, including but not limited to the amount of the remuneration, in a manner that is calibrated to achieve the parties' legitimate business purposes. For example, as described in the OIG Proposed Rule, if VBE participants were to enter into a value-based arrangement to facilitate the sharing of patient-outcome data, it may be commercially reasonable for a hospital VBE participant to donate technology to a group practice VBE participant to facilitate this process. However, it may not be commercially reasonable for that same hospital VBE participant to donate technology substantially more sophisticated, or with enhanced functionality, beyond that necessary for communicating data on shared patients between the two parties.[35] We are concerned that, absent the commercial reasonableness requirement, the other conditions in this safe harbor will not sufficiently mitigate the risk of one party offering more remuneration than is necessary, such as in the example above, to reward the other party for referrals of target patient population patients, which is why we are finalizing the requirement in this final rule that the value-based arrangement itself be commercially reasonable. Further, the commercial reasonableness requirement is the only safeguard in the care coordination arrangements safe harbor that directly addresses the risk that parties might use a series of value-based arrangements to effectuate a payment-for-referral scheme. For this reason, we are finalizing the second prong of the commercial reasonableness requirement that the value-based arrangement must be commercially reasonable when considering all value-based arrangements in the VBE.

In sum, the commercial reasonableness requirement in this safe harbor: (i) Helps to ensure that the value-based arrangement, and all value-based arrangements within in the VBE, serve legitimate objectives; (ii) mandates that parties structure the terms of their value-based arrangement, including but not limited to the amount of the remuneration, in a manner that is calibrated to achieve the parties' legitimate business purposes; and (iii) reduces the likelihood that the value-based arrangement might be a payment-for-referral scheme.

With respect to the complexities associated with assessing commercial reasonableness and the potential need to consult with legal counsel, we appreciate those concerns and note that the inclusion of a commercial reasonableness condition in safe harbors is not new. Several existing safe harbors require protected remuneration to be commercially reasonable. We believe parties, including small and rural providers, can apply this concept and that including it as a condition of this safe harbor will not impose significant additional burden.

In response to those commenters who noted that the proposed safe harbor is inconsistent with CMS's proposed exception for value-based arrangements, we note that CMS's exception for value-based arrangements (42 CFR 411.357(aa)(3)), as finalized, includes a commercial reasonableness requirement.

Comment: A commenter asserted that the move to value-based care helps to eliminate many of the program integrity concerns that OIG might seek to address through a commercial reasonableness requirement.

Response: We agree that a shift to value-based payment models may curb some of the traditional program integrity concerns associated with a fee-for-service payment system. However, this safe harbor offers protection for care coordination arrangements without requiring that the parties assume financial risk or otherwise participate in a value-based payment model. As a result, the traditional program integrity risks resulting from fee-for-service payment are likely to persist. For example, we are concerned that, in some circumstances and in the absence of safe harbor guardrails, remuneration furnished pursuant to a value-based arrangement may lead to overutilization, corruption of practitioners' medical judgment, inappropriate patient steering, or unfair competition. By requiring the value-based arrangement to be commercially reasonable with respect to both the arrangement itself and all value-based arrangements within the VBE, this condition helps to safeguard against these program integrity concerns by requiring that the terms of the value-based arrangement be calibrated to achieve the parties' legitimate business purposes.

For example, we explained in the OIG Proposed Rule that a single value-based arrangement in which a hospital VBE participant provides a necessary number of care coordinators for the target patient population to a SNF VBE participant may be commercially reasonable. However, if a VBE includes multiple similar value-based arrangements, each of which involves the same hospital VBE participant furnishing care coordinators to the same SNF VBE participant for the same or a similar target patient population, the commercial reasonableness of the remuneration exchanged within the value-based arrangements in the aggregate may be suspect if it lacks a legitimate business purpose.[36] This arrangement could lead to the program integrity concerns identified above (e.g., inappropriate patient steering) and, absent a commercial reasonableness requirement, the conditions of the safe harbor might otherwise be met.

Comment: Some commenters asserted that a commercial reasonableness requirement will create an obstacle to value-based care. Others asserted that few arrangements would ever satisfy this criterion because value-based arrangements do not make any commercial sense without the potential for referrals. These commenters noted that changes in referral patterns alone are not the goal of a value-based arrangement but that they may well be the consequence.

Response: We are not persuaded that a commercial reasonableness requirement will impede the transition to value-based care. We believe that it is eminently feasible to structure value-based arrangements to meet the commercial reasonableness requirement by ensuring that the terms of the value-Start Printed Page 77733based arrangement, and all value-based arrangements within the VBE, are reasonably calculated to achieve the VBE participants' legitimate business purposes.

The framing of the commercial reasonableness condition in the final rule, which allows for the possibility of referrals, addresses the commenters' concerns. Specifically, we recognize that a value-based arrangement may, and often will, result in referrals. The commercial reasonableness requirement is intended to ensure that the terms of the value-based arrangement, considering both the arrangement itself and all value-based arrangements within the VBE, are calibrated to achieve the value-based purpose(s) of the arrangement, not the generation of referrals. We agree with the commenters' related assertion that changes in referral patterns alone are not the goal of a value-based arrangement but may be the consequence.

For example, a value-based arrangement that provides remuneration in excess of what is reasonably necessary to coordinate and manage the care of the target patient population, as contemplated by the terms of that arrangement, would not be commercially reasonable. Likewise, terms that are calibrated to secure referrals, rather than to achieve the value-based purposes of the value-based arrangement, would result in an arrangement that is not commercially reasonable for purposes of this safe harbor. The mere fact that referral patterns may change as a result of a value-based arrangement does not necessarily preclude the arrangement from meeting the commercial reasonableness requirement.

Comment: With respect to whether we should adopt a definition for a commercially reasonable arrangement, several commenters expressed support, but these commenters did not agree on a definition. Some commenters supported the definition presented in the preamble to the OIG Proposed Rule, which defined a “commercially reasonable arrangement” as an arrangement that would make commercial sense if entered into by reasonable entities of a similar type and size, even without the potential for referrals. Others encouraged us to adopt CMS's proposed definition, which states that commercially reasonable means the particular arrangement furthers a legitimate business purpose of the parties and is on similar terms and conditions as like arrangements. Other commenters suggested that OIG should focus on whether the arrangement makes “value-based” sense in the context of a value-based arrangement instead of whether it makes “commercial” sense. Other commenters provided alternative definitions that varied in scope. A commenter asserted that the definition should not preclude consideration of referrals not covered by Medicare.

Commenters also requested various clarifications and affirmative statements from OIG, including that: (i) Commercial reasonableness refers primarily to the non-financial elements of a transaction or arrangement while the concept of fair market value addresses the financial aspects, and (ii) an arrangement may be commercially reasonable even if it operates at a loss.

Response: While we are not adopting a definition of “commercially reasonable arrangement,” we appreciate commenters' requests for guidance. There are multiple dimensions to commercial reasonableness, including both the financial and non-financial terms of an arrangement. The fact that an arrangement generates a loss for a party is one factor, among many, that could be considered in analyzing whether an arrangement is commercially reasonable. An arrangement may be commercially reasonable even if it does not result in profit for one or more of the parties. Any determination whether a particular value-based arrangement is commercially reasonable would be based on the totality of the facts and circumstances of such arrangement, and the financial aspects of the value-based arrangement would be relevant to that inquiry.

With respect to the assertion that the commercial reasonableness definition should not preclude consideration of referrals of non-Medicare business, as we stated above, we are not adopting this definition. We reiterate that the commercial reasonableness requirement in this safe harbor requires that the VBE participants structure the terms of the value-based arrangement in a manner that is calibrated to achieve the parties' legitimate business purposes. We also reiterate our longstanding guidance that arrangements that do not involve referrals of Federal health care program beneficiaries or business generated by Federal health care programs may implicate the Federal anti-kickback statute by disguising remuneration for Federal health care program business through the payment of amounts purportedly related to non-Federal health care program business. Arrangements with this type of disguised remuneration would not be calibrated to achieve a legitimate business purpose and would thus not be commercially reasonable. Whether any particular arrangement reflects this type of disguised remuneration would depend on the specific facts of the arrangement.

Comment: Some commenters asserted that the definition of “commercially reasonable arrangement” in the preamble to the OIG Proposed Rule, which considered defining such an arrangement as one that would make commercial sense if entered into by reasonable entities of a similar type and size, even without the potential for referrals, is inconsistent with OIG's prior commentary relating to the requirement in certain other safe harbors that the remuneration must be reasonably necessary to accomplish the commercially reasonable business purpose of the arrangement.

Response: We are not further defining a “commercially reasonable arrangement” in this final rule, beyond the test for commercial reasonableness articulated in the regulatory text (i.e., that commercial reasonableness must be evaluated by considering both the value-based arrangement itself and all value-based arrangements within the VBE). As explained above, the test for commercial reasonableness is tailored to this particular safe harbor for care coordination arrangements and is meant to be both flexible to allow for innovative arrangements that serve legitimate objectives and sufficiently constrained to limit the risk of schemes to pay for referrals. That said, our prior guidance remains instructive on the application of the term “commercially reasonable” in the safe harbor context, particularly with respect to having a legitimate business purpose.[37]

d. Writing

Summary of OIG Proposed Rule: We proposed in proposed paragraph 1001.952(ee)(3) to require that each value-based arrangement, pursuant to which the remuneration is exchanged, be set forth in a signed writing, established in advance of, or contemporaneous with, the commencement of the value-based arrangement or any material change to the value-based arrangement. We proposed in the same paragraph that the writing state, at a minimum: (i) The value-based activities to be undertaken Start Printed Page 77734by the parties to the value-based arrangement; (ii) the term of the value-based arrangement; (iii) the target patient population; (iv) a description of the remuneration; (v) the offeror's cost for the remuneration; (vi) the percentage of the offeror's cost contributed by the recipient; (vii) if applicable, the frequency of the recipient's contribution payments for the offeror's ongoing costs; and (viii) the specific evidence-based, valid outcome measure(s) against which the recipient would be measured.

Summary of Final Rule: We are finalizing, with modifications, the writing requirement in paragraph 1001.952(ee)(3). The following modifications respond to public comments: (i) The writing requirement can be satisfied by a collection of documents; (ii) parties must document the fair market value of the remuneration or, alternatively, the offeror's cost of the remuneration and the accounting methodology utilized to determine such cost; and (iii) parties must document the value-based purpose(s) of the value-based activities provided for in the value-based arrangement. We are also clarifying that the terms of the value-based arrangement must be established in advance of, or contemporaneous with, the commencement of the value-based arrangement “and any material change,” instead of “or any material change.” In the preamble to OIG Proposed Rule, we described a writing requirement that would promote transparency of the value-based arrangement, both at its commencement and when there is a material change. These are the logical junctures where the writing requirement particularly serves its transparency purposes. Our proposed regulatory text did not make clear that the writing was needed at both junctures; our modifications more clearly express that policy. Lastly, we are modifying the writing requirement for consistency with changes to the language of the outcome and process measures condition, discussed in section III.3.b. The remaining requirements of the writing requirement are finalized as proposed.

Comment: While several commenters expressed support for the writing requirement, numerous commenters were concerned that this requirement does not afford parties the flexibility to document their value-based arrangement in a “collection of documents” and instead requires a single signed writing.

Response: We have revised the writing requirement to permit a “collection of documents” approach in response to commenters' concerns. To receive safe harbor protection, the terms of the value-based arrangement must be set forth in writing and signed by the parties in advance of, or contemporaneous with, the commencement of the value-based arrangement and any material change to the value-based arrangement. Under this approach, parties are not required to have a single, signed writing setting forth the terms of the agreement, but there must be either a single, signed writing or a collection of documents in place—in advance of, or contemporaneous with, the commencement of the value-based arrangement—in order to meet this condition. In addition, if any material term (e.g., an outcome or process measure) changes during the course of the value-based arrangement, the parties would need to set forth such changes in a signed writing or collection of documents in advance of, or contemporaneous with, the commencement of the modified value-based arrangement. We note that, while the terms do not need to be set forth in a single, signed writing, we believe this approach is a best practice from a compliance perspective.

Comment: A commenter requested that OIG permit a VBE to sign the writing required by this safe harbor on behalf of all parties to the applicable value-based arrangement because, according to the commenter, it would be challenging to arrange for all parties to sign a single document in advance of the commencement of the value-based arrangement.

Response: We decline to adopt the commenter's suggestion. To promote transparency and accountability, each value-based arrangement must be set forth in writing and signed by all parties to the value-based arrangement. While the VBE may be a signatory to the value-based arrangement, its signature alone would not meet the writing requirement for this or any of the other value-based safe harbors. We believe there is sufficient flexibility in this requirement insofar as we do not require the writing to be a single document (i.e., the parties can sign separate documents), and we allow it to be signed in advance of, or contemporaneous with, the commencement of the value-based arrangement.

Comment: Some commenters disagreed with the proposed writing requirement, stating that it was burdensome, was too prescriptive, or would increase the risk of inadvertent non-compliance. Commenters took particular issue with the requirement that parties document the offeror's cost for the remuneration. A commenter asserted that this provision is unnecessary in light of the condition to maintain and make available to the Secretary, upon request, all materials and records sufficient to establish compliance with the conditions of this safe harbor, while at least two commenters expressed concern that it could result in the inappropriate disclosure of competitively sensitive information. One such commenter provided the example of an offeror that might furnish certain in-kind remuneration to a VBE participant to benefit the VBE and further its value-based purpose, but who might want to offer the same in-kind remuneration to the recipient at market rates for use in other lines of business. According to the commenter, it would be commercially unreasonable to require the offeror to disclose its cost structure and requested that we allow parties to satisfy this condition through a written representation that the contribution amount equals at least 15 percent of the offeror's cost.

Response: We are not persuaded that our writing requirement is overly prescriptive or burdensome, rather it is an essential safeguard. The required contents are of the kind commonly part of business agreements: The parties, purposes, services, financial and business terms, duration, and metrics. In addition, for safe harbor purposes, we view the requirement that the writing set forth the offeror's cost for the remuneration or the fair market value of the remuneration—detailed in section III.B.3.g—as a material term to the parties' arrangement because of the safe harbor's 15 percent contribution requirement. The inclusion of this term in the writing ensures a transparent understanding of the arrangement agreed to by the parties.

Accordingly, we are finalizing the writing requirement, including a requirement that parties document: (i) Either the fair market value of the remuneration or the offeror's cost of the remuneration, dependent upon the methodology used by the parties to determine the contribution amount; and (ii) the percentage and amount contributed by the recipient. Consistent with revisions to the contribution requirement methodology discussed in detail in section III.B.3.g, we require that parties who choose to document the offeror's cost of the remuneration, instead of the fair market value, also must document the reasonable accounting methodology used to calculate such costs.

We believe requiring parties to calculate and document the contribution amount based on the fair Start Printed Page 77735market value of the remuneration or the offeror's cost of the remuneration addresses commenters' confidentiality concerns and, for this reason, we are not adopting the commenter's suggestion to use written representations of the offeror's cost for the purposes of satisfying the writing requirement. We understand that information relating to an offeror's cost may include proprietary or competitively sensitive information that parties might not wish to put in their written agreements. We do not believe the same holds true for fair market value.

In response to commenters' concerns that the writing requirement increases the risk of inadvertent non-compliance, we note that our modification to permit a collection of documents to satisfy the requirement should help address compliance concerns by incorporating more flexibility in this requirement. Further, should an arrangement inadvertently fail to comply with a safe harbor condition that would not mean that the arrangement violates the Federal anti-kickback statute. Rather, the arrangement would not have safe harbor protection and would need to be analyzed based on its facts, including the intent of the parties, for compliance with the statute.

Comment: A commenter requested that we address how parties to a value-based arrangement would need to document a value-based arrangement's value-based purpose.

Response: We did not expressly propose—as part of the writing requirement—that the parties document the value-based purpose(s) of the value-based activities provided for in the value-based arrangement. However, such requirement, which we are including in the final rule, effectuates our intent and logically flows from the intersection of the following proposals, each which is finalized here: (i) That the writing state, among other things, the value-based activities to be undertaken by the parties to the value-based arrangement; (ii) the “value-based activity” definition, which would require, in part, that the activity is reasonably designed to achieve at least one value-based purpose of the value-based enterprise; and (iii) the requirement that protected remuneration be used predominantly to engage in value-based activities that are directly connected to the coordination and management of care for the target patient population. In particular, it seems sensible that in describing the value-based activity—which, by definition, are reasonably designed to achieve at least one value-based purpose of the value-based enterprise—and to confirm that one purpose is the coordination and management of care, the writing would specify the value-based purpose that the activities are designed to achieve.

Consequently, we finalize a condition requiring that parties document the value-based purpose(s) of the value-based activities provided for in the value-based arrangement as part of the required writing. In particular, we view the documentation of the value-based purpose(s)—and specifically, documentation of the care coordination and management of care purpose—to be an important component of a writing designed to ensure transparency and accountability.

e. Limitations on Remuneration

i. In-Kind Remuneration

Summary of OIG Proposed Rule: We proposed that the remuneration exchanged must be in-kind under the proposed condition at paragraph 1001.952(ee)(4)(i).

Summary of Final Rule: We are finalizing, without modification, the requirement that the remuneration be in-kind, and moving it to paragraph 1001.952(ee)(1)(i).

Comment: While some commenters supported limiting protection under the care coordination arrangements safe harbor to in-kind remuneration, a number of commenters requested that OIG expand the safe harbor to protect monetary remuneration of any amount or, alternatively, monetary remuneration up to a certain amount annually. Many commenters asserted that the proposed safe harbor would not protect financial arrangements that incentivize behavior change, such as shared savings payments or payments to adhere to care protocols, and further asserted that the other safeguards in the safe harbor are sufficient to protect against fraud and abuse. A commenter suggested that OIG only protect shared savings distributed after the VBE has satisfied its expenses. Some commenters requested that the safe harbor protect monetary remuneration distributed under upside-only risk arrangements, particularly where the remuneration is tied directly or indirectly to achievement under a value-based arrangement with a payor. Other commenters asserted that the care coordination arrangements safe harbor should protect ownership, investment interests, loan arrangements (including interest payments), and similar transactions to fund infrastructure for the VBE that will facilitate the development and operation of a value-based arrangement.

Other commenters asserted that the safe harbor should permit the exchange of monetary remuneration, so physician practices can receive remuneration and purchase their own clinical tools or services and select staff members who best meet the needs of the practice. For example, a primary care practice explained that it would like to engage a psychologist or behavioral health professional to assist with patients presenting with depressive symptoms or needing additional assistance managing mental health conditions and that expanding this safe harbor to protect monetary remuneration would allow the practice to select a behavioral health professional who, among other things, best meets the needs of the practice's patient population. They explained that, otherwise, the offeror of in-kind remuneration would make those purchasing decisions and selections for the recipient. Another commenter asserted that OIG's and CMS's final rules should align to protect both in-kind and monetary remuneration or only in-kind remuneration, arguing that any inconsistency would result in a barrier to the advancement of value-based care. A commenter suggested that the safe harbor protect monetary remuneration for specific services; for example, a hospital might offer to cover the costs of a nurse navigator at a SNF, instead of providing the nurse navigator directly, because it wants the SNF to have the contractual relationship with the nurse navigator. Lastly, several commenters requested that OIG expand the safe harbor to protect monetary remuneration exchanged under arrangements involving Indian health programs.

Response: We are finalizing the requirement that the remuneration exchanged pursuant to this safe harbor must be in-kind. We continue to believe that providing safe harbor protection to monetary remuneration exchanged under arrangements where: (i) The parties are not required to assume financial risk, and (ii) the protected remuneration is not required to be fair market value and may take into account the volume or value of referrals for the target patient population, presents heightened fraud and abuse risks that outweigh the potential benefits to Federal health care programs and patients. OIG's longstanding guidance makes clear that remuneration in the form of cash and cash equivalents pose a higher risk of interfering with clinical decision-making, incentivizing overutilization or inappropriate utilization, and increasing costs to Federal health care programs. We do not Start Printed Page 77736view protection for ownership or investment interests as fundamental to parties entering into value-based arrangements for the coordination and management of care for a target patient population. Parties seeking to protect a particular investment interest may look to existing safe harbors (e.g., the safe harbor for investment interests at paragraph 1001.952(a)); in addition, the advisory opinion process remains available. Further, while we understand recipients' desire to select their own care coordination items and services rather than receiving items and services an offeror selects, we note that parties do not have to enter into value-based arrangements and might agree to enter into such arrangements only where the item(s) or service(s) being offered are satisfactory to the recipient. We also note that, where a party offering remuneration desires for the recipient to contract directly for items and services, the recipient may do so as long as the offeror pays the vendor of the items and services directly. Further, while we understand recipients' desire to select their own care coordination items and services rather than receiving items and services an offeror selects, we note that parties do not have to enter into value-based arrangements and might agree to enter into such arrangements only where the item(s) or service(s) being offered are satisfactory to the recipient. We also note that, where a party offering remuneration desires for the recipient to contract directly for items and services, the recipient may do so as long as the offeror pays the vendor of the items and services directly. Lastly, we note that individuals and entities may look to other safe harbors, such as the safe harbor for personal services and management contracts and outcomes-based payment arrangements at paragraph 1001.952(d), for protection for certain monetary remuneration.

Finally, in response to the comment requesting that CMS's and OIG's final protections align to protect both in-kind and monetary remuneration or only in-kind remuneration, we refer readers to section III.A.1, where we discuss fundamental differences in statutory structures and sanctions across the physician self-referral law and Federal anti-kickback statute and elaborate on the reasoning behind conditions that differ in any similar exception and safe harbor finalized by CMS and OIG, respectively, in each agency's final rule in connection with the Regulatory Sprint. With respect to OIG's specific policy to limit the care coordination arrangements safe harbor to in-kind remuneration, this policy addresses the heightened risk that fungible monetary remuneration could be misused to make intentional kickback payments and would be more difficult to track. OIG and CMS permit monetary and non-monetary remuneration in the value-based safe harbors and exceptions that require parties to assume risk.

ii. Remuneration Used To Engage in Value-Based Activities

Summary of OIG Proposed Rule: We proposed to require, at proposed paragraph 1001.952(ee)(4)(ii), that the remuneration provided by, or shared among, VBE participants be used primarily to engage in value-based activities that are directly connected to the coordination and management of care of the target patient population. We recognized that in-kind remuneration exchanged for value-based activities may indirectly benefit patients outside of the scope of the value-based arrangement and that parties may find it difficult to anticipate or project the scope or extent of these “spillover” benefits.

Summary of Final Rule: We are finalizing, with modifications, the proposed requirement at paragraph 1001.952(ee)(1)(ii). The two modifications are explained in greater detail in the responses to comments. First, the remuneration exchanged must be used predominantly to engage in value-based activities that are directly connected to the coordination and management of care for the target patient population. We replaced the word “primarily” with the word “predominantly.” Second, we added a condition that the remuneration exchanged result in no more than incidental benefits to persons outside of the target patient population. Further, for the reasons previously explained in the value-based terminology section discussing the definition of the “coordination and management of care” at section III.B.2.g, we added a condition to this final safe harbor clarifying that remuneration exchanged pursuant to a value-based arrangement may not be exchanged or used more than incidentally by the recipient for the recipient's billing or financial management services.

Comment: Commenters generally supported our proposal to require that protected remuneration be primarily used to engage in value-based activities that are directly connected to the coordination and management of care for the target patient population and expressed concerns about our alternative proposal to require that the remuneration exchanged be limited to value-based activities that only benefit the target patient population. Commenters asserted a variety of reasons why prohibiting spillover benefits outside the target patient population would be unworkable or undesirable in practice. For example, some commenters asserted that prohibiting spillover benefits would create a disincentive for innovation, and others emphasized the complexities in trying to manage benefits to prevent spillover. Some commenters requested that we expressly state that the benefits of the value-based arrangement do not need to be limited to the members of a target patient population. Another commenter stated that the term “primarily” is vague, which could make this requirement difficult to implement and monitor.

Response: We agree with the commenters' concerns that prohibiting spillover benefits outside of the target patient population would be unworkable. In the OIG Proposed Rule, and for purposes of this final rule, we recognize that in-kind remuneration exchanged for value-based activities may indirectly benefit patients out of the scope of the associated value-based arrangement and that parties may find it difficult to anticipate or project the extent of such “spillover” benefits. We likewise acknowledge the need to provide parties with sufficient flexibility while also minimizing the risk of disguised, improper remuneration unrelated to the coordination and management of care for the target patient population. To address the commenters' concerns about spillover effects, in the final rule we have clarified that the value-based activities for which the remuneration is used can result in no more than incidental benefits to persons outside of the target patient population. This language acknowledges the difficulty VBE participants could face in preventing “spillover” benefits and reflects our intent to permit safe harbor protection for care coordination arrangements that predominantly benefit the target patient population.

We are replacing the proposed term “primarily” with “predominantly” in the final rule. These words are analogous (e.g., meaning chiefly, mainly, principally). We make the change for consistency with comparable language in other safe harbors. The term “predominantly” appears for a similar purpose in the EHR and cybersecurity safe harbors, at paragraphs 1001.952(y) and (jj), respectively, and our parallel use of the same term in paragraph 1001.952(ee) enhances consistency for stakeholders across safe harbors. To the commenter's concern about vagueness, Start Printed Page 77737we are not quantifying with specificity the degree to which remuneration is used to engage in value-based activities to offer flexibility for the range of value-based arrangements for which safe harbor protection may be sought.

Comment: Several commenters requested that we clarify that a device with multiple functions does not violate the Federal anti-kickback statute or the Beneficiary Inducements CMP when it is primarily used for managing a patient's health care. Commenters noted that increasingly medical devices are being produced with multiple functions, or they rely on non-medical platforms such as consumer electronic products (e.g., smartphones, tablets).

Response: It appears that the commenters are asking whether the furnishing of a multi-function device, or a device that relies on a multi-use technology platform, can meet the safe harbor requirement that the remuneration is predominantly used to engage in value-based activities that are directly connected to the coordination and management of care for the target patient population. We also presume for purposes of this response that the device would be furnished to the recipient for less than fair market value.

As a threshold matter, compliance with the care coordination arrangements safe harbor depends on whether the device is furnished from one VBE participant to another VBE participant or if the device is furnished directly from a VBE participant to a patient. If the device is furnished by a VBE participant to another VBE participant, then the care coordination arrangements safe harbor may protect the remuneration if the device will be used predominantly to engage in value-based activities that are directly connected to the coordination and management of care for the target patient population, and all other safe harbor requirements are met.

For example, a health information technology tool that enables both remote patient monitoring and two-way telehealth capabilities may satisfy the predominant use requirement if the remote patient monitoring and two-way telehealth technologies will be used by the recipient to coordinate and manage care for the target patient population. However, a health information technology tool that includes some functionalities that the recipient may use to coordinate and manage care for the target patient population and other functionalities that the recipient may use for purposes other than to coordinate and manage care for the target patient population may not meet this standard. For example, a health information technology tool that the recipient VBE participant uses to collect, track, and analyze data relevant to the outcome measures established by the VBE participants and is also used to collect, track, and analyze the VBE participant's internal financial metrics for purpose of operating its own business would likely not meet the predominant use standard, unless the use for financial metrics is minimal.

In the above example, if the VBE participants wish to protect the health information technology tool under this safe harbor, the financial monitoring functionalities could be disabled to ensure that the predominant use test is met. Alternatively, if the recipient VBE participant pays fair market value for the financial monitoring functionalities, then the parties might conclude that they do not need to protect that aspect of the arrangement under this safe harbor, or they may look to another safe harbor, such as the personal services and management contracts safe harbor at paragraph 1001.952(d), to protect that aspect of the arrangement. To be protected under paragraph 1001.952(ee), the remaining remuneration for which fair market value has not been paid would need to meet the predominant use condition and all other safe harbor conditions.

We note that if the collecting, tracking, and analyzing data for the outcomes measures for the target patient population results in the VBE participant observing something that prompts a change to how it delivers care for all patients, not just the target patient population, this additional use would constitute an incidental benefit to persons outside the target patient population; such incidental benefit would not be a disqualifying feature of the remuneration under this provision in paragraph 1001.952(ee).

If a multi-function device is being furnished by a VBE participant directly to a patient, then the VBE participant would look to the patient engagement and support safe harbor, at paragraph 1001.952(hh), for protection, not the care coordination arrangements safe harbor. As explained above, the care coordination arrangements safe harbor does not protect remuneration—including a free or discounted device—flowing from VBE participants to patients. Note that, among other requirements, the patient engagement and support safe harbor requires that the remuneration has a direct connection to the coordination and management of care of the target patient population.

With respect to the Beneficiary Inducements CMP, we note that remuneration that is protected under a safe harbor to the Federal anti-kickback statute is not considered remuneration for purposes of the Beneficiary Inducements CMP.

Comment: Some commenters argued that this proposed limitation on the exchange of remuneration—in particular, the requirement that the remuneration be used to engage in value-based activities directly connected to the coordination and management of care of the target patient population—is unduly restrictive. Commenters stated that this condition should not be limited to the first of the four value-based purposes (the coordination and management of care for the target patient population) and should be expanded to permit a direct connection to any of the value-based purposes. Commenters further asserted that expanding this condition to require a direct connection to any value-based purpose would reduce regulatory burden, foster innovation, and facilitate alignment with CMS's value-based exceptions to the physician self-referral law.

Response: The care coordination arrangements safe harbor does not preclude a value-based arrangement from furthering other value-based purposes; however, the safe harbor does require that the remuneration exchanged be used predominantly to engage in value-based activities that are directly connected to the coordination and management of care for the target patient population. By requiring that each party to a value-based arrangement under the care coordination arrangements safe harbor include the coordination and management of care for the target patient population as at least one of the value-based purposes, we seek to distinguish between referral arrangements, which would not be protected, and legitimate care coordination arrangements, which naturally involve referrals across provider settings but include beneficial activities beyond the mere referral of a patient or ordering of an item or service.

Comment: Some commenters supported using alternative language to the direct connection standard, such as “reasonably related and directly tied” or “directly connected or reasonably related.” Many of these commenters asserted that alternative language would better convey the close nexus between this safe harbor and the coordination and management of care of a target patient population. Other commenters advocated for other changes to the standard, e.g., replacing “directly connected” with only “connected.”

Response: We are finalizing the standard, proposed at paragraph Start Printed Page 777381001.952(ee)(1), now codified at paragraph 1001.952(ee)(1)(ii) requiring that remuneration be used predominately to engage in value-based activities that are directly connected to the coordination and management of care for the target patient population. We are not finalizing the similar standard proposed at paragraph 1001.952(ee)(7) requiring that the value-based arrangement is directly connected to the coordination and management care of the target patient population, because doing so would introduce unnecessary duplication to the safe harbor. We believe the direct connection standard we are finalizing appropriately captures the relationship we are requiring (i.e., a close nexus) between the value-based activities (for which protected remuneration must be used predominantly to engage in) and the coordination and management of care for the target patient population.

Comment: A commenter sought clarification as to whether remuneration tied to either receiving referrals or being included in a preferred provider network would be a value-based activity directly connected to the coordination and management of care.

Response: As stated elsewhere in this final rule, the making of a referral, standing alone, is not a value-based activity. Accordingly, neither the exchange nor use of remuneration tied solely to receiving patient referrals or being included in a preferred provider network would be a value-based activity, let alone one that is directly connected to the coordination and management of care. Were such conduct combined with other value-based activities, the “direct connection” standard could be met, depending on the facts and circumstances.

iii. No Furnishing of Medically Unnecessary Items or Services or Reduction in Medically Necessary Items or Services

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(ee)(4)(iii) to require that the remuneration exchanged not induce VBE participants to furnish medically unnecessary items or services or reduce or limit medically necessary items or services furnished to any patient.

Summary of Final Rule: We are finalizing, with modification, this condition at paragraph 1001.952(ee)(7)(iii). The modification provides that the value-based arrangement (rather than merely the remuneration) cannot induce the parties to furnish medically unnecessary items or services or reduce or limit medically necessary items or services.

Comment: Commenters universally supported this safeguard. A commenter separately encouraged OIG to develop clear guidelines to enforce this provision that do not unduly hinder the provision of health care or second-guess physicians' medical decision-making.

Response: We are finalizing this proposed protection for patient care and Federal program expenditures, with additional modifications to fully effectuate our intent. As stated in the OIG Proposed Rule, remuneration that induces a provider to order or furnish medically unnecessary care is inherently suspect. We likewise stated that a reduction in medically necessary services would be contrary to the goals of this rulemaking and could, in certain instances, be a violation of the CMP law provision relating to gainsharing arrangements.[38] We do not intend to protect arrangements that do either. Upon further consideration, we have determined that our choice of language for the regulatory text too narrowly focused on the remuneration in the care coordination arrangement and did not capture the full range of ways through which ill-intentioned parties might seek to use a value-based arrangement to induce medically unnecessary care or limit medically necessary care. Accordingly, to better reflect our intent, the final regulation text prohibits the value-based arrangement from inducing parties to order or furnish medically unnecessary items or services or reduce or limit medically necessary items or services furnished to any patient.

