The healthcare industry’s transition from fee-for-service to value-based care has fundamentally altered how providers structure financial relationships. The Stark Law and Anti-Kickback Statute (AKS), two pillars of federal healthcare fraud and abuse prevention, have evolved to accommodate innovative care delivery models while maintaining safeguards against improper referrals and kickbacks. For hospitals, physician groups, health systems, accountable care organizations, and healthcare executives, understanding these regulatory changes is essential to participating in value-based arrangements without incurring compliance risk.
Recent regulatory updates from the Centers for Medicare & Medicaid Services (CMS) and the Office of Inspector General (OIG) have introduced new exceptions and safe harbors specifically designed for value-based care. However, the legal landscape remains complex, and the consequences of noncompliance—including False Claims Act liability, program exclusion, and criminal prosecution—demand careful attention to regulatory requirements and proactive compliance strategies.
This article examines the latest Stark Law and Anti-Kickback Statute changes, explores the new value-based care exceptions and safe harbors, and provides practical guidance for healthcare organizations structuring compliant financial arrangements.
Understanding Stark Law and Anti-Kickback Changes in 2025
The Stark Law, formally known as the physician self-referral law, prohibits physicians from referring Medicare patients for designated health services (DHS) to entities with which they have a financial relationship, unless an exception applies. DHS includes clinical laboratory services, imaging, physical therapy, and numerous other services. The Stark Law is a strict liability statute, meaning violations occur regardless of intent, and noncompliance results in denial of payment, refund obligations, and substantial civil monetary penalties.
The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remuneration to induce or reward referrals of federal healthcare program business. Unlike Stark Law, AKS requires proof of intent, but violations carry severe consequences including criminal penalties, civil monetary penalties, and exclusion from federal healthcare programs. A single remuneration arrangement that violates AKS can taint all claims submitted for services resulting from improper referrals, potentially triggering False Claims Act liability.
Both statutes include exceptions and safe harbors—regulatory provisions that permit certain financial arrangements if specific requirements are met. Historically, these exceptions and safe harbors were designed for traditional fee-for-service arrangements and created barriers to value-based care models emphasizing quality, coordination, and cost efficiency over service volume.
The Regulatory Shift: New Value-Based Care Exceptions and Safe Harbors
Recognizing that legacy fraud and abuse regulations impeded healthcare transformation, CMS and OIG issued comprehensive rule changes in 2020 creating new value-based exceptions to Stark Law and safe harbors to AKS. These provisions became effective in 2021 and continue to shape how healthcare organizations structure value-based arrangements.
The regulatory framework establishes three tiers of value-based arrangements based on the level of financial risk assumed by participants. Each tier provides different levels of regulatory flexibility, with greater risk-sharing permitting more liberal compensation arrangements.
- Full Financial Risk: Arrangements where value-based enterprise (VBE) participants assume “full financial risk” for patient care receive maximum regulatory flexibility. In these arrangements, compensation can account for the value or volume of referrals, provided the arrangement meets other requirements. Full financial risk typically involves capitated payment models where providers accept fixed payments for defined patient populations regardless of service utilization.
- Meaningful Downside Financial Risk: Arrangements requiring participants to assume “meaningful downside financial risk” receive intermediate flexibility. Compensation cannot directly account for referral volume or value, but participants have greater latitude in structuring quality-based payments and shared savings. Meaningful downside risk requires participants to be financially responsible for at least 10% of losses, creating incentive alignment without requiring full capitation.
- No Financial Risk: Even arrangements involving no financial risk can qualify for value-based exceptions and safe harbors if they meet specific requirements. These arrangements must be directed toward coordinating and managing care, improving quality, or achieving cost efficiencies. Compensation must not account for referral volume or value and must be consistent with fair market value standards.
Key Requirements for Value-Based Arrangements
Healthcare organizations pursuing value-based exceptions and safe harbors must satisfy multiple requirements designed to ensure arrangements serve legitimate care improvement purposes rather than disguised referral payments.
- Value-Based Enterprise: Participants must be part of a value-based enterprise, defined as two or more VBE participants collaborating to achieve at least one value-based purpose for a target patient population. The VBE must have a governing body responsible for oversight, a written description of arrangements, and processes for monitoring quality and outcomes.
- Value-Based Arrangements: Financial arrangements between VBE participants must be memorialized in signed writing specifying terms, value-based activities, target patient population, type and extent of remuneration, outcome measures, and methodology for determining remuneration. Arrangements must be commercially reasonable and serve value-based purposes including coordinating and managing care, improving quality, appropriately reducing costs, or transitioning from fee-for-service to value-based care.
- Target Patient Population: Value-based arrangements must define the patient population to which value-based activities apply. The population must be described in writing and can be defined geographically, by payer, or by medical condition, but cannot be determined in a manner that takes into account referral volume or value.
