The Stark Law, also known as the physician self-referral law, has created a “minefield for the healthcare industry” and is overdue for changes, according to a report released by Senate Finance Committee Chairman Orrin Hatch on Thursday.
“Congress intended the Stark law to provide a bright line test to curb physician self-referral,” according to the report (PDF) which sums up comments submitted by experts and others on the law following a Senate Finance Committee and House Ways and Means Potential MACRA byproduct: physician consolidation roundtable in December. “But despite CMS' efforts to provide clear rules and interpretations to address the strict liability regime, the Stark law's breadth, complexity and impenetrability have created a minefield for the healthcare industry.”
The Stark law prohibits physicians from referring Medicare patients to hospitals, labs and other doctors that the physicians have financial relationships with, unless they fall under certain circumstances. No intent of wrongdoing is required to prove liability, and offenses carry potential civil monetary penalties.
In recent years, a number of Stark allegations have been brought to court under the False Claims Act, under which damages are tripled. In those cases, whistle-blowers allege that Stark violations led to the submission of false claims to the government.
Perhaps most famously, last year a federal appeals court upheld a $237 million judgement against Tuomey Healthcare System in Sumter, S.C., based on allegations it violated the Stark law, leading to false claims. Though the appeals court ruled against the hospital, Judge Albert Diaz, who wrote the opinion (PDF), called the Stark law “a booby trap rigged with strict liability and potentially ruinous exposure—especially when coupled with the False Claims Act.”
Ultimately, Tuomey agreed to settle with the government for $72.4 million.
The report released Thursday called the Stark law “increasingly unnecessary” and a “significant impediment” to the value-based payment models that are replacing traditional, fee-for-service models. The report argues that the type of overuse of services the Stark law was meant to prevent is mostly eliminated in alternative payment models. In such models, it's in physicians' best interests to eliminate unnecessary services because they don't get paid per service as they did in traditional payment models.
The report said many of the comments that followed the December roundtable focused on potential new waivers or exceptions to Stark, expansion of existing waiver or exceptions, a broadening of the CMS' regulatory authority, and repealing parts of Stark or the entire law.
Commenters did acknowledge, however, that the Stark law has been effective in restricting physician ownership and investment in providers of ancillary services and has encouraged close scrutiny of physician relationships. They also praised the way the law allows providers to self-disclose violations and the CMS to compromise on repayment amounts.
Hatch noted in the report that the committee would consider all the comments as it evaluates and develops potential changes to Stark.
The CMS already finalized some changes to Stark last year within the Medicare physician fee schedule for 2016 that offered providers a little more flexibility when it came to technical violations of the law. But those changes didn't really address Stark within the context of the industry's move to value-based care, said Danielle Sloane, a member of law firm Bass Berry & Sims who represents providers.
Sloane called the report a “good sign” that the Senate Finance Committee is acknowledging the healthcare industry's frustration with Stark. But she cautioned that it still doesn't give much insight into what the committee might actually do about it.
“One would hope this is the signal of more to come,” Sloane said.
