October 28, 2025 • 44 mins
Scott Strickland, Shareholder, Hall Render Killian Heath & Lyman PC, Jim Carr, Co-Founder and Partner, InHealth Advisors, and Rachel Polzin, Assistant General Counsel, SSM Health, discuss the value-based enterprise (VBE) framework and the associated exceptions and safe harbors. They cover why the uptick in the framework has been a bit slower than anticipated, ways for health care organizations to take advantage of the VBE exceptions and safe harbors to mitigate risk, the future of traditional co-management arrangements, integrating new compliance processes, and how the Transforming Episode Accountability Model might promote the adoption of VBE. Scott, Jim, and Rachel spoke about this topic at AHLA’s 2025 Annual Meeting in San Diego, CA.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_00 (00:04):
This episode of AHLA Speaking of Health Law is
brought to you by AHLA membersand donors like you.
For more information, visitAmericanHealthlaw.org.
SPEAKER_03 (00:17):
Welcome everyone to our latest uh AHLA podcast
recording titled Cracking theCode: Unlocking the Power of the
Value-Based Exceptions and SafeHarbors.
My name is Scott Strickland.
I'm a shareholder with HallRender in our Raleigh office.
(00:37):
And I'm delighted to be herealong with my two co-presenters.
We previously presented thissame topic at the AHLA annual
meeting in 2025 in San Diego.
So so delighted to be back withmy good friends Jim and Rachel
to talk more about VBEs.
SPEAKER_04 (00:58):
Hi, everybody.
My name is Jim Carr.
I am a co-founder and partner ofInHealth Advisors.
And my work at InHealth focuseson helping folks with uh
alignment, compensation, andpartnership strategies, and have
found that the value-basedenterprise framework is a
fantastic model for that.
(01:19):
So I'm excited to be back withuh Rachel and Scott talking to
you today.
SPEAKER_01 (01:24):
Nice.
My name is Rachel Paulzine.
I'm assistant general counselwith SSM Health.
Um I'm here today, though, in mypersonal capacity, kind of
chatting with these guys againabout VBEs.
And prior to that, I was at CMS,where I, Scott and I, our paths
didn't cross, but I just wantedto put it back to Scott so you
can kind of give your backgroundas well.
SPEAKER_03 (01:41):
Oh, yeah, absolutely.
I'm glad you mentioned it.
So we have Once Upon a Time, um,I worked with the HHS Office of
General Counsel in our CMSdivision in the program
integrity branch.
So that was a mouthful um forthe title, but um that was a
wonderful experience.
And yes, indeed, uh Rachel and Ium we did not overlap, but we I
(02:07):
think worked with similar folksin the government in advising
our client CMS on a range ofissues, including with respect
to some issues that are similarto the ones where we're that
we're gonna discuss here today.
So um why don't we jump rightin?
I think Jim and Rachel, I'd doyou think it'd be a good idea to
(02:32):
just briefly touch on just whatthe heck a VBE is for those that
may be coming into this likefairly new.
We won't spend a lot of time onthis.
We promised to get into some ofthe the good stuff as soon as
possible, but um thinking itmight be helpful to uh just
briefly go over that framework.
What do you think?
(02:53):
Sounds great.
SPEAKER_02 (02:54):
Sounds great.
SPEAKER_03 (02:55):
Um so let's just touch on some highlights here.
So VBE, a value-basedenterprise, uh, I think the way
that I think about it is it'sit's a network of participants
that are engaging in value-basedactivities.
Um, it doesn't have to be aseparate legal entity, although
(03:16):
it can be.
So it might be an ACO or aclinically integrated network,
um, but there are a range ofstructures uh that can be used
to form and establish a VVE.
Uh, and it can be formed just uhvia contract, and so this can be
uh as simple as a hospital and aphysician group establishing a
(03:41):
VBE through a value-basedarrangement and a corresponding
governing document.
Um I think one of the, well oneof the reasons why I think folks
were excited when the um finalrules came out at the beginning
of 2021 that established thevalue-based enterprise framework
(04:04):
and the corresponding umvalue-based safe harbors and
exceptions for the kickbackstatute and Starquaw, is that
this um this allowed providersto come up with arrangements and
really be creative in how theyhow they did this.
They could design their ownmodel, their own value-based
(04:26):
model.
And if they um met the thresholdrequirements for uh establishing
the VVE and um made sure theywere um working towards uh
permissible value-based purpose.
We can get into that in in asecond, but um as long as we
were meeting these thresholdrequirements, there were
(04:48):
exceptions and safe harbors theycould take advantage of, which
did not have some of the or donot have some of the traditional
safeguards that you would findin the more traditional um safe
harbors and exceptions.
And so, for instance, theseexceptions and safe harbors do
not contain a requirement thatthe arrangement be set at fair
(05:09):
market value.
Um, there is no set in advancerequirement.
There's also the parties to thearrangement can potentially
allow for and make compensationcontingent upon directed
referrals to particularproviders for the patients in
(05:30):
the target patient population,so long as there are there's a
series of conditions andexceptions that go along with
that.
Um, and there's not a broadprohibition on remuneration
under the arrangement, takinginto account the volume or value
of referrals.
And so that's I think probablythe main reason why folks were
(05:51):
excited about these, and itallowed for some increased
flexibility in establishingthese arrangements that
otherwise we wouldn'tnecessarily have if we were just
looking to say the personalservices and management safe
harbor or in the companionexception in the Star Claw.
So that is, I think, umhopefully that's a solid
(06:15):
foundation on what a VBE is andwhy uh it's potentially useful
to healthcare organizations.
Um, Rachel, I wanted to bringyou in because we were talking
before the recording, and wethis is one of the things we
covered in San Diego, is why,even though I think adoption of
(06:38):
these safe harbors andexceptions, the use of these
safe harbors and exceptions, andadoption of this BV framework is
trending upwards over the lastfew years, it's probably not
where we thought it would be atthe beginning of 2021.
And I wondered if you mightspeak a little bit to why you
think that is, um, maybe throughyour lens of an in-house counsel
(07:01):
to a sophisticated healthsystem, um may or may not be um
crazy about going down thisroad.
SPEAKER_01 (07:09):
Right.
Thanks, Scott.
So I think too, you know, we'vebeen, I think the VBE, the VBE
exceptions are intended to kindof really start a lot of
value-based care.
But I'll also just admit we'realready doing a lot of
value-based care.
The problem is we're doing itwithin kind of the traditional
framework of the fraud and abuselaws, and I think we're doing
okay.
So I think there is a little bitof a mindset of, you know, it's
(07:33):
working.
Yes, we could definitely, youknow, I think I'm not trying to
say that the traditional fraudand abuse framework doesn't
stifle some of the goals ofvalue-based care.
It definitely does, and that'swhy these value-based exceptions
have been created.
But I think there is a lot offear of, well, it's it's working
for us pretty well.
You know, we've been able to dosome things.
So why would we kind of jumpinto this unknown?
(07:54):
And then, like the three of ushave talked about quite a bit.
And I think Jim says, you know,the the guidance has been pretty
vague.
The regulators did a good job ofkind of, as Jim says, giving us
a nice blank canvas.
But I will say that makes usvery nervous.
So, you know, we're in thisspace of it's working, yes,
there's barriers.
We could jump into this newworld, but it's a very unknown
world.
(08:14):
Um, so kind of on the same, onthe same token is we we don't
really know how regulators aregonna be looking at a lot of
this stuff.
We don't have very prescriptiveguidelines, which gets at least
in-house council attorneys alittle bit nervous.
Um, and then I think too, in alot of our value-based, our
current value-based care modelsor programs that we're working
in, whether they be supercomplex, like you guys are gonna
(08:35):
get into or kind of basic stuff,you know, we do fear complexity
and we kind of want to keep itas easy to comply with as we
can.
And I think sometimes with thesenew exceptions, you know,
there's some of the nuances goaway, but we get new nuances, I
guess, or new requirements.
And again, it could it in someways, I know you guys will talk
about this, but you know, someof the quality metrics and the
(08:57):
tracking, that's daunting.
And you know, for our complianceteams, it could seem like a
whole new world for them.
And again, that's complexity,which is gonna create compliance
issues with these newarrangements.
So that's that's scary.
And I think too, just the lastthing I'll say is um, you know,
the front abuse laws, we've allwe're all in this space, so we
(09:18):
know them backwards andforwards.
And again, I'm not trying to saythey're not stifling innovation
and value-based care.
We all agree they are, but we'vealso developed a certain level
of comfort with thosesafeguards.
And I think for me as in-housecounsel, like it's great news.
Oh my goodness, we can dodirected referrals.
That's that seems great, right?
That's really gonna help thisvalue-based model succeed in a
(09:39):
lot of its goals and purposesand metrics.
But that's a really, you know,the safeguards that are going
away for that really do create alot of angst for us.
And I think we're trying tobalance, okay, those safeguards
are gone, but what new ones dowe need and what are they gonna
look like?
And then just trying to tryingto balance that, you know, is is
this new, these newflexibilities in this new world
(10:01):
worth kind of figuring out thenew world?
And I think it is, but butagain, for my seat on the bus,
that's a lot.
That's a lot to think about.
You know, these are packaged asreally exciting things, and I
know they are, and you guys aregonna share all kind of the
exciting things they can do, butit still just seems like a lot
for people in in my seat, Ithink.
