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April 22, 2021 - United States, Digital Health, Healthcare, Regulatory

Is 2021 the Value-Based and Shared Savings Revolution?

Is 2021 the Value-Based and Shared Savings Revolution?

By now you are likely aware of the new safe harbor provisions of the federal anti-kickback statute (AKS), which the U.S. Office of Inspector General (OIG) finalized as of January 19, 2021. Among other changes to the AKS regulations, OIG created new safe harbors for: (i) value-based arrangements and (ii) arrangements related to the Centers for Medicare & Medicaid Services (CMS) sponsored model arrangements and modeled patient incentives. These new safe harbors emphasize the idea of value-based care and involve some level of risk sharing between entities in the provision of health care or services adjacent to health care.

Prior to the promulgation of these new safe harbors, parties found it difficult to creatively structure arrangements to neatly fit into an AKS safe harbor. However, since the beginning of the new year, and the finalization of the new safe harbors, we have witnessed a sharp uptick in these types of value-based arrangements, as health care providers, medical device companies, and insurers attempt to get more creative with partnerships and their delivery of health care services. Accordingly, in order to take advantage of the more flexible pricing structures that these safe harbors allow, we expect to continue to see these types of arrangements increase.

While the CMS-sponsored model safe harbor clearly maps out specific models adopted by CMS, the value-based arrangement safe harbors allow parties to innovate in their relationships to provide care that aligns with a “value-based purpose.” Under the AKS safe harbor language, value-based purposes include: coordinating and managing the care of a target patient population; improving the quality of care for a target patient population; appropriately reducing the costs to or growth in expenditures of payors without reducing the quality of care for a target population; and 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.

Notably, OIG prohibits medical device manufacturers from utilizing two of the new value-based safe harbors: value-based arrangements with substantial downside risk and value-based arrangements with full financial risk safe harbors. However, there are still two additional value-based safe harbors that medical device manufacturers may employ. Specifically, medical device manufacturers can utilize: (i) the safe harbor for care coordination arrangement to improve quality, health outcomes, efficiency, and patient engagement; and (ii) the safe harbor for support to improve quality, health outcomes and efficiency.

The care coordination safe harbor focuses on digital health tools. The AKS regulations define digital health tools 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 enable the operation of the item or service for that purpose.” Effectively, this safe harbor allows a company wider flexibility in structuring arrangements, particularly for new products that may assist health care providers with care coordination and provide higher quality health care services at lower costs, particularly where these products may be untested and could therefore benefit from a risk-sharing arrangement until the true impact and value of the products becomes known.

For the new AKS safe harbors pertaining to substantial downside and full financial risk, we expect to see insurance companies and various types of health care providers employ new digital health tools when providing health care services. These companies will test the tools against patient populations to examine whether the tools increase the quality of health care services provided while simultaneously lowering health care costs. When risk sharing, both sides have skin in the game to incentivize providing high-quality care at lower costs.

With the influx of innovation and new health care delivery models, it is important to note that all of the new AKS value-based safe harbors contain guardrails to ensure that health care providers and ancillary companies enter these arrangements for a value-based purpose; health care providers do not ration medically necessary care; parties do not prevent health care providers from making decisions in the best interests of their patients; parties do not limit patients’ preferences for different practitioners, providers, or suppliers; and that arrangements have clear outcome-based benchmarks and measures for evaluating the value-based arrangements.