The 1989 Stark Law penalizing physicians and hospitals for making medical decisions for patients based on their financial self-interest has few remaining fans. Even its author, former California Democratic Rep. Pete Stark, has called for repealing the law, which has metastasized in complexity over 30 years.
Now the Trump administration, backed by provider groups, is poised to make what CMS Administrator Seema Verma called “the most significant changes to the Stark law since its inception.”
Administration officials argue that the law, written at a time when fee-for-service payment was dominant, hampers alternative payment models that encourage providers to deliver better-quality, lower-cost care. “In a system where we’re paying for value, where the provider is ideally taking on some risk for outcomes and cost overruns, we don’t have nearly as much need to interfere with who’s getting paid for each service,” Deputy HHS Secretary Eric Hargan said in January.
Providers say fear of being hit with penalties and even criminal actions has led them to go slow on value-based care models, which typically involve incentive payments for meeting cost and quality targets that could violate the rules. That’s despite no one being able to cite any enforcement actions against providers involved in such programs.
The Stark law is particularly dreaded because the federal government can go after providers for unintentional violations, including documentation errors, in their financial relationships with physicians who make referrals for designated health services. In addition, whistleblowers can sue providers for alleged Stark violations under the False Claims Act, which carries potential treble damages and other penalties.
The CMS is working on an update, to be issued later this year, that would, among other things, clarify the regulatory definition of the Stark law’s ban on paying physicians for the volume or value of referrals, Verma said last week during a speech to the Federation of American Hospitals. The agency also will address the murky definition of payments that are commercially reasonable and represent fair-market value. It received nearly 400 public comments on a request for information issued last year seeking input on how to retool the law.
HHS’ Office of Inspector General is working on a separate but related safe harbor rule for the anti-kickback statute.
But provider groups want the administration to go bigger. The American Hospital Association and others are seeking an exception for innovative payment models. The AHA also seeks safe harbors from the anti-kickback statute for shared-savings programs and for financial support to patients for services such as transportation, nutrition and housing. Providers would like to see Congress establish these safe harbors and clearer definitions in statutory law.
“Providers would really like to see a new exception for value-based arrangements,” said Kim Roeder, a healthcare compliance attorney at King & Spalding in Atlanta. “Or, if we can’t agree on that, at least give relief by clarifying terms like the volume or value of referrals, to accommodate value-based payments.”