In response to the commenter's concern that this safeguard not unduly hinder physicians' medical judgment, this condition is not intended to interfere with medical decision-making; rather, it is intended to support decision-making in the best interests of patients without inappropriate financial influence. This requirement is a hallmark safeguard against fraudulent and abusive practices that could lead to inappropriate utilization, inappropriate steering of patients, or stinting on care. We note that a separate condition of the safe harbor prohibits potential limitations on VBE participant's ability to make decisions in the best interests of the target patient population.

iv. Remuneration From Individuals or Entities Outside the Applicable VBE

Summary of OIG Proposed Rule: We proposed at 1001.952(ee)(4)(iv) that the remuneration exchanged could not be funded by, or otherwise result from the contributions of, any individual or entity outside of the applicable VBE. We stated that we were considering a requirement that remuneration be provided directly from the offeror to the recipient.

Summary of Final Rule: We are not finalizing the proposed funding limitation or a requirement that remuneration be provided directly from the offeror to the recipient.

Comment: A few commenters supported the requirement prohibiting remuneration from individuals or entities outside the applicable VBE. Other commenters asked for exceptions to the requirement, such as exceptions for remuneration that would benefit the VBE's patients and where the donating third-party would have no direction or control over how the remuneration could be used. Other commenters opposed the requirement, stating that it would prevent VBE participants from deriving remuneration from a wide variety of appropriate outside funding sources, such as payors. Another commenter raised concerns that a VBE participant could lose safe harbor protection unfairly if it receives remuneration from another VBE participant that was funded by another party without recipient of the renumeration knowing that source of funding. We also received comments on OIG's consideration of whether to require that remuneration be provided directly from the offeror to the recipient, with such commenters stating that such a requirement would create unnecessary practical impediments.

Response: We are not finalizing the proposed requirement prohibiting parties to a value-based arrangement from exchanging any remuneration funded by, or otherwise resulting from the contributions of, an individual or entity outside of the applicable VBE. The purpose of these proposals was to ensure that protected arrangements would be closely related to the VBE, that VBE participants would be committed to the VBE and striving to achieve the coordination and management of care for the target patient population, and that non-VBE participants could not indirectly use the safe harbor to protect arrangements that are designed to influence the referrals or decision-making of VBE participants. On balance, we do not believe the proposed conditions would add appreciably to the program integrity protection offered by the combination of safeguards we are including in the final safe harbor, which address these same concerns. We seek to minimize practical impediments to use of the safe harbor by avoiding conditions we do not believe are needed. However, we emphasize that remuneration exchanged outside of Start Printed Page 77739a value-based arrangement would not be protected by any of the value-based safe harbors.

We also are not finalizing the requirement considered in preamble to the OIG Proposed Rule that remuneration be provided directly from the offeror to the recipient. As explained in the OIG Proposed Rule, this requirement would have prohibited the involvement of individuals and entities other than the VBE or a VBE participant in the exchange of remuneration under a value-based arrangement, including, potentially third-party vendors and contractors. We agree with commenters asserting that this requirement could create unnecessary practical impediments that would be outweighed by any potential benefit of such a condition.

f. Taking Into Account the Volume or Value of, or Conditioning Remuneration on, Business or Patients Not Covered Under the Value-Based Arrangement

Summary of OIG Proposed Rule: We proposed in proposed paragraph 1001.952(ee)(5) to prohibit the offeror of the remuneration from taking into account the volume or value of, or conditioning an offer of remuneration on: (i) Referrals of patients that are not part of the value-based arrangement's target patient population; or (ii) business not covered under the value-based arrangement.

Summary of Final Rule: We are finalizing, without modification, the requirement in paragraph 1001.952(ee)(5).

Comment: While some commenters supported our proposal, asserting that the requirement appropriately differentiates between actual care coordination arrangements and improper pay-for-referral schemes, a few commenters did not support the requirement for various reasons. A commenter expressed concern that this requirement will be difficult to administer if recipients of remuneration have any business arrangements outside the VBE and posited that adequate remedies exist under current law to address the type of sham or abusive arrangements this provision intends to preclude from safe harbor protection, although the commenter did not identify any specific remedies. Another commenter asserted that this requirement should be removed to align physician incentives with the delivery of value-based care.

Conversely, a commenter opposed the proposed standard on the basis that it is too narrow and encouraged us to prohibit parties from taking into account the volume or value of referrals within the target patient population and to also prohibit exclusivity or minimum-purchase requirements in value-based arrangements. The commenter advocated for a modified condition that would restrict any remuneration that depends on or is calculated based on the volume or value of any Federal health care referrals, whether inside or outside the target patient population.

Response: We are finalizing this condition, as proposed. For purposes of the safe harbor, value-based care, including coordinated care, may take into account the volume of patients in the target patient population or value of referrals or other business generated between the parties resulting from referrals of the target patient population (e.g., an offeror may base the number of hours it provides care coordination services to the recipient on the volume of patients in the target patient population). A complete prohibition on remuneration that takes into account the volume or value of referrals could operate as an actual or perceived barrier to safe harbor protection for the kinds of innovative care coordination arrangements that are the goal of this rulemaking. We are finalizing the limitation with respect to referrals of patients and business generated outside the target patient population under the value-based arrangement as an important safeguard to protect against remuneration offered under the guise of a value-based arrangement that is intended to induce the recipient's referrals of patients or business not covered under the value-based arrangement.

g. Contribution Requirement

Summary of OIG Proposed Rule: We proposed in paragraph 1001.952(ee)(6) to condition safe harbor protection on the recipient's payment of at least 15 percent of the offeror's cost for the in-kind remuneration (i.e., a 15 percent contribution requirement). We also proposed at paragraph 1001.952(ee)(6) that the recipient make such a contribution in advance of receiving the in-kind remuneration, if a one-time cost, or at reasonable, regular intervals if an ongoing cost.

Summary of Final Rule: We are finalizing, with modification, the contribution requirement in paragraph 1001.952(ee)(6). Based on comments, we are revising the contribution requirement methodology to require recipients to pay at least 15 percent of either the offeror's cost of the remuneration, as determined using any reasonable accounting methodology, or the fair market value of the remuneration. We are finalizing, with only a minor technical modification to address syntax, our proposal that, if the remuneration is a one-time cost, the recipient must make the contribution in advance of receiving the in-kind remuneration; if the remuneration is an ongoing cost, the recipient must make any contributions at reasonable, regular intervals.

Comment: Many commenters expressed support for the proposed 15 percent contribution requirement or otherwise acknowledged that some level of contribution likely would be an appropriate safeguard to hold VBE participants accountable, promote engagement, and lower the risk that unnecessary or improper remuneration would be furnished pursuant to a value-based arrangement. The majority of commenters opposed any contribution requirement, with several asserting that such a requirement would be administratively burdensome; would necessitate onerous documentation and analysis, e.g., documenting and tracking the exchange of remuneration, in addition to undertaking an analysis as to whether the items or services exchanged constitute remuneration in the first place; and would discourage parties from entering into beneficial value-based arrangements.

Response: We are retaining a 15 percent contribution requirement for purposes of the care coordination arrangements safe harbor. We proposed the contribution requirement to: (i) Increase the likelihood that the recipient would use the care coordination item(s) and service(s); (ii) ensure that the remuneration would be well-tailored to the recipient; and (iii) promote the recipient's vested interest in achieving the intended purpose of the value-based arrangement, namely, furthering the coordination and management of care of the target patient population.

We are not persuaded that the contribution requirement would be overly burdensome or chill participation in value-based arrangements. While there may be some administrative burden associated with a contribution requirement, on balance we believe this requirement is important to mitigate what OIG identified in the OIG Proposed Rule as traditional fraud and abuse risks, e.g., inappropriately increased costs to the Federal health care programs or patients, corruption of practitioners' medical judgment, overutilization, and inappropriate patient steering.

Comment: Many commenters supported a lower contribution amount (or no contribution amount) for arrangements involving certain providers with financial constraints. Start Printed Page 77740These commenters generally asserted that, absent an exemption from, or significant reduction in the amount of, the contribution requirement, many providers would not be able to afford to participate in value-based arrangements. Commenters had varying suggestions for who should qualify as a provider with financial constraints, including, for example, essential hospitals, critical access hospitals, Indian health care providers, not-for-profit social services organizations, free and charitable clinics, small and rural practices, and practices serving medically underserved areas. Some commenters offered potential definitions while others favored existing definitions, such as those promulgated by the U.S. Small Business Administration, CMS, and the Health Resources and Services Administration.

Response: Having considered the comments and the goals of this rulemaking, we are not reducing or eliminating the contribution amount for arrangements involving certain providers with financial constraints. While we remain sensitive to the limited resources of many types of potential VBE participants, including those cited by commenters, we believe that the contribution requirement serves as an important guardrail to prevent fraud and abuse under the guise of a value-based arrangement and an incentive for parties to develop arrangements that are both effective in coordinating and managing care and economically prudent. We believe the contribution requirement will help ensure that parties are serious about collaborating to achieve the purpose of coordinating and managing patient care and will deliberately design care coordination arrangements most likely to be effective at achieving quality and efficiency aims in an economically prudent manner. In addition, we decline to make exceptions to the 15 percent contribution requirement for categories of VBE participants (e.g., small and rural practices) for several reasons. First, some designations can change over time (for example, a physician practice may qualify as a small practice at some points in time but not at others, depending on staffing changes), which could create confusion about the implementation of the contribution requirement when such a change occurs. Second, the same types of fraud and abuse risks associated with potentially valuable in-kind remuneration from a referral source apply equally to both larger or urban recipients, for example, and the types of recipients that requested an exemption from the 15 percent contribution requirement or a lower contribution percentage, such as small or rural providers. OIG's enforcement experience demonstrates that fraud is perpetrated by both small and large entities and happens across all geographic areas. Third, the 15 percent contribution requirement is based on the electronic health records items and services safe harbor at paragraph 1001.952(y)(11), which does not differentiate among recipients. Finally, in the context of the flexibilities of the overall safe harbor, the advantages from a compliance perspective of a single bright line standard outweigh the potential benefits of variable standards based on geographic location or other characteristics. Moreover, we have no basis for determining different amounts for different parties. Should the 15 percent contribution requirement pose a barrier to use of the safe harbor, parties are reminded that failure to fit in a safe harbor does not mean that an arrangement is necessarily unlawful and that OIG's advisory opinion process is also available.

Comment: At least one commenter suggested that the safe harbor except certain forms of in-kind remuneration (e.g., remuneration that consists of cybersecurity technology and related services and IT-related updates, upgrades, and patches) from the contribution requirement.

Response: We decline to include any exceptions to the contribution requirement under the care coordination arrangements safe harbor because we believe that, in the context of this safe harbor, this requirement is important to mitigate traditional fraud and abuse risks and ensure that parties enter into arrangements that serve value-based purposes. However, we remind parties seeking safe harbor protection for the exchange of cybersecurity technology and related services that the cybersecurity technology and related services safe harbor, paragraph 1001.952(jj), is available to protect the exchange of cybersecurity items and services, provided all safe harbor requirements are met, and note that such safe harbor does not include a contribution requirement.

Comment: Commenters generally opposed the proposal that the contribution requirement be calculated based upon the offeror's cost. For example, a commenter asserted that an offeror's cost may be difficult to determine where the offeror has substantial development costs but small marginal costs for each individual recipient or user. Another commenter posited that this standard would provide insufficient flexibility because the benefit of the remuneration exchanged may be realized by one party more than the other, for example, where the remuneration exchanged between two or more parties primarily benefits the offeror versus the recipient. Commenters suggested various methodologies to calculate the contribution requirement, including: (i) The offeror's cost or fair market value; (ii) the offeror's cost or a price charged by the offeror to purchasers outside of the VBE; (iii) any reasonable accounting methodology; and (iv) an amount based on the price for that product or service (or a reasonably comparable product or service if it is new to the market) typically charged by the offeror to reasonably comparable customers outside VBEs. Another commenter recommended we define “offeror's cost,” whereas another commenter expressed concern that the standard would be difficult to implement because items or services that benefit patients could have little or no quantifiable independent value to the VBE recipient.

A commenter asserted that calculating cost may be difficult when tools and software are developed internally by the developer or manufacturer and made available by a VBE participant or acquired as part of a bundled sale under the discount safe harbor. A commenter also stated that there may be substantial development costs but only marginal costs for each individual recipient and that costs could be subject to proprietary and confidentiality obligations.

Response: In the OIG Proposed Rule, in addition to our proposal that the contribution requirement be calculated based upon the offeror's cost, we stated we were considering two other methodologies for determining the 15 percent requirement: Fair market value of the remuneration to the recipient or the reasonable value of the remuneration to the recipient. To afford parties additional flexibility, we are revising the contribution requirement methodology in this final rule to require recipients to pay at least 15 percent of either: (i) The offeror's cost of the remuneration, as determined using any reasonable accounting methodology; or (ii) the fair market value of the remuneration. As indicated in the OIG Proposed Rule, we are not requiring that parties obtain an independent fair market valuation. We selected fair market value rather than reasonable value because fair market value is a more specific standard, a widely used term in valuation, and common to many existing safe harbors such that many stakeholders and the government have experience with it. We are finalizing the Start Printed Page 77741requirement as “fair market value” instead of “fair market value of the remuneration to the recipient” because we believe the inclusion of “to the recipient” could confuse generally accepted valuation methodologies due to its focus on only one party. We expect that parties to a value-based arrangement seeking protection under this safe harbor would use generally accepted valuation methodologies and principles in any determination of “fair market value” in relation to the contribution requirement, which could incorporate factors related to the recipient.

To provide parties flexibility we are not specifically defining “offeror's cost” or requiring a specific methodology for determining fair market value. To the extent costs are proprietary or confidential, depending on the circumstances, parties could meet this condition through the use of contractual provisions in their value-based arrangements to protect information from further disclosure or rely on the fair market value option to determine the 15 percent contribution requirement.

We are finalizing our proposal that, if the remuneration is deemed by the parties to be a one-time cost, e.g., a one-time purchase of telehealth-related technology, the recipient must make the contribution in advance of receiving the in-kind remuneration; to the extent the remuneration is deemed by the parties to be an ongoing cost, e.g., a subscription service to a data analytics tool, the recipient must make any contributions at reasonable, regular intervals, with the frequency of such payments documented in writing. We note that parties have the flexibility to structure the recipient's contribution payment as either a one-time or ongoing payment, depending upon the facts and circumstances of the arrangement and the parties' preference.

Comment: We received several comments advocating for or against the adoption of alternative proposals noted in the OIG Proposed Rule. For example, many commenters favored an across-the-board reduction in the contribution requirement from 15 percent to 5 percent. Other commenters backed an exemption to, or a significant reduction in, the contribution requirement for certain categories of remuneration, such as technology and technology-related items, although at least one commenter opposed this approach due to administrative burden concerns. Another commenter urged OIG to calibrate the contribution based on the financial need of the target patient population.

Response: We are retaining the 15 percent contribution requirement, as proposed, with the aforementioned methodology modifications. We believe that a contribution requirement lower than 15 percent would not achieve a sufficient level of accountability and engagement of the recipient. Moreover, we decline to vary the contribution requirement based upon the type of remuneration at issue or the arrangement's target patient population; such variation would introduce unnecessary operational complexity.

Comment: A commenter recommended that OIG take into account nonmonetary contributions from the recipient to the offeror for purposes of calculating the contribution requirement.

Response: To meet this safe harbor's contribution requirement, a recipient must pay at least 15 percent of the offeror's cost of the remuneration (as determined using any reasonable accounting methodology) or at least 15 percent of the fair market value of the remuneration. Parties to a care coordination arrangement where any nonmonetary contributions flow in both directions—from the offeror to the recipient and the recipient to the offeror—would need to assess any potential Federal anti-kickback statute implications for both streams of contributions. To the extent that both streams of contributions constitute remuneration, implicate the Federal anti-kickback statute, and the parties seek protection under the care coordination arrangements safe harbor, the parties must satisfy the contribution requirement for each stream of remuneration. There may be circumstances under which the parties could appropriately offset payments made to satisfy the contribution requirement for each stream, but any such assessment would be fact specific. For example, it would be appropriate for parties to offset payment amounts to satisfy the contribution requirement for separate streams of remuneration to reduce administrative burden, provided each stream of remuneration complied with the Federal anti-kickback statute. In contrast, it would be inappropriate for parties to offset payment amounts in an attempt to reduce a party's contribution requirement below 15 percent and any associated arrangement would not be protected by this safe harbor.

Comment: A commenter recommended that, for purposes of applying the 15 percent contribution requirement in the care coordination arrangements safe harbor, OIG recognize a VBE's good faith allocation of the in-kind remuneration across various arrangements. The commenter identified a number of manners in which it believed a reasonable allocation could be made (e.g., patient needs associated with a particular arrangement, such as a chronic care program), and noted that in some cases, a reasonable allocation might be a per capita allocation of in-kind remuneration across all VBE participants.

Response: First, for the purposes of our response, we assume that the commenter means that the in-kind remuneration provided by the VBE or VBE participant to other VBE participants would be shared by various VBE participants to a value-based arrangement, or various value-based arrangements, under the same VBE (e.g., a shared care coordinator or shared information technology system). To the extent that VBE participants to a value-based arrangement or various value-based arrangements are sharing in-kind remuneration provided by the VBE or another VBE participant, it would be reasonable—under both methodologies that parties can use to determine the contribution requirement—to reasonably and in good faith allocate the “offeror's cost for the in-kind remuneration” or the “fair market value” of the shared resources between the various VBE participants sharing in the resources.

As stated above, we would expect that parties to a value-based arrangement seeking protection under this safe harbor would use reasonable accounting methodologies and generally accepted valuation methodologies and principles in determining any appropriate allocation of the shared resources for the purposes of determining the “offeror's cost for the in-kind remuneration” or the “fair market value” in relation to the contribution requirement. We acknowledge that reasonable accounting methodologies and commonly accepted valuation principles would allow for consideration of the shared nature of the in-kind remuneration. We further highlight that we would not expect that any aggregate contribution amounts—from VBE participants sharing in any in-kind remuneration—result in a windfall to the offeror.

Comment: Some commenters expressed concern that a contribution requirement would upend the existing regulatory framework that parties rely on to assess whether an item or service constitutes remuneration. For example, a dialysis provider stated that a contribution requirement may unintentionally create a presumption that many care coordination activities Start Printed Page 77742that do not constitute remuneration for purposes of the Federal anti-kickback statute are, in fact, remuneration with a specific value. The same commenter illustrated its concern by explaining that multiple Medicare conditions for coverage require dialysis facilities to coordinate dialysis patients' care with other providers, including physicians and nursing homes. The dialysis provider requested that OIG confirm that the following does not constitute remuneration: (i) The provider performs care coordination services because they are required to do so by Medicare or other payors' rules, other law, or to meet the clinical standard of care, and (ii) the care coordination services provided do not relieve another party of an obligation assigned to it by Medicare or other payors' rules or other law.

Response: The contribution requirement does not change the current regulatory framework for assessing whether an item or service exchanged between two or more parties constitutes remuneration under either the Federal anti-kickback statute or the Beneficiary Inducements CMP. As we have stated in prior OIG guidance on this issue, we view “remuneration” under the Federal anti-kickback statute to consist of anything of value in any form or manner whatsoever.[39] With respect to the request for guidance as to whether (i) care coordination services performed by a provider because they are required to do so by Medicare or other payors' rules, other law, or to meet the clinical standard of care, and (ii) care coordination services that do not relieve another party of an obligation assigned to it by Medicare or other payors' rules or other law, such services could constitute remuneration under the Federal anti-kickback statute. However, we remind readers that even if care coordination services constitute remuneration, the Federal anti-kickback statute is not necessarily implicated. For example, the Federal anti-kickback statute generally is not implicated for financial arrangements limited solely to patients who are not Federal health care program beneficiaries. Further, depending on the facts and circumstances (including the intent of the parties), the provision of care coordination services may implicate the Federal anti-kickback statute but not violate it.

Comment: Some commenters asserted that the proposed 15 percent contribution requirement is arbitrary or that there is no evidence a contribution requirement would mitigate fraud and abuse concerns. Other commenters suggested that the contribution requirement is duplicative of existing safeguards included in the care coordination arrangements safe harbor, e.g., the requirement that remuneration must be used primarily to engage in value-based activities that are directly connected to the coordination and management of care of the target patient population.

Response: We disagree with the commenters. We believe the contribution requirement will promote accountability, fiscal responsibility, and greater engagement by the recipient. We note that contribution requirements have been implemented in other contexts, such as those included in the electronic health records items and services (EHR) safe harbor at paragraph 1001.952(y) and the Federal Communications Commission's Rural Health Care Pilot Program.[40] Moreover, we do not believe the contribution requirement is duplicative of other safeguards. While several conditions in the safe harbor promote accountability, the contribution requirement provides an objective, bright-line standard for parties that requires recipients in value-based arrangements to have a financial stake in the arrangement and encourages a tangible commitment to achieving the value-based arrangement's goals.

Comment: At least two commenters drew attention to the parallel contribution requirements in the care coordination arrangements and EHR safe harbors. For example, a commenter highlighted the perceived inconsistency of relying on the EHR safe harbor to justify our contribution requirement on the one hand and indicating that we were considering revisiting or eliminating the contribution requirement in the EHR safe harbor on the other. Another commenter sought to distinguish the care coordination arrangements safe harbor from the EHR safe harbor by stating that a contribution requirement may be appropriate in the EHR safe harbor because the EHR safe harbor has less stringent standards, but a contribution requirement is not warranted in the care coordination arrangements safe harbor. The commenter further asserted that the EHR safe harbor protects items and services that have clear independent value to the recipient, while items and services exchanged pursuant to value-based arrangements may not always have such independent value.

Response: In the OIG Proposed Rule, we considered removing the contribution requirement in the EHR safe harbor, but as discussed subsequently in this final rule, we are retaining the EHR safe harbor's contribution requirement. Accordingly, both the care coordination arrangements safe harbor and the EHR safe harbor, as finalized, include a 15 percent contribution requirement. We disagree that the EHR safe harbor has less stringent standards. The care coordination arrangements and EHR safe harbors have distinct requirements tailored to the type of remuneration that may be protected by the respective safe harbor. With respect to the commenter's suggestion that items and services exchanged pursuant to the care coordination arrangements safe harbor may not always have independent value to the recipient (in contrast to the EHR safe harbor), we note that any such determination would be fact specific. Moreover, the contribution requirement does not change any assessment of whether an item or service exchanged between two or more parties constitutes remuneration under the Federal anti-kickback statute. We remind stakeholders that to implicate the Federal anti-kickback statute, there must be “remuneration” offered, paid, solicited, or received in the transaction or arrangement at issue. If the Federal anti-kickback statute is not implicated by a transaction or arrangement, then safe harbor protection is not necessary. Consequently, we would expect arrangements that qualify under the care coordination arrangements safe harbor to involve remuneration exchanged between the parties.

h. Direct Connection to the Coordination and Management of Care

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(ee)(7)(i) that a value-based arrangement must have a direct connection to the Start Printed Page 77743coordination and management of care for the target patient population.

Summary of Final Rule: We are not finalizing the condition at proposed paragraph 1001.952(ee)(7)(i) because it would substantially duplicate the condition at paragraph 1001.952(ee)(1)(ii), which requires the remuneration to be used predominantly to engage in value-based activities that are directly connected to the coordination and management of care.

Comment: Commenters generally did not support the condition proposed at paragraph 1001.952(ee)(7)(i), albeit for varying reasons. Some took issue with the fact that the condition did not afford parties the flexibility to select any one of the value-based purposes available to VBEs, and rather tied parties to the value-based purpose relating to the coordination and management of care. Some commenters argued that this condition was not necessary in light of other safeguards included in the care coordination arrangements safe harbor.

Response: We are not finalizing the condition proposed at paragraph 1001.952(ee)(7)(i) because it would substantially duplicate the condition we are finalizing at paragraph 1001.952(ee)(1)(ii). With respect to the commenters that argued that the proposed condition did not afford parties the flexibility to select any one of the value-based purposes available to VBEs, and rather tied parties to the value-based purpose relating to the coordination and management of care, we refer commenters to the discussion of the condition we finalize at paragraph 1001.952(ee)(1)(ii), in section III.B.3.e.ii. of the preamble. There we explain, in part, that the care coordination arrangements safe harbor's conditions do not preclude a value-based arrangement from furthering other value-based purposes; however, the safe harbor does require that the remuneration exchanged be used predominantly to engage in value-based activities that are directly connected to the coordination and management of care for the target patient population.

i. Preserving Clinical Decision-Making

Summary of OIG Proposed Rule: In proposed paragraph 1001.952(ee)(7)(ii), we proposed that the value-based arrangement must not limit parties' ability to make decisions in the best interests of their patients.

We also proposed in proposed paragraph 1001.952(ee)(7)(iii) that value-based arrangements cannot direct or restrict referrals if: (i) A patient expresses a preference for a different practitioner, provider, or supplier; (ii) the patient's payor determines the provider, practitioner, or supplier; or (iii) such direction or restriction is contrary to applicable law or regulations under titles XVIII and XIX of the Act.

Summary of Final Rule: We are finalizing, with modification, the proposed condition that the value-based arrangement must not limit the VBE participant's ability to make decisions in the best interests of its patients and relocating it to paragraph 1001.952(ee)(7)(i). We are making a technical correction to change “their patients” to “its patients.” In paragraph 1001.952(ee)(7)(ii), we are finalizing the condition related to directing or restricting referrals with one clarification. We are deleting “or regulations” because “regulations” is already captured by the term “applicable law” in the final regulation. Thus, a value-based arrangement cannot direct or restrict referrals if such direction or restriction is contrary to applicable law under titles XVIII and XIX of the Act.

Comment: Commenters were very supportive of prohibiting any limitation on VBE participants' ability to make decisions in the best interests of their patients and limiting how the value-based arrangement can direct or restrict referrals to a particular provider, practitioner, or supplier. Many commenters asserted that these standards will protect patient choice and ensure the independence of medical or professional judgment.

Response: We agree with the commenters, and we are finalizing these two requirements—a prohibition on any limitation of VBE participants' ability to make decisions in the best interests of their patients, and limiting the circumstances in which parties to a value-based arrangement may direct or restrict referrals—to support patient choice and independent medical and professional judgment. Based on these conditions, remuneration exchanged as part of arrangements that unduly restrict patient choice or the independence of medical or professional judgment through inappropriate direction or restriction of referrals will not be protected. This requirement aims to ensure that VBEs and VBE participants that are parties to a value-based arrangement maintain their independent, medical, or other professional judgment without undue restriction. This condition is not intended to bar VBEs or VBE participants from communicating the benefits of receiving care from other VBE participants in the VBE.

Comment: Several commenters urged the OIG to adopt more robust safeguards to protect patient choice and ensure the independence of medical or professional judgment. A commenter recommended that health care professionals be given the ability to override any (i) practice guideline or standard; (ii) electronic health record technology; (iii) clinical-decision support software; (iv) computerized order entry program; or (v) policies that may be imposed or implemented by a VBE or payor if such an override is, in the professional judgment of the health care professional, consistent with their determination of medical necessity and appropriateness or nursing assessment, in the best interests of the individual patient, and consistent with the patient's wishes.

Another commenter asserted that the OIG Proposed Rule appears to give a provider the authority to direct a referral unless the patient otherwise expresses an alternative choice. The commenter recommended that we include a requirement that the VBE provide notice to patients informing them that: (i) The entity is participating in a financial risk-based program where the entity receives financial benefits under applicable conditions; (ii) referrals for care may be made to a restricted list of providers and practitioners; and (iii) the patient has the freedom to choose any qualified provider or practitioner and the right to reject any referral to a particular provider or practitioner if they have an alternative preferred provider or practitioner. Another commenter urged OIG to provide consumer-tested templates for VBEs to communicate with patients that they retain their rights to choose providers.

Response: With respect to the commenter's assertion that the OIG Proposed Rule appears to give the provider the authority to direct a referral unless the patient otherwise expresses an alternative choice, we note that the provision we are finalizing also prohibits the value-based arrangement from directing or restricting referrals where the patient's payor determines the provider, practitioner, or supplier, or where the direction or restriction is contrary to applicable law under titles XVIII and XIX of the Act. Moreover, nothing in this safe harbor gives providers authority to direct referrals. This provision describes one among several conditions of safe harbor protection, in this case a limitation on what a protected value-based arrangement can do.

With respect to the suggestion that providers be permitted to override various care protocols, guidelines, policies, or technology-driven systems, this safe harbor does not affect the authority of providers to do so. A Start Printed Page 77744provider's obligation to comply with care protocols, guidelines, policies, or technology-driven systems is outside the scope of this final rule. This safe harbor speaks only to the conditions under which a value-based arrangement would receive prospective safe harbor protection under the Federal anti-kickback statute. The value-based arrangement may not limit the VBE participant's ability to make decisions in the best interests of its patients. Facts and circumstances demonstrating that the value-based arrangement has limited a VBE participant's ability to make decisions in the best interest of its patients would disqualify the remuneration exchanged pursuant to the value-based arrangement from protection under this safe harbor. In drafting the final rule on this point, we have been guided in part by experience with long-established rules in the physician self-referral law [41] and the Medicare Shared Savings Program [42] that address preservation of patient preferences and clinician judgment choice in the context of directed referrals.

While we appreciate the commenters' suggestions regarding patient notice, we did not propose a patient notice requirement in the OIG Proposed Rule for any of the three value-based safe harbors, and we are not including a patient notice requirement in this final rule. Such a requirement would add administrative burden without appreciably adding benefits, including protections against fraud and abuse, given the combination of conditions we are finalizing. Further, such notices, if executed poorly, could confuse patients. Parties may wish to provide notifications, and nothing in this rule prevents them from doing so. We are not providing templates for communications with patient regarding patient choice, and defer to providers, payors, and others to develop best practices for notices and other relevant communications.

Comment: A commenter urged the OIG to preclude safe harbor protection for any arrangement that involves paying for referrals and to protect against any given market player requiring referrals only to certain facilities. Another commenter recommended that VBEs be prohibited from taking any adverse action against a patient that chooses an alternative provider or practitioner.

Response: We share the commenter's concerns regarding abusive, pay-for-referral arrangements. We also recognize that legitimate care coordination arrangements may involve an exchange of remuneration between parties that are in a position to give or receive referrals and that referrals may be made between VBE participants coordinating and managing a patient's care through a value-based arrangement. One of the objectives of the care coordination arrangements safe harbor is to identify and define attributes of legitimate care coordination arrangements and afford protection only to remuneration exchanged under such arrangements. The requirements of this safe harbor and the value-based terminology (e.g., value-based purpose, value-based activity, value-based arrangement) work together to achieve this objective. Abusive, pay-for-referral arrangements, such as an arrangement where an individual or entity is required to offer remuneration to a provider in order to receive that provider's referrals or an arrangement that encourages providers to steer patients in ways that are not in the patients' best interests, will not be able to meet the requirements of the safe harbor.

With respect to the commenter's concern regarding a particular person or entity requiring referrals only to certain entities, we believe these types of directed referral provisions may be problematic in certain instances but also are common features of many legitimate care coordination arrangements. As explained in the preceding response, the limitations we are adopting in this final rule reflect important safeguards to protect patient choice and independence of medical and professional judgment and effectuate an appropriate balance between the competing concerns of protecting legitimate care coordination arrangements and preventing inappropriate pay-for-referral schemes.

With respect to the recommendation that, as a condition of safe harbor protection, VBEs should be prohibited from taking any adverse action against a patient that chooses an alternative provider or practitioner, we note that nothing in the safe harbor limits or directs a patient's choice of provider or services, including a patient's choice to seek care outside the VBE. As indicated in the OIG Proposed Rule and implemented in this final rule, it is our intent that a patient can express a preference for a different practitioner, provider, or supplier and the value-based arrangement cannot restrict or limit that choice. Further, safe harbor protection does not extend to any arrangement where the value-based arrangement directs or restricts referrals to a particular provider, practitioner, or supplier if the patient's payor determines the provider, practitioner, or supplier or the direction or restriction is contrary to applicable law under titles XVIII and XIX of the Act.

j. Marketing of Items or Services or Patient Recruitment Activities

Summary of OIG Proposed Rule: We proposed in proposed paragraph 1001.952(ee)(7)(iv) that the value-based arrangement could not include marketing to patients of items or services or engaging in patient recruitment activities. We stated that we did not intend for this limitation to prohibit a VBE participant that is a party to a value-based arrangement from educating patients in the target patient population regarding permissible value-based activities.

Summary of Final Rule: We are finalizing, with modifications, this requirement at paragraph 1001.952(ee)(1)(iii). We have revised the language of the text at paragraph 1001.952(ee)(1)(iii) to clarify that the protected remuneration under the value-based arrangement may not be exchanged or used for the purpose of marketing items or services furnished by the VBE or a VBE participant to patients or for patient recruitment activities.

