Value-based Health Care: Fraud & Abuse Laws

June 13, 2017
3 minutes

Michael Lampert, Ropes & Gray health care partner, discusses fraud and abuse law application to value-based health care arrangements.

Much has been made about how the fraud and abuse laws, which were designed in order to prevent abusive arrangements that exploited the historic reimbursement models, can or should be applied in a value-based world and whether they prevent or stand as impediments to developing new value-based arrangements between providers and payers, medical device companies and payers, pharma companies and payers, what have you. I take a little bit of a contrarian view on this – my view is that the laws don’t stand as impediments, that fraud and abuse laws don’t stand as impediments to developing new value-based arrangements.

When the Affordable Care Act developed Accountable Care Organizations in 2010, there were waivers that were developed for those who formed them under the Medicare statute and those waivers were intended to facilitate payments between providers who participated in Medicare ACOs and the Medicare ACOs themselves. Now providers have put together ACOs that don’t serve just Medicare beneficiaries, but that also serve beneficiaries in Blue Cross, and in Cigna, and every other commercial plan. Now the same type of arrangement is in place on the commercial side and so if I am a physician, I might treat a Medicare beneficiary at 10:00 and a commercial enrollee at 10:20, and I might have a relatively similar reimbursement arrangement with the commercial insurer as I do with Medicare. I may operate under both a commercial ACO together with my health system and a Medicare ACO under my health system with exactly the same revenue arrangements for the two. The waivers were developed under the Medicare ACOs, because the ACOs were focused on Medicare and because the fraud and abuse laws focused squarely in the Medicare program, but we have all seen the fraud and abuse laws ultimately have a somewhat broader penumbra – that they hit commercial arrangements as well, but were certainly comfortable that commercial ACOs operating like Medicare ACOs without the benefit of a waiver, none the less are operating within the law because fundamentally if one structures a value-based system to reward value, not to reward volume, one is going to be doing something that the fraud and abuse laws are not intended to prevent. The fraud and abuse laws are intended to prevent financial incentives that drive volume up, but fundamentally value-based incentives aren’t intended to drive volume up, they’re intended to drive value up, which often drives volume down – and so I don’t think there is a conflict between what the fraud and abuse laws prevent and what parties have to do in order to succeed in a value-based world.

If one is operating in a value-based arrangement for its true objective to increase value, that’s something that the fraud and abuse laws say one should do – it’s not paying money to induce the delivery of services. Now of course, money motivates, and it can motivate for the better – and so when entering into a value-based arrangement, one may use financial incentives that would look a little bit funny in the old world because they might look like they are intended in order to have a provider delivering and care in ones own system. That can certainly present questions that people need to think through in the fraud and abuse laws, but if they’re fundamentally being paid – if the incentives are fundamentally being paid in order to reward high quality, in order to reward the behaviors that lead to higher value care, they can be structured in compliance with the laws, which is what makes me somewhat of a contrarian in saying that it’s not necessary to change the laws in order to be able to succeed in value-based care – we can succeed in value-based care paying attention to the laws as they exist.