SPEAKER_04 (10:18):
I think those are fantastic points you raise,
Rachel, and and definitelythings that I hear on a daily
basis in terms of like sort ofthe reticence to to go there, if
you will.
Right.
Um, you know, a couple of otherthings that that stand out.
I think number one, and you youkind of hit on this a little
bit, is just like I'm notcomfortable being, I don't want
(10:38):
to go first.
I don't want to be the I don'twant to be the test case for,
you know, this if somethingabout what we're doing is not
perfect and and and we getcalled on, we don't we don't
know what's gonna happen becausethere hasn't been any precedent
set for how this is gonna behandled.
And so there's like I think alittle bit of gunshine maybe is
(10:58):
the right word to to say I Idon't want to test um the
government's willingness tochallenge these types of
arrangements.
Absolutely.
I also think there's a littlebit of, you know, and and we can
talk about this in more detail,but there's a little bit of
difference between the stockexceptions and the and the
kickback safe harbors, andthat's necessary given um what
(11:21):
they're intended to do.
But I think that has caused alittle confusion in terms of do
I have to meet, you know, butboth a stock exception and a
safe harbor, or do I need to fitwithin a safe harbor?
And if it if I do, am I going tobe able to?
Because the requirements arepretty strict, particularly on
like the the care coordinationsafe harbor where there's a
no-cash compensation requirementthere, it has to be in-kind
(11:44):
compensation.
So I think that definitelyraises um some concern as well.
And then um maybe this is a goodtransition for us kind of in
terms of where we're going withour presentation.
But I mean, I I feel likethere's this perception that
anything you have you do with aVBE has to be complex.
And like there's this level,yeah, there's this level of
(12:07):
complexity that that comes alongwith a value-based enterprise.
And that can be the case, um,but it certainly doesn't have to
be.
And I think that was kind ofwhere we were going with our
presentation in San Diego was toreally try to highlight some
cases that really mimic veryclosely arrangements that folks
are doing today, but justputting the protection and the
(12:28):
the sort of the belt andsuspenders, if you will, of the
VBE framework around those.
SPEAKER_03 (12:35):
Yeah, absolutely.
I'm glad you mentioned that,Jim, because I do think the I
have experienced with uhadvising clients, I think some
confusion and a little bit offrustration on their part.
The confusion is um, well, whatthe heck what the heck is this
(12:55):
VBE um concept?
Once they learn a little bitmore about it, they get really
excited, but sometimes then theyget frustrated when they
realize, oh, well, what we'redoing is not going to fit
squarely within the any of theapplicable kickback safe armors
because we're not no one'staking on risk, or at least not
(13:18):
any risk with respect to a payerarrangement.
And we would like to providecash compensation to providers
to do certain things.
And so I think that is part of,and I promise we've we promised
to crack the code and and unlockthe possibilities.
So we we won't hang on this umthis point for too long.
(13:38):
But I do think that if we'rethinking about reasons why um
the um maybe the uptake has beena little bit slower than we
would have thought, I think itis that um difference between
how the kickback statute and thestark law views um the sets of
requirements and what'spermitted.
(13:59):
And in a lot of arrangements,you're very likely to be able to
structure the arrangement in away where you take um full
advantage of a stark exception,but then much like the more
traditional world, you'reoutside of a safe harbor, and
then it's just a matter of risktolerance for the organization.
(14:20):
And I think sometimes creatingthe VBE and getting as close as
you can to one of the applicablesafe harbors gets you pretty far
down the road to a place whereyou can with a straight face
make an argument that there isreally no improper intent here
(14:41):
and and really it'd be hard toinfer in proper intent intent.
But without the safety of thesafe harbor, I think a fair
number of clients that I'mworking with are scratching
their heads and wondering, well,is this really worth it given
what Rachel mentioned as far aslike the lack of real history
(15:02):
with respect to any enforcementin this area or guidance?
So um but with that, I wouldlove Jim um to go down the road
a little bit of just um talkingthrough some of maybe the the
low-hanging fruit or the maybethe easier ways for um
healthcare organizations toactually take advantage of these
(15:23):
exceptions in safe harbors andand meaningfully um mitigate or
even eliminate risk for somearrangements that they are
already in.
SPEAKER_04 (15:32):
Yeah, that sounds great, Scott.
Um, you know, I think the thething that really stands out to
me, and you you hit on this inthe outset, is is the tremendous
flexibility that this frameworkoffers, whether it's in the
purposes that you'reaccomplishing.
You know, it can be thetraditional, hey, we want to um
improve quality, we want toreduce cost, but there's also a
(15:53):
value-based purpose around carecoordination, and we want to
improve uh the care coordinationfor a given patient population.
And there's a fourth one thatis, you know, about
transitioning to payment basedon value instead of payment
based on volume.
And man, talk about immenseflexibility there.
I mean, like, you know, this isreally just saying, hey, this is
this is where we get our sealegs.
(16:14):
We we build the muscle memory tobe able to succeed when we get
to value-based payments.
And so we don't have to betaking on a bunch of payer risk
um to get into a value-basedenterprise.
We can use it to do things thathelp us get there.
And so um, to me, those arereally like the the introductory
(16:34):
use cases to try to figure out,hey, what do we have to do to be
successful if we're going to betaking on payer risk in five
years or whatever?
You know, I mean, let's figureout some pathway to get there so
that when we get to that pointand somebody comes to us and
says, hey, we need you to takerisk, or or maybe even better,
you've developed the capabilitythat you can go to the payer and
(16:56):
say, hey, we're ready to takerisk, give it to us, um, which
is really where the successfulorganizations are right now.
Um I think that's where you knowthis framework really positioned
you for success.
So um I'd be curious to hearfrom from you, Rachel.
You know, kind of what what areyou hearing from maybe your
(17:19):
colleagues um about um how theymight consider utilizing this?
Um and um, you know, in general,do you think they're like simple
use cases or are they kind ofgravitating to the more advanced
end of the spectrum?
SPEAKER_01 (17:35):
Well, I was gonna say I think as a starting point,
everyone always kind of startsat the advanced, which is maybe
why it's so slow, is they thinkthat's what we need to do.
We need to think big, we need tokind of jump in head first.
But what you both have taught meover the presentations we've
done on this and kind ofprepping on this is that it
actually doesn't need to be afrom scratch new thing.
It can actually be used to solvea lot of I'll say traditional
(17:57):
problems that we all face.
You know, call you guys wentthrough examples, but call
coverage and your, you know,your troublesome doc that's
always an outlier.
Like I think that is huge fororganizations like mine in terms
of I think Word is getting outfrom your experience of working
with clients, and you guys arekind of showing that.
And I think that's for someorganizations, not all, but I
(18:17):
think sometimes that's a a goodway to start is that kind of
showing them the problems it cansolve that you're currently
facing and how to how to fixthose.
And then, like you're saying,Jim, once you get good at it,
you kind of have a track recordand you get again more
comfortable, then you can kindof advance.
But that's kind of what I'mhearing recently as people are
(18:37):
starting to better understandhow they can be used in that
way, I guess.
SPEAKER_03 (18:40):
But yeah.
I'd just to put a maybe a finerpoint on one of the examples.
I mean, this we talked about inSan Diego, one of the examples
was the the employment VBE,where you've got, you know,
again, like a lot of times whenclients are coming to me with an
(19:05):
idea for a VBE, we need to pauseand think, well, what problem
are we trying to solve for?
And and do we really have like abecause really the the purpose
of the VBE is to allow for uh tome the the increased uh
flexibility and protection underthese new exceptions at safe
(19:27):
harbors.
And so do we have like a fraudand abuse issue that we feel
like you know needs to beaddressed?
One potential issue for anemployee position might be he or
she is receiving reallyincreased compensation from
these value-based arrangementsthat that they're participating
in through like a health systemsACO or CIN.
(19:51):
Uh so they're getting morepayments from shared savings,
more quality bonuses.
And over time, the system isstarting to get nervous that,
well, this particular position,we were already pretty high with
respect to their totalcompensation.
And now here we are, we'removing north of maybe um you
know 90% of the um you knowrelic percentile.
(20:14):
And so um we're a little nervousnow that we might be actually
outside of the um protection ofthe employment exception.
I think that Jim as we andRachel, as we talked about in
San Diego, seems like a great umarea for um where VBE can be
really helpful.
And again, the VBE there isreally just the employer, say
(20:38):
the hospital and or the systemand the physician employee.
And we're building in um thevalue-based arrangement into the
employment agreement, and it'sreally a belt and suspenders
approach where we're still usingthe employment exception.
We're also protecting thatvalue-based compensation by
(20:58):
using the either the Stark lawno-risk value-based exception,
or if we're putting some of thatcompensation at risk for the
physician, then maybe themeaningful downside risk
exception.
And then in that case, for thatpiece of the compensation, then
we're we're not worried aboutfair market value.
(21:19):
And so I think that's a to me,if we're thinking about ways
that organizations can thinkabout using these in a very
non-complicated way, that'sthat's certainly one.
SPEAKER_04 (21:33):
How does that approach strike you, Rachel?
SPEAKER_01 (21:35):
I think it's great.
You guys, I mean, when you guys,when we started working through
examples, I think that was thatwas goal for me, because
admittedly, I did not think theycould be used for that.
I only was thinking thesecomplex, integrated, integrated
models.