Comment: Several commenters strongly supported our proposal, or, alternatively, advocated for the imposition of additional conditions to protect against abusive marketing practices. However, the majority of commenters on this topic either sought clarification on the parameters of the condition or opposed it altogether. A commenter asked OIG to define allowable educational activities and prohibited marketing activities, and another commenter questioned whether a distinction between marketing and educational activities is possible when, according to the commenter, the line between marketing and education is subjective and requires an intent-based inquiry. Another commenter suggested that OIG prohibit marketing and patient recruitment activities but permit efforts to make patients aware of the availability of items or services at times when the patient could reasonably benefit from such information. Other commenters requested that OIG provide guidance on, and specific examples of, the distinction between marketing and patient recruitment activities on the one hand, and patient education activities on the other. For example, a commenter asked whether a program to screen patients for fall risk and educate them on their risks and appropriate next steps would be considered patient education or a marketing activity. Another Start Printed Page 77745commenter asked whether a hospice's provision of free home-based palliative care services or room and board to patients unable to pay would constitute marketing or patient recruitment activities.

Numerous commenters opposed the prohibition on patient marketing and patient recruitment activities altogether, asserting that the condition is too broad. A commenter declared that marketing activities are necessary in order to meaningfully educate patients on their health care options, and another commenter claimed that a marketing and patient recruitment prohibition would limit a value-based enterprise's ability to leverage technology that might empower patients to make informed decisions and gain timely access to appropriate care. This commenter encouraged OIG to provide an exception for marketing-based technology that is used to achieve a defined health outcome under a value-based arrangement.

Response: We are finalizing a narrower condition than the condition proposed in the OIG Proposed Rule because we agree with the commenters that our proposed condition was broader than necessary to prevent the fraud and abuse concerns addressed by the condition. Rather than prohibiting all marketing and patient recruitment activities under a value-based arrangement, as proposed, the requirement we are finalizing prohibits the exchange of or use of remuneration for the purpose of marketing items or services provided by the VBE or VBE participants or for patient recruitment activities.

We use the terms “marketing” (e.g., promoting or selling something), “education” (e.g., informing, instructing, or teaching), and “recruitment” (e.g., enlisting someone to do something) in accordance with their commonsense meanings. We are not defining in regulatory text “marketing,” “patient recruitment activities,” or “education,” or a similar term (note that the regulatory text does not use “education” or “educational activities” but we use such terms in our preamble explanation). We decline to define these terms: (i) In recognition that these terms are commonly understood; and (ii) to avoid overly prescriptive definitions that may chill appropriate educational activities. In lieu of regulatory definitions, we offer illustrative examples below to aid stakeholders in applying the safe harbor provision.

As noted in the OIG Proposed Rule, the proposed marketing and recruitment restriction would prevent misuse of the safe harbor by those seeking to use purported value-based arrangements to perpetuate fraud schemes through the purchase of beneficiaries' medical identity or other inducements to lure beneficiaries to obtain unnecessary care. As stated in the OIG Proposed Rule, our enforcement experience demonstrates that fraud schemes often involve a mixture of both inducements to lure beneficiaries to obtain unnecessary care and the use of marketing-like activities to steal patients' medical identities. In particular, OIG has long-standing concerns about marketing activities that involve personal contact with beneficiaries. For example, OIG has previously explained that door-to-door marketing, telephone solicitations, direct mailings, and in-person sales pitches or “informational” sessions can be extremely coercive, particularly when such activities target senior citizens, Medicaid beneficiaries, and other particularly vulnerable patients.[43]

Consequently, we believe that remuneration used for marketing and patient recruitment activities, regardless of whether the activities are driven by technology or tied to achieving a defined health outcome, remains suspect and requires fact-specific scrutiny under the Federal anti-kickback statute; therefore, we decline to provide safe harbor protection for such remuneration in this safe harbor.

Nevertheless, we acknowledge the benefits of objective educational materials to provide patients with general health care information and information about their health care options. We do not consider remuneration exchanged between parties to a value-based arrangement to (i) provide objective patient educational materials or (ii) engage in objective patient informational activities to constitute marketing or patient recruitment activities for purposes of this safe harbor condition. As we explained in the OIG Proposed Rule, this condition would not prohibit a VBE participant that is a party to the value-based arrangement from educating patients in the target patient population about permissible value-based activities.

A determination regarding whether remuneration is being exchanged or used for the purposes of marketing items or services or patient recruitment activities or for an educational activity requires a fact-specific analysis; however, the following examples illustrate how we distinguish between marketing and patient recruitment, on the one hand, and education on the other. Using examples from the OIG Proposed Rule,[44] if a SNF or home health agency placed a staff member at a hospital to assist patients in the discharge planning process, and in doing so, the staff member educated patients regarding care management processes used by the SNF or home health agency, this would not constitute marketing of items and services (provided the staff member only worked with patients that had already selected the SNF or home health agency and SNF or home-health agency care was medically appropriate for such patient). However, if the SNF or home health agency placed a staff member at a hospital to perform care coordination services and to market the SNF's or home health agency's services to hospital patients, the arrangement would not comply with this requirement because the remuneration being exchanged pursuant to the arrangement—the services offered by the staff member—would be exchanged for the purpose of engaging in marketing.

As an additional example, we would not consider actions, such as notifying a patient of the criteria used by a VBE participant to determine patient eligibility for care coordination services or informing the target patient population of potential health benefits that may be derived from care coordination for a patient's chronic condition, to be marketing or patient recruitment activities. This sort of targeted education to the patient is distinguishable from broader marketing and recruiting campaigns designed to sell products or services or recruit patients.

Notably, in some circumstances, it may not be necessary to make a distinction between marketing and education to determine whether an arrangement fits in a value-based safe harbor. If remuneration is exchanged pursuant to an arrangement that does not qualify as a “value-based arrangement,” as defined here, it is not eligible for safe harbor protection. For example, an arrangement solely for a direct-mail marketing campaign or other advertising would need to qualify as a value-based arrangement under the definition at paragraph 1001.952(ee) to be eligible to use a value-based safe harbor. We cannot envision a circumstance where such an arrangement would be a “value-based arrangement” as defined in this final rule or be eligible under this safe harbor. Should one VBE participant wish to Start Printed Page 77746engage in a direct-mail campaign that markets, in part, another VBE participant's services and the parties seek safe harbor protection for such arrangement, they should look to the personal services and management contracts safe harbor at paragraph 1001.952(d).

In response to the commenter's inquiry regarding a screening program for fall risk, it is not clear from the commenter's description whether the program would be part of a coordinated plan of care for a target patient population to improve outcomes or a marketing or patient recruitment activity to attract patients to the VBE or its participants. If the former, the arrangement could qualify for safe harbor protection, if all safe harbor conditions are met. If the latter, it would not be protected. Based on our oversight experience, we are concerned that a fall risk screening program could be misused as a marketing or patient recruitment activity if the screening program was not part of the coordination and management of care or an objective educational program. There is a risk that such a program could be used to lure beneficiaries to obtain unnecessary care. Whether a particular fall risk screening program is a marketing program, an educational program, or a value-based arrangement will depend on its specific facts and circumstances.

Additionally, we note that remuneration exchanged between parties to a value-based arrangement that is used to offer something of value to patients to incentivize them to obtain a fall screening examination from one of the parties would not be protected by this safe harbor. We have modified the regulatory text to make clear that prohibited marketing includes not only exchanging remuneration for the purpose of engaging in patient recruitment activities or marketing but also using remuneration for such purposes. This change effectuates our intent articulated in the preamble to the OIG Proposed Rule to limit the risk of the value-based arrangement being used as a marketing or recruiting tool to generate federally payable business for the VBE participant.[45] To illustrate how this condition would operate, the parties cannot exchange remuneration for the purpose of engaging in patient recruitment activities or marketing (e.g., a SNF or home health agency placed a care coordinator at a hospital to market the SNF's or home health agency's services to hospital patients). In addition, the parties cannot use the remuneration for marketing or engaging in patient recruitment activities (e.g., the hospital asks the care coordinator placed by the SNF or home health agency to send out mailings to the local community regarding the hospital's services).

Regarding the question about a hospice's provision of free home-based palliative care services or room and board to patients unable to pay, such an arrangement would not be protected by the care coordination arrangements safe harbor. This safe harbor is limited to remuneration exchanged between parties to a value-based arrangement, i.e., between a VBE and VBE participant or between VBE participants. It does not encompass arrangements involving the exchange of remuneration to patients. Other safe harbors or exceptions to the Beneficiary Inducements CMP may be available to protect the provision of such items and services to patients, depending upon the facts and circumstances.

We reiterate that nothing in this safe harbor prevents VBEs or VBE participants from marketing their services. Indeed, arrangements need not have safe harbor protection to be lawful, and we observe that many legitimate health care entities lawfully market services without benefit of a safe harbor. However, value-based arrangements that include the exchange or use of remuneration for the purpose of marketing or patient recruitment would not be eligible for protection under the care coordination arrangements safe harbor.

Comment: A commenter requested that OIG address whether a VBE participant that is a payor and owns a company that provides remote monitoring devices or has a vendor relationship with a company that provides such devices could suggest certain device utilization for purposes of improved care.

Response: The commenter describes the recommendation or referral of a device by a VBE participant that is a payor and is affiliated with a company that provides remote monitoring devices but does not identify remuneration provided under the value-based arrangement. Without additional facts, we can only respond generally to the comment. First, we would highlight that this safe harbor does not protect free or reduced-priced items or services that sellers provide either as part of a product sale arrangement or ancillary to a value-based arrangement. Free or reduced-priced items and services provided either as part of a product sale arrangement or ancillary to a value-based arrangement may not need safe harbor protection or may be protected by other safe harbors.

Second, nothing in the safe harbor would prohibit a VBE participant from using remuneration it received pursuant to a value-based arrangement to inform the target patient population of the availability of care coordination activities it provides to patients (e.g., patient monitoring) in a targeted, objective, and educational manner so long as the remuneration is not exchanged or used for marketing or patient recruitment activities. In this final rule, we have clarified that the content of the marketing the safe harbor prohibits is the marketing of items and services furnished by the VBE or a VBE participant to patients.

To the extent that payors or other VBE participants provide remuneration to patients in the form of a free device, such remuneration would not be protected by this safe harbor. We note that other safe harbors or exceptions to the Beneficiary Inducements CMP may be available to protect the provision of such items and services, depending upon the facts and circumstances.

Comment: A health system recommended that provider affiliation announcements be carved out of the definition of marketing or recruitment activities so that providers can inform patients that they participate in value-based arrangements. Another commenter similarly urged OIG to permit individuals or entities participating in a VBE to market themselves as VBE participants to patients.

Response: Remuneration exchanged between parties to a value-based arrangement may be used to inform patients in the target patient population that the VBE participant participates in the value-based arrangement without such information being considered a marketing or recruitment activity. However, whether broader advertising (that includes VBE participant-related information) would be considered a prohibited marketing or recruitment activity for safe harbor purposes would be a fact-specific determination. For example, as part of a larger value-based arrangement between a physician group and a hospital, a hospital provides tablets to the physician group, which the physician group uses for in-office patient asthma management education. If the education application used on the tablet identifies all VBE participants capable of helping the patients manage their asthma and provide other services, the tablet would not run afoul of the marketing prohibition because it is not being used to market or recruit patients. It informs patients of VBE participants Start Printed Page 77747capable of providing disease management and other services. However, if the hospital also used the tablets to send text messages, notifications, and other pop-ups that solicit the patient to receive services from VBE participants, the tablet would be marketing under this safe harbor because it is being used for broader advertising or patient recruitment activity. A tablet, as part of a care coordination arrangement, could be protected remuneration; however, if it is part of a larger marketing scheme, the tablet would not be protected because that scheme would not be eligible for protection under this safe harbor and would be subject to a separate analysis under the Federal anti-kickback statute. Similarly, if the tablet was used as part of larger data harvesting scheme for marketing purposes, that scheme would not be eligible for protection under this safe harbor and be subject to a separate analysis under the Federal anti-kickback statute.

Comment: A commenter sought clarification on how to interpret the marketing and patient recruitment prohibition in the context of Medicare Advantage beneficiaries, and, specifically, whether compliance with existing CMS and OIG requirements associated with marketing to, and recruitment of, Medicare Advantage patients would be sufficient to maintain protection under the value-based safe harbors. In a similar vein, a health insurer requested that OIG clarify its definition of marketing and patient recruitment activities, as it relates to pre-enrollment activities.

Response: While acknowledging that payors may be subject to a wide range of other regulations, including CMS regulations and guidance specific to Medicare Advantage plans, we do not believe that compliance with CMS marketing requirements is sufficient for purposes of the safe harbor. Medicare Advantage regulations relating to patient enrollment and marketing are specific to payor-patient interactions in that program. In contrast, the conditions of this safe harbor are focused on facilitating beneficial care coordination and addressing potential fraud and abuse risks related to the exchange of remuneration between and among providers and suppliers. We remind the commenter that compliance with the care coordination arrangements safe harbor, as with all Federal anti-kickback statute safe harbors, is voluntary, and Medicare Advantage plans, or their contractors, may continue to seek protection under other existing safe harbors.

Comment: Several commenters expressed concern that the prohibition on marketing and patient recruitment activities may conflict with existing CMS rules regarding discharge planning, or, at the very least: (i) Be inconsistent with the concept of a preferred provider network operating within the context of a VBE; or (ii) potentially limit VBE participants' ability to inform patients of the availability of items and services during the discharge planning process.

Response: The prohibition on the marketing of items and services and patient recruitment activities, as finalized, relates specifically to the remuneration exchanged. Thus, for example, if a skilled nursing facility provides remuneration to a hospital under a value-based arrangement in the form of a discharge planner, the discharge planner could not market or recruit patients to the skilled nursing facility; doing so would prevent the value-based arrangement from qualifying for safe harbor protection. Nothing in the safe harbor prevents the hospital from informing patients about available skilled nursing facilities during the discharge planning process.

This prohibition is not inconsistent with current CMS hospital conditions of participation regarding discharge planning, which require (among other conditions) that hospitals provide a comprehensive list of certain post-acute care providers, as applicable, to patients prior to discharge.[46] Providing a comprehensive list of post-acute care providers would not constitute exchanging or using remuneration for marketing or patient recruitment for safe harbor purposes. This would be true even if the discharge planner provided to the hospital in the prior example were the person furnishing the list to patients, provided the discharge planner did not market or recommend the skilled nursing facility or another VBE participant on the list.

This prohibition is not inconsistent with the potential for a preferred provider network to operate within the context of a VBE. Using the above discharge planner example, the remuneration could comply with the marketing and patient recruitment activity prohibition if, for example, the discharge planner only provides written educational materials regarding the preferred provider network to target patient population members and does not actively recruit patients to the skilled nursing facilities in the preferred provider network and does not market or recommend any particular provider on the list. It is incumbent on parties seeking to establish and operate preferred provider networks to do so in a manner that complies with all pertinent regulations, and our safe harbor requirements are not intended to interfere with or supplant other compliance obligations.

Comment: A commenter expressed concern that the proposed prohibition on marketing and patient recruitment would bar a VBE from publishing quality improvement or cost reduction data. The commenter declared that VBEs should be permitted to share performance data regarding VBE participants to help inform patient choice.

Response: We would not consider the publication of quality and cost data to constitute marketing or patient recruitment activity. Therefore, parties to a value-based arrangement could exchange remuneration for the purpose of publishing such data, and we believe such data may be beneficial to inform patient choice.

Comment: To mitigate OIG's concerns regarding marketing, a manufacturer suggested that OIG include as an additional safe harbor requirement that VBE participants disclose their participation in the VBE to patients, similar to the Medicare Shared Savings Program beneficiary notice requirements.

Response: We thank the commenter for its suggestion. As noted elsewhere in this rule, we did not propose a patient notice requirement in the OIG Proposed Rule and are not including a patient notice requirement for reasons explained elsewhere. However, VBE participants are not prohibited, as noted above, from utilizing notices to transparently disclose their participation in a VBE to patients.

k. Monitoring and Assessment

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(ee)(8) that the VBE, a VBE participant in the value-based arrangement acting on the VBE's behalf, or the VBE's accountable body or responsible person monitor and assess, no less frequently than annually, or once during the term of the value-based arrangement for arrangements with terms of less than 1 year: (i) The coordination and management of care for the target population in the value-based arrangement; (ii) any deficiencies in the delivery of quality care under the value-based arrangement; and (iii) progress toward achieving the evidence-based, valid outcome measure(s) in the value-based arrangement. We further proposed to require that the party conducting such monitoring and Start Printed Page 77748assessment report the results of the monitoring and assessment to the VBE's accountable body or responsible person (if the VBE's accountable body or responsible person is not itself conducting the monitoring and assessment).

Summary of Final Rule: We are finalizing the monitoring and assessment requirement, with modifications, at paragraph 1001.952(ee)(9). We are requiring that the VBE, a VBE participant in the value-based arrangement acting on the VBE's behalf, or the VBE's accountable body or responsible person reasonably monitor and assess the following, no less frequently than annually, or once during the term of the value-based arrangement for arrangements with terms less than 1 year: (i) The coordination and management of care for the target patient population in the value-based arrangement; (ii) any deficiencies in the delivery of quality care under the value-based arrangement; and (iii) progress toward achieving the legitimate outcome or process measure(s) in the value-based arrangement. We are revising the proposed language—from specific evidence-based, valid outcome measure(s) to legitimate outcome or process measure(s)—to align with the standard for outcomes measures finalized in paragraph 1001.952(ee)(4), discussed at section III.B.3.b.

We also require that the party conducting such monitoring and assessment report their findings to the VBE's accountable body or responsible person (if the VBE's accountable body or responsible person is not itself conducting the monitoring and assessment). Finally, we are making a technical correction by adding “the following” and “of the following” to the introductory language of the paragraph for greater clarity about what must be monitored and assessed.

Comment: Many commenters supported an annual monitoring and assessment requirement, where monitoring is tailored to the complexity and sophistication of the VBE and VBE participants. A physician trade organization recommended that OIG require monitoring and assessment of a value-based arrangement's value-based activities instead of the coordination and management of care for the target patient population, and another commenter asserted that OIG should require monitoring and assessment of whether value-based activities meet any of the value-based purposes. A commenter urged that the monitoring and assessment provision require monitoring of utilization, referral patterns, and expenditure data to ensure that abuse is curtailed, and gaming is reduced. Another commenter supported heightened standards and conditions for monitoring and assessment but did not specify any such standards and conditions. Some commenters opposed a monitoring and assessment requirement, with a commenter stating that writing-related safeguards are sufficient to protect against fraud and abuse.

Response: We are finalizing a monitoring and assessment requirement because we believe it is a critical safeguard to ensure oversight of the value-based arrangement. We are not adopting the suggestion to expand the condition to require monitoring of all value-based activities instead of the coordination and management of the care for the target patient population. Paragraph 1001.952(ee)(1)(ii) of this safe harbor requires the remuneration exchanged to be used predominantly to engage in value-based activities related to the coordination and management of care for the target patient population; consequently, we believe that it is appropriate to require the monitoring and assessment to focus on this value-based purpose. Under this requirement, the responsible party must monitor and assess whether and how the coordination and management of care is being implemented. “Coordination and management of care” is defined at paragraph 1001.952(ee)(14) for purposes of this safe harbor as the deliberate organization of patient care activities and sharing of information between two or more VBE participants or VBE participants and patients, tailored to improving the health outcomes of the target patient population, in order to achieve safer and more effective care for the target patient population. Thus, we expect any monitoring and assessment to evaluate how the value-based arrangement is or is not achieving this value-based purpose, as defined in this final rule. The monitoring and assessment may identify opportunities to reevaluate the value-based activities the parties are undertaking and the manner in which they are undertaking them to improve their chances of achieving this value-based purpose.

While we are not requiring monitoring and assessment of utilization, referral patterns, and expenditure data, monitoring and assessment of such data may be a best compliance practice for many arrangements, depending on the complexity and sophistication of the VBE participants, the VBE, and the value-based arrangement and available resources. We have added “reasonably,” to the monitoring and assessment provision to codify that, for all value-based arrangements, monitoring and assessment should be reasonable in relation to the complexity and sophistication of the VBE participants, the VBE, and the value-based arrangement and available resources.[47] We would expect parties to do as much as is appropriate based on the complexity and sophistication of the VBE participants, the VBE, and the value-based arrangement and available resources, but nothing in this provision should be construed to stop parties from having more robust monitoring and assessment processes than those described herein. This requirement both: (i) Provides flexibility for VBE participants associated with smaller, less-sophisticated VBEs and value-based arrangements to effectuate relatively more modest monitoring and assessment processes; and (ii) requires VBE participants associated with more complex and sophisticated VBEs and value-based arrangements to develop and operate appropriately complex and robust monitoring and assessment processes.

Comment: A commenter expressed concern that the annual monitoring and assessment requirement may have limited impact unless: Patients have a clearly articulated pathway for communicating and resolving concerns; outcome measures are valid and reflect outcomes important to patients; and results are reported to the Department or another oversight entity. Another commenter asked OIG to provide more information on the monitoring and assessment requirement and, specifically, to outline the reporting, auditing, and general oversight requirement of each VBE participant in the VBE.

Response: We appreciate the commenter's concern regarding the potential limited impact of the monitoring and assessment requirement. We are not requiring parties to value-based arrangements to establish specific protocols for receiving and addressing patient concerns or to report data to the Department, except as otherwise set forth in paragraph 1001.952(ee)(12), which requires that the VBE or VBE participant make available to the Secretary, upon request, all materials and records sufficient to establish compliance with the conditions of this safe harbor. However, we are finalizing the requirement for parties to establish one or more legitimate outcome or process measures, and to monitor and assess certain information.Start Printed Page 77749

Specifically, to comply with the monitoring and assessment requirement, either the VBE, a VBE participant in the value-based arrangement acting on the VBE's behalf, or the VBE's accountable body or responsible person must reasonably monitor and assess: (i) The coordination and management of care for the target patient population in the value-based arrangement; (ii) any deficiencies in the delivery of quality care under the value-based arrangement; and (iii) progress toward achieving the legitimate outcome or process measure(s) in the value-based arrangement. While, as stated above, the final safe harbor does not require the establishment of specific monitoring and assessment protocols or prescribe how VBEs must receive and address any patient concerns, we note that, as part of any VBE's regular monitoring activities, it would be a good compliance practice to establish a mechanism through which patients and others could submit reports related to, for example, deficiencies in the delivery of quality care under the value-based arrangement. Further, it would be a good compliance practice, as part of any VBE's regular monitoring and assessment activities, to assess any credible reports of, for example, deficiencies in the delivery of quality care under the value-based arrangement to determine their validity and any potential triggering of the termination and corrective action provision.

Again, the final rule does not prescribe a one-size-fits-all approach for monitoring and assessment, nor does it specify the reporting, auditing, and general oversight requirement of each VBE participant in the VBE. This lack of specificity is designed to allow VBEs (and their VBE participants) flexibility to establish a monitoring and assessment program that is reasonable for that particular VBE and value-based arrangement. As stated above, the monitoring and assessment processes for each value-based arrangement should be reasonable in relation to the complexity and sophistication of the VBE, VBE participants, and value-based arrangement. Given the flexibility parties have to form VBEs and value-based arrangements of varying levels of complexity, we anticipate that the monitoring and assessment processes for the diverse value-based arrangements that could be protected by this safe harbor may vary.

Comment: A commenter expressed concern that, if the party responsible for monitoring and assessment does not comply with the requirements of the safe harbor, that party's noncompliance places other parties at risk through no fault of their own.

Response: A safe harbor applies only where each condition of the safe harbor is squarely met. Therefore, if the party responsible for monitoring and assessment does not perform its responsibility in accordance with the safe harbor requirements, the remuneration exchanged pursuant to the value-based arrangement would not receive protection. However, where another party has done everything that it reasonably could to comply with the safe harbor requirements applicable to that party but the remuneration exchanged loses safe harbor protection as a result of another party's noncompliance, the party's efforts to take all possible reasonable steps would be relevant in a determination of whether such party had the requisite intent to violate the Federal anti-kickback statute.

Comment: Commenters expressed concern regarding, and urged flexibility for, the requirement for monitoring and assessment of progress toward evidence-based outcome measures. For example, a commenter asserted that participants to a new value-based arrangement need time to achieve success, as evidenced by the performance results of Medicare Shared Saving Program, and may not be able to progress quickly towards the outcome measures. Commenters noted that factors beyond a provider's control can impact outcomes and that interventions such as primary care, preventive services, and chronic care management may yield benefits that take numerous years to materialize.

Response: For a number of reasons, we believe the responsible party or parties should monitor and assess progress toward the outcome or process measure(s) the parties establish. Such monitoring and assessment may reveal whether efforts to achieve the outcome measure(s) have led to improvements or deficiencies in patient care; whether the outcome measure(s) the parties initially established continue to be the best goalposts for achieving one or more value-based purposes; and whether the items or services the offeror provided under the value-based arrangement, such as care coordination services, are effective tools for driving beneficial changes in care delivery. We agree with commenters that factors beyond a VBE participant's control could impact outcomes and that benefits of outcome measures could manifest over a longer timeframe; for this reason, the requirement for monitoring and assessment does not mandate that the parties achieve the outcome or process measure(s) on any particular timeframe.

l. Termination of the Arrangement

Summary of OIG Proposed Rule: We proposed at proposed paragraph 1001.952(ee)(9) that the parties terminate the value-based arrangement within 60 days if the VBE's accountable body or responsible person determines that the value-based arrangement: (i) Is unlikely to further the coordination and management of care for the target patient population; (ii) has resulted in material deficiencies in quality of care; or (iii) is unlikely to achieve the evidence-based, valid outcome measure(s). We said we were considering for the final rule, and sought comments on, an alternative to the proposed termination requirement that would instead allow for remediation—within a reasonable timeframe—before any required termination.

Summary of Final Rule: We are finalizing, with modifications, a termination provision for this safe harbor at paragraph 1001.952(ee)(10). Under the final rule, if the VBE's accountable body or responsible person determines, based on the monitoring and assessment conducted pursuant to paragraph 1001.952(ee)(9), that the value-based arrangement has resulted in material deficiencies in quality of care or is unlikely to further the coordination and management of care of the target patient population, the parties must, within 60 days, either terminate the arrangement or develop and implement a corrective action plan designed to remedy the deficiencies within 120 days and, if the corrective action plan fails to remedy the deficiencies within 120 days, terminate the value-based arrangement.

Comment: Some commenters expressed support for our proposed termination requirement, but many expressed concerns about what it would mean in practice. Many commenters supported the alternative we described in the preamble to the proposed rule that would allow for remediation, within a reasonable timeframe, before any required termination. These commenters noted a variety of operational and policy concerns with mandating termination within 60 days. For example, some commenters noted that complex arrangements may require more than 60 days to unwind responsibly. Some commenters suggested that a cure period be permitted where the VBE determines that a plan of correction may be devised to cure the deficiencies, and others suggested that remediation should be an option, but not a requirement. With respect to the length of a remediation Start Printed Page 77750period during which parties could develop and implement a corrective action plan, commenters suggested a variety of time periods, ranging from 90 days to 1 year. Multiple commenters suggested a 120-day period. Another commenter suggested that any termination requirement should be suspended indefinitely as long as the parties are working in good faith to implement a corrective action plan. A commenter also noted that there is a difference between arrangements that are not making progress and those that are causing harm and suggested that the latter require immediate termination. Finally, a commenter requested that OIG clarify that parties do not have an obligation to assess for any events that trigger the termination provision on an ongoing basis, but instead are required to do so annually or prior to renewal of an agreement.

Response: We appreciate commenters' concerns regarding the potential challenges associated with requiring termination within 60 days if the VBE's accountable body or responsible person determines one or more of the triggering events has occurred. Several changes in the final rule address many of the concerns expressed by the commenters. The final rule provides more flexibility by requiring the parties, within 60 days, either to terminate the arrangement or to develop and implement a corrective action plan in the event the VBE's accountable body or responsible person determines that the value-based arrangement has resulted in material deficiencies in quality of care or is unlikely to further the coordination and management of care for the target patient population. The option for corrective action plans is consistent with our statements in the OIG Proposed Rule that we were considering allowing for remediation within a reasonable timeframe and that our goal is a reasonable but also prompt termination of arrangements that are no longer serving the goals for which safe harbor protection is offered.

The final rule does not require the parties to terminate the arrangement or implement a corrective action plan if the VBE's accountable body or responsible person determines that the value-based arrangement is unlikely to achieve its legitimate outcome or process measures. This safe harbor does not require the recipient to achieve an outcome or process measure. Also, the safe harbor permits the parties to the value-based arrangement to modify outcome or process measures prospectively, as long as other elements of the safe harbor continue to be met (for example, a change to an outcome measure would be a material change to the value-based arrangement that would need to be documented in writing and signed by the parties, in accordance with paragraph 1001.952(ee)(3)).

With respect to the option to develop and implement a corrective action plan, the final rule requires that such plan be designed to remedy the identified deficiencies within 120 days. If the corrective action plan fails to remedy the deficiencies within 120 days, the parties are required to terminate the value-based arrangement, and safe harbor protection for remuneration exchanged pursuant to the value-based arrangement would no longer be available. We selected a 120-day period based on recommendations from commenters and because we believe this time period is both long enough to allow a meaningful opportunity to remediate the deficiencies and short enough to necessitate diligent attention by the parties.

With respect to the commenter who asserted that a determination that the value-based arrangement has resulted in patient harm should require immediate termination, we appreciate the commenter's concern, and we agree that such a determination is a serious finding that should prompt immediate attention by the parties. We did not include a “patient harm” provision in the OIG Proposed Rule because incidents of patient harm will always be “material deficiencies in quality of care,” that would trigger this condition. However, not all material deficiencies in quality of care necessarily mean that there has been patient harm.

Finally, with respect to the commenter that requested clarification regarding the frequency with which parties must assess for any events that would trigger the termination or corrective action provision, we note that, consistent with the OIG Proposed Rule, this final rule ties the termination of the value-based arrangement or implementation of a corrective action to certain triggering events identified through “monitoring and assessment.” Monitoring and assessment must occur no less frequently than annually or at least once during the term of the value-based arrangement for arrangements with terms of less than 1 year. Thus, at a minimum, the party or parties responsible for monitoring and assessment must monitor the matters listed in the regulation at paragraph 1001.952(ee)(9) and report the results so that the accountable body or person can make a determination as to whether any of the events that trigger the termination or corrective action provision have occurred. We note that it would be a best compliance practice to ensure monitoring and assessment also involves receiving and assessing reports and other information related to the circumstances that must be monitored and assessed (e.g., deficiencies in the delivery of quality care under the value-based arrangement). These reports would inform the accountable body or responsible person's determination regarding termination or corrective action under paragraph 1001.952(ee)(10).

Comment: A commenter expressed concern that the safe harbor contains too much deference to the subjective beliefs and determinations of the VBE participants, who the commenter asserts are self-interested. The commenter recommended that the termination provision in the safe harbor be revised to require termination if the information available to the VBE's accountable body or responsible person indicates that a triggering event has occurred. The commenter also recommended that the safe harbor specify that the VBE bears the burden of proof with respect to the question of whether the information available to the VBE's accountable body or responsible person required termination of the value-based arrangement.

Response: We believe that the revisions we are adopting in this final rule, which require termination or a corrective action plan if the VBE's accountable body or responsible person reaches one of two determinations help to mitigate the commenter's concerns regarding excessive deference to the subjective beliefs of the VBE participants. We do not believe it is necessary to specify that the VBE bears the burden of proof with respect to whether termination was required because any party seeking to avail themselves of the protection of a safe harbor generally bears the burden of proof that they meet the requirements of the safe harbor.

Comment: Several commenters raised concerns regarding our proposal to require termination if the VBE's accountable body or responsible person determines that the value-based arrangement is unlikely to achieve the evidence-based, valid outcome measure(s). For example, several commenters noted that it may take time to see results and that results may plateau at certain times. Commenters suggested that this provision may result in parties' prematurely judging an arrangement's success or failure and that 60 days was an arbitrary timeframe. Another commenter expressed concern that the termination provision implies that an arrangement could move in and Start Printed Page 77751out of compliance with the safe harbor as performance changes from month to month. Another commenter requested that participants be permitted to modify measures prospectively, rather than have to terminate the value-based arrangement.

Response: We appreciate the concerns raised by commenters, and we are not finalizing the proposed requirement that the parties terminate the arrangement if the VBE's accountable body or responsible person determines that the value-based arrangement is unlikely to achieve the outcome measure(s). We believe that requiring termination, or a corrective action plan, upon such a determination is at odds with other elements of this safe harbor. As we have stated elsewhere, this safe harbor does not require that the value-based arrangement result in a particular level of performance on the outcome or process measure. It requires that the parties identify an outcome or process measure and that the outcome or process measure relates to the remuneration exchanged under the arrangement. We also wish to clarify that the safe harbor permits the parties to modify the outcome or process measure prospectively during the term of the agreement, as long as the other elements of the safe harbor continue to be met and the modification is memorialized in a writing signed by the parties.