- Outcome Measures: Arrangements must include one or more legitimate outcome measures against which the recipient’s performance will be assessed. Outcome measures must be objective, measurable, selected based on clinical evidence or credible medical support, and monitored during the arrangement term. This requirement ensures arrangements drive actual improvements rather than simply transferring value.
- Monitoring and Oversight: VBE participants must establish processes to monitor and assess whether value-based activities achieve intended outcomes. This includes tracking performance against outcome measures, evaluating whether arrangements contribute to value-based purposes, and making adjustments when arrangements fail to produce desired results.
Commercial Reasonableness and Fair Market Value
Even within value-based exceptions and safe harbors, compensation must satisfy commercial reasonableness and fair market value requirements. Commercial reasonableness means the arrangement makes sense from a business perspective independent of referrals. Healthcare organizations must document legitimate business rationales for arrangements and ensure compensation aligns with services provided.
Fair market value compensation reflects the value in an arm’s length transaction without considering referral volume or value. Determining fair market value in value-based arrangements presents challenges because traditional valuation methods may not capture the value of care coordination, quality improvement, or cost reduction activities. Healthcare organizations should engage qualified valuation experts and document the methodology supporting compensation determinations.
How Stark and AKS Impact Physician Compensation Models
Hospital employment of physicians and physician compensation arrangements remain high-risk areas under Stark Law and AKS. Value-based exceptions provide additional flexibility for physician compensation tied to quality metrics, patient satisfaction, and cost efficiency, but organizations must carefully structure these arrangements.
Physician compensation formulas can include quality bonuses, shared savings distributions, and withholds based on performance metrics, provided they satisfy exception requirements. However, productivity-based compensation tied to volume of referrals or services must comply with traditional Stark exceptions and cannot rely solely on value-based provisions unless the arrangement involves appropriate financial risk.
Healthcare organizations employing physicians should regularly review compensation arrangements to ensure continued compliance as regulatory guidance evolves. Compensation surveys, valuation opinions, and documentation supporting business rationale provide evidence of good faith compliance efforts.
Updated Stark Law Exceptions for Cybersecurity and EHR Technology
Beyond value-based arrangements, recent Stark Law changes expanded exceptions for cybersecurity technology and electronic health records (EHR). Healthcare organizations can provide cybersecurity technology and services to physicians and other referral sources without violating Stark Law if arrangements meet specific conditions.
The cybersecurity exception permits donation of cybersecurity technology and services to protect electronic health information, addressing the growing threat landscape facing healthcare organizations. The EHR exception was updated to remove the sunset provision and modify certain requirements, facilitating interoperability and information exchange.
Practical Steps for Maintaining Value-Based Care Compliance
Healthcare organizations implementing value-based arrangements should adopt comprehensive compliance strategies addressing structure, documentation, monitoring, and risk mitigation.
- Legal Review: All value-based arrangements should undergo legal review by counsel experienced in healthcare regulatory compliance. Legal analysis should confirm exception or safe harbor applicability, identify risk areas, and recommend structural modifications to enhance compliance.
- Written Agreements: Arrangements must be documented in detailed written agreements satisfying regulatory content requirements. Agreements should define value-based purposes, target patient populations, value-based activities, outcome measures, remuneration methodology, monitoring processes, and term. Template agreements should be avoided in favor of customized documentation reflecting specific arrangement terms.
- Valuation Documentation: Fair market value determinations should be supported by qualified valuation opinions considering relevant market data, services provided, and regulatory constraints. Valuation methodologies should be documented and updated periodically.
- Performance Monitoring: Organizations must implement systems to track outcome measures, monitor arrangement performance, and document results. Monitoring should include regular reporting to governance bodies and processes for terminating arrangements that fail to achieve value-based purposes.
- Ongoing Training: Participants in value-based arrangements require training on compliance obligations, monitoring requirements, and prohibitions on considering referral volume or value in compensation determinations.
Final Takeaways for Navigating Stark and AKS Changes in 2025
Stark Law and Anti-Kickback Statute changes have opened pathways for healthcare organizations to participate in value-based care while maintaining fraud and abuse protections. However, these arrangements require careful structuring, comprehensive documentation, and ongoing monitoring to ensure compliance with complex regulatory requirements.
Our Healthcare Legal Team at Jimerson Birr, P.A., assists clients with all aspects of Stark Law and Anti-Kickback Statute compliance, from reviewing physician compensation arrangements and value-based contracts to conducting compliance audits and defending government investigations. We stay current with regulatory developments and provide practical guidance balancing innovation with risk management.
If your organization is considering value-based arrangements or needs review of existing physician financial relationships, we invite you to contact our Healthcare Legal Team at Jimerson Birr, P.A. Whether you operate a hospital system, physician practice, accountable care organization, or healthcare services company, we can help you navigate Stark Law and Anti-Kickback Statute requirements and structure compliant arrangements supporting your strategic objectives.