And so I think that is huge, andI think it's really helpful.
And I also one thing we'vetalked about a lot too is it's
somewhat of a role reversal, alittle bit for in-house counsel
(21:58):
to kind of be thinking, hey, youknow, we've got all these
foreign abuse laws that we'vebeen harping on you for for
years, and now we kind of havean option of maybe throwing some
of that out the window, and itis a big role reversal, and
again, we're kind of skittish todo that sometimes, but I think
this is a great starting pointbecause again, these are
problems that we're all dealingwith nonstop every single day.
And now we do have a greatsolution that I think is going
(22:21):
to be I don't want to say easyto obtain because you guys deal
with kind of probably all theheavy lifting it entails, but I
think it's kind of like yousaid, low-hanging fruit and kind
of easy wins to get your to getyour feet wet.
SPEAKER_03 (22:34):
Yeah.
Jim, you I know have um coveredthis in San Diego, but um the
traditional co-managementarrangement.
Um do you think that is is rightfor review and maybe
transitioning over to avalue-based arrangement under a
VBE framework?
SPEAKER_04 (22:56):
Yeah, I I almost think that's a perfect use case,
Scott.
And and I think um, you know,you have to be careful in your
selection of value-basedpurposes and what you're trying
to achieve there, because youknow, many um co-management
arrangements are set up for youknow purely internal cost
savings.
And obviously that's not apermissible value-based purpose,
(23:20):
and and the the regulations andthe commentary are very explicit
about that.
Um, but if you're able to,through that co-management
arrangement, improve carecoordination, improve quality,
uh, reduce the cost or thegrowth in cost to payers, um,
transition to payment-based onvalue instead of volume, then
(23:42):
you're hitting the value-basedpurposes that you need to set up
a value-based enterprise.
And so, you know, at its core, aco- a service line co-management
agreement is really aboutimproving the efficiency of that
service line and making surethat the patients of that
service line get the bestpossible care.
And that is exactly in line withwhere the value-based enterprise
(24:07):
framework was designed to help.
And so the use cases we'reseeing out of that really are
kind of taking existingco-management arrangements, if
you will, and kind of convertingthem into sort of a VBE-based
co-management arrangement.
Um, gives you a little bit moreflexibility in terms of the
(24:28):
compensation.
One of the biggest things, youknow, physicians hate tracking
hours.
And with the traditionalco-management structure, um, we
we're often requiring them totrack hours and we're paying
them a pretty paltry rate forthose hours compared to other
things that they do.
And so in their mind, they'rethey're underpaid for that time.
And frankly, we don't always doa great job of making sure we've
(24:52):
got all those hours tracked andand and it becomes a compliance
issue.
So um just the flexibility toget away from the you know,
hours tracking in and of itselfis is huge.
Um, and then to be able to morecreatively fund the pool,
distribute the pool in differentways based upon the value
created as opposed to, you know,just ProRado or something along
(25:16):
those lines, um, is also thingsthat um seems to be gathering a
lot of interest from fromclients that we're working with.
SPEAKER_01 (25:24):
Yeah, the one thing I'll add to that too is you
know, we said that some of thenew VBEs are going to kind of
necessitate a little flipping ofits head on the in the
compliance world.
But I think this is an exampleof where it would be it's just a
win-win for everyone.
Because like you're saying,right now, the compliance for
these arrangements are trackinghours and it's just kind of plug
and chug.
It's a little bit just kind ofmaking sure we're all doing what
(25:45):
we said we'd do under theagreement, but turning it into a
VBE arrangement, it really, yes,there's still going to be
tracking, but it's I feel likeit's more meaningful.
You know, the groups are gonnabe coming together saying, is
this working?
Is this going well?
Because I think sometimes theserelationships can just get kind
of you're in it, they takeforever to negotiate, you're in
it, you're making sure you're incompliance with the agreement,
and that's kind of it.
(26:05):
But this almost requires thislike better engagement to check
on it more, I guess.
SPEAKER_03 (26:11):
Yeah, for sure.
Oh well, I just want to say thatas a as a lawyer in private
practice, um, I I feel theirpain with respect to tracking
hours.
Maybe that's a topic for anotherpodcast, but uh for my
therapist, I'm not sure.
SPEAKER_04 (26:32):
Um you know, Rachel, I think you raise a really good
point there, though.
Just and and I don't want to gettoo far afield from from the you
know basis of of ourpresentation here, but you know,
I do think that the complianceprocesses for um traditional
physician arrangements are theword I always use is they're
hardwired, right?
(26:52):
I mean, like everybody knowswhat to do, they've got the
process ironed out, you gothrough it, you do all those
things, you check the boxes, youyou put it in the drawer, and
you hope nobody misbehaves andeverything's good.
And that is really the um theopposite of the value-based
arrangement and and thepost-effective date monitoring
(27:17):
for compliance that you have todo.
And and I don't want to minimizeum the change that requires to
to compliance practices to beequipped to you know, be
monitoring outcome measures andand quickly identify if you're
not going to be able to achievethe outcome measure, that the
outcome measure isn't advancingthe value-based purpose anymore.
(27:37):
I mean, you've got pretty tightwindows to be able to rectify
those things.
And so, you know, it reallyrequires a very different
process.
And and I'm curious from yourperspective, is that um a
daunting thing to take on?
And and and Scott, I would loveto hear from you in terms of you
know clients you've worked with,like how how are they doing
(27:58):
that?
SPEAKER_01 (27:59):
That's I'll just start off with I'm curious what
Scott's hearing too, becausethat is a huge piece of this.
That's I think that's why we're,you know, like I said, it's it's
the best thing for thearrangement.
That's what we need.
We need to stop these set it andforget it arrangements.
It needs to be genuineassessment.
Is this working?
But that's not the currentworld, and that is going to ask
a lot of us.
And I think so much ofvalue-based care is data heavy.
(28:20):
So organizations are gettinggood at data, right?
We're we're we're getting goodat it, but it hasn't fully
translated yet to compliance.
You know, we're still trying tofigure out what that means, how
does how does this all work?
How can we pull this and pullthat and check this?
And so it's a lot.
It's it's very daunting.
And I think that's why sometimesthose smaller arrangements, you
know, if the less we need to do,the better.
(28:42):
But if we really want to getgood at this, you know, it's
gonna get complex and we'regonna have to figure it out.
So yeah, I'm curious to youguys, what have you been hearing
with some of your clients whohave who've been in this space
for a while?
What's working?
What's what's gonna be just thatthing that everyone's gonna
struggle with?
SPEAKER_03 (28:57):
Or I yeah, I think this one is, and it's funny,
like um a lot of thesearrangements are are in their
early stages, and so we're we'rewe're planning for this.
But one of the one of thecrucial questions at the outset
for me when I'm discussing thiswith clients is you know, we I
(29:18):
mean this is a requirement forjust establishing the VVE, but
it's critical to land on theappropriate accountable body or
person that is um meant to beresponsible for financial and
operational oversight of theVVE.
And you know, that doesn'tnecessarily have to mean a
board, but we've got to, at thefront end, make sure that we're
(29:41):
identifying the right folks whoare truly going to be plugged in
with the arrangement and who arewho know a little bit um more
than say your average personwithin the system about what's
going on on the ground withrespect to the arrangement,
because they're likely to be theones that are going.
Going to be conducting thisreally what's an audit at the
(30:05):
end of the year to make surethat the value-based activities
are furthering the purposes ofthe arrangement, not resulting
in material deficiencies inquality of care.
And as Jim, you mentioned thatthere are some pretty tight
windows to review and if you'veaddressed an issue to change the
(30:28):
outcome measure or transition toanother one or just scrap the
arrangement entirely.
And so, yes, I think to me, likeone of the key issues with
maintaining compliance is tomake sure that you've got you've
identified up front theappropriate group or person
that's going to serve in thatrole at the outset.
(30:51):
Yeah.
It's different for differentorganizations, I think.
Um, and it depends too on whothe target patient population is
and what the purposes of thearrangement are.
But so it's it's probably thereare going to be different
answers depending on what theVBE is intending to accomplish.
SPEAKER_01 (31:12):
And I think too, like we've all agreed and kind
of started the presentation onbecause the regulators haven't
really done anything yet.
They gave us they gave us prettybroad guidance and they haven't
really taken any action onanything, knock on wood, that's
good news.
But it's also then hard for ustoo.
So I think organizations areprobably gonna err on the side
of being really conservativewith some of this, um, the these
(31:33):
requirements.
And like I had mentioned to youtoo, is when we have these
flexibilities and the old theythey kind of created their own
new nuances and the newsafeguards, but we're probably
gonna maybe overkill some ofthat, right?
You know, we're gonna be heavyon the documentation, making
sure we we're documenting thatwe're doing all this.
Maybe in a couple of years we'llrealize that's not required.
But until the regulators sayotherwise, we're probably gonna
(31:55):
be, at least from ourperspective, you know, we'll be
going heavy, heavy on heavy onthe documentation, because
compliance is kind of unknownright now.
SPEAKER_03 (32:03):
But it's also, I think, important.
And so I think I forget whetherit was Jim or Rachel, one of you
um, I think mentioned just thatthe you know, there's already a
robust like system within healthsystems for the more traditional
compliance um um reviews withrespect to maybe physician comp
(32:29):
and and just some things thatare on the internal work plan
probably year over year.