We caution, however, that this safe harbor separately requires the VBE, a VBE participant in the value-based arrangement acting on the VBE's behalf, or the VBE's accountable body or responsible person to reasonably monitor, assess, and report progress toward achieving the outcome or process measure. There may be circumstances where such monitoring and assessment of outcome or process measure progress may generate a finding that indicates that the value-based arrangement no longer meets all of the requirements of the safe harbor. For example, the finding may indicate that the remuneration exchanged is not being used predominantly to engage in value-based activities that are directly connected to the coordination and management of care for the target patient population. Thus, while we are not creating an affirmative obligation to terminate or enter into a corrective action plan based on a determination that the value-based arrangement is unlikely to achieve the selected outcome or process measure, we caution that parties to a value-based arrangement who wish to be protected under the safe harbor should periodically evaluate compliance with safe harbor standards.

m. Diversion, Resell, or Use for Unlawful Purposes

Summary of OIG Proposed Rule: In proposed paragraph 1001.952(ee)(10), we proposed that an exchange of remuneration would not be protected under the care coordination arrangements safe harbor if the offeror knows or should know that the remuneration is likely to be diverted, resold, or used by the recipient for an unlawful purpose.

Summary of Final Rule: We are finalizing, without modification, this requirement at paragraph 1001.952(ee)(11).

Comment: We received very few comments on this proposal. Some commenters expressed support for the provision, while another commenter raised concerns that this standard would be difficult for individual providers and small group practices to understand and comply with because the standard is not specifically defined.

Response: We believe that the standard is straightforward. Where an offeror knows, or should know, that the recipient is likely to divert or resell the remuneration, or otherwise use it for an unlawful purpose, the remuneration is not protected by the safe harbor. This could arise in cases where the recipient's intended diversion is overt. For example, where a recipient expressly states its intent to sell the items received from the offeror to third parties, it would make clear its intended diversion. It can also arise, for example, where the nature or scope of the remuneration offered to the recipient is such that the offeror should know that diversion or resale is likely, such as where a VBE participant provides remuneration far in excess of what could reasonably be needed for the recipient to undertake the value-based activity for which the remuneration is intended and the remuneration is transferable in nature. For example, if a VBE participant provides handheld tablets to another VBE participant to facilitate coordination and management of care, but the offeror provides substantially more tablets than could reasonably be used by the recipient for the intended purpose (e.g., 100 tablets when ten are objectively sufficient for the intended use), then the offeror might reasonably know that the recipient is likely to divert or resell the excess tablets. In sum, this standard is an explicit statement of what is otherwise implicit in the conditions of the care coordination arrangements safe harbor: The exchange of remuneration that the offeror knows or should know is likely to be diverted, resold, or used by the recipient for purposes other than the coordination and management of care of a target patient population would not be protected under this safe harbor.

n. Materials and Records

Summary of OIG Proposed Rule: To enhance transparency, we proposed a requirement at proposed paragraph 1001.952(ee)(11) that VBE participants or the VBE make available to the Secretary, upon request, all materials and records sufficient to establish compliance with the conditions of this safe harbor. We solicited comments regarding whether we should require parties to maintain materials and records for a set period of time (e.g., at least 6 years or 10 years).

Summary of Final Rule: We are finalizing, with modifications, the materials and records requirement at paragraph 1001.952(ee)(12). The final rule specifies that, for a period of at least 6 years, the VBE or its VBE participants must maintain records and materials sufficient to establish compliance with the conditions of the safe harbor.

Comment: While we received relatively few comments on this condition, commenters were generally supportive of our proposal. In response to our solicitation regarding whether we should require parties to maintain materials and records for a set period of time, e.g., 6 years or 10 years, multiple commenters were in favor of a 6-year retention period, with one stating that this approach would facilitate alignment with CMS's proposed rule and existing HIPAA requirements.

Response: We are persuaded that a 6-year retention period will promote transparency while aligning with the corresponding requirement in CMS's final rule. We have modified the relevant provisions in the care coordination arrangements, substantial downside financial risk, and full financial safe harbors.

Comment: A commenter questioned the need for a materials and records requirement because maintenance of these materials is already part of any compliance program. The same commenter further questioned whether OIG would bring an investigation or pursue a Federal anti-kickback statute case based solely on the failure to satisfy a documentation requirement rather than the underlying substantive safeguards.

Response: We continue to believe this requirement promotes transparency and gives parties notice that the Secretary may request materials and records Start Printed Page 77752sufficient to demonstrate compliance with the care coordination arrangements safe harbor. We further note that not all parties seeking protection under this safe harbor may have a compliance program or may have developed one that requires maintenance of materials and records for less than 6 years.

Safe harbors offer voluntary protection from liability under the Federal anti-kickback statute for specified arrangements, and no entity or individual is required to fit within a safe harbor. Failure to fit within a safe harbor does not mean a party has violated—or even implicated—the Federal anti-kickback statute, it simply means the party may not look to the safe harbor for protection for that arrangement. For a party to assert safe harbor protection, all of the safe harbor's conditions must be satisfied, including any condition related to materials and records. Further, it would be prudent for any party relying on a safe harbor to protect certain remuneration to document in some form compliance with that safe harbor. Decisions regarding enforcement actions are made based on application of the Federal anti-kickback statute to the specific facts and circumstances presented by an arrangement.

Comment: A commenter stated that OIG should adopt additional requirements related to materials and records, including contemporaneous documentation of, among other things, the VBE's belief that the value-based arrangement is reasonably designed to achieve a value-based purpose, the specific basis for such belief, and the VBE's reasonable anticipation that particular evidence-based, valid outcome measures will advance the coordination and management of care of the target patient population.

Response: We decline to require the specific requested certifications. We intentionally drafted the materials and record requirement broadly to avoid creating a list of all documentation that parties must develop and maintain to comply with this condition of the safe harbor. Moreover, we do not seek to increase administrative burden by prescribing the manner in which parties must document their compliance.

Comment: A health system stated that the proposed care coordination arrangements safe harbor included burdensome reporting requirements and expressed concern about the large volume of paperwork that would go back and forth between ACOs and HHS or CMS.

Response: We disagree with the commenters' assertion that the materials and records requirement is burdensome. To the extent parties wish to avail themselves of the protection of this safe harbor, we believe it is reasonable to require them to maintain documentation that demonstrates their compliance with its terms. With respect to the commenter's concern about the exchange of large volumes of paperwork, we note that parties must only furnish such documentation to the Secretary upon request. We do not anticipate this requirement will necessitate frequent exchange of paperwork between, for example, an ACO and OIG.

Comment: A medical device manufacturer expressed concern that materials and records submitted to the Secretary pursuant to this condition would be subject to the Freedom of Information Act or other disclosure requirements. The manufacturer stated such materials could include proprietary and confidential trade secret information.

Response: OIG is subject to the Freedom of Information Act (FOIA) and the Department's FOIA regulations set forth at 45 CFR part 5. These regulations provide that submitters of records may designate in writing that all or part of the information contained in such records is exempt from disclosure under FOIA exemption 4—covering trade secrets and confidential commercial or financial information—at the time they submit such records or within a reasonable time thereafter. The Department, including OIG, will make reasonable efforts to notify submitters of records if the Department determines that material that submitters have designated as exempt from disclosure under FOIA exemption 4 may have to be disclosed in response to a FOIA request. Under the Department's FOIA regulations, submitters have an opportunity to respond and, if desired, file a court action to prevent disclosure of exempt records.

o. Additional Proposed Safeguards

i. Bona Fide Determination

Summary of OIG Proposed Rule: We considered a condition that would require that, in advance of, or contemporaneous with, the commencement of the applicable value-based arrangement, the VBE's accountable body or responsible person make two bona fide determinations with respect to the value-based arrangement: (i) The value-based arrangement is directly connected to the coordination and management of care for the target patient population; and (ii) the value-based arrangement is commercially reasonable, considering both the arrangement and all value-based arrangements within the VBE.[48]

Summary of Final Rule: We are not finalizing the proposed condition.

Comment: We received relatively few comments on this proposal. Commenters either expressed general statements of support or opposition, with a commenter who opposed the condition asserting that such bona fide determinations would add unnecessary complexity to demonstrating compliance with the safe harbor.

Response: We are not finalizing this requirement. We believe the goal of this proposed safeguard—ensuring appropriate oversight by the VBE's accountable body or responsible person—is achieved through the combination of other conditions included in this safe harbor. We do not believe this condition is needed to prevent fraud or abuse in light of the totality of other conditions we are finalizing in this rule.

ii. Prohibition on Cost-Shifting

Summary of OIG Proposed Rule: We considered, and sought comment on, a condition prohibiting VBEs or VBE participants from billing Federal health care programs, other payors, or individuals for the remuneration exchanged under the value-based arrangement; claiming the value of the remuneration exchanged under the value-based arrangement as a bad debt for payment purposes under a Federal health care program; or otherwise shifting costs to a Federal health care program, other payors, or individuals.

Summary of Final Rule: We are not finalizing the proposed condition.

Comment: We received comments expressing either general support for or opposition to this proposed safeguard. For example, in support of finalizing a cost-shifting prohibition, a commenter stated that a value-based enterprise's decision to offer remuneration in the context of a value-based arrangement should not make other parties financially responsible for such payments. A commenter argued that this proposed safeguard, among others, would be duplicative of other requirements in the safe harbor or be incompatible with or irrelevant in a value-based system. The commenter asserted that the additional safeguards proposed by OIG, including a prohibition on cost-sharing, would create an additional barrier to value-based arrangements rather than breaking down barriers that already exist. Other commenters, including Tribal organizations, advocated against the Start Printed Page 77753inclusion of a cost-shifting prohibition, stating such a safeguard is unnecessary because improvements in care coordination result in overall savings to the Federal Government even if they result in additional referrals or payments by Medicare and Medicaid.

Response: Having considered the comments, we are not finalizing a cost-shifting prohibition. On balance, we conclude that the combination of conditions in the final safe harbor will adequately protect against fraud and abuse risks, and an additional safeguard related to cost-shifting is not necessary in the context of the value-based safe harbors. We did not intend to limit appropriate billing of Federal health care programs or other payors for medically necessary items and services furnished in connection with value-based care. As we explained in the OIG Proposed Rule, we do not want to exclude arrangements from safe harbor protection that involve legitimate shifting of costs that result from achieving care coordination goals or other value-based purposes. As we explained, depending on the arrangement, one might expect to see increases in primary care costs or costs for care furnished in home and community settings paired with reductions in unnecessary hospitalizations, duplicative testing, and emergency room visits; one also might see increases in remote monitoring or care management services. Parties remain responsible for billing Federal health care programs and other payors in accordance with their program rules.

iii. Fair Market Value Requirement and Restriction on Remuneration Tied to the Volume or Value of Referrals

Summary of OIG Proposed Rule: We stated that we were considering including one or both of the following conditions in the care coordination arrangements safe harbor: (i) A fair market value requirement on any remuneration exchanged pursuant to a value-based arrangement; and (ii) a prohibition on VBE participants determining the amount or nature of the remuneration they offer, or the VBE participants to whom they offer such remuneration, in a manner that takes into account the volume or value of referrals or other business generated, including both business or patients that are part of the value-based arrangement and those that are not.

Summary of Final Rule: We are not finalizing either proposed condition in the care coordination arrangements safe harbor.

Comment: While we received some comments expressing support for these conditions, the overwhelming majority of commenters opposed the inclusion of a fair market value requirement or of a prohibition on determining the amount or nature of the remuneration in a manner that takes into account the volume or value of referrals or other business generated. While varying in their rationales, commenters generally asserted that including either safeguard would constrain care coordination efforts. Several commenters supported the condition that would prohibit taking into account the volume or value of referrals but recommended limiting this condition to patients who are not part of the value-based arrangement.

Response: In this final rule, we are not adopting a blanket prohibition on determining the amount or nature of remuneration in a manner that takes into account the volume or value of referrals or other business generated; rather, we are finalizing a narrower prohibition that the offeror of the remuneration cannot take into account the volume or value of, or condition an offer of remuneration on: (i) Referrals of patients that are not part of the value-based arrangement's target patient population; or (ii) business not covered under the value-based arrangement. We stated in the OIG Proposed Rule, and we continue to believe, that fair market value requirements and restrictions that prohibit paying remuneration based on the volume or value of referrals help ensure that protected payments are for legitimate purposes and are not kickbacks. For this reason, we included a safeguard in paragraph 1001.952(ee)(5) that requires, as a condition of safe harbor protection, that the offeror not take into account the volume or value of, or condition remuneration on, business or patients not covered under the value-based arrangement. This approach is consistent with our proposal in paragraph 1001.952(ee)(5), as well as the comments summarized above recommending that we limit any volume or value condition to patients who are not part of the value-based arrangement.

However, we also acknowledge commenters' concerns that legitimate care coordination arrangements may naturally involve referrals across provider settings. In this final rule, therefore, we have not finalized a fair market value requirement or a prohibition on determining the amount or nature of remuneration in a manner that takes into account the volume or value of referrals or other business generated. Instead, we have relied on other program integrity safeguards so that the safe harbor will protect beneficial care coordination arrangements while precluding protection for pay-for-referral schemes that do not serve, and may be contrary to, the goals of coordinated care and the shift to value. These safeguards operate to preclude safe harbor protection for abusive arrangements such as a provider churning patients through care settings to capitalize on a reimbursement scheme or otherwise generate revenue and arrangements where VBE participants offer, or are required to provide, remuneration to receive referrals or to be included in a “preferred provider network” (i.e., “pay-to-play” arrangements).

In response to commenters' concerns that a fair market value requirement would constrain the kinds of care coordination arrangements that we intend to protect, we also are not finalizing a fair market value requirement. However, we have included a commercial reasonableness standard in this safe harbor, which requires that the value-based arrangement be commercially reasonable, considering both the arrangement itself and all value-based arrangements within the VBE. We believe this commercial reasonableness standard, in combination with the other safe harbor conditions, appropriately balances program integrity concerns and the need to facilitate innovative value-based arrangements.

iv. Additional Requirements for Dialysis Providers

Summary of OIG Proposed Rule: In recognition of the unique attributes of the dialysis industry (e.g., market dominance by a limited number of dialysis providers), we expressed concern in the OIG Proposed Rule that participation by dialysis providers in value-based arrangements could present increased fraud and abuse risks. Accordingly, we solicited comments on potential additional safe harbor conditions specific to dialysis providers to ensure that their care coordination arrangements operate to improve the management and care of patients and are not pay-for-referral schemes. We stated that we were considering including conditions such as enhanced monitoring, reporting, or data submission.

Summary of Final Rule: We are not finalizing additional conditions on dialysis providers in the care coordination arrangements safe harbor.

Comment: Commenters generally opposed additional conditions on dialysis providers on the basis of one or both of the following arguments: (i) Start Printed Page 77754ESRD patients would stand to benefit the most from the care coordination arrangements safe harbor (highlighting, for example, the fact that such patients require care across multiple providers); and (ii) OIG's concerns regarding market consolidation were misplaced. Other commenters stated additional safeguards were not necessary for dialysis providers based on data indicating improved quality of care for ESRD patients and reduction of costs. In contrast, an association representing dialysis providers shared OIG's concerns that the unique characteristics of the highly concentrated dialysis market posed unique and significant fraud and abuse risks and encouraged OIG to develop detailed methodologies and metrics to facilitate OIG's monitoring and assessment of market consolidation and possible pay-for-referral schemes, before permitting dialysis providers to use the value-based safe harbors.

Response: While we are mindful of concerns created by a potential decrease in competition among dialysis providers, we are persuaded that the potential benefits of care coordination within the dialysis community outweigh the concerns for a potential decrease in competition. Accordingly, we are not imposing additional requirements specific to dialysis providers in the care coordination arrangements safe harbor.

v. Submission of Information to Department

Summary of OIG Proposed Rule: To promote transparency, we solicited comments in the OIG Proposed Rule on a requirement, specific to the care coordination arrangements safe harbor, for VBEs to submit certain data to the Department that would identify the VBE, VBE participants, and value-based arrangements.

Summary of Final Rule: We are not finalizing this proposed requirement in the care coordination safe harbor.

Comment: Some commenters strongly supported a requirement for VBEs to submit data to the Department or to a publicly available database that would identify the VBE, VBE participants, and value-based arrangements. A commenter supported an optional reporting requirement and appeared to believe that any such data submission would result in the applicable parties' automatically satisfying the safe harbor's writing requirement.

Other commenters urged OIG not to adopt such a requirement and provided various reasons for their position. For example, some commenters stated that the requirement would be unduly burdensome or that the administrative burden would outweigh any program integrity benefit to the Department, while at least one commenter believed the requirement could discourage implementation of value-based arrangements or full compliance with the safe harbor. Another commenter asserted that a requirement for VBEs to submit certain data to the Department would be unnecessary in light of the proposed requirement for parties to make available to the Secretary, upon request, all materials and records sufficient to establish compliance with the conditions of the care coordination arrangements safe harbor. A commenter also expressed concern that the materials and records submitted to the Department could be subject to the Freedom of Information Act and misused by some to gain access to potentially competitive, proprietary information regarding trade secrets, commercial relationships, or value-based arrangement business model information.

Response: To minimize burden, the final care coordination arrangements safe harbor does not require VBEs to submit data to the Department (e.g., data or information relating to the identity the VBE, VBE participants, and value-based arrangements), unless records are requested by the Secretary under the materials and records requirement. OIG will continue to evaluate whether to modify this safe harbor in the future. A better understanding of the structure of VBEs, likely VBE participants, and the form of value-based arrangements could allow for more effective oversight and identification of potential problems. OIG maintains its oversight authorities to conduct audits and evaluations, as well as criminal, civil, and administrative investigations of fraud and misconduct related to Federal health care programs, operations, and beneficiaries. Finally, we remind parties that they must make available to the Secretary, upon request, all materials and records sufficient to establish compliance with the conditions of a safe harbor, a required at paragraph 1001.952(ee)(12).

p. Alternative Regulatory Structure

Summary of OIG Proposed Rule: In the OIG Proposed Rule, we stated that we were considering an alternative regulatory structure and approach to protect care coordination and other value-based arrangements that are not at full financial risk and are not part of a CMS-sponsored model.[49] Under the alternative approach, we stated that we would rely on the personal services and management contracts safe harbor at paragraph 1001.952(d) to allow greater flexibility for innovation as arrangements become more closely aligned with value-based purposes and the parties take on more downside financial risk.

Summary of Final Rule: We are not finalizing the alternative regulatory structure.

Comment: Several commenters opposed this alternative regulatory approach. Some argued that it would not provide as clear a mechanism for obtaining safe harbor protection for value-based arrangements as the proposed value-based safe harbors and that a fair market value requirement would create operational challenges. Another commenter asserted that the alternative approach would not provide sufficient protection against fraud and abuse and encouraged OIG to proceed with the proposed value-based safe harbors. Another commenter expressed support for the alternative regulatory structure to the extent OIG did not adopt the value-based exceptions proposed by CMS.

Response: We thank commenters for their insights. While we believe that the alternative approach of creating tiered protection using the personal services and management contracts safe harbor at paragraph 1001.952(d) also would accomplish the objective of allowing greater flexibility for innovation as the arrangements become more closely aligned with value-based purposes and the parties take on more downside financial risk, we concluded that the value-based framework described in section III.B.1 of this preamble is better calibrated to achieve the objectives of the Regulatory Sprint to Coordinated Care. We elected to finalize the value-based framework because we agree with those commenters who stated that the value-based framework would better protect against fraud and abuse, and we were mindful of those commenters who stated that the alternative approach would create operational challenges.

Comment: A commenter suggested that OIG adopt a safe harbor specific to value-based activities undertaken by an integrated delivery system that includes a non-profit payor and a dedicated physician group that includes physician owners and employees. According to the commenter, the remuneration paid among the system's components presents a low risk of fraud and abuse. Another commenter recommended that OIG adopt a safe harbor for a limited set of arrangements that are pre-approved by OIG to promote care coordination and management, reduce costs, or Start Printed Page 77755facilitate a transition to value-based care. According to the commenter, the safe harbor should be limited to specific value-based purposes delineated by OIG, with certification required for any arrangements that have value-based purposes outside those identified by OIG.

Response: We did not propose these suggested safe harbors, and thus, we are not adopting them in this final rule. Depending on the facts and circumstances, remuneration exchanged pursuant to an arrangement between or among parties in an integrated delivery system could be protected under one of the value-based safe harbors we are finalizing in this final rule. With respect to the comment requesting a safe harbor for arrangements that would be pre-approved by OIG and, in certain instances, subject to certification requirements, we believe that such an approach would be administratively unworkable and overly burdensome. Parties who would like to recommend new safe harbors not finalized in this rulemaking may do so by responding to OIG's annual solicitation regarding the development of new or modified safe harbor regulations.[50]

4. Value-Based Arrangements With Substantial Downside Financial Risk (42 CFR 1001.952(ff))

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(ff) a safe harbor for certain value-based arrangements involving the exchange of remuneration between a VBE that assumes substantial downside financial risk from a payor and a VBE participant that meaningfully shares in the VBE's downside financial risk. We proposed methodologies for determining substantial downside financial risk and what it means to meaningfully share in risk (discussed further at III.B.4.b). We proposed that the safe harbor would protect both monetary and in-kind remuneration and explained that the safe harbor would offer greater flexibility, compared to the care coordination arrangements safe harbor at paragraph 1001.952(ee), in recognition of the VBE's assumption of substantial downside financial risk. We explained in the OIG Proposed Rule that the safe harbor could apply, for example, to a value-based arrangement between an accountable care organization that is a VBE and a network provider to share savings and losses earned or owed by the accountable care organization, or between a VBE that has contracted with a payor for an episodic payment and a hospital and post-acute care provider that would be coordinating care for the patients under the episodic payment. We proposed additional conditions that would apply under the safe harbor, detailed in sections III.B.4.c-q.

Summary of Final Rule: We are finalizing, with modifications, the requirements of this safe harbor at paragraph 1001.952(ff). For a value-based arrangement to be protected under this safe harbor, a VBE must assume substantial downside financial risk from a payor under one of three methodologies, and a VBE participant must assume a meaningful share of the VBE's total risk, which share has been reduced, under the first methodology, from 8 percent in the proposed rule to at least 5 percent in the final rule. The final provisions governing these levels of risk are discussed at section III.B.4.b of this preamble. The safe harbor, as finalized, protects both monetary and in-kind remuneration exchanged pursuant to value-based arrangements between VBEs and VBE participants. Other conditions finalized in the rule are explained in detail at sections III.B.4.c-q. These conditions include: Ineligible entities; inclusion of a 6-month “phase-in” period; requirements that certain remuneration be used to engage in value-based activities and directly connect to certain value-based purposes; writing and record retention requirements; protections for patient choice and clinical decision-making; protections against medically unnecessary services; limits on marketing or patient recruitment; and limits on remuneration that takes into account business or patients outside the value-based arrangement. We are not finalizing the proposed limit on outside funding of protected remuneration. The final safe harbor does not offer protection for arrangements downstream of a VBE participant, such as arrangements between two VBE participants. The final safe harbor permits protection for payments made under the upstream risk-assumption contracts between the VBE and the payor from whom the VBE assumes risk.

The final safe harbor at paragraph 1001.952(ff) may be used by participants in CMS-sponsored models, if safe harbor conditions are met, but it is primarily for other kinds of value-based arrangements, including arrangements in the commercial market. We are separately finalizing a safe harbor at paragraph 1001.952(ii) for CMS-sponsored models (as defined) (see discussion at section III.B.7).

a. General Comments

Comment: While some commenters supported the substantial downside financial risk safe harbor, others expressed concern that the safe harbor is too complicated to be useful.

Response: We appreciate commenters highlighting their concerns. We have revised the substantial downside financial risk safe harbor by streamlining and clarifying its defined terms and conditions, which we believe addresses these concerns. For example, in paragraph 1001.952(ff)(9), we provided additional clarity about the manner in which parties must calculate savings and losses pursuant to methodologies in the definition of “substantial downside financial risk.”

Comment: Multiple commenters urged OIG to align this safe harbor with CMS's exception to the physician self-referral law for value-based arrangements with meaningful downside financial risk in order to facilitate their compliance efforts. Commenters generally favored the risk thresholds proposed in the meaningful downside financial risk exception to the physician self-referral law over the substantial downside financial risk thresholds proposed in OIG's safe harbor.

Response: As with the OIG Proposed Rule, we coordinated with CMS in the development of this final rule and aimed to promote alignment between the two rules where possible. For a general discussion of the rationale for our decision to finalize safe harbors that diverge in certain aspects from the parallel exceptions to the physician self-referral law, we refer readers to section III.A.1 of the preamble to this final rule. With respect to the risk thresholds in CMS's rule, and as discussed further below, we have determined that CMS's methodology is not appropriate for this safe harbor because it focuses on physician risk arrangements and remuneration rather than risk assumed at the VBE level.

b. Definitions

i. Substantial Downside Financial Risk

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(ff)(8)(i) that a VBE would be at substantial downside financial risk if it were subject to risk pursuant to one of four methodologies: (i) Shared savings with a repayment obligation to the payor of at least 40 percent of any shared losses, where loss is determined based upon a comparison of costs to historical expenditures, or to the extent such data is unavailable, evidence-based, comparable expenditures; (ii) a Start Printed Page 77756repayment obligation to the payor under an episodic or bundled payment arrangement of at least 20 percent of any total loss, where loss is determined based upon a comparison of costs to historical expenditures, or to the extent such data is unavailable, evidence-based, comparable expenditures; (iii) a prospectively paid population-based payment for a defined subset of the total cost of care of a target patient population, where such payment is determined based upon a review of historical expenditures, or to the extent such data is unavailable, evidence-based, comparable expenditures; or (iv) a partial capitated payment from the payor for a set of items and services for the target patient population where such capitated payment reflects a discount equal to at least 60 percent of the total expected fee-for-service payments based on historical expenditures or, to the extent such data is unavailable, evidence-based, comparable expenditures of the VBE participants to the value-based arrangements.

Summary of Final Rule: We are finalizing, with modifications, the definition of “substantial downside financial risk” at paragraph 1001.952(ff)(9)(i). Based on comments, we are reducing the risk threshold that parties must assume in order to meet the definition of “substantial downside financial risk” for the first payment methodology (the “Shared Savings and Losses Methodology”) to 30 percent, and we are clarifying that, under this methodology, savings and losses must be calculated by comparing current expenditures for all items and services that are covered by the applicable payor and furnished to the target patient population to a bona fide benchmark designed to approximate the expected total cost of such care. We are clarifying that, for the second methodology, savings and losses must be calculated by comparing current expenditures for all items and services furnished to the target patient population pursuant to a defined clinical episode of care that is covered by the applicable payor to a bona fide benchmark designed to approximate the expected total cost of care for the defined clinical episode of care (the “Episodic Payment Methodology”). We also clarify that, for the Episodic Payment Methodology, the parties must design the clinical episode of care to cover items and services furnished collectively in more than one care setting. We are finalizing a revised partial capitation methodology (the “VBE Partial Capitation Methodology”) pursuant to which the VBE is at substantial downside financial risk if the VBE receives from the payor a prospective, per-patient payment that is: (i) Designed to produce material savings; and (ii) paid on a monthly, quarterly, or annual basis, for a predefined set of items and services furnished to the target patient population designed to approximate the expected total cost of expenditures for the predefined set of items and services. Finally, we are not finalizing the proposed population-based payment methodology because population-based payments may not, in all circumstances, involve downside financial risk. For example, we understand that at least some population-based payments do not put providers at risk of receiving a lower reimbursement amount and instead are used as a cash-flow mechanism to support provider investments in care management tools.

Comment: Although we received some statements of support, the overwhelming majority of commenters on this topic opposed our proposed definition of “substantial downside financial risk.” These commenters generally asserted that our proposed risk thresholds were too high, particularly for the Shared Savings and Losses Methodology and suggested other thresholds, such as 10 percent for the Shared Savings and Losses Methodology. For example, a commenter asserted that our proposed definition of “substantial downside financial risk” was not aligned with the levels of risk assumed under other public and private sector value-based payment initiatives and would serve as a barrier to providers entering into risk-based arrangements. The same commenter suggested that, in setting qualifying risk levels too high, OIG would promulgate safe harbors that would be available only to sophisticated entities that are able to take on high levels of financial risk (e.g., ACOs associated with large health systems). Another commenter stated that our identified risk thresholds were arbitrary and biased against smaller and rural health care providers because such providers likely lack the capital reserves necessary to assume substantial downside financial risk. Other commenters asserted that our view of risk was too narrow by failing to consider the importance of upside financial risk, contractual risk, clinical risk related to treating complex patients, operational risk, and investment risk. At least one commenter urged OIG to include financial risk that is assumed only in the event certain quality benchmarks are not met.

Response: We solicited comments on whether the proposed risk thresholds should be higher or lower, or whether some or all of the methodologies should be modified to better capture the assumption of substantial downside financial risk for items and services furnished to patients or omitted from the final rule entirely. In response to comments and based on further consideration of risk assumption requirements used by Innovation Center models, we are reducing the risk threshold required for the Shared Savings and Losses Methodology from 40 to 30 percent, and we are not including a risk threshold in the VBE Partial Capitation Methodology. We are retaining the 20 percent risk threshold for the Episodic Payment Methodology because we believe the risk threshold proposed and finalized is consistent with the design of episodic payment models in which health care stakeholders currently participate, including Innovation Center models that adopt a similar payment methodology. The risk thresholds in the final rule reasonably reflect substantial downside financial risk under the three methodologies for purposes of this safe harbor. Moreover, we believe risk thresholds are necessary to mitigate traditional fraud and abuse risks associated with payment systems that incorporate, in whole or in part, fee-for-service reimbursement methodologies. Arrangements with lower risk levels would be analyzed for compliance with the anti-kickback statute on a fact-specific basis.

The requirement for the VBE to assume substantial downside financial risk, as opposed to upside financial risk, contractual risk, clinical risk related to treating complex patients, operational risk, or investment risk, or financial risk that is assumed only in the event certain quality benchmarks are not met, is appropriate because we are not persuaded that other types of risk would provide as strong an incentive to change ordering or referring behaviors of providers and suppliers that might still be paid on a fee-for-service basis or otherwise help ensure that safe-harbored arrangements would serve appropriate value-based purposes. We believe the risk levels set in the final rule will be substantial enough to reduce any traditional volume-driven incentives to overutilize or increase program costs by ordering and referring providers and to increase incentives to promote efficient delivery of health care.

This safe harbor does not prevent the VBE from assuming other types of risk from the payor suggested by commenters, e.g., investment risk, contractual risk, and clinical risk related Start Printed Page 77757to treating complex patients, as long as the VBE also assumes substantial downside risk from a payor. However, we note that these other types of risk may result in an exchange of remuneration that implicates the Federal anti-kickback statute and must be separately considered for compliance with the statute.

As discussed in section III.B.4.d below, a VBE and a payor that is a VBE participant can enter into value-based arrangements to protect remuneration under this safe harbor. The types of risk suggested by commenters may be protected by this safe harbor if remuneration exchanged and the associated value-based arrangements meet all applicable conditions.

We appreciate the challenges associated with assuming risk that certain smaller and rural providers may face. The definition of “VBE” affords parties significant flexibility and places no limit on the number of providers that can participate in the VBE and work together to assume substantial downside financial risk. We also highlight that other safe harbors, including the care coordination arrangements safe harbor, at paragraph 1001.952(ee), and the outcomes-based payments safe harbor at paragraph 1001.952(d)(2), may be available for parties that are not ready to assume the level of risk required by this safe harbor.

Comment: Commenters requested clarification on the practical application of the methodology OIG proposed in the “substantial downside financial risk” definition—shared savings with a repayment obligation to the payor of at least 40 percent of any shared losses. For example, a commenter asked whether the shared savings and losses repayment calculation must be applicable to the entire value-based enterprise or if it could be limited to a particular shared savings and losses arrangement between specified VBE participants. Other commenters asked whether the shared savings and losses repayment obligation could be in the form of a forfeited withhold or risk-pool payment, as opposed to an actual repayment of cash. Similarly, another commenter asserted that this methodology should permit the assumption of risk through front-end withholds or dues assessments. Another commenter asked how the shared savings and losses percentage threshold should be calculated if the sharing rate varies based on quality performance and other adjustments.

Response: In response to commenters' request for additional detail, we are clarifying that the Shared Savings and Losses Methodology expressly requires that any losses and savings calculations take into account all items and services that are covered by the applicable payor and furnished to the target patient population, not simply those items and services furnished by specified VBE participants. In other words, the Shared Savings and Losses Methodology is dependent on the items and services covered by the payor and provided to the target patient population, not the specific composition of the VBE and its VBE participants. For example, a VBE could not limit its risk for shared savings and losses under this methodology for certain outpatient items and services by only entering into value-based arrangements with a narrow set of providers that only furnish care in outpatient settings.

In response to comments, we also are clarifying that this methodology permits the assumption of risk prospectively or retrospectively. As long as the VBE meets the requirements of the Shared Savings and Shared Losses Methodology, as finalized, including the requirement that losses and savings be calculated by comparing certain expenditures to a bona fide benchmark designed to approximate the expected total cost of the applicable care, this safe harbor does not prescribe how the payor and VBE structure payments to effectuate the VBE's risk.

