Dive Brief:

• As part of the Trump administration's overhaul of the Stark Law and Anti-Kickback Statute — laws meant to prevent fraud and abuse among physicians and other healthcare providers — medical device manufacturers can take part in certain value-based arrangements with providers with less legal risk than before.
• In particular, device or supply manufacturers are eligible to participate in the arrangements under two safe harbor pathways but only for what HHS calls digital health technologies, among other requirements, according to a final rule out Friday from the HHS Office of Inspector General.
• Industry lobby AdvaMed has not yet commented on the final rules, but has backed revamping the decades-old laws to allow more participation in flexible payment models.

Dive Insight:

The Stark Law and AKS were structured to regulate a predominantly fee-for-service payment system, but HHS and many in the healthcare industry have complained they have actually hindered adoption of more value-based arrangements between providers as the healthcare industry has further embraced this style of payment model.

The pair of final rules, proposed in October 2019, is meant to make it easier for providers to adopt value-based arrangements that coordinate care among different provider types and other members of the industry like medical device manufacturers and suppliers.

Victoria Vaskov Sheridan, a member of the firm Epstein Becker Green, said because the Stark Law is narrower, the AKS changes will be more of a backstop against any potential fraud or abuse that may happen under new arrangements.

"Stark is a strict liability statute, meaning that if your arrangement's not going to fit within this very specific structure for compliance, you violate the law and are subject to enforcement," Sheridan said. "Because of that narrow application, and the potential [for] extreme consequences, CMS didn't take the step to prohibit all of those potential arrangements and instead is looking to the kickback safe harbors and the Anti-Kickback Statute as a backstop in this area in particular."

While the changes from CMS modifying the Stark Law largely pertain to providers, the final rule from HHS OIG that changes anti-kickback regulations outlines several ways that medical device manufacturers can participate in value-based arrangements.

Manufacturers can enter into arrangements through two safe harbors: the care coordination arrangements safe harbor, which requires that in-kind remunerations be made for digital health technology to providers, and the patient engagement and support safe harbor, which allows tools and supports to be given to patients that are digital health technology.

HHS defined digital health technology 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."

Jennifer Michael, who previously worked for HHS in the Office of Counsel to the Inspector General and is now a member of the firm Epstein Becker Green, said it's hard to say what exactly falls under this definition, but hardware like a glucose monitor could be included. Any tools provided, however, would be capped at $500 per year for patients, Michael added.

Other provisions that medical device manufacturers could take advantage of under the new rules are changes regarding warranties. According to the OIG final rule, medical device manufacturers can create a bundled warranty for a collection of items, or items and services together. Services alone cannot be bundled.

This provision allows manufacturers to reimburse providers up to the cost for bundles based on clinical outcomes, according to the final rule.

"It certainly opens the door for a lot more arrangements that previously had not been protected," Michael said. "It does give manufacturers the opportunity to distinguish themselves in the market by saying, 'We've got this suite of products and if you use them together, we're going to guarantee that, for example, your patient doesn't get a post-surgical infection because this is a suite of wound care products and together, we have a really high success rate.'"

The rules are set to take effect Jan. 19, 2021, one day before President-elect Joe Biden is sworn into office, but experts do not believe that the Biden administration will make any major changes, and legal challenges are unlikely

"This rule is different from a lot of other rules in that it's allowing people to do more things; it's not proscriptive," Michael said. "[The final rules] allow you to do things that otherwise might violate the kickback statute or the Stark Law. So, that is always welcome in the industry."