But this is something that Ithink compliance departments
they may not even be aware thatthere is a VVE.
And so I think like making surethat you're looping in the
appropriate folks in complianceand that this is part of the
(32:51):
audit plan or process within theorganization.
And so there are some folks thatknow that this exists and can
come in the independent of theaccountable body, but just as an
organization, yeah.
SPEAKER_02 (33:02):
Right.
SPEAKER_03 (33:03):
And it'd be pretty important because otherwise I
think they it's probably gonnafly under the radar.
SPEAKER_01 (33:08):
Well, they don't know what they don't know,
right?
Yeah.
And knowing that this looksdifferent, you know, your risk
assessment every year, thisdidn't get caught, this didn't
fall into it.
Yeah.
SPEAKER_04 (33:19):
Scott, was there a particular um use case that we
that we covered in San Diegothat that you wanted to
highlight today, whether it wasum, I think there was one
related to um ACO distributionsand things like that?
SPEAKER_03 (33:34):
I think well, actually one of them um, because
we were talking earlier aboutjust the flexibilities of um
these new exceptions in safeharbors, and I think one one of
the flexibilities to me is thehow many ways there are to
(33:57):
establish the target patientpopulation.
And that, you know, unlike umsay the waivers that CMS and the
OIG have come out with withrespect to specific Medicare
alternative payment programs,here organizations have the
flexibility to define the targetpatient population in a way that
(34:22):
cuts across payer.
And so we can include commercialpatients, Medicare Advantage,
Medicaid, Medicare.
Um and so one thing I wasthinking about, Jim, was just
the team model and for hospitalsthat are participating or and
have been mandated that theymust participate in team, you
(34:44):
know, there there are some umexisting mechanisms to protect
those sharing payments uh withinthe context of the team model
that live outside of the VBEframework.
And so you don't necessarilyneed the VBE for that piece.
But if you're going to, youknow, if it makes sense for the
(35:06):
organization to put togethersimilar funnel payment
arrangements with other payersfor these same episodes of care,
then all of a sudden I think theVBE framework becomes something
that I think could be of greatuse to organizations as they um
(35:26):
are spurred on to um uh to lookoutside of that Medicare
population um with thesephysicians.
And so I wondered if you wouldhave been advising folks on
that.
I know you've been advising somefolks on probably complying with
or just getting ready for thatteam model, but um what do you
(35:48):
think about the VBE as apotential mechanism to um
protect similar programs outsideof team?
SPEAKER_04 (35:56):
Yeah, I I've honestly I feel like team might
be sort of the the tipping pointfor the adoption of VBEs.
I really, I really do.
I think it's it's that importantto the success.
Maybe not during track one whereit's upside only, but when you
get to track two and track threewhere there's downside risk, um
I think it's really gonna beimportant for folks.
(36:19):
I mean, we're talking about 20%plus a quality adjustment.
So you know, it can be likenegative 22% if you don't
perform well.
Um, that's massive on some ofthe most commonly utilized
episodes of care in in an acutecare hospital.
So um seeing tremendous interestin how do we do this better.
(36:42):
And we talked aboutco-management agreements before,
and that that's perfect overlayfor sort of what you do within
the confines of the hospital.
But even more than that, um, andand I'll be really curious to
hear your thoughts on this,Rachel, is you know, what do I
do when the patient getsdischarged from the hospital?
Because this is a 30-day episodeof care in the team model.
(37:06):
And so, you know, I've got folksleaving and going to rehab, I've
got folks leaving and going toSNF, I've got folks leaving and
going home.
And I've got different providersin all those areas, and some of
those providers are going tohelp me more in terms of my
success in team than others.
And so um the ability to sort ofcreate, I know the narrow
(37:29):
network is kind of a uh a dirtyword, it seems like these days,
but um, you know, a network thatyou know is going to help you
succeed both in terms of qualityand in terms of of cost um is
going to be important forsuccess.
And so being able to sort ofutilize the directed referral
aspect of of the VBE, I thinkcould become really important
(37:52):
too.
SPEAKER_01 (37:54):
I I completely agree.
And, you know, we've we'vetalked about this before.
These relationships are socritical.
I mean, dis to discharge inevery in every aspect of the
hospital is huge, but with thismodel, it's gonna be critical.
And I think these relationshipsare key, but like we've talked
about that directed referral isa little bit daunting, right?
How do we make sure we'rehonoring patient choice, that
(38:15):
things don't get hardwired, oryou know, we we can establish
these relationships that aregoing to be critical for the
success of the program whilealso kind of maintaining patient
choice, making sure that, youknow, the full delivery of care
is still compiled, that youknow, everything outside of
Teams is still being met innormal course.
Um, so I think that to me isstill kind of an outlying
(38:36):
question and something that our,you know, organizations like
ours who are participating inteams, I think are still trying
to figure out, to be honest.
Um, how can we use these andstill be comfortable with these
relationships in this new space?
The other thing I'll say too,you you guys had kind of
suggested it.
Um yes, maybe the teams, the thewaivers embedded in the teams
program make some of the VBEarrangements not unnecessary,
(39:00):
but you know, you're getting thesame thing kind of through those
waivers.
But I think adding it to thecommercial payers, I will say
it's really hard to implementthings payer specific.
I mean, that that can cut bothways, though, right?
Some or sometimes theorganization is so grateful
because, oh, we only have toworry about it for government
payers, which is which is truesometimes.
It's it's better because it'sonly them.
But all things considered, whenyou think of case management and
(39:23):
all the different parts of ourproviders that get involved in
these processes, then payersspecific things get really
challenging to operationally.
SPEAKER_04 (39:32):
Tell a physician you want a separate workflow for
your Medicare patients versustheir own.
SPEAKER_01 (39:36):
My goodness, you guys, it's it's that's what I'm
saying.
Sometimes, sometimes they wantthat, right?
Oh, we only have to do it inthis instance, but operationally
it is so challenging.
And so I'm always excited tohear things that can do it
across the board.
It's it's for every patient.
Um, so yeah, I think that's areally great point, especially
if if people start thinking, oh,we don't need to worry about
(39:56):
that anymore because it's allpart of the team's program.
SPEAKER_04 (39:58):
So Scott, do you think those gain sharing
provisions in in team are asflexible or as useful, if you
will, as as potentially theoptions available to you through
a VBE?
SPEAKER_03 (40:14):
Um that is a good question.
I think that I believe they'repotentially easier to satisfy
just in the team context.
Um I think they're a little bitclearer uh in the in the reg
with respect to the sharingarrangement, and there's a very
(40:36):
specific um detailed uh regtitled sharing arrangements that
that relates to the team model,and and if we're so I'm feeling
a little bit better about umsatisfying that regulation with
(40:58):
respect to the sharing paymentswithin the team model.
But I do think to Rachel'spoint, and this is where what I
was thinking earlier, that Ithink it's it's hard to just do
this for one set of patients andone payer.
And so I'm wondering if overtime it's going to make sense
(41:21):
for hospitals that are in-teamto start thinking about doing
encouraging or incentivizing thedownstream providers to take
some of the same actions withrespect to other patient
populations.
And again, if we're talkingabout financial incentives
outside of the team model, thenI think the VBE is like very
(41:43):
useful to potentiallyprotecting.
Now you still you're still goingto need to involve the the payer
in that, but I think it's it'sit's going to make it easier to
do the the same things for abroader set of patients.
Um I think that's where um Ithink that's where it could be
(42:05):
beneficial.
Um any other pearls of wisdomfrom this group or or uh last
words before we uh wind thingsup.
SPEAKER_04 (42:19):
I I would just say, you know, I I would encourage
folks to uh, you know, asproblems arise, and and Rachel
mentioned this, you know,in-house counsel has really uh
developed the ability to becomesort of like an internal
consultant um with the advent ofof this framework.
And um you know, don't you don'thave to take on your most
(42:39):
daunting use case, but when whenyou identify a problem that,
hey, maybe this could be solvedum using some of the the
flexibilities of the value-basedarrangement, explore it and and
and see where you can take it.
SPEAKER_01 (42:51):
That's what I was gonna say, is just be be
curious, right?
Even if it doesn't mean 2026,we're gonna do three new VBE
arrangements.
It's just get educated, talk topeople like you guys who are
dealing with this every singleday.
You know, people just need toget curious, get informed, and
then start kind of you knowgetting your feet wet a little
bit.
SPEAKER_03 (43:09):
But hey, I I love ending on that because that
seems like good advice just forlive in life.
SPEAKER_00 (43:16):
Right.
SPEAKER_03 (43:17):
Yeah, it's me.
Forget about the BBE context.
Let's let's end on that note.
Let's be curious.
Yeah.
SPEAKER_02 (43:23):
Yeah.
SPEAKER_03 (43:24):
Um well, uh, I think this was a lot of fun.
Uh, I know that I enjoyed it.
I'm and speak for Jim andRachel.
I think we we all enjoyed thisconversation.
Um please uh note that AHLA ishaving its next annual meeting
um in 2026, summer of 2026,probably late June or early
(43:46):
July, uh in New York for thefirst time, um, I think in at
least 10 years.
And so uh hopefully uh the threeof us will be there, but um
please consider um joining AHLAat the annual meeting in New
York.
It should be a lot of fun.
And with that, I think we'llsign off.
But thank you everyone forlistening.