Finally, under the Shared Savings and Losses Methodology, financial risk must equal at least 30 percent of loss, where loss is determined by comparing current expenditures for all items and services that are covered by the applicable payor and furnished to the target patient population to a bona fide benchmark designed to approximate the expected total cost of such care. To satisfy the Shared Savings and Losses Methodology, any adjustments based on quality performance or other factors may not bring the financial risk below 30 percent of such loss.

Comment: With respect to the second proposed methodology (the Episodic Payment Methodology), some commenters asked whether such arrangements could be prospective or retrospective. A commenter asserted that we should add another episodic or bundled payment arrangement methodology, similar to this methodology, but that requires any repayment obligation for losses to equal, at a minimum, 20 percent of historical expenditures. The commenter also requested that we clarify that this methodology applies only to an “episode of care” that involves multiple care settings. Finally, a commenter, asserting that it was unaware of any value-based arrangement that can provide quality care at 80 percent of episode costs, recommended we reframe this substantial downside financial risk methodology as “discount-based.”

Response: As an initial matter, we clarify that the Episodic Payment Methodology is with respect to a set of defined items and services related to a clinical condition and, as a result, have replaced the OIG Proposed Rule term “episodic or bundled payment methodology” with “clinical episode of care” in order to better convey this requirement. We also confirm that financial risk assumed pursuant to the Episodic Payment Methodology may be prospective or retrospective.

In response to the commenter that requested we clarify that this methodology applies only to an “episode of care” that involves multiple care settings, we are requiring in paragraph 1001.952(ff)(9)(i)(B)(2) that the parties design the clinical episode of care to cover items and services collectively furnished in more than one care setting. The VBE and the payor can meet this requirement as long as they design the clinical episode of care to cover a collection of items and services that they anticipate will be provided in more than one care setting even if a particular patient in the target patient population undergoing a clinical episode of care ultimately does not receive items and services in more than one care setting. We believe this requirement is consistent with episodic or bundled payment methodologies that involve services delivered by more than one provider and promotes collaboration across providers and suppliers that may otherwise operate independently and deliver care in silos.

To illustrate these clarifications, the Episodic Payment Methodology could include a clinical episode of care for an inpatient procedure for which the payor and the VBE design the clinical episode of care to cover items and services furnished across care settings in a hospital and post-acute care setting, such as a physician clinic or a skilled nursing facility. In contrast, we do not consider a bundled payment to a provider for an episode of care that occurs in a single setting, such as a DRG payment to a hospital for inpatient services, to be an episodic payment for purposes of this rule.

Lastly, we are not finalizing an episodic payment methodology that requires a repayment obligation for losses equal to, at a minimum, 20 percent of historical expenditures or reframing the Episodic Payment Methodology as “discount based,” as suggested by a commenter. We clarify that the Episodic Payment Methodology, Start Printed Page 77758as finalized, does not require the payor to discount the cost of items and services included in the defined clinical episode of care by 20 percent. Rather, the VBE must assume risk for at least 20 percent of any loss realized pursuant to a defined clinical episode of care, with losses (and savings) calculated by comparing current expenditures for all items and services included in the defined clinical episode of care and furnished to the target patient population to a bona fide benchmark designed to approximate the expected total cost of such care.

Comment: Commenters generally expressed confusion regarding the application of the fourth prong included in the proposed “substantial downside financial risk” definition—a partial capitation payment that reflects a discount equal to at least 60 percent of the total expected fee-for-service payments. For example, a commenter asked why this methodology includes a discount because capitation itself places a physician at risk through a per-member, per-month payment. Another commenter suggested that we revise this prong to encompass capitated payments for a limited set of services, e.g., primary care. Some commenters asserted that the 60 percent discount level was not economically feasible and suggested that OIG lower the discount level.

Response: In response to comments, we are finalizing the VBE Partial Capitation Methodology, with modifications. We are removing the discount percentage requirement in recognition that the partial capitation payment, as set forth in paragraph 1001.952(ff)(9)(i)(C), itself, constitutes the assumption of substantial downside financial risk. In keeping with the intent of the prior discount percentage requirement, we also are requiring that this methodology be designed to result in material savings. In other words, the VBE Partial Capitation Methodology is designed to achieve cost efficiencies by incentivizing better care coordination that benefits patients and the health care delivery system by placing the VBE at substantial downside financial risk.

We are not defining material savings in regulatory text to provide parties flexibilities in designing partial capitation payments. There are a number of ways that parties might design a partial capitation payment consistent with this methodology to generate material savings. For example, the parties may design a capitation payment with utilization targets that are intended to lower costs versus historical utilization, or the parties may use other methodologies that incentivize the VBE to operate more efficiently and lower costs. We recognize that, as the VBE and its VBE participants become more efficient, the opportunity to achieve materials savings, as that term is commonly understood, may become more difficult. As a VBE successfully reduces costs in one year, it becomes harder to further reduce costs in subsequent years. Under this methodology, and because we are not defining “material savings,” parties have flexibility to design partial capitation payment rates to account for such issues. For example, the parties could use national or regional utilization data in designing the partial capitation payment to appropriately adjust the payment rates to account for the efficiency of the VBE.

Additionally, given the complexity of establishing a partial capitation payment, payors, from whom the VBE assumes risk under this methodology, will have a significant role in their design. Payors have experience and expertise in designing actuarial models to assess and project costs for their plans and establish rates. Capitation payments designed consistent with generally accepted actuarial principles can, for example, ensure that a partial capitation payment: (i) Captures all reasonable, appropriate, and attainable costs; (ii) is sufficient, based on past and anticipated service utilization by the target patient population; (iii) reflects cost trends; (iv) is risk adjusted as appropriate; and (iv) provides documentation and transparency on how the rate was developed. While not an exhaustive list, these factors would be relevant in assessing whether a capitation payment is designed to generate material savings.

We also are clarifying the form in which the VBE must receive a partial capitation payment. Specifically, we are requiring that the VBE receive from a payor a prospective, per-patient payment, paid on a monthly, quarterly, or annual basis. This methodology would not include fee-for-service payments under the Medicare inpatient prospective payment system or other fee-for-service payments under Medicare Parts A or B. The per-patient payment must be for a predefined set of items and services furnished to the target patient population, designed to approximate the expected total cost of expenditures for the predefined set of items and services. As noted above, this payment must be intended to result in material savings.

We emphasize that, under the VBE Partial Capitation Payment Methodology, the VBE is assuming risk for a predefined set of items or services that are less than all of the items and services covered by the payor, in contrast to the full financial risk safe harbor, which requires the VBE to assume full financial risk for all items and services from a payor. For example, a partial capitation payment under this methodology may cover primary care services only for a target patient population but not inpatient services, prescription drugs, or other items and services covered by the payor.

While we are not specifying a percentage or scope of items and services that must be reimbursed on a capitated basis, the requirement that partial capitation payments be intended to result in material savings achieves a similar purpose. A VBE assuming substantial downside risk is afforded flexibility under this safe harbor because, as explained previously, this level of risk mitigates the traditional risks of fraud and abuse associated with fee-for-service payments. The effectiveness of that mitigation is directly connected to the incentive associated with substantial downside risk methodologies; increased risk means the VBE has a greater incentive to reduce costs and improve outcomes for patients. In the context of the VBE Partial Capitation Methodology, the substantial downside risk is partly dependent on the scope of items and services covered by the partial capitation payment. For example, a VBE that receives a partial capitation payment for inpatient services associated with one DRG has less incentive than a VBE that receives a partial capitation payment for all inpatient services.

We recognize that payors are unlikely to contract with a VBE under a partial capitation payment for a narrow set of items or services. However, ensuring that VBEs have the appropriate level of incentives by assuming risk is a key safeguard in this safe harbor and is the reason why we are finalizing the requirement that partial capitation payments be designed to generate material savings. We note that the scope of services is just one factor for determining whether the capitation payment was designed to generate material savings. For example, a VBE and a payor could design a partial capitation payment that meets this methodology if the VBE receives capitation payments for a narrow set of services that are typically high cost as long as the capitation payments for that limited set of high-cost items or services were designed to generate material savings.

We also note that this safe harbor conditions protection on the VBE assuming substantial downside Start Printed Page 77759financial risk from the payor for the predefined items and services. It does not require the VBE to assume other functions from the payor, such as enrollment, grievance and appeals, solvency standards, and other administrative functions performed by payors.

Comment: In response to our solicitation of comments regarding alternative means to calculate savings and losses (and in particular, how best to establish a baseline that appropriately assesses the VBE's financial performance), we received a number of comments recommending modifications to the proposed requirement that, for each methodology under the “substantial downside financial risk” definition, parties would need to determine any savings or losses realized based upon a review of historical expenditures, or to the extent such data was unavailable, evidence-based, comparable expenditures. For example, several commenters questioned our reliance on historical expenditures as a reliable datapoint, with several expressing concern that such a standard may not be adequately risk-adjusted or an accurate benchmark to the extent parties are providing new treatments, items, and services (representing the latest advances in technology, for example) that exceed the cost of treatment in benchmark years. At least two commenters recommended that we add “projected spending” as a method to compare costs, with one asserting that historical expenditures may not be appropriately risk adjusted. A commenter also suggested that we allow parties to adjust payments as needed to cover the costs of new treatment options.

Response: We are no longer requiring that parties rely on historical expenditures or evidence-based, comparable expenditures to determine a benchmark used in calculating any losses or savings realized. We recognize, as highlighted by commenters, that historical expenditures could be volatile or otherwise result in an inaccurate benchmark, particularly for smaller entities, and that other data, such as national or regional data, may be appropriate factors that can be used for setting an accurate benchmark. Consequently, we are revising this requirement to provide that, for two of the methodologies finalized in the “substantial downside financial risk” definition—the Shared Savings and Losses Methodology and the Episodic Payment Methodology—parties must calculate any losses or savings based upon a bona fide benchmark, i.e., a legitimate benchmark, designed to approximate the cost of care.[51] Specifically, for the Shared Savings and Shared Losses Methodology, we require that the parties calculate losses by comparing current expenditures for all items and services that are covered by the applicable payor and furnished to the target patient population to a bona fide benchmark designed to approximate the expected total cost of such care. Similarly, for the Episodic Payment Methodology, we require that parties calculate losses by comparing current expenditures for all items and services that are covered by the applicable payor, furnished to the target patient population, and relate to a defined clinical episode of care to a bona fide benchmark designed to approximate the expected total cost of care for the defined clinical episode of care.

This revision has two aims. First, we seek to protect against the selection of benchmarks that artificially create savings or inappropriately insulate any VBE participant from losses. This is based on our intent to ensure that parties are truly assuming downside financial risk. Second, we seek to provide parties with the flexibility necessary to establish a baseline tailored to the contract or value-based arrangement between the VBE and the payor. Thus, under these revised methodologies, a bona fide benchmark does not need to be based on historical expenditures or, to the extent such data is unavailable, evidence-based, comparable expenditures, as proposed in the OIG Proposed Rule. With this revised standard, a bona fide benchmark may be appropriately adjusted, e.g., through a prospective or retrospective risk-adjustment to account for outlier health care expenditures, provided the methodology for such adjustment is established in advance. We emphasize that any such adjustment must be consistent with the requirement that the bona fide benchmark be designed to approximate the expected total cost of care.

We note that there are several ways that parties may demonstrate that a benchmark is bona fide. Parties seeking examples of bona fide benchmarks may look to Innovation Center models, the Medicare Shared Savings Program, Medicaid programs, or private payors that have adopted and validated benchmarks for their participants in similar risk-based models. Bona fide benchmarks may incorporate concepts such as risk adjustments, cost projections (including those related to new treatments), and peer comparisons, as applicable. Given the complexity of establishing a benchmark, we anticipate that payors from whom the VBE assumes risk will be involved in their design. Similar to the design of a partial capitation payment, payors have relevant experience and expertise in designing actuarial models to assess and project costs for their plans that will support the development of bona fide benchmarks. Benchmarks that are validated or designed consistent with generally accepted actuarial principles will likely be bona fide. Parties will need to assess and ensure the validity and appropriateness of the benchmark based on the specific facts and circumstances of their VBE, the value-based arrangement, the scope of the items and services covered, and the target patient population.

Comment: Several commenters requested that OIG include a cap or stop-loss threshold in the substantial downside financial risk safe harbor that would limit the amount of loss incurred by the VBE. For example, specific to the clinical episode of care methodology, a commenter recommended that we limit potential losses to 20 percent of historical expenditures; specific to the shared savings methodology, a commenter encouraged protection for arrangements that include stop-loss thresholds for shared losses set at a certain percentage of historical benchmark costs, akin to the Medicare Shared Savings Program.

Alternatively, other commenters urged OIG to simply clarify that reinsurance arrangements, or other like arrangements to protect against catastrophic losses, would not fall outside of our proposed definition of “substantial downside financial risk.” According to these commenters, reinsurance arrangements are critical to encouraging the assumption of downside financial risk.

Response: Given the inherent differences in target patient populations, the sophistication of parties participating in value-based arrangements, and varying risk methodologies that parties may adopt, we decline to include a specific cap, stop-loss threshold, or reinsurance threshold. This provides parties Start Printed Page 77760flexibility to adopt various risk methodologies that still satisfy the safe harbor's definition of “substantial downside financial risk.” Parties entering into a contract or a value-based arrangement to assume substantial downside financial risk should have the flexibility to determine the appropriate cap, stop-loss, or reinsurance threshold, if any, and we clarify that neither the safe harbor's conditions nor the definition of “substantial downside financial risk” precludes parties from entering into reinsurance arrangements or other like arrangements to protect against catastrophic losses. Nevertheless, we caution that such arrangements should not be used as a vehicle to materially shift the substantial downside financial risk a VBE is otherwise required to assume pursuant to this safe harbor.

Comment: Several commenters supported OIG's alternate proposal to adopt risk levels more closely aligned with advanced APMs and other payor advanced APMs, as both terms are defined at 42 CFR 414.1305, or requested that the definition of “substantial downside financial risk” include advanced APMs. In addition, a commenter noted that the risk levels proposed by OIG exceeded those required in advanced APMs.

Response: We are not revising the risk levels set forth in the “substantial downside financial risk” definition to align with those of advanced APMs and other payor advanced APMs, as both terms are defined at 42 CFR 414.1305. Different risk thresholds between this safe harbor and advanced APMs and other payor advanced APMs are appropriate in light of the differing objectives between this rulemaking and the Quality Payment Program, the Medicare payment program that relies on the defined terms advanced APMs and other payor advanced APMs. For example, the advanced APM track of the Quality Payment Program is specific to eligible clinicians and offers a potential five percent Medicare bonus payment, among other benefits. By contrast, this safe harbor protects arrangements of a wide variety of industry stakeholders beyond eligible clinicians from liability under a criminal statute and sets out the conditions under which that protection is available.

It is possible that participants in an advanced APM might assume risk at levels that meet the requirements of this safe harbor. Further, some advanced APM participants may be eligible for safe harbor protection under the new CMS-sponsored model arrangements safe harbor found at paragraph 1001.952(ii).

Comment: Multiple commenters requested that we opine on whether certain arrangements would meet our proposed definition of “substantial downside financial risk.” For example, at least two commenters requested that we address whether a bonus pool or gainsharing arrangement, tied to the achievement of certain outcome measures, could potentially meet our definition of “substantial downside financial risk.” The commenters argued in favor of such an interpretation, asserting that the potential to earn a bonus payment constitutes downside risk to the extent the bonus is (i) otherwise considered part of the recipient's aggregate compensation, and (ii) withheld if outcome measures are not met.

Response: The definition of “substantial downside financial risk” requires, among other criteria, that the VBE assume the potential for realizing losses. This definition would permit parties to design a two-sided risk methodology that would place the VBE at downside financial risk and upside financial risk. In other words, the definition requires, at a minimum, the VBE to assume substantial downside financial risk, but does not preclude the parties from including other risk methodologies, so long as all other conditions of the safe harbor are met. For example, arrangements that include a bonus pool or gainsharing, along with the VBE assuming the required substantial downside financial risk, may be protected by this safe harbor. However, a risk methodology that only includes upside risk would not meet this requirement.

ii. Meaningful Share

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(ff)(2) that this safe harbor would protect remuneration exchanged between a VBE and a VBE participant if the VBE participant meaningfully shares in the VBE's substantial downside financial risk for providing or arranging for items and services for the target patient population. We proposed that a VBE participant would meaningfully share in the VBE's risk if the VBE participant met one of the following three methodologies: (i) A risk-sharing payment pursuant to which the VBE participant is at risk for 8 percent of the amount for which the VBE is at risk under its agreement with the applicable payor (e.g., an 8-percent withhold, recoupment payment, or shared losses payment); (ii) a partial or full capitated payment or similar payment methodology (excluding certain enumerated reimbursement methodologies); or (iii) in the case of a VBE participant that is a physician, a payment that meets the requirements of the physician self-referral law's regulatory exception for value-based arrangements with meaningful downside financial risk at 42 CFR 411.357(aa)(2).

Summary of Final Rule: We are finalizing, with modifications, at paragraph 1001.952(ff)(3) a requirement for the VBE participant to be at risk for a meaningful share of the VBE's substantial downside financial risk for providing or arranging for the provision of items and services for the target patient population. We are finalizing, with modifications, the proposed definition of “meaningful share” at paragraph 1001.952(ff)(9)(ii). Specifically, based on comments we are: (i) Revising the first methodology of the “meaningful share” definition (the “Risk-Sharing Payment Methodology”) to clarify that any risk assumed by a VBE participant pursuant to this methodology must be two-sided risk; (ii) lowering the risk threshold for the Risk-Sharing Payment Methodology from 8 percent to at least 5 percent of the losses and savings, as applicable, realized by the VBE pursuant to its assumption of substantial downside financial risk; (iii) revising the second methodology of the “meaningful share” definition to apply to prospective, per-patient payments for a predefined set of items and services furnished to the target patient population (the “Meaningful Share Partial Capitation Methodology”); and (iv) not finalizing the proposed methodology applicable to physician payments that meet the requirements of the physician self-referral law's regulatory exception for value-based arrangements with meaningful downside financial risk at 42 CFR 411.357(aa)(2) (the “CMS Exception Methodology”).

Comment: While we received comments in favor of our proposed requirement for the VBE participant to assume a meaningful share of the VBE's substantial downside financial risk, many advocated against it, suggesting no or optional risk requirements for VBE participants downstream from the VBE assuming substantial downside financial risk. These commenters highlighted varying Innovation Center models that do not require the downstream assumption of risk.

Response: We are finalizing a requirement for VBE participants, other than the payor from which the VBE is assuming risk, to be at risk for a meaningful share of the VBE's substantial downside financial risk pursuant to a value-based arrangement Start Printed Page 77761with the VBE. This safe harbor is not chiefly designed for Innovation Center models, which may not have downside financial risk, and which may fit more readily in the new safe harbor at paragraph 1001.952(ii) for CMS-sponsored models. The requirement to assume a meaningful share of the VBE's risk is foundational to the structure of the safe harbor, which does not include certain established safeguards, such as a fair market value requirement, designed to mitigate risks inherent to a traditional fee-for-service payment methodology, nor additional safeguards present in the care coordination arrangements safe harbor, such as a bar on monetary compensation or a contribution requirement, that protect against payment for referral schemes. The requirement to assume a meaningful share of the VBE's risk helps ensure that VBE participants ordering or arranging for items and services for the target patient population share in the VBE's value-based purposes and cost-reduction goals.

The payor from which the VBE is assuming substantial downside financial risk is exempt from the requirement to meaningfully share in the VBE's substantial downside financial risk in paragraph 1001.952(ff)(3). As discussed in greater detail in section III.B.4.d, this carve-out applies to those payors from which VBEs are assuming risk that elect to also be a VBE participant and enter into a value-based arrangement with a VBE. In such circumstances, the payor, as a VBE participant, need not share again in the risk that the VBE assumed from it in the value-based arrangement.

Comment: While at least one commenter supported the risk threshold in the first proposed methodology for meaningfully sharing in the VBE's risk (a risk-sharing payment pursuant to which the VBE participant is at risk for 8 percent of the amount for which the VBE is at risk under its agreement with the applicable payor), the majority of commenters advocated that we lower the risk threshold, such as to 5 percent. Commenters highlighted varying Innovation Center models that impose lower risk requirements or rely on a broader risk framework. Other commenters suggested that this methodology should be expanded to encompass other types of risk, for example, operational or contractual risk. Commenters suggested that a more expansive methodology would encourage a greater number of providers to take on downside risk arrangements while still effectively deterring potential fraudulent behavior. A commenter recommended that OIG revise the first proposed methodology for meaningfully sharing in the VBE's risk to state that the VBE participant is at risk for “at least 8 percent” of the VBE's risk to allow for other arrangements that involve greater downside risk.

Response: We are revising the Risk-Sharing Payment Methodology to reduce the required minimum risk threshold from 8 percent to at least 5 percent and requiring two-sided risk (e.g., savings and losses). We believe this level of risk is appropriate to ensure VBE participants share the VBE's goal of cost reduction and to reduce fraud and abuse risks while making this safe harbor more accessible to individuals and entities that want to exchange remuneration with the VBE pursuant to this safe harbor. As finalized, this methodology aligns with the Shared Savings and Losses Methodology in the definition of “substantial downside financial risk.” This modification will provide VBE and VBE participants additional flexibilities to align risk-sharing methodologies and protect similar exchanges of remuneration (e.g., savings and losses) in value-based arrangements.

We are not permitting VBE participants to meet the Risk-Sharing Payment Methodology by assuming other types of risk, such as operational or contractual risk. We are concerned these types of risk would not adequately align a VBE participant's financial incentives with that of the VBE's cost-reduction goals resulting from the VBE's assumption of substantial downside financial risk.

Comment: Some commenters opposed pegging the first risk-sharing payment methodology of the “meaningful share” definition to the total risk assumed by the VBE. For example, a commenter noted that VBE participants, and in particular smaller providers, are unlikely to accept risk for 8 percent of the total amount for which the VBE is at risk from the payor. The commenter urged OIG to revise its meaningfully share standard to require that the VBE participant assume risk only for its own costs and suggested 20 percent as a potential risk assumption threshold.

Response: As finalized, the Risk-Sharing Payment Methodology continues to require that the VBE participant share in a certain percentage of the VBE's total risk. However, in response to comments, we are finalizing a lower risk threshold of 5 percent for this methodology and clarifying that this methodology requires two-sided risk.

We also clarify that, to the extent a VBE realizes catastrophic losses, triggering any reinsurance or other like arrangement into which the VBE has entered, the VBE participant would calculate any amount owed to the VBE pursuant to this methodology based on the VBE's losses, as adjusted by the reinsurance or other like arrangement.

Comment: A commenter requested that OIG define “partial capitation arrangements” in the context of the second proposed methodology for meaningfully sharing in the VBE's risk—a partial or full capitation payment or similar payment methodology, excluding the Medicare inpatient prospective payment system or other like payment methodology. The commenter also asked whether there is a minimum amount that would qualify as partial capitation.

Response: In response to comments, we are finalizing the Meaningful Share Partial Capitation Methodology with revisions that, for clarity, more fully describe the permissible capitation methodology. Pursuant to this revised methodology, a VBE participant must: (i) Receive from the VBE a prospective, per-patient payment on a monthly, quarterly, or annual basis for a predefined set of items and services furnished to the target patient population by the VBE participant designed to approximate the expected total cost of those expenditures for the predefined items or services; and (ii) not separately claim payment from the payor for the predefined set of items and services covered by the partial capitated payment. Consistent with our stated goal in the OIG Proposed Rule, we believe this methodology ensures that those VBE participants assuming a meaningful share of the VBE's risk pursuant to the Meaningful Share Partial Capitation Methodology do so in a manner that is aligned with the payor's cost-reduction goals.

For the same reasons we are not specifying the percentage or scope of items and services that must be included in the VBE Partial Capitation Methodology, we are not specifying a minimum amount of items and services that must be covered to meet the Meaningful Share Partial Capitation Methodology. Likewise, we note that this methodology would not include fee-for-service payments under the Medicare inpatient prospective payment system or other fee-for-service payments under Medicare Parts A or B. Payments must be made on a monthly, quarterly, or annual basis to satisfy this methodology.

A VBE participant may be at risk through this methodology not only where the VBE is at substantial downside financial risk through the VBE Partial Capitation Methodology but Start Printed Page 77762also any other substantial downside financial risk methodology. For example, VBE participants could be at risk through the Meaningful Share Partial Capitation Methodology, and the VBE could assume substantial downside financial risk from a payor through the Episodic Payment Methodology.

Comment: We received varying comments on the third proposed methodology for meaningfully sharing in the VBE's risk: Physician VBE participants would be deemed to meaningfully share in the VBE's risk if they meet the definition of “meaningful downside financial risk” under the physician self-referral law at 42 CFR 411.357(aa)(2). Some commenters either opposed this provision altogether or advocated for a lower threshold than the 25 percent threshold for sharing in the costs of the remuneration exchanged under a value-based arrangement, with a few commenters suggesting between 5 and 15 percent. On the other hand, some commenters supported this provision stating, for example, that it facilitated alignment across OIG's and CMS's rules. Another commenter requested that OIG amend this provision to apply more broadly to other VBE participants and not just physicians.

Response: We are not finalizing the third proposed methodology (the CMS Exception Methodology). Pursuant to the final meaningful downside financial risk exception at 42 CFR 411.357(aa)(2), a physician must be at “meaningful downside financial risk” for failure to achieve the value-based purpose(s) of the value-based enterprise during the entire duration of the value-based arrangement. A physician assumes “meaningful downside financial risk” if the physician is responsible to repay or forgo no less than 10 percent of the total value of the remuneration the physician receives (or is entitled to receive) under the value-based arrangement in the event of the failure to achieve the value-based purpose(s) of the value-based enterprise.

Upon further consideration of the varied comments we received regarding the CMS Exception Methodology, we believe the CMS Exception Methodology does not fit within the framework of the substantial downside financial risk safe harbor, which is different from the meaningful downside financial risk exception CMS is finalizing. Unlike CMS's meaningful downside financial risk exception, OIG's safe harbor requires the VBE participant to assume risk for a meaningful share of the VBE's substantial downside financial risk. Risk under the CMS Exception Methodology is tied to a percentage of the total value of the remuneration the physician receives under the value-based arrangement rather than a percentage of the risk the VBE assumes from the payor. The CMS Exception Methodology does not require the physician to meaningfully share in financial risk assumed by the VBE, a requirement of the safe harbor.

Comment: A commenter expressed concern that the differing standards for the assumption of downside risk in the safe harbor (i.e., “substantial downside financial risk” and “meaningfully sharing in the VBE's substantial downside financial risk”) would confuse parties to value-based arrangements and discourage participation. The commenter appeared to suggest that OIG adopt a single, low risk threshold in the substantial downside financial risk safe harbor.

Response: While we appreciate the commenter's input, we respectfully disagree. It is appropriate to have differing risk assumption requirements for the VBE and the VBE participant. The VBE is contracting or entering into a value-based arrangement with a payor to assume substantial downside financial risk, most likely for items and services provided across care settings and by multiple VBE participants. Conversely, the VBE participant contracting with the VBE is not only one step removed from the payor contract, but its performance of value-based activities is likely to have a narrower focus, specific to the items and services it furnishes to the target patient population. As such, we believe a lower risk assumption threshold is appropriate for the VBE participant.

Comment: A commenter recommended that “advanced APMs” and “other payer APMs,” as both terms are defined at 42 CFR 414.1305, should be expressly included in the safe harbor and automatically qualify as assuming a meaningful share of the VBE's substantial downside financial risk. Another commenter suggested that we adopt the “more than nominal risk” standard for advanced APMs instead of the proposed “meaningfully share” standard.

Response: Because this safe harbor has broader applicability to the health care industry than the regulations in which the defined terms referenced by the commenter are used (which apply to a Medicare payment program for physicians), we decline to revise the definition of “meaningful share” to encompass the potentially lower risk thresholds set forth in the “advanced APM” and “other payer APM” definitions as set forth in 42 CFR 414.1305 or adopt, in lieu of “meaningful share,” the “more than nominal risk” standard. Thus, participants in advanced APMs and other payer APMs will not automatically qualify as having a “meaningful share” of the VBE's substantial downside financial risk and must meet the risk thresholds we are finalizing.

Comment: A commenter asked whether a VBE participant could join an existing value-based arrangement between a VBE and one or more VBE participants and satisfy the safe harbor requirement to assume a meaningful share of the VBE's risk by sharing in such risk only for the duration of its participation in the value-based arrangement, as opposed to the duration of the value-based arrangement.

Response: If the VBE has already entered into a value-based arrangement with one or more VBE participants for purposes of this safe harbor, a party may join the existing value-based arrangement as a VBE participant provided all safe harbor requirements are met, including amending the signed writing to include a description of the manner in which the new VBE participant will have a meaningful share of the VBE's substantial downside financial risk.

We note that, other than during the 6-month phase-in period that is available under this safe harbor, the VBE participant must be at risk for a meaningful share of the VBE's risk throughout its participation in the value-based arrangement. This requirement does not apply if the VBE participant is the payor from which the VBE is assuming risk.

Comment: A commenter asserted that OIG should add language to the safe harbor stating that VBE participants' meaningful share of risk can be through front-end withholds or dues assessments and need not be through back-end repayment.

Response: For the risk methodologies under the definition of “meaningful share,” we did not propose, and the final rule does not prescribe, how the parties to a value-based arrangement may effectuate the VBE participant's risk, and as such, the parties could effectuate risk prospectively or retrospectively.

iii. Other Defined Terms

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(ff)(8)(ii) that the terms “coordination and management of care,” “target patient population,” “value-based activity,” “value-based arrangement,” “value-based enterprise,” “value-based purpose,” and “VBE participant” would Start Printed Page 77763have the meaning set forth in proposed paragraph 1001.952(ee).

Summary of Final Rule: We are finalizing, with modifications, our proposed use of the value-based terminology at paragraph 1001.952(ff)(9)(iii). We no longer use the term “coordination and management of care” in this safe harbor. Additionally, because we are finalizing at paragraph 1001.952(ff)(1) a requirement making certain entities ineligible to use the safe harbor, we adopt for this safe harbor the definition of “manufacturer of a device or medical supply” at paragraph 1001.952(ee)(12).

Comment: A few commenters requested that OIG define the term “payor,” with a commenter specifically suggesting that we define such term to include a managed care organization that has a contract with Medicare, Medicaid, or another Federal health care program that is subject to 1128B of the Act. A commenter also asked OIG to define the term “used” in relation to the requirement that remuneration be used primarily to engage in value-based activities that are directly connected to the items and services for which the VBE is at substantial downside financial risk and that are set forth in writing. The commenter also asked OIG to define the term “offeror's cost” in relation to the requirement that the writing state all material terms of the value-based arrangement, including the offeror's cost of the remuneration.

Response: We are not defining the term “payor.” The term has its commonsense meaning of a payor of health care items and services on behalf of patients. We confirm that, for purposes of this safe harbor, such term would include managed care organizations that have contracted with Medicare, Medicaid, and other Federal health care programs. We also are not defining the term “used” in regulatory text but use the term consistent with its commonsense, well-understood meaning (e.g., to put into action or service, utilize). Further, we decline to define the term “offeror's costs” because, as explained at section III.B.4.k, we are not finalizing the requirement that the writing include the offeror's costs.

c. Entities Ineligible for Safe Harbor Protection

Summary of OIG Proposed Rule: We proposed in proposed paragraph 1001.952(ee) to limit the entities that could qualify as VBE participants, which would have the effect of limiting availability of the value-based safe harbors, including the substantial downside financial risk safe harbor at proposed paragraph 1001.952(ff), for those ineligible entities. The proposed definition of “VBE participant” is summarized more fully in section III.B.2.e of this preamble.

Summary of OIG Final Rule: As explained at section III.B.2.e, we are not finalizing our proposal in proposed paragraph 1001.952(ee) to limit the entities that could qualify as VBE participants. Rather, in the final rule we are identifying parties ineligible to rely on safe harbors in the safe harbors themselves. For the substantial downside financial risk safe harbor, we are finalizing a requirement that remuneration is not exchanged by any of the following entities: (i) Pharmaceutical manufacturers, wholesalers, and distributors; (ii) PBMs; (iii) laboratory companies; (iv) pharmacies that primarily compound drugs or primarily dispense compounded drugs; (v) manufacturers of devices or medical supplies; (vi) entities or individuals that manufacture, sell, or rent DMEPOS (other than a pharmacy or a physician, provider, or other entity that primarily furnishes services, all of whom remain eligible); and (vii) medical device distributors or wholesalers that are not otherwise manufacturers of devices or medical supplies.

Summaries of comments, our responses, and policy decisions regarding this issue can be found in the discussion of VBE participants in section III.B.2.e of this preamble.

d. VBE's Assumption of Risk From a Payor

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(ff)(1) that the VBE must assume substantial downside financial risk from a payor and that the VBE could assume such risk directly from a payor or through a VBE participant acting on behalf of the VBE (i.e., as an agent of, and accountable to, the VBE).

