AdvaMed Proposes New Safe Harbors to the Anti-Kickback Statute for Value-Based Pricing Arrangements

By Alixandra Cossette and Sheva Sanders

AdvaMed, the trade association representing manufacturers of medical devices, diagnostic products, digital health technologies and health information systems, proposed three new safe harbors to the Anti-Kickback Statute (AKS); one each for value-based pricing arrangements, value-based warranty arrangements, and value-based risk sharing arrangements.

In an October 26, 2018 letter to the Department of Health and Human Services Office of Inspector General, AdvaMed argues that while the federal government has shown a strong interest in transitioning the health care system away from the traditional fee-for-service system that rewards volume, towards a value-based care system that rewards outcomes, the safe harbors to the AKS have not kept pace. AdvaMed observes that in the absence of applicable safe-harbors, some value-based arrangements could be viewed as triggering the AKS, and inviting possible qui tam actions. AdvaMed's three proposed safe harbors endeavor to alleviate these concerns.  

The letter catalogues the many ways in which the current safe harbors may be obsolete, explaining that they were designed to guard against abuses of a reimbursement system involving different incentives than are currently in play. It explains that “value-based arrangements frequently involve a suite of services, software and/or equipment which are provided in conjunction with a given product or service to achieve the targeted outcome(s). These product and services offerings are necessary to realize the goals of value-based care.” It cites a number of features of the current safe harbors and related regulatory doctrine as potentially insufficient to protect, or at odds with, such a model. For example, the letter notes that:

  • Value-based payment models often involve the provision of a suite of products and services which may be reimbursed by different payors or under different methodologies, while the discount safe harbor's “same methodology” requirement does not allow for protection of discounts in such circumstances.
  • Value-based payment models often involve the provision of “support services,” and the “no independent value” doctrine, which holds that some services are effectively a part of the reimbursable product(s) to which they relate, and as such are not remuneration within the meaning of the statute, is not sufficiently robust to clearly protect the provision of these services.
  • Value-based payment models often measure incentives on a long-term basis, while the discount safe harbor requires that rebates be earned in a single year.
  • Value-based payment models often measure compensation pursuant to a formula, but the the personal services safe harbor does not allow for formula based compensation.

The letter also voices more general dissatisfaction with some of the authorities and theories relating to the AKS.

As a solution, AdvaMed proposes safe harbors, one each for pricing, warranties and risk sharing arrangements, each of which clearly protects a conforming arrangement. AdvaMed's proposed safe harbor for value-based pricing arrangements protects adjustments, including rebates, meant to take into account clinical and/or cost outcomes in order to better promote quality care rather than volume of care. AdvaMed's proposed safe harbor for warranties includes a warranty price adjustment and/or warranty replacement items and/or services. AdvaMed's final safe harbor protects value-based risk sharing arrangements. These types of arrangements require a written agreement on identified and measurable outcomes, processes and procedures associated with optimized patient centered care, and an assumption of financial risk to achieve agreed upon goals.

While adoption of these safe harbors would increase certainty and remove the "chill,” even without them many value-based arrangements can be structured for AKS compliance and defensibility.  

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