(44:06):
We we had a good time.
SPEAKER_02 (44:08):
This is great.
SPEAKER_03 (44:10):
All right, take care.
SPEAKER_00 (44:16):
If you enjoyed this episode, be sure to subscribe to
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(44:39):
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SPEAKER_03 (00:17):
Welcome everyone to our latest uh AHLA podcast
recording titled Cracking theCode: Unlocking the Power of the
Value-Based Exceptions and SafeHarbors.
My name is Scott Strickland.
I'm a shareholder with HallRender in our Raleigh office.
(00:37):
And I'm delighted to be herealong with my two co-presenters.
We previously presented thissame topic at the AHLA annual
meeting in 2025 in San Diego.
So so delighted to be back withmy good friends Jim and Rachel
to talk more about VBEs.
SPEAKER_04 (00:58):
Hi, everybody.
My name is Jim Carr.
I am a co-founder and partner ofInHealth Advisors.
And my work at InHealth focuseson helping folks with uh
alignment, compensation, andpartnership strategies, and have
found that the value-basedenterprise framework is a
fantastic model for that.
(01:19):
So I'm excited to be back withuh Rachel and Scott talking to
you today.
SPEAKER_01 (01:24):
Nice.
My name is Rachel Paulzine.
I'm assistant general counselwith SSM Health.
Um I'm here today, though, in mypersonal capacity, kind of
chatting with these guys againabout VBEs.
And prior to that, I was at CMS,where I, Scott and I, our paths
didn't cross, but I just wantedto put it back to Scott so you
can kind of give your backgroundas well.
SPEAKER_03 (01:41):
Oh, yeah, absolutely.
I'm glad you mentioned it.
So we have Once Upon a Time, um,I worked with the HHS Office of
General Counsel in our CMSdivision in the program
integrity branch.
So that was a mouthful um forthe title, but um that was a
wonderful experience.
And yes, indeed, uh Rachel and Ium we did not overlap, but we I
(02:07):
think worked with similar folksin the government in advising
our client CMS on a range ofissues, including with respect
to some issues that are similarto the ones where we're that
we're gonna discuss here today.
So um why don't we jump rightin?
I think Jim and Rachel, I'd doyou think it'd be a good idea to
(02:32):
just briefly touch on just whatthe heck a VBE is for those that
may be coming into this likefairly new.
We won't spend a lot of time onthis.
We promised to get into some ofthe the good stuff as soon as
possible, but um thinking itmight be helpful to uh just
briefly go over that framework.
What do you think?
(02:53):
Sounds great.
SPEAKER_02 (02:54):
Sounds great.
SPEAKER_03 (02:55):
Um so let's just touch on some highlights here.
So VBE, a value-basedenterprise, uh, I think the way
that I think about it is it'sit's a network of participants
that are engaging in value-basedactivities.
Um, it doesn't have to be aseparate legal entity, although
(03:16):
it can be.
So it might be an ACO or aclinically integrated network,
um, but there are a range ofstructures uh that can be used
to form and establish a VVE.
Uh, and it can be formed just uhvia contract, and so this can be
uh as simple as a hospital and aphysician group establishing a
(03:41):
VBE through a value-basedarrangement and a corresponding
governing document.
Um I think one of the, well oneof the reasons why I think folks
were excited when the um finalrules came out at the beginning
of 2021 that established thevalue-based enterprise framework
(04:04):
and the corresponding umvalue-based safe harbors and
exceptions for the kickbackstatute and Starquaw, is that
this um this allowed providersto come up with arrangements and
really be creative in how theyhow they did this.
They could design their ownmodel, their own value-based
(04:26):
model.
And if they um met the thresholdrequirements for uh establishing
the VVE and um made sure theywere um working towards uh
permissible value-based purpose.
We can get into that in in asecond, but um as long as we
were meeting these thresholdrequirements, there were
(04:48):
exceptions and safe harbors theycould take advantage of, which
did not have some of the or donot have some of the traditional
safeguards that you would findin the more traditional um safe
harbors and exceptions.
And so, for instance, theseexceptions and safe harbors do
not contain a requirement thatthe arrangement be set at fair
(05:09):
market value.
Um, there is no set in advancerequirement.
There's also the parties to thearrangement can potentially
allow for and make compensationcontingent upon directed
referrals to particularproviders for the patients in
(05:30):
the target patient population,so long as there are there's a
series of conditions andexceptions that go along with
that.
Um, and there's not a broadprohibition on remuneration
under the arrangement, takinginto account the volume or value
of referrals.
And so that's I think probablythe main reason why folks were
(05:51):
excited about these, and itallowed for some increased
flexibility in establishingthese arrangements that
otherwise we wouldn'tnecessarily have if we were just
looking to say the personalservices and management safe
harbor or in the companionexception in the Star Claw.
So that is, I think, umhopefully that's a solid
(06:15):
foundation on what a VBE is andwhy uh it's potentially useful
to healthcare organizations.
Um, Rachel, I wanted to bringyou in because we were talking
before the recording, and wethis is one of the things we
covered in San Diego, is why,even though I think adoption of
(06:38):
these safe harbors andexceptions, the use of these
safe harbors and exceptions, andadoption of this BV framework is
trending upwards over the lastfew years, it's probably not
where we thought it would be atthe beginning of 2021.
And I wondered if you mightspeak a little bit to why you
think that is, um, maybe throughyour lens of an in-house counsel
(07:01):
to a sophisticated healthsystem, um may or may not be um
crazy about going down thisroad.
SPEAKER_01 (07:09):
Right.
Thanks, Scott.
So I think too, you know, we'vebeen, I think the VBE, the VBE
exceptions are intended to kindof really start a lot of
value-based care.
But I'll also just admit we'realready doing a lot of
value-based care.
The problem is we're doing itwithin kind of the traditional
framework of the fraud and abuselaws, and I think we're doing
okay.
So I think there is a little bitof a mindset of, you know, it's
(07:33):
working.
Yes, we could definitely, youknow, I think I'm not trying to
say that the traditional fraudand abuse framework doesn't
stifle some of the goals ofvalue-based care.
It definitely does, and that'swhy these value-based exceptions
have been created.
But I think there is a lot offear of, well, it's it's working
for us pretty well.
You know, we've been able to dosome things.
So why would we kind of jumpinto this unknown?
(07:54):
And then, like the three of ushave talked about quite a bit.
And I think Jim says, you know,the the guidance has been pretty
vague.
The regulators did a good job ofkind of, as Jim says, giving us
a nice blank canvas.
But I will say that makes usvery nervous.
So, you know, we're in thisspace of it's working, yes,
there's barriers.
We could jump into this newworld, but it's a very unknown
world.
(08:14):
Um, so kind of on the same, onthe same token is we we don't
really know how regulators aregonna be looking at a lot of
this stuff.
We don't have very prescriptiveguidelines, which gets at least
in-house council attorneys alittle bit nervous.
Um, and then I think too, in alot of our value-based, our
current value-based care modelsor programs that we're working
in, whether they be supercomplex, like you guys are gonna
(08:35):
get into or kind of basic stuff,you know, we do fear complexity
and we kind of want to keep itas easy to comply with as we
can.
And I think sometimes with thesenew exceptions, you know,
there's some of the nuances goaway, but we get new nuances, I
guess, or new requirements.
And again, it could it in someways, I know you guys will talk
about this, but you know, someof the quality metrics and the
(08:57):
tracking, that's daunting.
And you know, for our complianceteams, it could seem like a
whole new world for them.
And again, that's complexity,which is gonna create compliance
issues with these newarrangements.
So that's that's scary.
And I think too, just the lastthing I'll say is um, you know,
the front abuse laws, we've allwe're all in this space, so we
(09:18):
know them backwards andforwards.
And again, I'm not trying to saythey're not stifling innovation
and value-based care.
We all agree they are, but we'vealso developed a certain level
of comfort with thosesafeguards.
And I think for me as in-housecounsel, like it's great news.
Oh my goodness, we can dodirected referrals.
That's that seems great, right?
That's really gonna help thisvalue-based model succeed in a
(09:39):
lot of its goals and purposesand metrics.
But that's a really, you know,the safeguards that are going
away for that really do create alot of angst for us.
And I think we're trying tobalance, okay, those safeguards
are gone, but what new ones dowe need and what are they gonna
look like?
And then just trying to tryingto balance that, you know, is is
this new, these newflexibilities in this new world
(10:01):
worth kind of figuring out thenew world?
And I think it is, but butagain, for my seat on the bus,
that's a lot.
That's a lot to think about.
You know, these are packaged asreally exciting things, and I
know they are, and you guys aregonna share all kind of the
exciting things they can do, butit still just seems like a lot
for people in in my seat, Ithink.
SPEAKER_04 (10:18):
I think those are fantastic points you raise,
Rachel, and and definitelythings that I hear on a daily
basis in terms of like sort ofthe reticence to to go there, if
you will.
Right.
Um, you know, a couple of otherthings that that stand out.
I think number one, and you youkind of hit on this a little
bit, is just like I'm notcomfortable being, I don't want
(10:38):
to go first.
I don't want to be the I don'twant to be the test case for,
you know, this if somethingabout what we're doing is not
perfect and and and we getcalled on, we don't we don't
know what's gonna happen becausethere hasn't been any precedent
set for how this is gonna behandled.