Summary of Final Rule: We are finalizing, with modifications, this requirement at paragraph 1001.952(ff)(2). First, we are modifying the safe harbor to provide two options to VBEs assuming substantial downside financial risk from a payor. A VBE can assume risk from the payor through an arrangement that meets the definition of “value-based arrangement,” or a VBE can assume risk from a payor through a contract that places the VBE at substantial downside financial risk. The first option provides protection for the remuneration exchanged between the payor and the VBE, if all safe harbor requirements are met. To effectuate this, the payor must be a VBE participant and the VBE must assume risk from the payor through a value-based arrangement. Under the second option, if a payor does not wish to be part of the VBE, the VBE can assume substantial downside financial risk from the payor through a written contract. Under this option, the contract that places the VBE at risk is not a value-based arrangement and the safe harbor would not protect remuneration exchanged pursuant to it.

Second, we are modifying the risk assumption requirement to clarify that the payor cannot act on behalf of the VBE; the VBE must be a distinct legal entity or represented by a VBE participant, other than a payor, that acts on the VBE's behalf.

Comment: Some commenters opposed the proposed requirement that a VBE assume risk from a payor, asserting payor involvement should not be a prerequisite to safe harbor protection. For example, a post-acute-care provider asserted that, where the financial risk shared between providers is significant, the safe harbor should be available regardless of whether a payor is directly involved.

Response: We are finalizing the requirement that the VBE assume substantial downside financial risk from a payor because we view it as a critical safeguard against the potential for fraud and abuse. Payors are ultimately responsible for the cost of the items and services furnished to a target patient population, which informs our decision to require that they be party to the risk arrangement that serves as the foundation for this safe harbor. Moreover, the payor serves as an entity with both a holistic view of, and a financial interest in reducing, total expenditures for the target patient population, which we believe mitigates the risks traditionally associated with fee-for-service systems, such as overutilization or inappropriate utilization.

Consistent with our emphasis in the OIG Proposed Rule that parties assuming substantial downside financial risk have more flexibility, we have modified the safe harbor so that payors and VBEs have two options for entering into the risk arrangement—entering into either a value-based arrangement or a written contract for the VBE to assume risk from the payor.

Under the first option for risk arrangements, payors must be a VBE participant, which is permitted under our final definition of “VBE participant.” The payor (as a VBE participant) and the VBE can enter into a value-based arrangement for the VBE to assume substantial downside Start Printed Page 77764financial risk. As we proposed and are finalizing in this rule, the introductory paragraph to 1001.952(ff) protects remuneration exchanged between a VBE and a VBE participant pursuant to a value-based arrangement. Therefore, remuneration exchanged pursuant to a payor's and a VBE's value-based arrangement could be protected by this safe harbor, including remuneration exchanged to implement a substantial downside financial risk methodology (e.g., shared savings and losses), if the value-based arrangement meets all applicable conditions of the safe harbor. We do not believe this option would pose an unreasonable burden on the payor because a value-based arrangement requires only the provision of at least one value-based activity for a target patient population, and the payor and VBE already must enter into an agreement to effectuate the VBE's assumption of risk for the target patient population. We believe any burden would be outweighed by the benefits of safe harbor protection.

Under the second option, payors that do not wish to be part of the VBE may choose to enter into a written contract for purposes of the VBE assuming substantial downside financial risk. Under this option, payors would not be VBE participants, the written contract between the payor and the VBE would not be a value-based arrangement, and the payor would not be subject to the other conditions of the safe harbor. In such circumstances, these contracts must only meet the condition at paragraph 1001.952(ff)(2), i.e., they must evidence the VBE's assumption of substantial downside financial risk from the payor. Remuneration exchanged pursuant to a risk assumption contract that is not a value-based arrangement is not protected by this safe harbor. The VBE and the payor would need to assess any potential remuneration exchanged pursuant to the risk arrangement contract and its compliance with the Federal anti-kickback statute.

In response to the commenter suggesting that providers should be permitted to assume risk without a payor, we recognize that there may be risk-based arrangements between and among providers that facilitate the goals set forth in the definition of “value-based purpose” and that seek to reduce overall costs. However, this safe harbor does not protect such arrangements. Other safe harbors may be available to protect such arrangements, such as the care coordination arrangements safe harbor or the personal services and management contracts and outcomes-based payment arrangements safe harbor.

Comment: Commenters requested that we clarify how the safe harbor would apply to arrangements involving certain categories of Federal health care program beneficiaries, such as Medicare fee-for-service patients or Indian Health Service (IHS) beneficiaries. In particular, multiple commenters expressed concern that, because Indian health care is compensated through IHS appropriations and the Medicare, Medicaid, and CHIP programs, Indian health care providers could not be risk-bearing entities, as required in the proposed substantial downside financial risk safe harbor.

Response: Given the requirement that the VBE assume substantial downside financial risk from a payor, this safe harbor will be available only for contracts or value-based arrangements where the target patient population is comprised of patients insured by a payor with which a VBE can enter into a risk arrangement. For example, whereas the safe harbor may be available for certain Medicaid direct contracting or managed care models,[52] it likely would not currently be available for an arrangement with a target patient population comprised of patients enrolled only in Medicare Parts A and B (i.e., Medicare fee-for-service) because, outside of Innovation Center models and the Medicare Shared Savings Program, we are not aware of a mechanism that would allow a VBE to contract with the Medicare program to assume substantial downside financial risk for items and services for those patients.

It is also possible that Indian health care providers might not be risk-bearing entities for purposes of this safe harbor. This would not foreclose Indian health care providers from engaging in care coordination arrangements and seeking safe harbor protection under the care coordination arrangements safe harbor, which does not require the assumption of any risk (but is available for non-monetary remuneration in risk-bearing arrangements), or other available safe harbors, such as the personal services and management contracts and outcomes-based payments safe harbor that protects monetary payments for achieving quality outcomes. Moreover, the fact that an arrangement does not fit in a safe harbor does not make the arrangement unlawful, and the OIG advisory opinion process is also available for parties seeking a determination about a specific existing or proposed arrangement.

Comment: At least two commenters expressed support for the ability of a VBE participant to contract and assume risk on behalf of the VBE.

Response: We confirm that, for purposes of this final rule, parties have this flexibility. A VBE may assume risk from the payor directly or through a single VBE participant acting on its behalf because we recognize that not all VBEs may be a separate legal entity.

Comment: While acknowledging patients' right to choose a provider, a commenter requested that OIG not require parties to assume downside financial risk for those patients who choose to receive health care items or services from parties outside of the VBE. According to the commenter, physicians participating in VBEs that are clinically integrated need to refer patients within high-functioning networks that follow care management programs, and providers should not be required to assume downside financial risk for those patients who seek care outside the network.

Response: We are not adopting the commenter's suggestion to exclude those patients who choose to receive care outside a VBE from the calculation of downside financial risk. While we recognize that patients in the target patient population ultimately could select providers and suppliers both inside and outside the VBE, we believe the VBE and its VBE participants can still coordinate and manage the care of these patients and should be required to assume risk for these patients in order to benefit from the increased flexibility afforded by this safe harbor. In addition, allowing providers to remove patients from the calculation of downside risk if they choose any provider outside the VBE could lead to manipulation of the target patient population in ways that could compromise the quality of patient care, e.g., providers might encourage more costly patients to obtain care elsewhere. This approach is consistent with the Medicare Shared Savings Program.

Comment: A medical device manufacturer asserted that this safe harbor should be expanded to recognize that, in many cases, the items or services for which the VBE is at risk will not necessarily be provided directly to patients in the target patient population but instead may be an ancillary part of their care under the value-based arrangement, such as products and services deployed by medical device manufacturers.

Response: We require that the VBE be at substantial downside financial risk Start Printed Page 77765for providing or arranging for the provision of items and services for a target patient population and that the VBE participant assume a meaningful share of that risk. There is no requirement that such items and services be provided directly to the target patient population, and there is nothing in the safe harbor that prevents the VBE's risk from encompassing items and services for, but not provided directly to, the target patient population, such as ancillary products and services. However, pursuant to paragraph 1001.952(ff)(1)(v), manufacturers of devices or medical supplies are not eligible to use this safe harbor to exchange remuneration.

e. Phase-In Period

Summary of OIG Proposed Rule: To address start-up arrangements for parties preparing to take on risk, we proposed at paragraph 1001.952(ff)(1) that this safe harbor would protect remuneration exchanged between the VBE and a VBE participant during the 6 months prior to the date by which the VBE must assume substantial downside financial risk. We proposed that, during this phase-in period, the VBE must be contractually obligated to assume such risk from a payor.

Summary of Final Rule: We are finalizing the 6-month phase-in period, with modification, and relocating it to paragraph 1001.952(ff)(2).

Comment: Commenters overwhelmingly supported a phase-in period, noting that many providers and organizations will need time to assume downside financial risk. However, many commenters asserted that the proposed 6-month time period was insufficient and recommended a longer phase-in period, such as 1 or 2 years. These commenters expressed concern that, absent a longer phase-in period, the safe harbor would be available to only highly sophisticated and large organizations that already have the capacity to take on high levels of financial risk. Another commenter argued that a longer phase-in period is essential in order to allow newly formed or small VBEs the flexibility to establish baselines against which to measure losses or savings. Some commenters highlighted other justifications for a longer phase-in period, including the significant training and integration needed for the adoption of new software systems and the need for providers with less experience with value-based arrangements, including small or rural providers, to have more time to assume financial risk. Other commenters requested that OIG extend the phase-in period only in defined circumstances, e.g., for VBEs created by independent medical practices or in circumstances where the 6-month phase-in period would place an undue burden on the parties to the arrangement. Finally, another commenter suggested a capacity-building period of 2 years where an entity would take on lower levels of downside financial risk and gradually build up to the thresholds set forth in the definition of “substantial downside financial risk.”

Response: We solicited comments on whether 6 months was a sufficient timeframe for a phase-in period or whether a longer or shorter timeframe would be appropriate. Having reviewed the comments and considered the issue, we have determined that, while some parties interested in assuming substantial downside financial risk might benefit from a phase-in period of more than 6 months, a 6-month phase-in period, paired with the availability of the care coordination arrangements safe harbor, should provide a sufficient on-ramp for parties seeking safe harbor protection for start-up or capacity-building arrangements to prepare to assume substantial downside financial risk.

In addition, the changes we have made to the definition of “substantial downside financial risk” to replace the previous requirements for comparisons to historical benchmarks should allay concerns raised by newly formed or small entities about the time needed to establish baselines against which to measure losses or savings. In particular, the new standard for setting a benchmark provides flexibility to individuals and entities that may not have historical benchmarks to establish benchmarks using other appropriate data, such as regional or national data.

Comment: A commenter requested that OIG confirm that all remuneration exchanged during the phase-in period related to VBE participants' good faith efforts to set up the VBE or value-based arrangement would be protected, even if the value-based arrangement ultimately did not move forward.

Response: To qualify for protection during the phase-in period, the VBE must have a contract or a value-based arrangement with the payor to assume risk within the next 6 months. To illustrate, if a VBE enters into a contract with a payor on January 1, the VBE must assume substantial downside financial risk no later than July 1st. The phase-in period runs from January 1 to July 1 (or an earlier date if the VBE assumes risk sooner). We recognize that a VBE might discover during the phase-in period that it is unable to assume the planned risk because, for example, of a failure to achieve an adequate network or necessary infrastructure. Remuneration exchanged between a VBE and a VBE participant during the phase-in period would be protected even if the VBE ultimately does not assume substantial downside financial risk at the conclusion of the phase-in period, provided the VBE had entered into a contract or a value-based arrangement with the payor to assume substantial downside financial risk and all other safe harbor requirements were met.

With respect to the question about setting up a VBE, under the final rule, parties may not use the 6-month phase-in period to protect remuneration exchanged in order to set up a VBE because, as a condition of meeting the safe harbor, the VBE must already be in existence. In addition, there must be a value-based arrangement between the VBE and VBE participant that includes the exchange of payments or something of value for which safe harbor protection is sought. The remuneration under this value-based arrangement could relate to efforts to set up necessary infrastructure to assume risk for the target patient population.

Comment: A commenter asked OIG to protect all legitimate pre-arrangement activities associated with assuming risk, even where the VBE is not under a contractual obligation to assume risk. Another commenter asked whether payments by an academic medical center to physicians to maintain income levels during the phase-in period are protected.

Response: We decline to protect pre-arrangement activities when the VBE has not entered into a contract or a value-based arrangement to assume risk from a payor, although the actual assumption of risk need not occur for 6 months. The requirement that the VBE enter into a contract or value-based arrangement to assume risk is a critical safeguard to protect against parties' attempts to exploit the phase-in period of this safe harbor to protect problematic payments when they have no intention of entering into the risk arrangements required by the safe harbor.

Income guarantee payments would not satisfy any of the risk-based methodologies set forth in the definitions of “substantial downside financial risk” or “meaningful share.” Whether income guarantee payments to physicians could otherwise be protected by this safe harbor would depend on whether such remuneration satisfies all requirements of the safe harbor. For example, such payments likely would not satisfy the requirement that remuneration be directly connected to at least one of the three value-based Start Printed Page 77766purposes defined in paragraph 1001.952(ee)(14)(x)(A)-(C). It seems unlikely that income guarantee payments would be directly connected to the deliberate organization of patient care activities and sharing of information to improve care for the target patient population, as the definition of coordination and management of care requires. Additionally, while we acknowledge that income guarantees could result in ancillary benefits to patients or could contribute to appropriate cost reductions, we consider it unlikely that income guarantee payments could be directly connected to improvements in the quality of care or appropriate reductions in costs.

f. Remuneration Used To Engage in Value-Based Activities

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(ff)(3)(i) that the remuneration exchanged pursuant to this safe harbor must be used primarily to engage in value-based activities that are directly connected to the items and services for which the VBE is at substantial downside financial risk.

Summary of Final Rule: We are finalizing, with modifications, this requirement at paragraph 1001.952(ff)(4)(ii). First, for the reasons set forth in section III.B.3.e.ii of this preamble, we are replacing the word “primarily” with “predominantly” so that the safe harbor now requires the remuneration exchanged to be used predominantly to engage in value-based activities that are directly connected to the items and services for which the VBE has assumed (or has entered into a written contract or value-based arrangement to assume within the next 6 months) substantial downside financial risk. Second, we are modifying this requirement to provide that the remuneration exchanged pursuant to a methodology for the assumption of risk does not need to meet this condition if the remuneration is part of a value-based arrangement that meets all other safe harbor conditions. That is, remuneration exchanged between either a VBE and a payor (as a VBE participant) pursuant to a methodology that meets the definition of “substantial downside financial risk,” or between a VBE and a VBE participant (other than a payor) pursuant to a methodology that meets the definition of “meaningful share,” need not be used predominantly to engage in value-based activities that are directly connected to the items and services for which the VBE is at substantial downside financial risk. Lastly, we are clarifying that the items and services to which the value-based activities must be directly connected are those for which the VBE has assumed (or has entered into a written contract or value-based arrangement to assume within the next 6 months) substantial downside financial risk. This clarification is in recognition that parties to a value-based arrangement may exchange remuneration during the phase-in period when the VBE has not yet assumed substantial downside financial risk but has entered into a written contract or value-based arrangement to assume such risk within the next 6 months.

Comment: Some commenters expressed general concern that this proposed requirement would be administratively burdensome, and at least one commenter more specifically stated that it would be burdensome to track how monetary remuneration is spent in order to ensure compliance with this requirement. Another commenter suggested that this requirement would preclude protection of remuneration in the form of shared savings. These commenters appeared to request that OIG remove this condition either in its entirety (thereby permitting parties to use any remuneration protected under this safe harbor for any purpose permissible under applicable law) or only with respect to monetary remuneration or a subset of monetary remuneration, such as shared savings and other performance-based payments. Alternatively, a commenter asserted that OIG should treat certain payments, such as bonus distributions and performance-based payments, as payments for the past performance of activities directly connected to the items and services for which the VBE is at risk.

Response: The commenters' concerns and recommendations appear to stem from a perceived difficulty with tracking and monitoring the VBE participant's use of the remuneration. In response to the commenter's concerns, we are revising this requirement to include the following modifier at the start of paragraph 1001.952(ff)(4)(i): Unless exchanged pursuant to risk methodologies defined in paragraph (9)(i) or (ii). With this modifier, monetary remuneration exchanged pursuant to a risk methodology that meets the definition of “substantial downside financial risk” or “meaningful share,” i.e., the risk methodologies defined in paragraph 1001.952(ff)(9)(i) and (ii), does not need to be used predominantly to engage in value-based activities. Because such remuneration effectuates the assumption of risk required by the safe harbor, it is appropriate to exempt this remuneration from the requirement for remuneration to be used predominantly to engage in value-based activities.

All other remuneration exchanged must be used predominantly to engage in value-based activities that are directly connected to the items and services for which the VBE has assumed substantial downside financial risk. With respect to the commenters' concerns regarding tracking another party's use of such remuneration, we emphasize that the safe harbor does not require the offeror of remuneration to track the recipient's use to determine whether such use is consistent with the safe harbor requirement to predominantly use remuneration to engage in value-based activities for the target patient population. We recognize that all parties to the value-based arrangement would lose safe harbor protection if the recipient fails to satisfy the predominant use requirement, but we believe there are ways for an offeror to protect itself against this risk, such as by including terms in the signed writing requiring the recipient to use funds in a particular manner. With respect to a commenter's concern that this condition would preclude the protection of shared savings, this condition, as finalized, would not preclude the protection of shared savings, as long as the shared savings arrangement satisfies all of the safe harbor's conditions.

We are not persuaded by the suggestion that we allow remuneration to be used for any purpose permissible under applicable law. In order to use this safe harbor, the parties must have formed a value-based enterprise that has one or more value-based purposes. We believe that requiring remuneration to be used predominately for value-based activities associated with the target patient population is an important mechanism to help ensure that the parties are working toward these purposes.

Comment: Commenters stated that the requirement for parties to exchange remuneration that is used to engage in value-based activities that are “directly connected” to the items and services for which the VBE has assumed (or has entered into a contract to assume within the next 6 months) substantial downside financial risk could subject parties seeking protection under this safe harbor to undue scrutiny regarding what constitutes a direct connection.

Response: We believe parties are well-positioned to demonstrate that the value-based activities they undertake have a direct connection to the items and services provided to patients in the target patient population. Pursuant to paragraph 1001.952(ff)(5) of the safe Start Printed Page 77767harbor, the value-based activities must be set forth in writing, which provides an opportunity for parties to document how such activities are directly connected to the items and services for which the VBE is at substantial downside financial risk.

By way of example, in a value-based arrangement where a VBE is at risk for an episode of care involving hospital and post-acute care, if the VBE furnishes or finances the provision of additional clinical staff or social workers for use by both a VBE participant hospital and a VBE participant skilled nursing facility, the clinical staff or social workers must predominantly engage in value-based activities that are directly connected to the items and services furnished during the episode of care for which the VBE is at substantial downside financial risk. In the OIG Proposed Rule, we provided an example involving a target patient population undergoing hip replacement surgery to show what it means to have a direct connection between the value-based activities and items and services for the target patient population. Using this same example under the final rule, if a VBE is at substantial downside financial risk for the items and services provided to patients in a target patient population undergoing hip replacement surgery, the VBE could give a VBE participant money to hire a staff member who predominately coordinates patients' transitions between care settings after hip replacement surgery. The VBE could not give the VBE participant money to hire a staff member who coordinates transitions between care settings for patients undergoing an array of surgical procedures other than hip replacement surgery.[53]

g. Direct Connection to Value-Based Purposes

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(ff)(3)(ii) that the protected remuneration must be directly connected to one or more of the VBE's value-based purposes, at least one of which must be the coordination and management of care for the target patient population.

Summary of Final Rule: We are finalizing, with modification, this condition at paragraph 1001.952(ff)(4)(i). The final rule provides that protected remuneration must be directly connected to at least one of the three value-based purposes defined in paragraph 1001.952(ee)(13)(x)(A)-(C). Remuneration may advance more than one value-based purpose.

We summarize and respond to comments specific to the substantial downside financial risk safe harbor regarding this condition below. For a more detailed discussion and a summary of the general comments received regarding the requirement for a direct connection to the coordination and management of care, as proposed in both the care coordination arrangements safe harbor and this safe harbor, and our responses, we refer readers to the care coordination arrangements safe harbor section discussion at section III.B.3.h.

Comment: A commenter asserted that all payment arrangements protected by this safe harbor should have as a value-based purpose a focus on cost reduction and quality improvement.

Response: In the context of remuneration exchanged pursuant to value-based arrangements where parties have met the requirements of the definitions of “substantial downside financial risk” and “meaningful share,” we recognize that it may be appropriate for parties to have value-based purposes related to achieving appropriate cost reductions or quality improvements. Accordingly, we are revising this condition to provide parties additional options for remuneration to be directly connected to at least one of three value-based purposes defined in paragraph 1001.952(ee)(13)(x)(A)-(C). Remuneration must be directly connected to one or more of the following value-based purposes: The coordination and management of care for the target patient population; improving the quality of care for the target patient population; and appropriately reducing the costs to, or growth in expenditures of, payors without reducing the quality of care for the target patient population. Parties may choose to meet one or more of these three value-based purposes to satisfy this condition. For a more detailed discussion regarding these value-based purposes see section III.B.2.f.

h. Reductions in Medically Necessary Items or Services

Summary of OIG Proposed Rule: At proposed paragraph 1001.952(ff)(3)(iii), we proposed to require that the remuneration exchanged not induce the VBE participants to reduce or limit medically necessary items or services furnished to any patient.

Summary of Final Rule: We are finalizing, with modification, this condition at paragraph 1001.952(ff)(7)(iii). We are modifying the condition to clarify that the value-based arrangement (not merely the remuneration exchanged) may not induce the VBE or VBE participants to reduce or limit medically necessary items or services furnished to any patient. We summarize and respond to comments specific to the substantial downside financial risk safe harbor regarding this provision below. For a more detailed discussion and a summary of additional comments received regarding this requirement, as proposed in both the care coordination arrangements and substantial downside financial risk safe harbors, and our responses, we refer readers to the care coordination arrangements safe harbor discussion at section III.B.3.e.iii.

Comment: Multiple commenters supported additional conditions to safeguard against the risks of cherry-picking, lemon-dropping, and stinting on care. For example, a commenter stated that the assumption of downside financial risk presented a heightened risk for cherry-picking patients, discharging highly complex, rare, or costly patients, and stinting on care for patients with high medical needs. The commenter appeared to recommend Federal Government oversight of value-based arrangements to address these risks. Another commenter recommended OIG formally monitor for cherry-picking or lemon-dropping activities and eliminate eligibility for safe harbor protection for parties inappropriately engaged in these activities.

Response: We acknowledge that assuming downside financial risk may heighten the risks identified by the commenter. We believe that the parameters created by the value-based definitions as well as the safeguards in this safe harbor protect against such conduct. For example, the definition of “target patient population” requires that the VBE or its VBE participants identify the target patient population using legitimate criteria, and criteria that seek to exclude costly or noncompliant patients would not be legitimate. However, in response to the comment that the nature of value-based arrangements, themselves, can create incentives for stinting or cherry-picking, we are expanding this prohibition to apply to not only the remuneration exchanged between the parties but also all terms and conditions of a value-based arrangement.

With respect to OIG's oversight, we anticipate that individuals and entities that are part of a value-based enterprise will be subject to OIG's program integrity and oversight activities to the same extent as other individuals and entities that engage in Federal health care program business.Start Printed Page 77768

i. Ownership or Investment Interests

Summary of OIG Proposed Rule: At proposed paragraph 1001.952(ff)(3)(iv), we proposed that this safe harbor would not protect an ownership or investment interest in the VBE or any distributions related to an ownership or investment interest.

Summary of Final Rule: We are finalizing, without modification, this condition and relocating it to paragraph 1001.952(ff)(4)(iii).

Comment: A few commenters opposed this condition. For example, a commenter asserted that some potential participants may not be comfortable investing in a VBE where such investment is unprotected by safe harbors and therefore may avoid involvement in otherwise beneficial substantial downside financial risk arrangements. Another commenter urged OIG to clarify that it was not our intent to prohibit VBE participants from establishing a corporate structure for a VBE in which the participants may receive an equity interest, stating that, without such a clarification, the safe harbor would unnecessarily restrict the ability of individuals and entities to dictate the corporate structure of VBEs they create.

Response: We do not view protection for ownership or investment interests as fundamental to removing barriers to parties entering into value-based arrangements and are not protecting them under this safe harbor. Parties seeking to protect a particular ownership or investment interest may look to other safe harbors (e.g., the safe harbor for investment interests, paragraph 1001.952(a), which protects certain investment interests if all requirements of the safe harbor are met), and the advisory opinion process remains available.

j. Remuneration From Individuals or Entities Outside the Applicable VBE

Summary of OIG Proposed Rule: At proposed paragraph 1001.952(ff)(3)(v), we proposed that the safe harbor would not protect remuneration funded, or otherwise resulting from contributions, by an individual or entity outside of the applicable VBE.

Summary of Final Rule: We are not finalizing this condition.

Comment: A commenter asserted that imposing this requirement would inhibit contributions or funding by an affiliate of a VBE or a VBE participant (e.g., a parent organization). Another commenter suggested OIG permit “outside” donations under the substantial downside financial risk safe harbor when the donation would benefit a VBE's patients and the third-party donor would have no direction or control over how the funds would be spent.

Response: We are not finalizing this condition because of concerns that it may be unduly prescriptive and for the reasons described at section III.3.e.iv related to the similar proposal for the care coordination arrangements safe harbor. However, the exchange of remuneration between parties other than the VBE and a VBE participant (e.g., remuneration exchanged between a third-party donor and a VBE participant or a VBE) would not be protected by this or any value-based safe harbor. Similarly, in the circumstances presented by the commenter, we would not view contributions or funding from an affiliate of a VBE (that is not a VBE participant) to that VBE as qualifying for protection under this or any value-based safe harbor. However, under this final rule, the mere fact that an affiliate of a VBE exchanges remuneration with that VBE would not preclude safe harbor protection for value-based arrangements between that VBE and its VBE participants.

Comment: A commenter requested that we address how the exclusion of safe harbor protection for remuneration funded, or otherwise resulting from contributions, by an individual or entity outside of the applicable VBE would operate where a VBE sought to enter into a value-based arrangement with a payor that was not, itself, a VBE participant.

Response: As noted above, we are not finalizing the proposed condition. For purposes of the value-based safe harbors, we are finalizing a definition of “value-based arrangement” in paragraph 1001.952(ee)(14)(vii) that requires the arrangement to be only between or among the VBE and one or more of its VBE participants or between or among VBE participants in the same VBE.

However, the modification explained in section III.B.4.d above, addresses the commenter's concern regarding assuming risk from a payor that is not a VBE participant. In that section, we explained that, while a payor could opt to be a VBE participant, it need not do so in order for a VBE to contract to assume substantial downside financial risk from a payor. However, unless the payor is a VBE participant, this safe harbor would not protect the remuneration exchanged between the payor and the VBE.

k. Writing

Summary of OIG Proposed Rule: At proposed paragraph 1001.952(ff)(4), we proposed that the terms of the value-based arrangement must be set forth in a signed writing that contains, among other information, a description of the nature and extent of the VBE's substantial downside financial risk for the target patient population and a description of the manner in which the recipient meaningfully shares in the VBE's substantial downside financial risk.

Summary of Final Rule: We are finalizing, with modifications, this condition at paragraph 1001.952(ff)(5). The modifications are based on public comments. First, parties must document the manner in which the VBE assumes risk from a payor and the VBE participant assumes a meaningful share of such risk. Second, the writing requirement can be satisfied by a collection of documents. Third, we are not requiring documentation of the offeror's costs. Fourth, the writing must be established in advance of, or contemporaneous with, the commencement of the value-based arrangement “and any material change,” instead of “or any material change.” Thus, the initial terms of the value-based arrangement must be set forth in the signed writing, in advance of, or contemporaneous with the commencement of the arrangement, and any material change to the value-based arrangement also must be set forth in the signed writing in advance of, or contemporaneous with the commencement of the material change. As with the similar modification we are making to the writing requirement in the care coordination arrangements safe harbor, these are the logical junctures where the writing requirement particularly serves its transparency purposes. Our proposed regulatory text did not make clear that the writing was needed at both junctures; our modifications more clearly express that policy.

This writing requirement does not apply to the contracts between a payor and a VBE in circumstances where the payor is not a VBE participant. Such contracts would not constitute value-based arrangements, subject to this condition. However, as set forth in paragraph 1001.952(ff)(2), such contracts must be in writing.

For further discussion of the general comments we received regarding a writing requirement in the value-based safe harbors, we refer readers to section III.B.3.d discussing the writing requirement for purposes of the care coordination arrangements safe harbor; in this section, we respond only to the comments specific to the proposed substantial downside financial risk safe harbor's writing requirement. Start Printed Page 77769

Comment: A commenter recommended that OIG revise this condition of the substantial downside financial risk safe harbor to remove the requirement that parties specify the type and the offeror's cost of the remuneration. The commenter stated that the offeror's cost is not material to the arrangement because the safe harbor does not include a contribution requirement and, furthermore, may be difficult to determine.

Response: We agree and are removing the requirement that the parties include the offeror's costs in the writing.

l. Does Not Take Into Account the Volume or Value of, or Condition Remuneration on, Business or Patients Not Covered Under the Value-Based Arrangement

Summary of OIG Proposed Rule: At proposed paragraph 1001.952(ff)(5), we proposed that the VBE or VBE participant offering the remuneration could not take into account the volume or value of, or condition the remuneration on, referrals of patients outside of the target patient population or business not covered under the value-based arrangement. This safeguard is identical to that proposed for the care coordination arrangements safe harbor.

Summary of Final Rule: We are finalizing this condition, without modification and relocating it to paragraph 1001.952(ff)(6). For a more detailed discussion and a summary of our responses to the comments received on this condition and our rationale for finalizing it, we refer readers to the care coordination arrangements safe harbor discussion at III.B.3.f. Comments received on this topic addressed the condition as it applied to the value-based safe harbors generally; we did not receive separate comments on this condition specific to this safe harbor.

m. Preserving Clinical Decision-Making

Summary of OIG Proposed Rule: At proposed paragraph 1001.952(ff)(6)(i), we proposed that value-based arrangements must not limit VBE participants' ability to make decisions in the best interests of their patients. In addition, at proposed paragraph 1001.952(ff)(6)(ii) we proposed that value-based arrangements cannot direct or restrict referrals to a particular provider, practitioner, or supplier if: (i) A patient expresses a preference for a different practitioner, provider, or supplier; (ii) the patient's payor determines the provider, practitioner, or supplier; or (iii) such direction or restriction is contrary to applicable law or regulations under titles XVIII and XIX of the Act. We proposed to interpret this condition consistent with the parallel condition proposed for the care coordination arrangements safe harbor.

Summary of Final Rule: We are finalizing, with modification, the proposed condition that the value-based arrangement must not limit the VBE participant's ability to make decisions in the best interests of its patients at paragraph 1001.952(ff)(7)(i). We are making a technical correction to change “their patients” to “its patients.” We also are finalizing, with modification, the condition related to directing or restricting referrals, at paragraph 1001.952(ff)(7)(ii). We are deleting “or regulations” from the proposed provision because regulations are captured by the term “applicable law.”

For a more detailed discussion, summaries of comments we received regarding this requirement, as proposed in each of the value-based safe harbors, and our responses, we refer readers to the discussion of this condition in the care coordination arrangements safe harbor at section III.B.3. Below we discuss the comments we received on this condition specific to the proposed substantial downside financial risk safe harbor.

Comment: A commenter requested that OIG clarify how this requirement would apply to an arrangement involving patients who are covered by managed care payors, where patient preferences are likely to be limited.

Response: If a managed care payor determines the providers, practitioners, or suppliers from whom patients may seek health care items and services under a managed care plan, then the value-based arrangement could not direct or restrict referrals to a particular provider, practitioner, or supplier in a contrary manner.

n. Materials and Records

Summary of OIG Proposed Rule: At proposed paragraph 1001.952(ff)(7), we proposed to require that the VBE or its VBE participants make available to the Secretary, upon request, all materials and records sufficient to establish compliance with the conditions of the safe harbor. We solicited comments regarding whether we should require parties to maintain materials and records for a set period of time (e.g., at least 6 years or 10 years).

Summary of Final Rule: We are finalizing, with modification, the materials and records requirement. We are specifying that, for a period of at least 6 years, the VBE or its VBE participants must maintain records and materials sufficient to establish compliance with the conditions of the safe harbor.

This requirement will promote transparency and facilitate alignment with CMS's parallel value-based exception. For a more detailed discussion and a summary of and responses to the comments received about the records requirement, as proposed in each of the value-based safe harbors, we refer readers to the discussion of this condition in the care coordination arrangements safe harbor at section III.B.3.n. Comments received on this topic addressed the requirement as it applied to the value-based safe harbors generally; we did not receive separate comments on this requirement specific to this safe harbor.

o. Marketing of Items or Services or Patient Recruitment Activities

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(ff)(6)(iii) a condition to bar protection for remuneration exchanged pursuant to value-based arrangements that include marketing to patients of items or services or engaging in patient recruitment activities. We proposed to interpret this condition consistent with our interpretation of the same proposed requirement in the care coordination arrangements safe harbor.

