Stark law complicated by 'smart lawyers' finding loopholes

For decades, Pete Stark was one of the most powerful members of Congress on healthcare issues. Originally a banker, he served in the House for 40 years representing a northern California district and chaired the House Ways and Means Subcommittee on Health until he was defeated by another Democrat in the 2012 election. He is now retired and living in Maryland. In an interview with Modern Healthcare reporter Joe Carlson, Stark talks about why the complex and controversial law named after him—which prohibits anyone from providing anything of value as an inducement to receive Medicare services—should be repealed and how he sees healthcare reform playing out. The following is an edited excerpt:

Modern Healthcare: Why do you favor repealing the Stark Law?

Pete Stark: The law started out very simple. There is a federal regulation that says if you take a bribe, commission or fee for referring a patient for additional service that the government pays for, you're liable for a criminal penalty of five years in prison or $50,000. I had a physician-attorney staffer who said that's too vague, there needs to be a clear line. So we passed it into law. The minute we did that, smart lawyers found eight ways around it. So we amended it to close those loopholes, and they came up with more ideas to get around it. Before we were done, there were a bunch of rules about as thick as a phone book, and it was super complicated. We were much better off when it was vague, because then if a doctor came to his lawyer and asked, “Can I do this and get a fee?” the lawyer has to say, “I don't know, maybe or maybe not.” And that uncertainty would have prevented more of this fee-splitting than drawing the clear lines.

MH: Would you wipe it out completely or make some changes?

Stark: If the law were repealed, it still would leave the federal anti-kickback statute, under which anybody splitting fees or doing referrals could be prosecuted.

MH: So you agree with critics who say the law is too complicated?

Stark: It's been complicated by people looking for the loopholes—scumbag-type physicians who are trying to get kickbacks and referral fees, aided by very smart attorneys who dream up these things. It's gotten tremendously complicated from what was a pretty simple idea that you shouldn't get kickbacks and rebates.

MH: I've seen cases where health systems charged with violating the Stark law offered the defense that they were following the advice of their counsel but that their counsel misread the law.

Stark: I don't know what to tell you. If I shot somebody in the head on the advice of counsel, would that be a defense?

MH: Tuomey is a South Carolina health system that's facing more than $200 million in Stark and False Claims Act penalties because of 19 physician contracts. Does that penalty seem out of line to you?

Stark: I don't think a penalty is out of line when the misconduct either causes people to have to pay more or be denied medical care because they can't afford it.

MH: What do you think about physician-owned hospitals?

Stark: Doctors have used the “whole hospital” exemption to the Stark law to start and own hospitals. The problem is these hospitals don't have emergency rooms. In one doctor-owned hospital in Texas, they didn't have a nurse on duty in the evening and somebody died because there wasn't somebody there who could provide defibrillator or oxygen treatment. It was nothing more than a scam for this doctor to provide care and get a kickback for it.

MH: What do you think of doctors who complain about the Stark law?

Stark: I have no sympathy for doctors who are troubled by this. All you've got to do is obey the law and you're not in trouble. You know, I don't know many poor physicians.

MH: Where do you think the healthcare system is heading and where should it go?

Stark: I think 10 years from now you'll probably see Medicare for everyone under the new insurance exchanges. I think it's very clear that integrated care, what Kaiser Permanente does, is better care than people shopping around hither and yon for a primary-care doctor and then for a specialist. I believe that in the near future, everyone will be assigned to a primary-care physician, and I think that's great. If you don't choose, you'll get assigned, and the primary-care docs will get a fee. They might get 1,000 people assigned to them, and it will be the doctor's responsibility to know whether each person needs immediate care and have a follow-up program for them. They'll get paid enough to cover the extra help they will need to have people call you at home at night and ask you if you've taken your medicine and if you've kept your weight down and all that. And this will mean greater income for primary-care doctors, and I think it will improve the medical system a lot.

MH: How will doctors in general respond to these changes?

Stark: The doctors are not going to buy it quietly, but I think they'll see the handwriting on the wall and they'll have to participate. There will be some who won't. And there will be some well-to-do people who under no circumstances will want the government involved in their healthcare, and that's fine. They can join one of these boutique doctor practices, which I wish I could afford. But not everybody can afford a thousand bucks a year just to have a boutique primary-care doc at their beck and call. So we're moving. We're the only industrialized country in the world that does not have universal medical care as a right, not a privilege. I think we'll catch up with the rest of the world in the next few years.

Follow Joe Carlson on Twitter: @MHJCarlson