Healthcare executives call for Stark law reform

Beth Hughes' job involves closely partnering with physicians to sync Sioux City, Iowa-based MercyOne's operations and move the health system forward. But one regulation continues to stand in her way—the Stark law, the president of MercyOne's Western Iowa region said.

The Stark law is meant to curb Medicare and Medicaid spending by prohibiting a physician from making referrals that financially benefit the doctor. That combined with the federal anti-kickback statue have impeded new payment models by limiting incentives used to reward progress, providers said, noting that they can incur significant financial penalties even if they didn't intend to violate the regulations.

While CMS Administrator Seema Verma aims to update the statutes to reflect the push to value-based care, the regulation continues to delay the transition, Hughes said.

"Being creative with value-based care flies in the face of fraud and abuse laws," Hughes said as organizations like MercyOne aim to reduce hospital readmissions and length of stay. "You can try to get an exception, but most people are discouraged because it is a long and arduous process. Those laws may be inhibiting our ability to creatively align ourselves with providers."

More than 36% of 162 healthcare executives surveyed by Advis said that fraud and abuse laws don't support new models of care—the most common answer to what regulations stand in the way of changing healthcare for the better. Fraud and abuse laws were followed by Medicare conditions of participation and state licensure laws as well as limits on telehealth reimbursement.

Shifting from a volume-based reimbursement system to one based on efficiency and quality has largely been slow, and in some cases nonexistent. Less than 3% of net patient revenue came from capitation and risk-based contracting in 2017, a share that has stayed relatively consistent since 2013, a 2018 Moody's Investors Service analysis on not-for-profit hospitals found.

There is not clarity in how the Stark law relates to new forms of reimbursement and bonus sharing, Advis President and CEO Lyndean Brick said. Outside of accountable care organizations, things get murky. Even trying to give practitioners incentives dealing with social determinants of health can get very complicated, she said.

"The whole area has to get reformed," Brick said. "The industry is seeking some simplicity to this complex regulatory landscape that has not caught up with the operational realities of the practice of healthcare today. Until we make significant changes to the anachronistic regulatory system, it will be difficult for providers to be cost effective, transparent and consumer focused."

Aultman Specialty Hospital can be more creative inside the confines of its ACO, but it has to carefully wade into physician alignment opportunities outside of that, CEO Ryan Kuharich said.

"There is always the risk of litigation and you have to leverage that with each decision you make," he said. "The ACO allows us to share quality data that improves quality and decreases cost. But if you are not in an ACO, how do you do that?"

Value-based care initiatives like bundled models, Medicare shared savings and capitated payments should be broadly exempted from the Stark statutes, Hughes said.

As for telemedicine reimbursement, the technology is needed to fill coverage gaps in areas that have difficulty recruiting physicians, experts said. But the current reimbursement model can make the investment a risky bet.

Around 30 states are now part of an interstate compact that allows them to practice telemedicine across those states' borders. But there are still vast disparities in state licensure laws regarding telehealth, physical therapy oversight and many other areas that perpetuate healthcare's fragmented framework.

"We have to make sure that reimbursement is keeping pace with the pace of medicine," Hughes said. "The appropriate reimbursement of telehealth is of paramount importance going forward."

Another regulation that vexed providers was the three-day acute-care stay requirement to qualify for Medicare reimbursement for patients who move to skilled-nursing facilities. More than half of respondents advocated for repealing that rule, followed by individual state licensure laws and the "96-hour rule" as a condition of participation for critical-access hospitals.

"The regulation is adding a day or two to a stay without real meaning," Brick said. "It doesn't look at the realities of healthcare today."

"It doesn't make any sense," Hughes said. "Under the federal payer model, getting approvals to move patients from one level of care to another is an arduous process that is getting worse."

As the prospect for a Medicare overhaul looms, Medicare for All or a similar single national health program will not come to fruition in the next 10 years, nearly 85% of respondents said. Most healthcare executives only expect incremental changes to the existing system as well as continued reduction of medical benefits to reduce the federal budget.

The idea of a national patient identifier to track a patient's treatment across the system garnered the support of more than half of the respondents, followed by decriminalization of medical marijuana and reclassification under the Controlled Substances Act. About a quarter of executives said they were also in favor of site-neutral payment.

"If we want to have a true continuum of care and aggregate data to get a bigger picture of a patient, we have to be able to pull the data from different electronic medical records, and it will take a national patient identifier to get there," Kuharich said. "If we don't, we are never going to reap the full benefit of the investments we have made."

Meanwhile, continued pressure on cost reduction and lower reimbursement levels are what keep two-thirds of respondents up at night. Around a third were also worried about the predominance of for-profit medicine fueled by private investments.

"Decreasing reimbursement from most payers and increasing costs on supplies, staffing and everything involved in operating a hospital definitely keeps me up at night," Kuharich said. "You are racing in a constantly uphill battle. There are a few changes you can make here and there that hopefully offset inflation, but I don't know where it ends."

Balancing cost-cutting efforts with employee retention through competitive wages is of particular concern, Hughes said.

"The ability to continue to give healthcare providers and staff a cost-of-living increase is outstripping the reimbursement we receive," she said.