Summary of Final Rule: We are finalizing this requirement, with modifications and relocating it to paragraph 1001.952(ff)(4)(v). As with the care coordination arrangements safe harbor, rather than prohibiting all marketing and patient recruitment activities, we are modifying this provision to prohibit the exchange of remuneration for the purpose of marketing items or services furnished by the VBE or VBE participants to patients or for the purpose of patient recruitment activities. Comments received on this topic addressed the requirement as it applied to the value-based safe harbors generally; we did not receive separate comments on this requirement specific to this safe harbor. Consequently, we refer readers to the discussion in section III.B.3.j of this condition in the care coordination arrangements safe harbor for a summary of applicable comments, our responses, and a more detailed discussion of this standard, including our rationale for the modification being made.

p. Downstream Arrangements

Summary of OIG Proposed Rule: We proposed to protect only remuneration exchanged between a VBE and a VBE participant at paragraph 1001.952(ff).

Summary of Final Rule: We are finalizing, without modification, the requirement that the exchange of remuneration be between the VBE and Start Printed Page 77770a VBE participant in the introductory paragraph of 1001.952(ff).

Comment: A commenter agreed with our proposal to limit this safe harbor to remuneration exchanged solely between the VBE and a VBE participant and acknowledged the potential fraud and abuse risks inherent in downstream arrangements where a contracting party has assumed little or no financial risk. However, the majority of commenters advocated for extending safe harbor protection to remuneration that passes between and among VBE participants, or between VBE participants and downstream contractors. A commenter stated that downstream arrangements are essential to facilitating care coordination efforts, while another commenter asserted that requiring a VBE participant to meaningfully share in the VBE's substantial downside financial risk appropriately curtails any fee-for-service incentives. A commenter posited that this requirement would result in value-based activities being inefficiently routed through the VBE, and another commenter questioned why this safe harbor only protects remuneration between a VBE and VBE participant when the care coordination arrangements safe harbor more broadly protects remuneration between a VBE and a VBE participant or between VBE participants.

Response: We did not propose to protect arrangements where remuneration is passed from one VBE participant to another VBE participant or from a VBE participant to a downstream contractor. In this final rule, we are limiting safe harbor protection to the exchange of remuneration between the VBE and a VBE participant for which the combination of safe harbor conditions was designed. This safe harbor provides greater regulatory flexibility than the care coordination arrangements safe harbor, and as a result, we decline to extend safe harbor protection to downstream financial arrangements to which the VBE is not a party and that may not include all of the safeguards required by this safe harbor, including requirements related to the assumption of downside financial risk. A VBE participant seeking to exchange remuneration with another VBE participant may look to the care coordination arrangements safe harbor or other safe harbors, such as the personal services and management contracts and outcomes-based payments safe harbor.

Comment: A commenter expressed concern that limiting safe harbor protection to remuneration exchanged between the VBE and a VBE participant would be unworkable if the applicable VBE were comprised of an informal network of individuals and entities (versus a separate legal entity). In particular, the commenter seemed to believe that, in such circumstances, the VBE participants would not be able to protect any remuneration using this safe harbor.

Response: This safe harbor requires that a VBE assume substantial downside financial risk for certain items and services provided to the target patient population. In circumstances where the VBE is not a formal legal entity, but rather is comprised of a network of VBE participants, a single VBE participant may act on behalf of the VBE to contract or enter into a value-based arrangement with a payor to assume substantial downside financial risk. In such circumstances, this safe harbor could protect the exchange of remuneration between the VBE participant acting on behalf of the VBE and other VBE participants. We note that, while different VBE participants may act on behalf of the VBE at different times during the term of the value-based arrangement, only remuneration between a VBE participant acting on behalf of the VBE and another VBE participant may be protected. The safe harbor would not protect remuneration exchanged between two VBE participants, neither of whom are currently acting on behalf of the VBE.

q. Possible Additional Safeguards

Summary of OIG Proposed Rule: We stated in the preamble to the OIG Proposed Rule that we were considering adopting specified additional safeguards in the final rule, including a commercial reasonableness requirement, a monitoring standard, a cost-shifting prohibition, and a requirement to submit information to the Department regarding the VBE, the VBE participants, and the value-based arrangement.

Summary of Final Rule: We are not finalizing these proposed conditions. Upon further consideration, we do not consider them necessary to mitigate fraud and abuse risk given the overall structure and totality of conditions in the final safe harbor.

Comment: We received a variety of comments regarding potential additional safeguards in the substantial downside financial risk safe harbor. A commenter opposed the addition of a commercial reasonableness requirement, asserting that it would be inconsistent with CMS's similar exception and potentially would chill innovation where parties have assumed downside risk. Several commenters suggested including additional transparency requirements for patients. A commenter recommended that we include a prohibition on inappropriate cost shifting to Federal health care programs. A few commenters suggested that OIG require objective and quantifiable outcome measures to show the remuneration exchanged enhances patient outcomes. Another commenter urged us to include a termination provision similar to that in the care coordination arrangements safe harbor.

Response: We are not imposing a commercial reasonableness requirement in this safe harbor in recognition of the VBE and its VBE participants assuming substantial downside financial risk. We believe the assumption of downside financial risk helps to ensure that the remuneration is exchanged in order to achieve value-based purposes rather than to pay for referrals, which is at the core of the commercial reasonableness standard in other safe harbors. We did not propose patient transparency or notice requirements and are not including such conditions in this final rule. While parties may choose to provide patient notifications, such a condition in the safe harbor would not add appreciable additional protection against payments for referrals. We also are not including a cost-shifting prohibition, in recognition that the assumption of substantial downside financial risk is intended to drive a reduction in costs, which may include Federal health care program costs.

While parties may include termination provisions or outcome measure requirements as part of their value-based arrangements, we are not requiring these terms as a condition of the safe harbor.

5. Value-Based Arrangements With Full Financial Risk (42 CFR 1001.952(gg))

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(gg) a full financial risk safe harbor that would protect remuneration exchanged between a VBE and a VBE participant pursuant to a value-based arrangement where the VBE has assumed, or is contractually obligated to assume within the next 6 months, full financial risk, as set out at proposed paragraph 1001.952(gg)(1). We proposed to define “full financial risk” at proposed paragraph 1001.952(9)(i) to mean that “the VBE is financially responsible for the cost of all items and services covered by the applicable payor for each patient in the target patient population and is prospectively paid by the applicable payor.”

We proposed that the full financial risk safe harbor would include certain safeguards, such as requirements that: Start Printed Page 77771(i) The VBE have a signed writing with the payor that specifies the target patient population and terms evidencing full financial risk (proposed paragraph 1001.952(gg)(1)); (ii) the parties have a signed writing that specifies the material terms of the value-based arrangement (proposed paragraph 1001.952(gg)(2)); and (iii) the VBE participant not claim payment from a payor (proposed paragraph 1001.952(gg)(3)). Further, we proposed at paragraph 1001.952(gg)(4) that the remuneration exchanged be used primarily to engage in value-based activities; be directly connected to one or more of the VBE's value-based purposes, at least one of which must be the coordination and management of care for the target patient population; not induce reductions or limitations of medically necessary care; and not be funded by outside contributions. At proposed paragraph 1001.952(gg)(5), we proposed a restriction on taking into account the volume or value of business outside the value-based arrangement, and at proposed paragraph 1001.952(gg)(6), we proposed that the VBE provide or arrange for an operational utilization review program and quality assurance program. At proposed paragraph 1001.952(gg)(7), we proposed a restriction on marketing and patient recruitment, and at proposed paragraph 1001.952(gg)(8), we proposed a requirement to make available materials and records to the Secretary.

Summary of Final Rule: We are finalizing, with modifications, the safe harbor at paragraph 1001.952(gg). We are modifying the definition of “full financial risk” at paragraph 1001.952(gg)(10)(ii) to require the VBE to be at risk on a prospective basis for the cost of all items and services covered by the applicable payor for each patient in the target patient population for a term of at least 1 year. We are defining “prospective basis” at paragraph 1001.952(gg)(10)(ii) to mean the VBE has assumed financial responsibility for the cost of all items and services covered by the applicable payor prior to the provision of items and services to patients in the target patient population.

We are finalizing the proposed safeguards, with some modifications at paragraphs 1001.952(gg)(2)-(8), as explained in more detail in the topical discussions below. In addition, we have added a list of entities ineligible to use the safe harbor at paragraph 1001.952(gg)(1) for the reasons set forth in the discussion of the definition of “VBE participant” at section III.B.2.e.

a. General Comments

Comment: While some commenters expressed support for this proposed safe harbor, multiple commenters conveyed their concerns that this safe harbor may have limited application. For example, some commenters noted that the proposed safe harbor requirements, including the definition of “full financial risk,” would limit the safe harbor to only large integrated delivery systems capable of providing nearly all Medicare and Medicaid covered services to a target patient population and would disadvantage small and rural practices and practices serving underserved areas. Other commenters highlighted a potential intersection between certain state insurance and licensure laws and the proposed safe harbor requirements that could, according to the commenters, limit the availability of safe harbor protection only to those entities that could comply with such state laws, some of which may require a VBE to be licensed as a health care services plan. To address this issue, a commenter requested revisions to the proposed safe harbor to make safe harbor protection available to advanced, risk-bearing provider networks in states with such licensure requirements.

Response: We designed this safe harbor to provide significant flexibility under the Federal anti-kickback statute in light of the level of financial risk assumed by the parties. We crafted the “full financial risk” definition, as well as the conditions of this safe harbor, to balance the additional flexibilities under the anti-kickback statute with appropriate safeguards against both risks associated with fee-for-service payment systems, such as overutilization and skewed decision-making, and risks present in risk-based arrangements, including stinting on care (underutilization), cherry-picking lucrative or adherent patients, and lemon-dropping costly or noncompliant patients. We believe that the definition of “full financial risk,” combined with the conditions of this safe harbor, appropriately balance the flexibilities afforded by this safe harbor with any identified program integrity risks.

We understand that there currently are a limited number of providers assuming the level of risk required by this safe harbor. The purpose of implementing a full financial risk safe harbor is to remove one potential barrier to providers taking on more risk and having additional financial incentives to coordinate care. Providers assessing whether they can move to full financial risk in the future can consider this safe harbor and the flexibilities it offers under the Federal anti-kickback statute as one factor in that determination. There are other factors that parties would consider in the decision to assume a higher level of risk, including some considerations raised by the commenters. While safe harbors cannot address all factors that may prohibit a provider from taking on full financial risk, this safe harbor is designed to encourage more providers to do so. We also note that this safe harbor conditions protection on the VBE assuming full financial risk from the payor for the items and services. It does not require the VBE to assume other functions from the payor, such as enrollment, grievance and appeals, solvency standards, and other administrative functions performed by payors.

We recognize that some states may have laws that limit providers and other health care entities from taking on full financial risk unless they form licensed health care plans or meet other licensure requirements. We have attempted to create significant flexibility under the Federal anti-kickback statute while recognizing that parties still must comply with applicable state laws. For example, this safe harbor provides flexibility around how the VBE assumes full financial risk from a payor. Such flexibilities provide payors, VBEs, and VBE participants with options to structure arrangements that are consistent with the safe harbor and state laws. Nothing in these safe harbors preempts any applicable state law (unless such state law incorporates the Federal law by reference). Other safe harbors may be available to parties unable—by virtue of any state law requirements—to structure an arrangement that satisfies the conditions of this safe harbor.

Comment: A commenter suggested that we consider a new safe harbor or a fraud and abuse waiver for Medicare Advantage plans testing value-based arrangements. The commenter asserted that such a safe harbor or waiver would allow entities not otherwise eligible for protection under the value-based safe harbors to participate in value-based arrangements.

Response: We did not propose a safe harbor or a fraud and abuse waiver specific to Medicare Advantage plans, and thus we are not finalizing such safe harbor or waiver in this final rule. This safe harbor may be available to protect remuneration exchanged under certain Medicare Advantage plan arrangements, provided the plan enters into a contract or a value-based arrangement with a VBE pursuant to which the VBE assumes full financial risk from the Start Printed Page 77772plan. We also note that there may be other existing safe harbors not modified by this final rule that are available to protect financial arrangements involving a Medicare Advantage plan, such as paragraphs 1001.952(t) and (u), and the advisory opinion process remains available.

Comment: While a commenter expressed support for OIG's and CMS's consistent definitions of full financial risk, others requested that OIG finalize a full financial risk safe harbor that further aligns with CMS's parallel full risk exception. These commenters generally urged OIG and CMS to impose the same risk thresholds and requirements for purposes of the full financial risk safe harbor and the CMS full risk exception.

Response: As with the OIG Proposed Rule, in this final rule, we have endeavored to align our full financial risk safe harbor to the greatest extent possible with CMS's full risk exception. The definition of “full financial risk” we are finalizing is more closely aligned with the definition of “full financial risk” that CMS is finalizing in its full risk exception. However, reflecting statutory differences that exist between the Federal anti-kickback statute and the physician self-referral law, explained further in section III.A.1, the full financial risk safe harbor differs from CMS's full risk exception. For example, in recognition of the statutory differences between the two laws, the safe harbor includes conditions that differ from those in CMS's parallel exception, such as the requirement that the value-based arrangement be set forth in writing and that the VBE provide or arrange for a quality assurance program for services furnished to the target patient population.

b. Definitions

i. Full Financial Risk

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(gg)(9)(i) that a VBE would be at “full financial risk” for the cost of care of a target patient population if the VBE is financially responsible for the cost of all items and services covered by the applicable payor for each patient in the target patient population and is prospectively paid by the applicable payor.

Summary of Final Rule: We are finalizing, with modifications, a definition of “full financial risk” at paragraph 1001.952(gg)(9)(i). The modifications, based on public comments, provide parties with additional flexibility in the manner in which the VBE assumes risk from the applicable payor. The definition of “full financial risk” now requires the VBE to be at risk on a prospective basis for the cost of all items and services covered by the applicable payor for each patient in the target patient population for a term of at least 1 year. “Prospective basis,” as defined at paragraph 1001.952(gg)(9)(ii), means the VBE has assumed financial responsibility for the cost of all items and services covered by the applicable payor prior to the provision of items and services to patients in the target patient population.

Comment: While at least one commenter supported the definition of “full financial risk,” as proposed, the vast majority of commenters recommended that we revise the definition to encompass arrangements where the VBE assumes risk for less than all of the items and services covered by the applicable payor. For example, many commenters recommended that the VBE be required to have risk only for “substantially all” items and services furnished to the target patient population, which commenters suggested could be defined as 75 percent of such items and services. Other commenters requested that full financial risk include assuming risk for a much more specifically defined set of services (e.g., hospital inpatient and outpatient care or ongoing services related to breast care). Other commenters asked OIG to carve out certain high-cost or specialty items and services (e.g., organ transplants or pharmacy benefits) or new technologies that were not incorporated into rate calculations from the scope of items and services for which a VBE must be at risk.

Some commenters requested that the definition of “full financial risk” include risk only for all of the items and services required to treat a particular disease or condition or an episode of care (e.g., risk for all of the items and services required to treat diabetes for patients with diabetes in the target patient population or an episode of care for a knee replacement). Another commenter asked OIG to permit partial capitation arrangements and, lastly some commenters contended that full financial risk should include risk for only the items and services to which the remuneration relates. Many of these commenters asserted that VBE participants would still be incentivized to maximize quality and efficiency of care even where the VBE assumes risk for less than all items and services provided to the target patient population by the applicable payor.

Response: We are finalizing a definition of “full financial risk” that requires the VBE to be at risk on a prospective basis for the cost of all items and services covered by the applicable payor for each patient in the target patient population for a term of at least 1 year. We decline to extend safe harbor protection under this safe harbor where a VBE has assumed risk for only a subset of items and services, such as for 75 percent of items and services, for all items and services except certain high-cost or specialty items and services, or for only the items and services to which the remuneration relates, although we note that the substantial downside financial risk safe harbor may be available for such arrangements. Additionally, a VBE could assume full financial risk for patients with a particular disease condition (e.g., patients with diabetes) by selecting a target patient population comprised only of patients with diabetes, but the VBE must cover all items and services for those patients. Therefore, while a VBE must be at risk for all items and services furnished to the target patient population, the VBE can limit the number of patients for whom it assumes full financial risk through its selection of the target patient population, as long as the VBE selects the target patient population using legitimate and verifiable criteria, among other requirements.

In light of the significant flexibility we are offering under this safe harbor, we believe the risk level we are requiring for VBEs is necessary to reduce traditional fraud and abuse concerns associated with payment systems that incorporate, in whole or in part, fee-for-service reimbursement methodologies. While we appreciate the challenges associated with assuming risk for certain high-cost or specialty items and services or new technologies, VBEs may address such challenges through arrangements to protect against catastrophic losses, such as risk-adjustment or reinsurance agreements, without losing safe harbor protection.

Comment: Some commenters asked OIG to clarify whether the VBE and its VBE participants can collectively be at risk for items and services to the target patient population, such as by each VBE participant being at risk only for the services it provides.

Response: A value-based enterprise is a collection of two or more VBE participants. As such, some or all of the VBE participants that comprise the VBE can combine their respective risk to satisfy the definition of “full financial risk” as long as the VBE participants' collective risk amounts to risk for all items and services covered by the Start Printed Page 77773applicable payor for the target patient population.

Comment: A physicians' trade organization expressed concern that smaller practices that attempt to assume too much risk could result in the closures of community practices and consolidation. Another commenter highlighted that there may be substantial up-front investments that can strain any physician practice's limited resources but can be particularly challenging for small, rural, or underserved practices with smaller patient pools to spread risk.

Response: We recognize that the full financial risk safe harbor requires a level of risk that many in the health care industry may not currently be able to assume. For parties seeking protection for remuneration exchanged pursuant to risk arrangements requiring a lower level of risk, the substantial downside financial risk safe harbor or the care coordination arrangements safe harbor may be available. This safe harbor does not require small, rural, or community practices or practices serving underserved populations to assume full financial risk or make substantial up-front investments on their own. Parties have flexibility in establishing a VBE, which must have at least two VBE participants but can have any number of additional VBE participants. We believe the “VBE participant” definition and the safe harbors in this final rule provide small, rural, and community practices and practices serving underserved populations options to enter into arrangements to assume higher levels of risk without having to integrate practices or become part of a larger health care system.

Further, we believe that establishing a VBE with other providers, either similarly situated entities or larger entities, could help practices (including small, rural, and community practices) take on more risk and mitigate potential financial shocks. As value-based arrangements continue to proliferate, we believe there may be opportunities for these types of practices to form VBEs, take on risk, and potentially have success in reducing costs and coordinating care.

Comment: Commenters requested that the definition of “full financial risk” expressly include payments based on global budgets, as well as capitation and other alternative payment methodologies.

Response: While the definition of “full financial risk” does not expressly list global budget or capitation payment methodologies as permissible payment methodologies, we confirm that such prospective payment methodologies would satisfy the definition of “full financial risk” as long as the global budget or capitation payments covered the cost of all items and services covered by the applicable payor for the target patient population for a term of at least 1 year. Without additional detail related to the alternative payment methodologies referenced by the commenter, we are unable to opine on whether such payment methodologies would meet the definition of “full financial risk.” Parties also may request an advisory opinion from OIG to determine whether an arrangement meets the definition of “full financial risk” and the conditions of the full financial risk safe harbor or is otherwise sufficiently low risk under the Federal anti-kickback statute to receive prospective immunity from administrative sanctions by OIG.

Comment: A commenter requested that OIG explain why the proposed definition of “full financial risk” required that the payor prospectively pay the VBE.

Response: We proposed a definition of “full financial risk” that required prospective payment, and we stated in the OIG Proposed Rule that we interpreted “prospective” to mean the anticipated cost of all items and services covered by the applicable payor for the target patient population had been both determined and paid in advance (as opposed to billing under the otherwise applicable payment systems and undergoing a retrospective reconciliation after items and services have been furnished). In this final rule, we are revising the definition of full financial risk to require risk on a prospective basis and defining “prospective basis” to mean the VBE has assumed financial responsibility for the cost of all items and services covered by the applicable payor prior to the provision of items and services to patients in the target patient population. As such, the VBE no longer needs to be prospectively paid by the applicable payor prior to the provision of items and services to each patient in the target patient population. Instead, the VBE must simply assume financial responsibility prior to the provision of items and services.

We are requiring the assumption of risk on a prospective basis not only in recognition of the additional flexibilities under the Federal anti-kickback statute that this safe harbor affords but also because risk assumption can serve to limit the potential harms that may result from financial incentives inherent to fee-for-service payments systems, such as overutilization and skewed medical decision-making. For example, if providers know the amount of reimbursement they will receive for providing items and services to the target patient population before providing such items and services, then the providers may be less likely to order excessive tests or otherwise provide unnecessary items and services to the patients.[54]

Comment: We received various comments regarding how a payor could transfer risk to the VBE. For example, a commenter requested confirmation that the payor and VBE could engage in retrospective reconciliations. Another commenter asserted that OIG should add language to the safe harbor stating that risk, both at the enterprise level and at the VBE participant level, can be through front-end withholds or dues assessments and need not be through a back-end repayment. A commenter further asked whether, as long as the payment covers a particular period, the payor could pay the VBE at the end or in the middle of the coverage period.

Response: Under the revised definition of “full financial risk,” a payor could pay the VBE at any point in the coverage period and engage in retrospective reconciliations, as long as the VBE has assumed full financial risk for a term of at least 1 year prior to the provision of items and services to patients in the target patient population. We also are not dictating the manner in which the VBE exchanges remuneration with VBE participants, so a VBE could impose front-end withholds or dues assessments on VBE participants.

Comment: A commenter asserted that the OIG Proposed Rule's proposed definition of “full financial risk” allowed a payor to make payments to physician practices to offset losses that the practices incurred.

Response: This safe harbor would not protect payments from a payor to a physician practice that is a VBE participant to offset losses the practice incurred because the safe harbor prohibits a VBE participant from claiming payment in any form from a payor for the items and services covered under the value-based arrangement. In other words, under the terms of this safe harbor, the VBE must assume full financial risk for the cost of all items Start Printed Page 77774and services covered by the applicable payor; this means that any claims submitted to a payor by a VBE participant related to such items and services—including a claim for payment to offset losses incurred—would fail this requirement. The VBE, however, may enter into reinsurance or other risk-adjustment arrangements and could address losses incurred by VBE participants by using reinsurance payments, for example, to reimburse VBE participants for such losses.

Comment: Many commenters appreciated OIG's position that the definition of “full financial risk” would not prohibit a VBE from entering into arrangements to protect against catastrophic losses. Multiple commenters requested guidance on the risk mitigation terms that full-risk arrangements can include while satisfying the requirements of the safe harbor, including whether there is a particular threshold on the amount of loss coverage. A commenter specifically asked whether incentive arrangements requiring stop-loss protection to meet existing physician incentive regulations in Federal health care programs would qualify as protecting against catastrophic losses under the full financial risk safe harbor.

Response: We are not imposing a specific limit on the amount of loss coverage a VBE may have, but as we stated in the OIG Proposed Rule, we would expect any stop-loss or other risk adjustment arrangements to act as protection for the VBE against catastrophic losses and not as a means to shift material financial risk back to the payor. Whether stop-loss protection required by the existing physician incentive regulations would be appropriate stop-loss protection for a VBE assuming risk pursuant to this safe harbor may depend on a number of factors, including the structure of the VBE, scope of the target patient population, and items and services covered by the applicable payor.

Comment: A commenter expressed concern that, because the proposed definition of “full financial risk” requires the assumption of risk for the cost of all items and services covered by the applicable payor, it would by default necessitate the involvement of hospitals as VBE participants. The commenter appeared to believe that this would lead to further consolidation of the health care industry.

Response: It is not the intent of this rule to foster industry consolidation. Rather, this rule aims to increase options for parties to create a range of innovative arrangements eligible for safe harbor protection. The safe harbor does not require all parties providing items and services to the target patient population to be VBE participants and thus does not require the VBE to enter into value-based arrangements with all such parties. For example, a VBE may enter into a services contract with a hospital that is not a VBE participant for the provision of items and services to the target patient population, although we note that the VBE must be at risk from the payor for the items and services provided by such hospital to the target patient population.

Accordingly, we do not view a hospital's participation in a value-based arrangement as a driver of industry consolidation; rather, we view the voluntary nature of a hospital's participation, as well as the voluntary participation of all other individuals or entities in a value-based arrangement, as facilitating collaboration and the transition to value-based care. Individuals and entities are not required to integrate their practices or corporations to meet the definition of “VBE,” to be a VBE participant, or to rely on this safe harbor. These definitions provide individuals and entities flexibility to determine how best to structure a VBE and the associated value-based arrangements to meet value-based purposes. VBEs and VBE participants that assume full financial risk from a payor and enter into value-based arrangements that meet the conditions of this safe harbor likely require different, more closely coordinated arrangements than VBEs and VBE participants that rely on the care coordination arrangements safe harbor. However, both sets of entities have flexibility to determine with what types of VBE participants to work and what types of arrangements work best.

ii. Items and Services

Summary of OIG Proposed Rule: We proposed to define “items and services” at paragraph 1001.952(gg)(9)(ii) as having the same meaning as that set forth in paragraph 1001.952(t)(2)(iv).

Summary of Final Rule: We are finalizing, with modification, the proposed definition of “items and services” at paragraph 1001.952(gg)(9)(iii) to mean health care items, devices, supplies, and services.

Comment: A commenter expressed concern that the proposed definition of “items and services” would inadvertently exclude arrangements that the health care industry views as full risk because “items and services” was defined to include services reasonably related to the provision of health care items, devices, supplies, or services, including, but not limited to, non-emergency transportation, patient education, attendant services, social services (e.g., case management), utilization review and quality assurance. According to the commenter, the scope of “items and services” could add significant potential costs to parties seeking protection under the safe harbor. The commenter recommended that OIG revise the definition of “items and services” to include covered medical items and services but not items and services more in the nature of optional supplemental benefits.

Response: In response to the commenter's concerns, we are modifying the proposed definition of “items and services” to mean only health care items, devices, supplies, and services. We are no longer cross-referencing and incorporating the definition of “items and services” found in paragraph 1001.952(t)(2)(iv). Thus, a VBE may assume risk for items and services reasonably related to the provision of health care items, devices, supplies, or services such as non-emergency transportation, patient education, and social services (as provided for in the definition of “items and services” found in paragraph 1001.952(t)(2)(iv)), but doing so is no longer a safe harbor requirement.

The scope of items and services for which a VBE must be at risk depends on the items and services covered by the payor. We recognize that, across the health industry, what constitutes full risk for health care items, devices, supplies, and services varies greatly from program to program and plan to plan, and we have tailored this safe harbor requirement accordingly. For example, Medicare Advantage generally does not cover items and services for long-term care at nursing facilities, but Medicaid does. This safe harbor does not change the scope of items and services a payor must cover in order for a VBE to meet the definition of “full financial risk.”

As we explained in the OIG Proposed Rule, a VBE would be at “full financial risk” if it contracts or enters into a value-based arrangement with a Medicaid managed care organization and receives a fixed per-patient per-month amount to be at full financial risk if the fixed amount covered the cost of all items and services covered by the Medicaid managed care plan and furnished to the target patient population. Similarly, we would consider a VBE to be at “full financial risk” if it contracts or enters into a value-based arrangement with a Medicare Advantage plan to receive a prospective, capitated payment for all items and services covered by the Start Printed Page 77775Medicare Advantage plan for a target patient population. Under this safe harbor, we are not protecting partial capitated arrangements that require the VBE to assume risk for only a limited set of items and services.

Parties may utilize OIG's advisory opinion process to determine whether an arrangement meets the conditions of this safe harbor or is otherwise sufficiently low risk under the Federal anti-kickback statute to receive prospective immunity from administrative sanctions by OIG.

Comment: While recognizing that the proposed definition of “full financial risk” ties risk to payor coverage, a commenter requested that OIG explicitly state the extent to which medication costs may be included in the items and services for which a VBE must be at risk under the safe harbor. Another commenter stated that, if prescription drugs are included in the definition of all items and services for purposes of the full financial risk safe harbor, it is important that pharmaceutical manufacturers be eligible to participate in the VBE.

Response: To the extent the payor with which the VBE contracts to assume full financial risk covers prescription drugs, the VBE's risk must encompass prescription drugs. The definition of “full financial risk” requires that the VBE assume financial responsibility on a prospective basis for the cost of all items and services covered by the applicable payor for each patient in the target patient population. Conversely, if the contracting payor does not cover prescription drugs, the VBE does not need to assume risk for such costs.

While we recognize that prescription drugs may be included in the definition of “full financial risk,” manufacturers of a drug or biological remain ineligible to give or receive protected remuneration under this safe harbor as finalized here. Such parties may be VBE participants, but they cannot exchange remuneration protected by this safe harbor. We refer readers to the section of this final rule addressing the definition of “VBE participant” for a discussion of our rationale.

iii. Other Defined Terms

Summary of OIG Proposed Rule: We proposed in proposed paragraph 1001.952(gg)(9) that the terms “coordination and management of care,” “target patient population,” “value-based activity,” “value-based arrangement,” “value-based enterprise,” “value-based purpose,” and “VBE participant” would have the meaning set forth in proposed paragraph 1001.952(ee).

Summary of Final Rule: We are finalizing, with modifications, our proposed use of the value-based terminology at paragraph 1001.952(gg)(9)(iv). We no longer use the term “coordination and management of care” in this safe harbor. Additionally, because paragraph 1001.952(gg)(1) makes certain entities ineligible to use the value-based safe harbors, we are finalizing the term “manufacturer of a device or medical supply,” with the same meaning set forth in paragraph 1001.952(ee)(14).

c. Entities Ineligible for Safe Harbor Protection

Summary of OIG Proposed Rule: We proposed in proposed paragraph 1001.952(ee) to limit the entities that could qualify as VBE participants, which would have the effect of limiting availability of the value-based safe harbors, including the full financial risk safe harbor at proposed paragraph 1001.952(gg), for those ineligible entities. The proposed definition of “VBE participant” is summarized more fully in section III.B.2.e of this preamble.

Summary of Final Rule: We are not finalizing our proposal in proposed paragraph 1001.952(ee) to limit the entities that could qualify as VBE participants. As explained at section III.B.2.e, in the final rule we are identifying parties ineligible to rely on safe harbors in the safe harbors themselves. For the full financial risk safe harbor, we are finalizing a requirement that remuneration is not exchanged by any of the following entities: (i) Pharmaceutical manufacturers, wholesalers, and distributors; (ii) PBMs; (iii) laboratory companies; (iv) pharmacies that primarily compound drugs or primarily dispense compounded drugs; (v) manufacturers of devices or medical supplies; (vi) entities or individuals that manufacture, sell, or rent DMEPOS (other than a pharmacy or a physician, provider, or other entity that primarily furnishes services, all of whom remain eligible); and (vii) medical device distributors or wholesalers that are not otherwise manufacturers of devices or medical supplies. This list, set forth at paragraph 1001.952(gg)(1), effectuates proposals in the OIG Proposed Rule to make these entities ineligible to use this safe harbor for the exchange of remuneration pursuant to a value-based arrangement.

Comments, our responses, and policy decisions regarding this issue can be found in the discussion of VBE participants in section III.B.2.e of this preamble.

d. VBE's Assumption of Risk From a Payor

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(gg)(1)that the VBE must assume full financial risk from a payor. We proposed that VBEs could assume full financial risk directly from a payor or through a VBE participant acting on behalf of the VBE.

Summary of Final Rule: We are finalizing this requirement at paragraph 1001.952(gg)(2), with the following modifications. First, VBEs have two options to assume full financial risk from a payor. A VBE can assume risk from the payor through an arrangement that meets the definition of “value-based arrangement,” or a VBE can assume risk from a payor through a contract that places the VBE at full financial risk.

The first option for risk arrangements requires the payor to be a VBE participant, which is permitted under our final definition of “VBE participant.” The payor (as a VBE participant) and the VBE can enter into a value-based arrangement for the VBE to assume full financial risk. As we proposed and are finalizing in this rule, the introductory paragraph to 1001.952(gg) protects remuneration exchanged pursuant to a value-based arrangement. Therefore, remuneration exchanged pursuant to a payor's and a VBE's value-based arrangement could be protected by this safe harbor, including remuneration exchanged to implement the full financial risk methodology, if the value-based arrangement meets all applicable conditions of the safe harbor.

