The Committee’s interest in the Stark Law and receptiveness to feedback from industry leaders may indicate that significant changes to the law are in the pipeline.

As the healthcare industry moves from a fee-for-service (FFS) reimbursement system for physicians to a value-based payment system, industry insiders are questioning whether the federal physician self-referral law and its implementing regulations (Stark Law) has outlived its usefulness, and their concerns may be picking up steam in the United States Senate. Opposition to the Stark Law is nothing new as stakeholders have argued for many years that the complexities of the law unduly interfere with the practice of medicine. CMS has acknowledged provider struggles with technical violations and revised its regulations in 2015 in an effort to ease this burden. The agency has also acknowledged that innovations in Medicare payment models and private payor arrangements that are designed to integrate physicians and hospitals can be difficult to achieve under the Stark Law. The Senate Finance Committee (Committee) has turned its attention to the Stark Law by engaging stakeholders in a discussion about these issues. The Committee’s recently released white paper describing the concerns of the industry may foreshadow significant changes to the law.

Payment Reform and the Stark Law

Congress enacted the Stark Law to limit the influence of financial relationships on physician referrals in the FFS reimbursement landscape, where the volume or value of services drive profit margins. New payment models resulting from the Affordable Care Act, the forthcoming physician payment system created under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), and clinical and financial integration in the commercial setting are designed to align physicians and other providers across the care spectrum. The Committee acknowledges in the white paper that these alternative payment models do not present the same risks for overutilization as traditional FFS because physicians’ “economic self-interest aligns with the interest to eliminate unnecessary services.”

The Committee’s white paper is a collection of comments from healthcare thought leaders detailing the challenges that healthcare providers face and suggests changes to the law that would help the industry move toward implementing these alternative payment models. Solutions proposed by commenters ranged from repealing the Stark Law entirely to modifying the existing compensation exceptions and fraud and abuse waivers to accommodate innovative payment arrangements. While the white paper does not make any specific recommendations, it shows that the Committee is considering diverse opinions about how to modernize the Stark Law to deal with clinical and financial integration.

Comments about Technical Revisions

Despite efforts by CMS to clarify the application of the Stark Law, its technical nature and regulations have presented interpretive challenges over the years. Moreover, the staggering financial penalties that can result when the Stark Law forms the basis for a False Claims Act case have raised the stakes for providers in recent years. The white paper demonstrates that stakeholders are frustrated by the complexities of the law and have a wide variety of opinions about how to revise the law to permit conduct that does not harm the Medicare program.

Some commenters advocated for amending the penalty scheme for technical violations, such as failure to maintain documentation of arrangements, suggesting that penalties should apply to the arrangement as a whole rather than on a per-claim basis. Others suggested eliminating penalties for technical violations altogether. However, the comments reveal that what constitutes a “technical violation” is a subjective determination. Thus, some stakeholders proposed, as an alternative, the elimination of the Stark Law’s applicability to compensation arrangements.

The white paper describes other comments about the fair market value standard, the volume or value standard in the group practice exception, and the interplay between the Stark Law and the Anti-Kickback Statute. One comment focused on the fair market value standard noted that tax-exempt entities are already subject to compensation restrictions and suggested creating a separate exception for compensation arrangements involving a tax-exempt entity. A sentiment echoed by many commenters is that Congress should ease the compliance burden by aligning the Stark Law with the Anti-Kickback Statute and replacing some Stark exceptions with their safe harbor counterparts.

Committee Hearing

The Committee held a follow-up hearing on July 12, 2016 to discuss ways to improve the Stark Law. A former CMS official in charge of Stark Law policy at the agency was among the witnesses at the hearing and described the law as “a tortured web of confusing standards.” During the hearing, Committee members acknowledged that the Stark Law is too complex and creates hurdles to implementing alternate payment arrangements.

Conclusion

CMS has recognized that the Stark Law can be a barrier to clinical and financial integration and that compliance with the law is a burden to providers. While it has made progress in amending the regulations, CMS cannot change the statute. The Committee’s interest in the Stark Law and receptiveness to feedback from industry leaders may indicate that significant changes to the law are in the pipeline.

Jessica R. Jolivet contributed to this article.