EnforceMintz — FCA Enforcement in Value-Based Care Arrangements Heated Up in 2024 and Likely to Remain a Priority in 2025

Value-based care (VBC) is a health care delivery model that has grown increasingly common in recent years. Perhaps unsurprisingly, this growth seems to have attracted the attention of government enforcement agencies. In September 2024, the Department of Justice (DOJ) announced a large False Claims Act (FCA) settlement with a VBC primary care practice. In December 2024, the Office of Inspector General for the Department of Health and Human Services (OIG) issued a Special Fraud Alert addressing enforcement efforts implicating certain VBC business arrangements. VBC stakeholders should take note of these developments and the government’s apparent focus on patient recruitment and referral arrangements. As health care delivery models continue to shift from traditional fee-for-service to VBC, we expect this emerging enforcement trend will continue in 2025 and beyond.

As Adoption of VBC Arrangements Grew in 2024, So Too Did Enforcement Efforts

Generally speaking, VBC is a payment and health care delivery model through which payors offer health care providers and suppliers financial incentives to meet performance measures intended to improve the quality of care and reduce costs. While VBC arrangements can be extraordinarily complex, the VBC model is best understood in contrast to what it is not: a traditional fee-for-service model. In the fee-for-service context, the payor reimburses the provider for each service delivered. By contrast, under a VBC arrangement, the provider’s compensation typically is based on shared savings, achievement of certain quality metrics, a per-patient payment, or a combination of factors intended to incentivize better patient outcomes and high-quality, cost-effective patient care. Examples of providers and payors that have adopted VBC models include primary care practices and accountable care organizations, as well as Medicare Advantage Organizations (MAOs) and Managed Care Organizations.

The VBC model has experienced significant growth in recent years. Increasingly widespread adoption of the VBC model has resulted in new market entrants, competition for market share, and downward pressure on VBC stakeholders to assume greater risk in payment arrangements. VBC primary care providers, for example, are rapidly expanding into new geographic markets and competing to gain patient membership. Given this competitive landscape, some VBC entities have explored growth opportunities — particularly in the Medicare Advantage context — through various marketing arrangements with third parties. The government has taken the position that, in certain circumstances, these arrangements may pose undue fraud and abuse risk.

VBC stakeholders’ referral arrangements, marketing practices, and patient incentive programs may implicate the Anti-Kickback Statute (AKS), which prohibits offering anything of value to induce referrals. Enforcement activity from 2024 involving VBC arrangements makes this point clear.

More broadly, it remains to be seen whether common FCA theories of liability, traditionally applied in the fee-for-service context, apply in equal force in VBC arrangements. For example, overutilization and lack of medical necessity are typical FCA theories pursued by the government. But in the VBC context, overutilization and medical necessity concerns are largely absent because, generally speaking, a VBC entity is financially at risk for the cost of patient care and thus does not receive fee-for-service payments. Rather, the financial incentives are focused on cost savings and quality of care.

The Oak Street Settlement Demonstrates the Government’s Focus on VBC Entities’ Patient Recruiting Activities

In September 2024, the Department of Justice announced an FCA settlement with Oak Street Health, a VBC primary care provider, through which Oak Street agreed to pay $60 million to resolve allegations that it violated the AKS by paying third-party insurance agents in exchange for their recruitment of seniors (predominantly Medicare Advantage beneficiaries) to Oak Street’s primary care clinics.

According to the settlement agreement, the government alleged that Oak Street paid remuneration to third-party insurance agents (or brokers and broker organizations) through a “Client Awareness Program.” Under that program, the agents allegedly delivered marketing messages about Oak Street to Medicare Advantage patients, and then referred those patients to Oak Street via a three-way phone call known as a “warm transfer.” In exchange, Oak Street paid the agents $200 per “warm transfer” referral. The settlement agreement resolved FCA allegations that Oak Street’s Client Awareness Program resulted in the submission of false claims to Medicare arising from kickbacks paid to agents in violation of the AKS. Oak Street denied the allegations in the settlement agreement and did not admit liability.

Two aspects of the Oak Street resolution are particularly noteworthy for VBC stakeholders. First, while patient recruitment efforts and educational programs about available plans or providers generally are permissible, the government’s press release explained that Oak Street’s referral payments “incentivized agents to base their referrals and recommendations on the financial motivations of Oak Street Health rather than the best interests of seniors.” Thus, in the government’s view, recruitment efforts may raise fraud and abuse concerns when they involve per-patient payments to agents or brokers based on referrals.