And so there's like I think alittle bit of gunshine maybe is
(10:58):
the right word to to say I Idon't want to test um the
government's willingness tochallenge these types of
arrangements.
Absolutely.
I also think there's a littlebit of, you know, and and we can
talk about this in more detail,but there's a little bit of
difference between the stockexceptions and the and the
kickback safe harbors, andthat's necessary given um what
(11:21):
they're intended to do.
But I think that has caused alittle confusion in terms of do
I have to meet, you know, butboth a stock exception and a
safe harbor, or do I need to fitwithin a safe harbor?
And if it if I do, am I going tobe able to?
Because the requirements arepretty strict, particularly on
like the the care coordinationsafe harbor where there's a
no-cash compensation requirementthere, it has to be in-kind
(11:44):
compensation.
So I think that definitelyraises um some concern as well.
And then um maybe this is a goodtransition for us kind of in
terms of where we're going withour presentation.
But I mean, I I feel likethere's this perception that
anything you have you do with aVBE has to be complex.
And like there's this level,yeah, there's this level of
(12:07):
complexity that that comes alongwith a value-based enterprise.
And that can be the case, um,but it certainly doesn't have to
be.
And I think that was kind ofwhere we were going with our
presentation in San Diego was toreally try to highlight some
cases that really mimic veryclosely arrangements that folks
are doing today, but justputting the protection and the
(12:28):
the sort of the belt andsuspenders, if you will, of the
VBE framework around those.
SPEAKER_03 (12:35):
Yeah, absolutely.
I'm glad you mentioned that,Jim, because I do think the I
have experienced with uhadvising clients, I think some
confusion and a little bit offrustration on their part.
The confusion is um, well, whatthe heck what the heck is this
(12:55):
VBE um concept?
Once they learn a little bitmore about it, they get really
excited, but sometimes then theyget frustrated when they
realize, oh, well, what we'redoing is not going to fit
squarely within the any of theapplicable kickback safe armors
because we're not no one'staking on risk, or at least not
(13:18):
any risk with respect to a payerarrangement.
And we would like to providecash compensation to providers
to do certain things.
And so I think that is part of,and I promise we've we promised
to crack the code and and unlockthe possibilities.
So we we won't hang on this umthis point for too long.
(13:38):
But I do think that if we'rethinking about reasons why um
the um maybe the uptake has beena little bit slower than we
would have thought, I think itis that um difference between
how the kickback statute and thestark law views um the sets of
requirements and what'spermitted.
(13:59):
And in a lot of arrangements,you're very likely to be able to
structure the arrangement in away where you take um full
advantage of a stark exception,but then much like the more
traditional world, you'reoutside of a safe harbor, and
then it's just a matter of risktolerance for the organization.
(14:20):
And I think sometimes creatingthe VBE and getting as close as
you can to one of the applicablesafe harbors gets you pretty far
down the road to a place whereyou can with a straight face
make an argument that there isreally no improper intent here
(14:41):
and and really it'd be hard toinfer in proper intent intent.
But without the safety of thesafe harbor, I think a fair
number of clients that I'mworking with are scratching
their heads and wondering, well,is this really worth it given
what Rachel mentioned as far aslike the lack of real history
(15:02):
with respect to any enforcementin this area or guidance?
So um but with that, I wouldlove Jim um to go down the road
a little bit of just um talkingthrough some of maybe the the
low-hanging fruit or the maybethe easier ways for um
healthcare organizations toactually take advantage of these
(15:23):
exceptions in safe harbors andand meaningfully um mitigate or
even eliminate risk for somearrangements that they are
already in.
SPEAKER_04 (15:32):
Yeah, that sounds great, Scott.
Um, you know, I think the thething that really stands out to
me, and you you hit on this inthe outset, is is the tremendous
flexibility that this frameworkoffers, whether it's in the
purposes that you'reaccomplishing.
You know, it can be thetraditional, hey, we want to um
improve quality, we want toreduce cost, but there's also a
(15:53):
value-based purpose around carecoordination, and we want to
improve uh the care coordinationfor a given patient population.
And there's a fourth one thatis, you know, about
transitioning to payment basedon value instead of payment
based on volume.
And man, talk about immenseflexibility there.
I mean, like, you know, this isreally just saying, hey, this is
this is where we get our sealegs.
(16:14):
We we build the muscle memory tobe able to succeed when we get
to value-based payments.
And so we don't have to betaking on a bunch of payer risk
um to get into a value-basedenterprise.
We can use it to do things thathelp us get there.
And so um, to me, those arereally like the the introductory
(16:34):
use cases to try to figure out,hey, what do we have to do to be
successful if we're going to betaking on payer risk in five
years or whatever?
You know, I mean, let's figureout some pathway to get there so
that when we get to that pointand somebody comes to us and
says, hey, we need you to takerisk, or or maybe even better,
you've developed the capabilitythat you can go to the payer and
(16:56):
say, hey, we're ready to takerisk, give it to us, um, which
is really where the successfulorganizations are right now.
Um I think that's where you knowthis framework really positioned
you for success.
So um I'd be curious to hearfrom from you, Rachel.
You know, kind of what what areyou hearing from maybe your
(17:19):
colleagues um about um how theymight consider utilizing this?
Um and um, you know, in general,do you think they're like simple
use cases or are they kind ofgravitating to the more advanced
end of the spectrum?
SPEAKER_01 (17:35):
Well, I was gonna say I think as a starting point,
everyone always kind of startsat the advanced, which is maybe
why it's so slow, is they thinkthat's what we need to do.
We need to think big, we need tokind of jump in head first.
But what you both have taught meover the presentations we've
done on this and kind ofprepping on this is that it
actually doesn't need to be afrom scratch new thing.
It can actually be used to solvea lot of I'll say traditional
(17:57):
problems that we all face.
You know, call you guys wentthrough examples, but call
coverage and your, you know,your troublesome doc that's
always an outlier.
Like I think that is huge fororganizations like mine in terms
of I think Word is getting outfrom your experience of working
with clients, and you guys arekind of showing that.
And I think that's for someorganizations, not all, but I
(18:17):
think sometimes that's a a goodway to start is that kind of
showing them the problems it cansolve that you're currently
facing and how to how to fixthose.
And then, like you're saying,Jim, once you get good at it,
you kind of have a track recordand you get again more
comfortable, then you can kindof advance.
But that's kind of what I'mhearing recently as people are
(18:37):
starting to better understandhow they can be used in that
way, I guess.
SPEAKER_03 (18:40):
But yeah.
I'd just to put a maybe a finerpoint on one of the examples.
I mean, this we talked about inSan Diego, one of the examples
was the the employment VBE,where you've got, you know,
again, like a lot of times whenclients are coming to me with an
(19:05):
idea for a VBE, we need to pauseand think, well, what problem
are we trying to solve for?
And and do we really have like abecause really the the purpose
of the VBE is to allow for uh tome the the increased uh
flexibility and protection underthese new exceptions at safe
(19:27):
harbors.
And so do we have like a fraudand abuse issue that we feel
like you know needs to beaddressed?
One potential issue for anemployee position might be he or
she is receiving reallyincreased compensation from
these value-based arrangementsthat that they're participating
in through like a health systemsACO or CIN.
(19:51):
Uh so they're getting morepayments from shared savings,
more quality bonuses.
And over time, the system isstarting to get nervous that,
well, this particular position,we were already pretty high with
respect to their totalcompensation.
And now here we are, we'removing north of maybe um you
know 90% of the um you knowrelic percentile.
(20:14):
And so um we're a little nervousnow that we might be actually
outside of the um protection ofthe employment exception.
I think that Jim as we andRachel, as we talked about in
San Diego, seems like a great umarea for um where VBE can be
really helpful.
And again, the VBE there isreally just the employer, say
(20:38):
the hospital and or the systemand the physician employee.
And we're building in um thevalue-based arrangement into the
employment agreement, and it'sreally a belt and suspenders
approach where we're still usingthe employment exception.
We're also protecting thatvalue-based compensation by
(20:58):
using the either the Stark lawno-risk value-based exception,
or if we're putting some of thatcompensation at risk for the
physician, then maybe themeaningful downside risk
exception.
And then in that case, for thatpiece of the compensation, then
we're we're not worried aboutfair market value.
(21:19):
And so I think that's a to me,if we're thinking about ways
that organizations can thinkabout using these in a very
non-complicated way, that'sthat's certainly one.
SPEAKER_04 (21:33):
How does that approach strike you, Rachel?
SPEAKER_01 (21:35):
I think it's great.
You guys, I mean, when you guys,when we started working through
examples, I think that was thatwas goal for me, because
admittedly, I did not think theycould be used for that.
I only was thinking thesecomplex, integrated, integrated
models.
And so I think that is huge, andI think it's really helpful.
And I also one thing we'vetalked about a lot too is it's
somewhat of a role reversal, alittle bit for in-house counsel
(21:58):
to kind of be thinking, hey, youknow, we've got all these
foreign abuse laws that we'vebeen harping on you for for
years, and now we kind of havean option of maybe throwing some
of that out the window, and itis a big role reversal, and
again, we're kind of skittish todo that sometimes, but I think
this is a great starting pointbecause again, these are
problems that we're all dealingwith nonstop every single day.
And now we do have a greatsolution that I think is going
(22:21):
to be I don't want to say easyto obtain because you guys deal
with kind of probably all theheavy lifting it entails, but I
think it's kind of like yousaid, low-hanging fruit and kind
of easy wins to get your to getyour feet wet.
