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Modifications to the Personal Services and Management Contracts Safe Harbor

December 2, 2020

In the recently released Anti-Kickback Statute final rule, the Office of the Inspector General (the “OIG”) finalized its proposed modifications to the personal services and management contracts safe harbor located at 42 C.F.R. § 1001.952(d) to be effective January 19, 2021.  The Anti-Kickback Statute final rule in PDF format can be found here

Modifications to Existing Safe Harbor

The OIG revised the personal services and management contracts safe harbor to remove the current requirement that the aggregate compensation for an agreement to be paid over the term of the agreement be set out in advance and to replace it with a requirement that only the methodology for determining the compensation to be paid over the term of the agreement need be set in advance.  This change brings this safe harbor more in line with the Stark Law’s exception for personal services arrangements.  It is now possible to structure an arrangement with hourly rate compensation, or other set, verifiable formulas, to fit within the safe harbor, provided all other standards of the safe harbor are met.  In addition, the OIG also removed the safe harbor requirement that written agreements for periodic, sporadic or part-time arrangements specify the schedule for such intervals. 

Protection of Outcomes-Based Payments

The OIG expanded the existing personal services and management contracts safe harbor to include the protection of certain outcomes-based payment arrangements to be located at § 1001.952(d)(2).  To receive safe harbor protection, the payments must be based on the achievement of legitimate outcome measures that are selected based on clinical evidence or credible medical support and have benchmarks that are used to quantify improvements in, or the maintenance of improvements in, the quality of patient care; a material reduction in costs to or growth in expenditures of payors while maintaining or improving quality of care for patients; or both.  Each outcome measure must be regularly monitored by the parties.  The methodology for determining the aggregate compensation (including any outcomes-based payments) must be set in advance, commercially reasonable, consistent with fair market value and not determined in a manner that directly takes into account the volume or value of referrals or other business generated between the parties.  Outcomes-based payments exclude any payments made directly or indirectly to the same entities ineligible for the new value-based safe harbors including pharmaceutical manufacturers, distributors, or wholesalers; pharmacy benefit managers (PBMs); laboratory companies; compounding pharmacies; certain device manufacturers; and certain durable medical equipment suppliers.  The OIG published this chart as an educational resource on the entities eligible for this safe harbor in addition to the other new value-based safe harbors.