Second, the underlying qui tam action against Oak Street (but not the settlement agreement) also alleged that Oak Street improperly advertised, offered, and provided free transportation to patients to induce them to enroll in Oak Street. Local transportation is the subject of an AKS safe harbor¹ that allows eligible entities to provide free or discounted local transportation to federal health care program beneficiaries to enable the provision of medically necessary services, so long as certain statutory requirements are satisfied. Given the transportation-related allegations in the Oak Street matter, future enforcement actions against VBC providers could potentially focus on similar arrangements. However, there are legitimate reasons, like access to care issues, why VBC providers may want to provide transportation to patients with the goal of maximizing patient outcomes.

The OIG’s Special Fraud Alert Warns MAOs and Other VBC Participants About Certain Marketing Practices

On December 11, 2024, the OIG issued a Special Fraud Alert: Suspect Payments in Marketing Arrangements Related to Medicare Advantage and Providers (Special Fraud Alert), warning of the fraud and abuse risks associated with:

• marketing arrangements between MAOs and health care professionals; and
• arrangements between health care professionals and agents and brokers for Medicare Advantage plans.

In the Special Fraud Alert, the OIG stated that it has “observed an increase in abusive marketing practices in recent years.” This Special Fraud Alert is relevant to all VBC stakeholders, including plans (like Medicare Advantage plans) as well as health care providers operating under VBC arrangements.

The Special Fraud Alert noted that the OIG has “identified abusive compensation arrangements” in the selection of health care professionals and “problematic payments” made by and to health care professionals. In particular, the OIG observed that insurance agents and brokers (who generally have established relationships with Medicare beneficiaries) “may be in a position to influence” the beneficiaries’ health care provider selections.

The Special Fraud Alert highlighted a list of “suspect characteristics” related to these types of arrangements and marketing activities. With respect to MAOs, agents, and brokers, suspect characteristics include offering or paying health care professionals remuneration:

• in the form of bonuses or gift cards in exchange for referring or recommending patients to a particular MAO plan;
• “disguised as payment for legitimate services” that is actually intended to be payment for a referral of individuals to a plan;
• in exchange for sharing patient information used by MAOs to market to potential enrollees;
• where the amount is contingent upon the “demographics or health status” of individuals enrolled or referred to a plan; and
• where the amount varies with the number of individuals referred for enrollment in a plan.

Additionally, with respect to health care professionals, the OIG highlighted suspect characteristics that include offering or paying agents, brokers, or other third parties remuneration:

• where the amount is contingent upon the “demographics or health status” of individuals enrolled or referred to a plan;
• to recommend a health care professional to a Medicare beneficiary; and
• where the amount varies with the number of individuals referred to the health care professional.

The Special Fraud Alert concludes that suspect characteristics represent potentially abusive practices that could implicate fraud and abuse laws, including the AKS.

The OIG explained that the risk of harm in these arrangements includes improper patient steering and unfair competition. For example, the Special Fraud Alert cautioned that the process of selecting a plan or health care provider may create a potential for “unscrupulous” agents, brokers, or health care professionals to “abuse their position of trust and to act based on financial incentives.” Similarly, the Special Fraud Alert noted the risk of unfair competition because payments may prompt brokers or agents to direct enrollees to larger MAOs or providers who can afford to make referral payments, even if a smaller MAO or provider might be more appropriate for the particular enrollee.

VBC Stakeholders Should Consider Whether Their Marketing Practices Implicate the OIG’s Special Fraud Alert

The Oak Street resolution and the OIG’s Special Fraud Alert should put VBC stakeholders on notice of FCA and AKS risks associated with certain referral arrangements and marketing practices. This enforcement trend is likely to continue in 2025 and beyond. As the Special Fraud Alert notes, OIG has recently “received significant and credible reports of potential violations” in areas involving remuneration from MAOs to agents, brokers, and others that could implicate the AKS. The OIG thus seems to be forecasting that similar enforcement actions may be on the horizon. Moving forward, VBC stakeholders should proactively assess whether their marketing or referral practices involve arrangements similar to those described in the Special Fraud Alert.

ENDNOTE

[1] 42 C.F.R. §1001.952(bb).

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