Under the second option, payors that do not wish to be part of the VBE may choose to enter into a written contract with the VBE that is not a value-based arrangement for the purposes of the VBE's assumption of full financial risk. Under this option, payors would not be VBE participants, the written contract between the payor and the VBE would not be a value-based arrangement, and the payor would not be subject to the other conditions of the safe harbor. In such circumstances, these contracts must only meet the condition at paragraph 1001.952(gg)(2), i.e., they must evidence the VBE's assumption of full financial risk from the payor. Remuneration exchanged pursuant to a risk assumption contract that is not a value-based arrangement is not protected by this safe harbor. The VBE and the payor would need to assess any potential remuneration exchanged pursuant to the risk arrangement contract and its compliance with the Federal anti-kickback statute.Start Printed Page 77776

To enable the payor and VBE to use this safe harbor to protect remuneration exchanged pursuant to their value-based arrangement, we are providing at paragraph 1001.952(gg)(4) of the safe harbor that, even though the payor is a VBE participant, the payor is exempt from the prohibition against a VBE participant claiming payment in any form from the payor for items or services covered under the value-based arrangement.

We are also modifying this requirement to clarify that the payor cannot act on behalf of the VBE; the VBE must be a distinct legal entity or represented by a VBE participant, other than a payor, that acts on the VBE's behalf.

We summarize and respond to comments regarding this proposed condition as applied only to the full financial risk safe harbor below. For a summary of the comments received regarding the requirement that a VBE assume financial risk from a payor pursuant to a value-based arrangement, in both the substantial downside financial risk and full financial risk safe harbors and our responses, we refer readers to the discussion of this condition in the substantial downside financial risk safe harbor at section III.B.4.d.

Comment: Commenters requested that OIG clarify that payors can act on behalf of the VBE to assume full financial risk.

Response: We are revising the regulatory text in response to these comments to clarify that a single VBE participant may act on behalf of the VBE to assume full financial risk from a payor, provided it is not itself a payor. That is, the agent of the VBE and the payor from which the VBE is assuming full financial risk from may not be the same entity.

Comment: Multiple commenters expressed concern that, because Indian health care is compensated through Indian Health Service appropriations and the Medicare, Medicaid, and CHIP programs, Indian health care providers could not be risk-bearing entities, as required in the proposed full financial risk safe harbor.

Response: It is possible that Indian health care providers might not be risk-bearing entities for purposes of this safe harbor; that would be a programmatic matter outside the scope of this rulemaking. There may be other providers of varying types that are not able to, or choose not to, meet the requirements of this safe harbor. This would not foreclose Indian health care providers or other providers from engaging in care coordination arrangements and seeking safe harbor protection under the care coordination arrangements safe harbor at paragraph 1001.952(ee), which does not require the assumption of any risk (but is available for risk-bearing arrangements), or other available safe harbors, such as the safe harbor for personal services and management contracts and outcomes-based payments at paragraph 1001.952(d). Moreover, the fact that an arrangement does not fit in a safe harbor does not make the arrangement unlawful. The OIG advisory opinion process is also available for providers seeking a legal opinion regarding their arrangements.

Comment: A commenter requested that the safe harbor not be limited to items and services covered by a particular payor, but rather extended to all items and services provided to a VBE participant's patients, regardless of payor. For example, the commenter requested that the safe harbor protect risk-based arrangements between a health system and providers where the VBE assumes risk for all of the providers' patients, regardless of the patients' payors.

Response: A VBE could assume full financial risk for all of the items and services provided to all of a VBE participant's patients, provided the VBE and VBE participant have defined the target patient population to include all of the VBE participant's patients, and if the VBE participant's patients are insured by multiple payors, the VBE has assumed full financial risk from each payor that insures a patient who is part of the target patient population. The risk that a VBE assumes is not limited to the items and services covered by the applicable payor that a VBE participant provides (e.g., only the items and services provided by the health system); rather, the VBE's risk encompasses all items and services covered by the applicable payor, regardless of whether a VBE participant or another provider provides such items and services.

e. Phase-In Period

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(gg)(1) that the full financial risk safe harbor would protect remuneration exchanged pursuant to value-based arrangements between a VBE and a VBE participant where the VBE is contractually obligated to assume full financial risk in the next 6 months. We solicited comments on whether such lead time should be shorter or longer.

Summary of Final Rule: We are finalizing, with modification, a protected “phase-in” period at paragraph 1001.952(gg)(2). In response to comments requesting a longer phase-in period, we are extending the protected phase-in period for parties that have entered into a contract or a value-based arrangement to assume full financial risk from the proposed 6 months to 1 year.

In contrast to the substantial downside financial risk safe harbor, we believe an extended 1-year phase-in period is warranted where a VBE is preparing to assume full financial risk for the total cost of items and services covered by the applicable payor for the target patient population.

We refer readers to the substantial downside financial risk safe harbor section at III.B.4.e regarding the phase-in requirement for a summary of comments we received on this phase-in period, and our responses, as applicable to both the substantial downside financial risk safe harbor and full financial risk safe harbor and for a more detailed discussion of this standard. We did not receive comments regarding the phase-in period specific to the full financial risk safe harbor. Among other comments, commenters recommended a 1-year phase-in period for both safe harbors.

f. Writing

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(gg)(2) that the parties to the value-based arrangement must set forth the material terms of the value-based arrangement in a signed writing that includes the value-based activities to be undertaken by the parties. At proposed paragraph 1001.952(gg)(1), we proposed that the VBE have a signed writing with the payor that specifies the target patient population and contains terms evidencing the VBE's full financial risk.

Summary of Final Rule: We are finalizing, with modification, a writing requirement for value-based arrangements at paragraph 1001.952(gg)(3). The modification, based on public comments, clarifies that the writing requirement can be satisfied by a collection of documents. The writing requirement now states that the value-based arrangement must be set forth in writing, signed by the parties, and specify all material terms, including the value-based activities and the term. This writing requirement does not apply to contracts between a VBE and a payor that are not value-based arrangements.

For further discussion of and responses to the general comments we received regarding a writing requirement, we refer readers to section III.B.3.d that discusses the writing requirement for purposes of the care coordination arrangements safe harbor. The general comments addressed Start Printed Page 77777aspects of the writing requirement that were common to all three value-based safe harbors. In this section, we discuss only the comments specific to the proposed full financial risk safe harbor's writing requirement.

Comment: A commenter asked OIG to clarify whether, to the extent parties have multiple value-based arrangements for which they are seeking protection under this safe harbor, each value-based arrangement must be set forth in separate writings or whether one agreement could suffice.

Response: This safe harbor, like the substantial downside financial risk safe harbor, does not dictate the manner in which parties document their value-based arrangements. For example, a VBE could choose to document the value-based arrangement it entered into with a payor and the value-based arrangement it entered into with a downstream VBE participant in a single writing; alternatively, it could maintain two separate writings for the two distinct value-based arrangements.

g. 1-Year Minimum Term of Value-Based Arrangement

Summary of OIG Proposed Rule: In the OIG Proposed Rule, we proposed in paragraph 1001.952(gg)(2) to require that the term of the value-based arrangement be for a period of at least 1 year.

Summary of Final Rule: We are not finalizing this proposed requirement.

Comment: A few commenters opposed the proposed requirement that the term of the value-based arrangement be for at least 1 year, with one commenter asserting that a value-based arrangement term requirement could impose unnecessary obstacles to beneficial innovation. Commenters also asked whether an arrangement would meet this requirement of the safe harbor if the parties terminate the arrangement during the first year but do not enter into a substantially similar arrangement until the expiration of the first year.

Response: We are not finalizing the proposed requirement that the term of the value-based arrangement be for a period of at least 1 year. We believe the requirement for a VBE to assume full financial risk from the payor for a period of at least 1 year is a sufficient safeguard against gaming without also requiring the value-based arrangement to have a 1-year minimum term. Parties must still document the term of their value-based arrangement as a condition of meeting this safe harbor's writing requirement.

h. Remuneration Used To Engage in Value-Based Activities

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(gg)(4)(i) to require that the remuneration exchanged be used primarily to engage in the value-based activities set forth in the parties' signed writing.

Summary of Final Rule: We are not finalizing this proposed requirement.

Comment: A commenter asked whether, given the requirement that remuneration must be used primarily to engage in value-based activities, all activities of an integrated delivery system subject to global budget arrangements, either upstream or downstream, will relate to the value-based activities for the target patient population. Another commenter requested that we interpret this requirement to mean that, if substantially all of an integrated delivery system's activities include the assumption of financial risk for all services, the remaining incidental activities and associated remuneration among VBE participants also would be protected.

Response: We are not finalizing the proposed requirement that all remuneration exchanged pursuant to the full financial risk safe harbor be used primarily to engage in value-based activities for the target patient population. We intended this proposed condition to safeguard against the exchange of remuneration to inappropriately induce referrals. However, based on comments received to this safe harbor and the substantial downside financial risk safe harbor (as detailed in section III.B.4.f), we do not think this safeguard is necessary in the full financial risk safe harbor, given this safe harbor's unique combination of safeguards, and in particular, the requirement that the VBE assume full financial risk from a payor for a target patient population and the safe harbor's limitation on exchanges of remuneration to those between the VBE and a VBE participant. For purposes of the substantial downside financial risk safe harbor, we addressed this issue more narrowly, excluding monetary remuneration exchanged pursuant to a risk methodology that meets the definition of “substantial downside financial risk” or “meaningful share” from the requirement that remuneration exchanged be used predominantly to engage in value-based activities. However, for the reasons set forth above, we believe a more flexible approach is warranted in this safe harbor, and we are not finalizing the proposed condition.

With respect to the comment regarding safe harbor protection for incidental activities and associated remuneration where substantially all of an entity's activities include the assumption of financial risk for all services, we note that the value-based safe harbors do not protect business models or necessarily all activities and remuneration flowing under, for example, an integrated delivery system. Rather, the full financial risk safe harbor, like the other value-based safe harbors, protects discrete streams of remuneration exchanged pursuant to a value-based arrangement, and parties would need to evaluate each stream separately to assess compliance with the Federal anti-kickback statute, and as applicable, any available safe harbor.

i. Direct Connection to Value-Based Purposes

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(gg)(4)(ii) to require that the remuneration be directly connected to one or more of the VBE's value-based purpose(s), at least one of which must be the coordination and management of care for the target patient population. We proposed that this condition would be interpreted consistent with the similar condition in the care coordination arrangements safe harbor.

Summary of the Final Rule: We are finalizing, with modification, the requirement that remuneration exchanged between the VBE and a VBE participant under this safe harbor be connected to one or more value-based purposes at paragraph 1001.952(gg)(5)(i). Based on public comment, we are modifying the provision to remove the requirement that all remuneration be connected to the purpose of coordinating and managing care for the target patient population.

Comment: Commenters asked for examples of the types of arrangements the safe harbor could protect, and a commenter specifically asked whether the safe harbor would protect fee-for-service payments, bonus payments based on quality outcomes, or both from a VBE to a VBE participant. A commenter also asked whether a VBE could give remuneration to an owner of the VBE, where the owner is a VBE participant.

Response: This safe harbor could protect arrangements for bonus payments based on quality outcomes or shared savings and losses arrangements, among other types of payment arrangements, as long as all requirements of the safe harbor are satisfied, including the requirement that Start Printed Page 77778the remuneration exchanged must be directly connected to one or more value-based purposes. With respect to the commenter's question about fee-for-service payment, this safe harbor does not dictate the manner of payment between the VBE and the VBE participant for items and services rendered to the target patient population. Provided the VBE has assumed full financial risk from a payor and the VBE participant does not claim payment from the payor for the items and services furnished to the target patient population, the VBE could pay the VBE participant on a fee-for-service basis.

Whether a VBE could give remuneration to an owner of the VBE, where the owner is a VBE participant, is a fact-specific determination. While the safe harbor, by its terms, does not preclude remuneration exchanged between a VBE and an owner of the VBE where the owner is a VBE participant, we highlight that this safe harbor does not protect an ownership or investment interest in the VBE or any distributions related to an ownership or investment interest.

Unlike the similar requirement in the other value-based safe harbors, we are not requiring a direct connection to any specific value-based purpose under this safe harbor. This safe harbor is designed to protect the broadest scope of remuneration, and some remuneration may be more closely connected to one of the other value-based purposes. Therefore, we are providing more flexibility for a VBE assuming full financial risk to determine the value-based purpose(s) to which the exchange of remuneration is directly connected. This includes remuneration exchanged pursuant to a value-based arrangement between the VBE and the payor (as a VBE participant) that effectuates the VBE's assumption of full financial risk from the payor. For a summary of comments received regarding the requirement for a direct connection to the coordination and management of care and further discussion of this requirement as proposed in the care coordination arrangements safe harbor, the substantial downside financial risk safe harbor, and the full financial risk safe harbor, we refer readers to the applicable section of this final rule for each safe harbor.

j. No Reduction in Medically Necessary Items or Services

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(gg)(4)(iii) to require that remuneration must not induce the VBE or VBE participants to reduce or limit medically necessary items or services furnished to any patient. We proposed to interpret this condition consistent with the similar condition proposed in the care coordination arrangements safe harbor.

Summary of Final Rule: We are finalizing, with modification, this condition at paragraph 1001.952(gg)(6). The modification provides that the value-based arrangement (not merely the remuneration exchanged) may not induce the VBE or VBE participants to reduce or limit medically necessary items or services furnished to any patient.

For a summary of comments received and our responses regarding this condition, as proposed in each of the value-based safe harbors, we refer readers to the care coordination arrangements and substantial downside financial risk safe harbor sections discussing this requirement at III.B.3.e and III.B.4.h, respectively.

k. Taking Into Account the Volume or Value of, or Conditioning Remuneration on, Business or Patients Not Covered Under the Value-Based Arrangement

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(gg)(5) that the VBE or VBE participant offering the remuneration could not take into account the volume or value of, or condition the remuneration on, referrals of patients outside of the target patient population or business not covered under the value-based arrangement. This proposed safeguard is identical to that included in the proposed care coordination arrangements and substantial downside financial risk safe harbors.

Summary of Final Rule: We are finalizing, without modification, this condition, and relocating it to paragraph 1001.952(gg)(7). Comments received on this topic addressed the requirement as it applied to the value-based safe harbors generally; we did not receive separate comments on this requirement specific to this safe harbor. Consequently, we refer readers to the care coordination arrangements safe harbor section regarding this requirement at III.B.3.f for a summary of applicable comments, our responses, and a more detailed discussion of this standard.

l. Offer or Receipt of Ownership or Investment Interests

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(gg)(4)(iv) that the full financial risk safe harbor would not protect an ownership or investment interest in the VBE or any distributions related to an ownership or investment interest, and we solicited comments on this approach and, in particular, any operational challenges this approach might present.

Summary of Final Rule: We are finalizing, without modification, this condition and relocating it to paragraph 1001.952(gg)(5)(ii).

Comment: Similar to the substantial downside financial risk safe harbor, several commenters opposed this condition or, alternatively, requested that OIG clarify that it does not intend to prohibit VBE participants from establishing a corporate structure for a VBE in which participants may each receive some equity. A commenter asserted that, without modifying or clarifying OIG's approach to protecting an ownership or investment interest in the VBE or any distributions related to an ownership or investment interest, the safe harbor would unnecessarily restrict individuals and entities from dictating the corporate structure of the VBEs they elect to create. Another commenter stated that the safe harbor should protect ownership or investment interests where payors require that only a single entity, as opposed to a collection of entities, enter into the full financial risk arrangement.

Response: We do not view protection for ownership or investment interests in a VBE as fundamental to parties entering into value-based arrangements under this safe harbor and decline to protect them under this safe harbor. We are concerned that, were we to protect such remuneration streams, such protection would serve only to align financial interests of the parties without benefitting the payor or target patient population. Remuneration in the form of ownership or investment interests presents a higher risk that offers of investment interests or returns on investment will be for the purpose of inducing referrals, without attendant care coordination, quality, or cost-reduction benefits related to the target patient population or the payor. Parties seeking to protect a particular ownership or investment interest may look to existing safe harbors (e.g., the safe harbor for investment interests found at paragraph 1001.952(a)), and the advisory opinion process remains available.

Regardless of whether a payor requires that a single entity, as opposed to a collection of entities, enter into a contract or a value-based arrangement to assume full financial risk, the safe harbor itself requires a single individual or entity to contract or enter into a value-based arrangement with the payor to assume full financial risk (e.g., the VBE may directly contract with the Start Printed Page 77779payor or a single VBE participant (other than a payor) may act on behalf of the VBE to contract with the payor). If a VBE participant that has assumed full financial risk as an agent of the VBE seeks to share its risk with other parties to the VBE, the safe harbor is available to protect such risk-sharing arrangements, provided they meet all requirements of the safe harbor.

m. No Remuneration From Individuals or Entities Outside the Applicable VBE

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(gg)(4)(v) that the full financial risk safe harbor would not protect any remuneration funded by, or otherwise resulting from contributions by, any individual or entity outside of the applicable VBE.

Summary of Final Rule: We are not finalizing this proposed requirement, based on concerns—raised by commenters in the context of the same provision in the care coordination arrangements safe harbor—that this condition could inadvertently restrict the exchange of beneficial remuneration that we intend to protect. While we are not finalizing this condition, we emphasize that remuneration exchanged outside of a value-based arrangement would not be protected by any of the value-based safe harbors. We did not receive separate comments on this requirement specific to this safe harbor. Consequently, we refer readers to the care coordination arrangements safe harbor and substantial downside financial risk safe harbor sections at III.B.3.e and III.B.4.j discussing this requirement for a summary of applicable comments, our responses, and a more detailed explanation of our rationale for not finalizing this standard.

n. Utilization Review and Quality Assurance Programs

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(gg)(6) that the VBE must provide or arrange for an operational utilization review program and a quality assurance program that protects against underutilization and specifies patient goals, including measurable outcomes, where appropriate. We noted that such proposed conditions would mirror those found in the managed care safe harbor at paragraph 1001.952(u) but explained that we were considering other ways to frame these proposed conditions to reflect the utilization review and quality assurance mechanisms in place today.

Summary of Final Rule: We are finalizing, with modifications, this proposed condition at paragraph 1001.952(gg)(8). Based on public comment, the modifications afford parties additional flexibility in conducting quality and utilization reviews. Specifically, VBEs seeking protection under this safe harbor must provide or arrange for a quality assurance program for services furnished to the target patient population that: (i) Protects against underutilization of items and services furnished to the target patient population; and (ii) assesses the quality of care furnished to the target patient population. We are not finalizing the proposed requirement to have an operational utilization review program.

Comment: Some commenters supported our proposal to require the VBE to provide or arrange for an operational utilization review program and a quality assurance program, while another commenter requested that OIG reconsider this requirement, stating that VBEs are not the equivalent of a managed care organization and that operational utilization review programs and quality assurance programs are robust, expensive programs that require significant lead time to implement. A couple of commenters asked OIG to explain the term “operational,” and a commenter specifically asked whether a utilization review program that is used only on an annual basis would be considered “operational.” Another commenter asked whether an existing utilization review program of a contracting payor or provider would meet this requirement.

Response: We are revising the terminology used in order to afford parties additional flexibility consistent with our intent that a VBE provide or arrange for a program to protect against underutilization and specify patient goals. Specifically, VBEs must provide or arrange for a quality assurance program for services furnished to the target patient population that: (i) Protects against underutilization of items and services furnished to the target patient population; and (ii) assesses the quality of care furnished to the target patient population. Such a quality assurance program may include an operational utilization review program and specify patient goals; however, an operational utilization review program is no longer a requirement. Pursuant to this revised standard, parties may determine what activities and mechanisms are most suitable to assess the quality and appropriateness of care furnished to the target patient population, provided such mechanisms meaningfully protect against underutilization and assess the quality of care furnished to the target patient population.

The flexibility we are providing to parties is in recognition that VBEs may be subject to varying requirements related to quality assurance programs based on State law or the terms of its value-based arrangement with the payor. Notwithstanding this additional flexibility, as with the condition proposed in the OIG Proposed Rule, this revised requirement effectuates our intent that a VBE provide or arrange for a program to protect against underutilization and specify patient goals.

In response to commenters' specific inquiries, we acknowledge that, even with the additional flexibility afforded by our revisions to this condition, quality assurance programs are robust and potentially expensive undertakings. Thus, we are highlighting that this condition does not mandate that VBEs establish such review programs themselves; the VBE may also arrange for such programs. For example, VBEs may look to payors with which they are contracting or entering into value-based arrangements to assume full financial risk to share, or fully assume, this responsibility. In such circumstances, the VBE may reasonably rely on the payor's existing quality assurance program infrastructure provided it meets all safe harbor requirements.

o. No Marketing of Items or Services or Patient Recruitment Activities

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(gg)(7) to exclude safe harbor protection for remuneration exchanged pursuant to a value-based arrangement that included marketing items or services to patients or engaging in patient recruitment activities. We proposed to interpret this condition consistent with our interpretation of this same proposed requirement in the care coordination arrangements safe harbor.

Summary of Final Rule: We are finalizing, with modifications, the limitation on marketing and patient recruitment at paragraph 1001.952(gg)(5)(iii). Rather than prohibiting all marketing and patient recruitment activities, we modified the provision to prohibit the exchange or use of remuneration for the purpose of marketing items or services furnished by the VBE or VBE participants to patients or for the purpose of patient recruitment activities. We received only one comment on this requirement specific to this safe harbor, detailed below. We refer readers to the care coordination arrangements safe harbor's discussion regarding this requirement at section III.B.3.j for a summary of applicable comments, our responses, additional Start Printed Page 77780explanation regarding this standard, and a rationale for the modification we are making.

Comment: Without further explaining its position, a commenter stated that there is no need for any marketing or patient recruitment limitations in the full financial risk safe harbor.

Response: Consistent with the other value-based safe harbors, we have modified the marketing requirement to be more limited in scope but to preclude protection for remuneration exchanged or used for the purpose of marketing items or services furnished by the VBE or a VBE participant to patients or patient recruitment activities. Although we agree that the VBE's assumption of full financial risk generally warrants greater flexibility in this safe harbor, we continue to believe that a prohibition on certain marketing and patient recruitment practices is an important fraud and abuse safeguard across all three value-based safe harbors for the reasons set forth in the discussion of the marketing condition in the care coordination arrangements safe harbor. In particular, with respect to the full financial risk safe harbor, we are concerned that remuneration under the value-based arrangement may be exchanged or used to engage in inappropriate patient recruitment activities to incentivize, for example, beneficiary enrollment in, or alignment to, a particular health plan.

p. Materials and Records

Summary of OIG Proposed Rule: We proposed at paragraph 1001.952(gg)(8) that the VBE or its VBE participants maintain documentation sufficient to demonstrate compliance with the safe harbor's conditions and to make such records available to the Secretary upon request. We solicited comments regarding whether we should require parties to maintain materials and records for a set period of time (e.g., at least 6 years or 10 years). We proposed to interpret this requirement as described in the OIG Proposed Rule's preamble discussing the proposed care coordination arrangements safe harbor.

Summary of Final Rule: We are finalizing, with modification, the materials and records requirement at paragraph 10001.952(gg)(9). The final rule includes new language to specify that, for a period of at least 6 years, the VBE or its VBE participants must maintain materials and records sufficient to establish compliance with the conditions of the safe harbor. We did not receive separate comments on this requirement specific to this safe harbor; the comments received related to the value-based safe harbors generally. Consequently, for a more detailed discussion and a summary of and responses to the comments received regarding this requirement, we refer readers to section III.B.3.n discussing the materials and records condition in the care coordination arrangements safe harbor.

q. Downstream Arrangements

Summary of OIG Proposed Rule: In the preamble, we noted that the proposed full financial risk safe harbor would apply only to remuneration exchanged between a VBE and a VBE participant pursuant to a value-based arrangement. We stated that the proposed safe harbor would not protect remuneration exchanged between or among VBE participants that are part of the same VBE, between a VBE participant and a downstream contractor, or between two downstream contractors. We explained that we were concerned about extending safe harbor protection to remuneration exchanged pursuant to these arrangements because the downstream parties may have assumed little or no financial risk, which could result in fee-for-service incentives, and therefore, a risk of overutilization or other traditional harms associated with fee-for-service payments. We solicited comments on a variety of alternate approaches to protecting remuneration exchanged pursuant to certain downstream arrangements (e.g., additional safeguards in either the full financial risk safe harbor or another safe harbor).

Summary of Final Rule: We are finalizing, without modification, the requirement that the exchange of remuneration must be between the VBE and a VBE participant in the introductory paragraph to 1001.952(gg). We are not extending safe harbor protection to remuneration that passes from one VBE participant to another VBE participant or a downstream contractor. As articulated in the substantial downside financial risk safe harbor section discussing downstream arrangements, we are limiting safe harbor protection to the exchange of remuneration between the VBE and a VBE participant because we believe it is important to provide the protection and regulatory flexibility the risk-based safe harbors afford only where the VBE is a party to the value-based arrangement. We are concerned that, without the VBE as a party, where neither party has assumed full financial risk and may continue to bill the applicable payor on a fee-for-service-basis, there is a heightened concern about traditional FFS fraud and abuse risks. We note that a VBE participant seeking to exchange remuneration with another VBE participant may look to the care coordination arrangements safe harbor or other safe harbors, such as the personal services and management contracts and outcomes-based payments safe harbor.

For a summary of the comments received regarding this limitation, our responses, and a detailed explanation regarding our decision not to extend this safe harbor to downstream arrangements, we refer readers to our discussion of the parallel provision in the substantial downside financial risk safe harbor in section III.B.4.p. We did not receive comments on this requirement specific to this safe harbor that diverged from the comments summarized in the section describing the parallel provision in the substantial downside financial risk safe harbor.

r. Potential Additional Safeguards

Summary of OIG Proposed Rule: We stated in the preamble that we were considering adopting two additional safeguards for purposes of the final rule: A cost-shifting prohibition and a requirement that parties submit information to the Department regarding their value-based arrangement.

Summary of Final Rule: We are not finalizing the two additional proposed safeguards. Similar to the substantial downside financial risk safe harbor, we are not including a cost-shifting prohibition, in recognition that the assumption of full financial risk is intended to drive a reduction in costs, which may include Federal health care program costs. We did not receive comments on this alternative condition specific to this safe harbor that diverged from the comments summarized in section III.B.4.q of the substantial downside financial risk safe harbor preamble, and we refer readers to that section for a summary of comments received and our responses.

We are likewise not finalizing a requirement for parties to submit information to the Department for the reasons previously articulated in the care coordination arrangements safe harbor's discussion of this alternative safeguard, including minimizing administrative burden. We did not receive comments on this condition specific to this safe harbor that diverged from the comments previously summarized in section III.B.4.p of the care coordination arrangements safe harbor preamble, and we refer readers to that section for a summary of comments and our responses.

We received comments requesting additional safeguards to the full financial risk safe harbor that we did not Start Printed Page 77781propose, and we summarize such comments below.

Comment: Several commenters supported the addition of other safeguards that we did not propose in the preamble to the full financial risk safe harbor. For example, some commenters supported a requirement for value-based arrangements to include objective and quantifiable outcome measures, and a commenter asserted that the outcome measures, the methodology for measuring them, and how the measures affect cost should be transparent to the public. Other commenters suggested that we include the requirement that neither the value-based arrangement nor VBE participants limit parties' ability to make decisions in the best interest of their patients.

Response: We are not requiring, in the context of the full financial risk safe harbor, that value-based arrangements include outcome measures (or any public transparency requirements related to such outcome measures) because we did not propose this as a requirement, and we do not believe that such a requirement would appreciably mitigate risk, given other conditions of the safe harbor. However, we note that we are separately requiring that the VBE provide or arrange for a quality assurance program for services furnished to the target patient population that: (i) Protects against underutilization of items and services furnished to the target patient population; and (ii) assesses the quality of care furnished to the target patient population. While outcome measurement is not a requirement of this safe harbor, as a practical matter, we anticipate that an assessment of the quality of care furnished to the target patient population pursuant to a quality assurance program may include quantitative or qualitative measures assessing, for example, performance on certain outcome measures. We did not propose and are not finalizing a requirement that neither the value-based arrangement nor VBE participants limit the parties' ability to make decisions in the best interest of their patients, nor do we think it would be necessary given other protections in the safe harbor.

6. Arrangements for Patient Engagement and Support To Improve Quality, Health Outcomes, and Efficiency (42 CFR 1001.952(hh))

Summary of OIG Proposed Rule: We proposed to establish a new safe harbor at paragraph 1001.952(hh) to protect remuneration in the form of patient engagement tools and supports furnished directly by VBE participants to patients in a target patient population. The tools and supports could not be funded by anyone outside the VBE (proposed paragraph 1001.952(hh)(2)). We proposed to protect only in-kind preventive items, goods, or services, or in-kind items, goods, or services, such as health-related technology, patient health-related monitoring tools and services, or supports and services designed to identify and address a patient's social determinants of health (proposed paragraph 1001.952(hh)(3)(i)). We proposed that protected remuneration would need to have a direct connection to the coordination and management of care (proposed paragraph 1001.952(hh)(3)(ii)) and advance one of six enumerated goals related to patient care (proposed paragraph 1001.952(hh)(3)(vii)). The proposal included a $500 cap on the amount of protected remuneration a VBE participant could furnish to a patient on an annual basis, with an exception based on the good faith, individualized determination of a patient's financial need (proposed paragraph 1001.952(hh)(5)). The proposed safe harbor included several additional conditions, such as a requirement that provision of a tool or support would not result in medically unnecessary or inappropriate items or services reimbursed in whole or in part by a Federal health care program. Other proposed conditions are summarized more fully below.

Summary of Final Rule: We are finalizing, with modifications, the patient engagement and support safe harbor at paragraph 1001.952(hh). The bases for the modifications are explained the preamble sections that follow. In particular, we have revised the language at paragraph 1001.952(hh)(3)(i) to remove the specific illustrative categories of health-related technologies, patient health-related monitoring tools and services, and supports and services designed to identify and address a patient's social determinants of health. With respect to preventive items, goods, and services, we have moved the element of prevention to the list of enumerated goals that can be advanced by protected remuneration at paragraph 1001.952(hh)(3)(vi). The final language at paragraph 1001.952(hh)(3)(i) articulates our policy to be agnostic as to the types of in-kind tools and supports that can be protected by the safe harbor if all safe harbor conditions are met.

Further, we are finalizing at paragraph 1001.952(hh)(1) a list of entities that may not furnish or otherwise fund or contribute to protected tools and supports under this safe harbor, which includes manufacturers, distributors, and wholesalers of pharmaceuticals; pharmacy benefit managers; laboratory companies; pharmacies that primarily compound drugs or primarily dispense compounded drugs; manufacturers of devices and medical supplies (unless the tool or support is digital health technology); entities or individuals that sell or rent DMEPOS (other than a pharmacy, a manufacturer of a device or medical supply, or a physician, provider, or other entity that primarily furnishes services); medical device distributors and wholesalers; and physician-owned medical device companies. Similar to our approach in the care coordination arrangements safe harbor at paragraph 1001.952(ee), a tool or support furnished or funded by a manufacturer of a device or medical supply (as defined in paragraph 1001.952(ee)(14)) is eligible for safe harbor protection only if the tool or support is digital health technology (defined at paragraph 1001.952(ee)(14)). As explained at section III.B.2.e above, we are listing ineligible entities in each safe harbor rather than excluding them in the definition of VBE participant.

The final safe harbor protects only in-kind remuneration. The final safe harbor includes at paragraph 1001.952(hh)(5) the proposed $500 annual, aggregate cap provision (without the proposed exception for tools and supports above the cap furnished based on good faith, individualized determinations of a patient's financial need). The final safe harbor also includes at paragraph 1001.952(hh)(3)(iv) the proposed requirement that the provision of a tool or support not result in medically unnecessary or inappropriate items or services reimbursed in whole or in part by a Federal health care program. Additional conditions of the final safe harbor are summarized by topic in discussions that follow.

a. General Comments

Comment: Among the commenters offering general feedback on the proposed safe harbor, some commenters supported the proposed safeguards, others supported adding some or all of the additional considered safeguards on which we solicited comments, and others stated that certain proposed or additional safeguards would impose a significant administrative burden on stakeholders seeking protection under the safe harbor. A number of comments noted that the safe harbor would promote patient engagement, encourage adherence to treatment, and improve outcomes. Other commenters requested Start Printed Page 77782specific changes or clarifications to various proposals.

Response: We appreciate the commenters' suggestions regarding the scope and impact of this safe harbor, including the conditions we proposed and considered. As discussed below, we are finalizing a number of the proposed conditions, in some cases with modifications suggested by commenters. We also are removing or modifying some conditions in response to comments and adding some of the proposed conditions for which we solicited comments.

b. Entities Ineligible for Protection

Summary of OIG Proposed Rule: We proposed to protect only tools and supports furnished by VBE participants, as defined in proposed paragraph 1001.952(ee)(12). This proposed definition excluded pharmaceutical manufacturers, laboratories, and manufacturers, distributors, and suppliers of DMEPOS. As a result, these entities would be ineligible to use this proposed safe harbor. The entities we proposed to make ineligible to participate in a VBE are described in more detail in section III.B.2.e of this preamble. We also indicated that the final rule might exclude additional entities from furnishing patient engagement tools and supports, including physician-owned device companies, compounding pharmacies, and medical device and supply manufacturers, wholesalers, and distributors.[55] We solicited comments on several alternative frameworks for protected offerors and conditions related to protected offerors under this safe harbor, including whether the offeror should assume at least some downside financial risk.

Summary of Final Rule: As explained in section III.B.2.e of thi