sad face bleh face and smiley faces on post it notes
July 9, 2018

Stark Changes Coming?

On June 25, the Centers for Medicare & Medicaid Services (CMS) published a public request for information (RFI) regarding the Physician Self-Referral Law, (a.k.a. the Stark Law).  In the last few years, industry stakeholder complaints about the ways Stark Law impedes providers from pursuing coordinated and integrated care have grown louder.

Changes to Stark Law could have major implications on alignment strategies among healthcare providers.  While no one should hold his or her breath waiting for such changes, this RFI represents a significant step toward evaluating appropriate changes to a 30-year-old regulation.

PYA experts Martie Ross and Angie Caldwell weigh in on the RFI and what it could mean for physicians and those with which they have financial relationships (e.g., hospitals, physician practices, clinical laboratories, diagnostic testing facilities, ambulatory surgery centers, etc.).

Q:  Why is CMS requesting input from the public on potential changes to the Stark Law?

Martie:  Under fee-for-service reimbursement, more referrals mean more revenue for providers—and higher costs for the Medicare program.  The Stark Law was intended to prevent a physician from making referrals for goods and services from which the physician (or an immediate family member) could personally profit.

With value-based reimbursement, smarter referrals mean more revenue.  Physicians are motivated to identify providers who deliver high-quality care in an efficient manner.  To accomplish this, physicians participate in integrated systems of care.  These relationships can take many forms—for example, employment by a health system, or participation in a clinically integrated network of independent providers, among many other types of alignment structures.

Stark Law restrictions, however, can complicate these relationships and, in some cases, make them unworkable.  To address this, CMS has announced its “Regulatory Sprint to Coordinated Care.”  This initiative is intended to identify regulatory provisions that create unnecessary obstacles to coordinated care.  The publication of the Stark Law RFI is a first step in this process.  CMS wants to hear from stakeholders how it can maintain proper checks on fee-for-service reimbursement, while encouraging coordination and collaboration among providers.

Q:  Is Stark Law impacting providers differently today than it was 5 or even 10 years ago?

Angie:  Without a doubt.  The shift from volume- to value-based payments has intensified in the last couple of years.  This shift has put immense pressure on providers to measure and deliver high-value care, which means providing services with higher quality at a lower cost.  Collaboration is essential for providers to deliver high-value care.

More so now than ever before, physician arrangements include qualitative compensation for driving higher-value care and improving patient outcomes.  Translating the value of collaboration and high-value care to physician compensation is challenging and becomes even more complicated when considering Stark Law as it is currently written.

Q:  Who has the authority to make changes to Stark Law to better align with value-based care?

Martie:  Congressional action would be necessary to repeal or significantly revise the Stark Law.  CMS, however, has the authority to create new Stark Law exceptions—like it did two years ago with non-physician provider recruitment assistance and timeshare arrangements.

Ten years ago, CMS proposed a new Stark Law exception to permit remuneration from a hospital to physicians on its medical staff under incentive payment or shared savings programs, provided that specified conditions were satisfied.  Many of the conditions mirrored those found important by the Health and Human Services Office of the Inspector General in 10 favorable advisory opinions it had issued to date for gainsharing programs.  CMS, however, never finalized this proposal.

CMS also has the authority to waive Stark Law requirements in specific circumstances.  For example, the legislation creating the Medicare Shared Savings Program authorized CMS to waive Stark Law requirements for program participants.  CMS eventually approved broad waivers to encourage care coordination and collaboration through accountable care organizations.

Q:  Based on the questions CMS asks in the RFI, what types of changes might you expect to see to Stark Law, if federal action is taken?

Angie:  To predict specific changes based purely on the RFI would be hasty.  What we can predict is that changes to Stark Law, if any, will probably come in the form of new exceptions.  As noted above, CMS went down this road once before, back in 2008, attempting to address gainsharing arrangements between hospitals and providers.

The RFI itself gives us a good idea of the types of changes we might see—new exceptions to protect participants in alternative payment models (APMs), new exceptions to protect providers outside APMs who engage in coordinated care, and updated definitions for key terminology in the context of healthcare payment and delivery reform.

Q:  Is anyone in favor of keeping Stark Law exactly as it is currently written? What are the primary barriers to making changes to Stark Law?

Martie:  The only parties interested in keeping Stark Law as-is are those who are actively paying providers under a fee-for-service model.  To reiterate, this law has been effective at hindering the perverse incentives of a volume-based payment model.  For the same reason, it has been a barrier for providers wanting to fully engage in coordinated care under value-based models.

The greatest barrier to revising Stark is regulators’ concern over unintended consequences.  For example, the lack of a good working definition of “incentive payment program” doomed the proposed gainsharing exception.  As long as a significant percentage of healthcare payments remain fee-for-service, there will be concern that Stark Law changes intended to promote coordinated care also will open the door to abusive practices.  This is probably CMS’ motivation for publishing the RFI: to draw on stakeholders’ expertise in precisely defining the terms of any new exceptions.

Q:  Does this RFI have any short-term implications for providers and provider organizations as they pursue APMs and other structures to support value-based reimbursement?

Angie:  The timing of this RFI is interesting, given that the 2019 Medicare Physician Fee Schedule Proposed Rule is due any day now.  Exceptions to Stark Law are often handled in the fee schedule.  Perhaps we’ll receive some other clues as to why CMS didn’t directly propose Stark Law changes or ask for input through the Medicare Physician Fee Schedule proposed rule.

With responses due in August, it is possible that we could see some changes later this year.  Of course, it’s also possible that changes will be delayed until next year or beyond.  For now, the best thing to do is consider responding to the RFI and watch for further updates.

And of course, the RFI should not hinder any organization from considering APM strategies.  If you weren’t convinced that the fee-for-service model as the primary payment mechanism is nearing its end, this is further evidence that the federal government is all-in on APMs and value-based reimbursement.

Q:  Why should organizations consider responding to CMS’ RFI on this subject?

Martie:  Health and Human Services Secretary Alex Azar and CMS Administrator Seema Verma have stated repeatedly their intentions to review existing regulations and eliminate those placing an undue burden on providers.  Those in the best position to highlight those burdens are providers.  If your organization has examples of how the Stark Law has been a barrier to achieving the Triple Aim, these will help CMS appreciate the importance of moving forward with changes to the regulations.

Providers also can help CMS define the terms of new Stark exceptions, helping to overcome the fear of the unknown.  Without industry input, CMS is likely to craft overly narrow exceptions that do not go far enough to enable effective coordinated care.

If you have questions regarding current or possible Stark Law exceptions or value-based reimbursement, or to request a speaker on this topic for your organization or event, contact one of our PYA executives below at (800) 270-9629.

About the Authors