SPEAKER_03 (22:34):
Yeah.
Jim, you I know have um coveredthis in San Diego, but um the
traditional co-managementarrangement.
Um do you think that is is rightfor review and maybe
transitioning over to avalue-based arrangement under a
VBE framework?
SPEAKER_04 (22:56):
Yeah, I I almost think that's a perfect use case,
Scott.
And and I think um, you know,you have to be careful in your
selection of value-basedpurposes and what you're trying
to achieve there, because youknow, many um co-management
arrangements are set up for youknow purely internal cost
savings.
And obviously that's not apermissible value-based purpose,
(23:20):
and and the the regulations andthe commentary are very explicit
about that.
Um, but if you're able to,through that co-management
arrangement, improve carecoordination, improve quality,
uh, reduce the cost or thegrowth in cost to payers, um,
transition to payment-based onvalue instead of volume, then
(23:42):
you're hitting the value-basedpurposes that you need to set up
a value-based enterprise.
And so, you know, at its core, aco- a service line co-management
agreement is really aboutimproving the efficiency of that
service line and making surethat the patients of that
service line get the bestpossible care.
And that is exactly in line withwhere the value-based enterprise
(24:07):
framework was designed to help.
And so the use cases we'reseeing out of that really are
kind of taking existingco-management arrangements, if
you will, and kind of convertingthem into sort of a VBE-based
co-management arrangement.
Um, gives you a little bit moreflexibility in terms of the
(24:28):
compensation.
One of the biggest things, youknow, physicians hate tracking
hours.
And with the traditionalco-management structure, um, we
we're often requiring them totrack hours and we're paying
them a pretty paltry rate forthose hours compared to other
things that they do.
And so in their mind, they'rethey're underpaid for that time.
And frankly, we don't always doa great job of making sure we've
(24:52):
got all those hours tracked andand and it becomes a compliance
issue.
So um just the flexibility toget away from the you know,
hours tracking in and of itselfis is huge.
Um, and then to be able to morecreatively fund the pool,
distribute the pool in differentways based upon the value
created as opposed to, you know,just ProRado or something along
(25:16):
those lines, um, is also thingsthat um seems to be gathering a
lot of interest from fromclients that we're working with.
SPEAKER_01 (25:24):
Yeah, the one thing I'll add to that too is you
know, we said that some of thenew VBEs are going to kind of
necessitate a little flipping ofits head on the in the
compliance world.
But I think this is an exampleof where it would be it's just a
win-win for everyone.
Because like you're saying,right now, the compliance for
these arrangements are trackinghours and it's just kind of plug
and chug.
It's a little bit just kind ofmaking sure we're all doing what
(25:45):
we said we'd do under theagreement, but turning it into a
VBE arrangement, it really, yes,there's still going to be
tracking, but it's I feel likeit's more meaningful.
You know, the groups are gonnabe coming together saying, is
this working?
Is this going well?
Because I think sometimes theserelationships can just get kind
of you're in it, they takeforever to negotiate, you're in
it, you're making sure you're incompliance with the agreement,
and that's kind of it.
(26:05):
But this almost requires thislike better engagement to check
on it more, I guess.
SPEAKER_03 (26:11):
Yeah, for sure.
Oh well, I just want to say thatas a as a lawyer in private
practice, um, I I feel theirpain with respect to tracking
hours.
Maybe that's a topic for anotherpodcast, but uh for my
therapist, I'm not sure.
SPEAKER_04 (26:32):
Um you know, Rachel, I think you raise a really good
point there, though.
Just and and I don't want to gettoo far afield from from the you
know basis of of ourpresentation here, but you know,
I do think that the complianceprocesses for um traditional
physician arrangements are theword I always use is they're
hardwired, right?
(26:52):
I mean, like everybody knowswhat to do, they've got the
process ironed out, you gothrough it, you do all those
things, you check the boxes, youyou put it in the drawer, and
you hope nobody misbehaves andeverything's good.
And that is really the um theopposite of the value-based
arrangement and and thepost-effective date monitoring
(27:17):
for compliance that you have todo.
And and I don't want to minimizeum the change that requires to
to compliance practices to beequipped to you know, be
monitoring outcome measures andand quickly identify if you're
not going to be able to achievethe outcome measure, that the
outcome measure isn't advancingthe value-based purpose anymore.
(27:37):
I mean, you've got pretty tightwindows to be able to rectify
those things.
And so, you know, it reallyrequires a very different
process.
And and I'm curious from yourperspective, is that um a
daunting thing to take on?
And and and Scott, I would loveto hear from you in terms of you
know clients you've worked with,like how how are they doing
(27:58):
that?
SPEAKER_01 (27:59):
That's I'll just start off with I'm curious what
Scott's hearing too, becausethat is a huge piece of this.
That's I think that's why we're,you know, like I said, it's it's
the best thing for thearrangement.
That's what we need.
We need to stop these set it andforget it arrangements.
It needs to be genuineassessment.
Is this working?
But that's not the currentworld, and that is going to ask
a lot of us.
And I think so much ofvalue-based care is data heavy.
(28:20):
So organizations are gettinggood at data, right?
We're we're we're getting goodat it, but it hasn't fully
translated yet to compliance.
You know, we're still trying tofigure out what that means, how
does how does this all work?
How can we pull this and pullthat and check this?
And so it's a lot.
It's it's very daunting.
And I think that's why sometimesthose smaller arrangements, you
know, if the less we need to do,the better.
(28:42):
But if we really want to getgood at this, you know, it's
gonna get complex and we'regonna have to figure it out.
So yeah, I'm curious to youguys, what have you been hearing
with some of your clients whohave who've been in this space
for a while?
What's working?
What's what's gonna be just thatthing that everyone's gonna
struggle with?
SPEAKER_03 (28:57):
Or I yeah, I think this one is, and it's funny,
like um a lot of thesearrangements are are in their
early stages, and so we're we'rewe're planning for this.
But one of the one of thecrucial questions at the outset
for me when I'm discussing thiswith clients is you know, we I
(29:18):
mean this is a requirement forjust establishing the VVE, but
it's critical to land on theappropriate accountable body or
person that is um meant to beresponsible for financial and
operational oversight of theVVE.
And you know, that doesn'tnecessarily have to mean a
board, but we've got to, at thefront end, make sure that we're
(29:41):
identifying the right folks whoare truly going to be plugged in
with the arrangement and who arewho know a little bit um more
than say your average personwithin the system about what's
going on on the ground withrespect to the arrangement,
because they're likely to be theones that are going.
Going to be conducting thisreally what's an audit at the
(30:05):
end of the year to make surethat the value-based activities
are furthering the purposes ofthe arrangement, not resulting
in material deficiencies inquality of care.
And as Jim, you mentioned thatthere are some pretty tight
windows to review and if you'veaddressed an issue to change the
(30:28):
outcome measure or transition toanother one or just scrap the
arrangement entirely.
And so, yes, I think to me, likeone of the key issues with
maintaining compliance is tomake sure that you've got you've
identified up front theappropriate group or person
that's going to serve in thatrole at the outset.
(30:51):
Yeah.
It's different for differentorganizations, I think.
Um, and it depends too on whothe target patient population is
and what the purposes of thearrangement are.
But so it's it's probably thereare going to be different
answers depending on what theVBE is intending to accomplish.
SPEAKER_01 (31:12):
And I think too, like we've all agreed and kind
of started the presentation onbecause the regulators haven't
really done anything yet.
They gave us they gave us prettybroad guidance and they haven't
really taken any action onanything, knock on wood, that's
good news.
But it's also then hard for ustoo.
So I think organizations areprobably gonna err on the side
of being really conservativewith some of this, um, the these
(31:33):
requirements.
And like I had mentioned to youtoo, is when we have these
flexibilities and the old theythey kind of created their own
new nuances and the newsafeguards, but we're probably
gonna maybe overkill some ofthat, right?
You know, we're gonna be heavyon the documentation, making
sure we we're documenting thatwe're doing all this.
Maybe in a couple of years we'llrealize that's not required.
But until the regulators sayotherwise, we're probably gonna
(31:55):
be, at least from ourperspective, you know, we'll be
going heavy, heavy on heavy onthe documentation, because
compliance is kind of unknownright now.
SPEAKER_03 (32:03):
But it's also, I think, important.
And so I think I forget whetherit was Jim or Rachel, one of you
um, I think mentioned just thatthe you know, there's already a
robust like system within healthsystems for the more traditional
compliance um um reviews withrespect to maybe physician comp
(32:29):
and and just some things thatare on the internal work plan
probably year over year.
But this is something that Ithink compliance departments
they may not even be aware thatthere is a VVE.
And so I think like making surethat you're looping in the
appropriate folks in complianceand that this is part of the
(32:51):
audit plan or process within theorganization.
And so there are some folks thatknow that this exists and can
come in the independent of theaccountable body, but just as an
organization, yeah.
SPEAKER_02 (33:02):
Right.
SPEAKER_03 (33:03):
And it'd be pretty important because otherwise I
think they it's probably gonnafly under the radar.
SPEAKER_01 (33:08):
Well, they don't know what they don't know,
right?
Yeah.
And knowing that this looksdifferent, you know, your risk
assessment every year, thisdidn't get caught, this didn't
fall into it.
