UPDATED Oct. 9, 2019, with comments from press briefing in Minneapolis.

The U.S. Department of Health and Human Services today proposed what it’s describing as a modernization of the physician self-referral law in order to promote value-based healthcare.

The proposed regulatory changes, which are heading into a 75-day public comment period, say the physician self-referral law may actually have a “chilling effect” on the value-based care initiatives. The proposals are meant to provide exceptions for doctors in value-based arrangements.

“Regulatory reform has been a key piece of President Trump’s agenda not just for faster innovation and economic growth, but also better, higher-value healthcare. Our proposed rules would be an unprecedented opportunity for providers to work together to deliver the kind of high-value, coordinated care that patients deserve,” HHS Secretary Alex Azar said in prepared remarks.

During a press briefing at Mayo Clinic Sports Medicine in downtown Minneapolis this afternoon, CMS Administrator Seema Verma spoke of “leaning into innovation, not shying away from it by imposing more government controls.”

Enacted by Congress in 1989 and expanded in 1993, the physician self-referral law prevents doctors from referring Medicare and Medicaid patients for services at other health entities where the doctors or their immediate family members have financial interests. The goal of the law is to prevent physicians from financially gaining from racking up charges with public health insurance providers. Exceptions to the rule reflect the structure of the fee-for-service healthcare system that’s existed in the U.S. for recent decades.

Under the Obama administration and now the Trump administration, however, there’s been a push to use Medicare and Medicaid to transition health providers toward more value-based arrangements where compensation is based on how efficiently and effectively certain patient populations are managed. The move has had major major device companies shifting toward also providing services, collecting data, and even experimenting with more exotic financial arrangements such as offering devices as a subscription or sharing risk with health providers.

The proposed regulations say HHS is considering whether to exclude medical device companies from being considered part of a value-based healthcare enterprise. But the document also says: “Regardless of whether we exclude these suppliers (or any other providers or suppliers) from the definition of ‘VBE participant,’ they may nevertheless be part of a value-based enterprise.”

Medical technology is expected to be part of value-based care arrangements, said HHS deputy secretary Eric Hargan.

“The question – ‘How do the companies themselves participate in this?’ – is a question we want comment on,” Hargan said.

HHS in its news release today listed examples of healthcare activities that might be exempted from the physician self-referral law under the proposed changes:

• A specialty physician practice could share data analytics services with a primary care physician practice in order to better coordinate care of their shared patients;
• To better coordinate care for people discharged from a hospital, a hospital might provide their physicians with care coordinators to ensure follow-up care, access to data analytics systems, and remote monitoring technology;
• A physician practice could provide its patients with smart pillboxes free of charge in order to help them remember to take their medicine, or it could provide a home health aide to teach the patients and their caregivers about the smart pillboxes;
• A local hospital could donate, for free, cybersecurity software to each physician that refers patients to its hospital;
• A nephrologist, dialysis facility, or other health providers could furnish end-stage kidney disease patients with technology that is capable of monitoring the patient’s health — with two-way, real-time interactive communication between the patient, facility and physician.

Madris Tomes – a former FDA analyst who is the founder and CEO of medical device safety information software company Device Events – would like to see the physician self-referral law extended to include financial relationships between doctors and medical device companies. But she also said that lack of data sharing is confounding the value of patient care.

“Access to drug data across specialty and primary care seems to be the norm, but I would like to see that extended to devices, as well. Adverse outcomes due to medical devices are not measured regularly, to my knowledge,” Tomes said.