Yeah.
SPEAKER_04 (33:19):
Scott, was there a particular um use case that we
that we covered in San Diegothat that you wanted to
highlight today, whether it wasum, I think there was one
related to um ACO distributionsand things like that?
SPEAKER_03 (33:34):
I think well, actually one of them um, because
we were talking earlier aboutjust the flexibilities of um
these new exceptions in safeharbors, and I think one one of
the flexibilities to me is thehow many ways there are to
(33:57):
establish the target patientpopulation.
And that, you know, unlike umsay the waivers that CMS and the
OIG have come out with withrespect to specific Medicare
alternative payment programs,here organizations have the
flexibility to define the targetpatient population in a way that
(34:22):
cuts across payer.
And so we can include commercialpatients, Medicare Advantage,
Medicaid, Medicare.
Um and so one thing I wasthinking about, Jim, was just
the team model and for hospitalsthat are participating or and
have been mandated that theymust participate in team, you
(34:44):
know, there there are some umexisting mechanisms to protect
those sharing payments uh withinthe context of the team model
that live outside of the VBEframework.
And so you don't necessarilyneed the VBE for that piece.
But if you're going to, youknow, if it makes sense for the
(35:06):
organization to put togethersimilar funnel payment
arrangements with other payersfor these same episodes of care,
then all of a sudden I think theVBE framework becomes something
that I think could be of greatuse to organizations as they um
(35:26):
are spurred on to um uh to lookoutside of that Medicare
population um with thesephysicians.
And so I wondered if you wouldhave been advising folks on
that.
I know you've been advising somefolks on probably complying with
or just getting ready for thatteam model, but um what do you
(35:48):
think about the VBE as apotential mechanism to um
protect similar programs outsideof team?
SPEAKER_04 (35:56):
Yeah, I I've honestly I feel like team might
be sort of the the tipping pointfor the adoption of VBEs.
I really, I really do.
I think it's it's that importantto the success.
Maybe not during track one whereit's upside only, but when you
get to track two and track threewhere there's downside risk, um
I think it's really gonna beimportant for folks.
(36:19):
I mean, we're talking about 20%plus a quality adjustment.
So you know, it can be likenegative 22% if you don't
perform well.
Um, that's massive on some ofthe most commonly utilized
episodes of care in in an acutecare hospital.
So um seeing tremendous interestin how do we do this better.
(36:42):
And we talked aboutco-management agreements before,
and that that's perfect overlayfor sort of what you do within
the confines of the hospital.
But even more than that, um, andand I'll be really curious to
hear your thoughts on this,Rachel, is you know, what do I
do when the patient getsdischarged from the hospital?
Because this is a 30-day episodeof care in the team model.
(37:06):
And so, you know, I've got folksleaving and going to rehab, I've
got folks leaving and going toSNF, I've got folks leaving and
going home.
And I've got different providersin all those areas, and some of
those providers are going tohelp me more in terms of my
success in team than others.
And so um the ability to sort ofcreate, I know the narrow
(37:29):
network is kind of a uh a dirtyword, it seems like these days,
but um, you know, a network thatyou know is going to help you
succeed both in terms of qualityand in terms of of cost um is
going to be important forsuccess.
And so being able to sort ofutilize the directed referral
aspect of of the VBE, I thinkcould become really important
(37:52):
too.
SPEAKER_01 (37:54):
I I completely agree.
And, you know, we've we'vetalked about this before.
These relationships are socritical.
I mean, dis to discharge inevery in every aspect of the
hospital is huge, but with thismodel, it's gonna be critical.
And I think these relationshipsare key, but like we've talked
about that directed referral isa little bit daunting, right?
How do we make sure we'rehonoring patient choice, that
(38:15):
things don't get hardwired, oryou know, we we can establish
these relationships that aregoing to be critical for the
success of the program whilealso kind of maintaining patient
choice, making sure that, youknow, the full delivery of care
is still compiled, that youknow, everything outside of
Teams is still being met innormal course.
Um, so I think that to me isstill kind of an outlying
(38:36):
question and something that our,you know, organizations like
ours who are participating inteams, I think are still trying
to figure out, to be honest.
Um, how can we use these andstill be comfortable with these
relationships in this new space?
The other thing I'll say too,you you guys had kind of
suggested it.
Um yes, maybe the teams, the thewaivers embedded in the teams
program make some of the VBEarrangements not unnecessary,
(39:00):
but you know, you're getting thesame thing kind of through those
waivers.
But I think adding it to thecommercial payers, I will say
it's really hard to implementthings payer specific.
I mean, that that can cut bothways, though, right?
Some or sometimes theorganization is so grateful
because, oh, we only have toworry about it for government
payers, which is which is truesometimes.
It's it's better because it'sonly them.
But all things considered, whenyou think of case management and
(39:23):
all the different parts of ourproviders that get involved in
these processes, then payersspecific things get really
challenging to operationally.
SPEAKER_04 (39:32):
Tell a physician you want a separate workflow for
your Medicare patients versustheir own.
SPEAKER_01 (39:36):
My goodness, you guys, it's it's that's what I'm
saying.
Sometimes, sometimes they wantthat, right?
Oh, we only have to do it inthis instance, but operationally
it is so challenging.
And so I'm always excited tohear things that can do it
across the board.
It's it's for every patient.
Um, so yeah, I think that's areally great point, especially
if if people start thinking, oh,we don't need to worry about
(39:56):
that anymore because it's allpart of the team's program.
SPEAKER_04 (39:58):
So Scott, do you think those gain sharing
provisions in in team are asflexible or as useful, if you
will, as as potentially theoptions available to you through
a VBE?
SPEAKER_03 (40:14):
Um that is a good question.
I think that I believe they'repotentially easier to satisfy
just in the team context.
Um I think they're a little bitclearer uh in the in the reg
with respect to the sharingarrangement, and there's a very
(40:36):
specific um detailed uh regtitled sharing arrangements that
that relates to the team model,and and if we're so I'm feeling
a little bit better about umsatisfying that regulation with
(40:58):
respect to the sharing paymentswithin the team model.
But I do think to Rachel'spoint, and this is where what I
was thinking earlier, that Ithink it's it's hard to just do
this for one set of patients andone payer.
And so I'm wondering if overtime it's going to make sense
(41:21):
for hospitals that are in-teamto start thinking about doing
encouraging or incentivizing thedownstream providers to take
some of the same actions withrespect to other patient
populations.
And again, if we're talkingabout financial incentives
outside of the team model, thenI think the VBE is like very
(41:43):
useful to potentiallyprotecting.
Now you still you're still goingto need to involve the the payer
in that, but I think it's it'sit's going to make it easier to
do the the same things for abroader set of patients.
Um I think that's where um Ithink that's where it could be
(42:05):
beneficial.
Um any other pearls of wisdomfrom this group or or uh last
words before we uh wind thingsup.
SPEAKER_04 (42:19):
I I would just say, you know, I I would encourage
folks to uh, you know, asproblems arise, and and Rachel
mentioned this, you know,in-house counsel has really uh
developed the ability to becomesort of like an internal
consultant um with the advent ofof this framework.
And um you know, don't you don'thave to take on your most
(42:39):
daunting use case, but when whenyou identify a problem that,
hey, maybe this could be solvedum using some of the the
flexibilities of the value-basedarrangement, explore it and and
and see where you can take it.
SPEAKER_01 (42:51):
That's what I was gonna say, is just be be
curious, right?
Even if it doesn't mean 2026,we're gonna do three new VBE
arrangements.
It's just get educated, talk topeople like you guys who are
dealing with this every singleday.
You know, people just need toget curious, get informed, and
then start kind of you knowgetting your feet wet a little
bit.
SPEAKER_03 (43:09):
But hey, I I love ending on that because that
seems like good advice just forlive in life.
SPEAKER_00 (43:16):
Right.
SPEAKER_03 (43:17):
Yeah, it's me.
Forget about the BBE context.
Let's let's end on that note.
Let's be curious.
Yeah.
SPEAKER_02 (43:23):
Yeah.
SPEAKER_03 (43:24):
Um well, uh, I think this was a lot of fun.
Uh, I know that I enjoyed it.
I'm and speak for Jim andRachel.
I think we we all enjoyed thisconversation.
Um please uh note that AHLA ishaving its next annual meeting
um in 2026, summer of 2026,probably late June or early
(43:46):
July, uh in New York for thefirst time, um, I think in at
least 10 years.
And so uh hopefully uh the threeof us will be there, but um
please consider um joining AHLAat the annual meeting in New
York.
It should be a lot of fun.
And with that, I think we'llsign off.
But thank you everyone forlistening.
(44:06):
We we had a good time.
SPEAKER_02 (44:08):
This is great.
SPEAKER_03 (44:10):
All right, take care.
SPEAKER_00 (44:16):
If you enjoyed this episode, be sure to subscribe to
AHLA Speaking of Health Lawwherever you get your podcasts.
For more information about AHLAand the educational resources
available to the health lawcommunity, visit American Health
Law.org and stay updated onbreaking healthcare industry
news from the major mediaoutlets with AHLA's Health Law
Daily Podcast, exclusively forAHLA comprehensive members.
(44:39):
To subscribe and add thisprivate podcast feed to your
podcast app, go toamericanhealthlaw.org slash
daily podcast.
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