Stark law needs a check-up, says Senate Finance Committee

As Medicare payments move from fee-for-service to value-based and other alternative payment methods, are the Stark law’s prohibitions on physician self-referrals still relevant? In a July 12, 2016 hearing titled “Examining the Stark Law: Current Issues and Opportunities,” the Senate Committee on Finance heard testimony on how the law can be improved. Both the Committee Chairman, Sen. Orrin Hatch (R-Utah), and Ranking Member, Sen. Ron Wyden (D-Ore), agreed on the importance of coordination of care and of the Stark law (42 U.S.C. §1395nn) and expressed their hopes of reaching a bipartisan solution.

As background information for the hearing, Hatch released a white paper on how the Stark law is working in practice, highlighting the law’s complexity, the severity of its penalties, its significant compliance costs, and its effect on efforts to integrate health care delivery. The paper, “Why Stark, Why Now? Suggestions to Improve the Stark Law to Encourage Innovative Payment Models,” followed up on a December 2015 round-table discussion with Stark law experts.

Testimony focused on the difficulties and costs of compliance with the Stark law, particularly in light of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) and the Medicare and CHIP Reauthorization Act of 2015 (MACRA) (P.L. 114-10). Troy A. Barsky, partner at Crowell & Moring LLP and former CMS Director of the Division of Technical Payment Policy, called Stark law reform “overdue and necessary.” Barsky says that the law has become a “tangled web” of “conflicting standards, ambiguous and conflicting definitions, and volumes of regulations” that leaves compliance expensive and “unachievable as a practical matter.” He further called the Stark law an obstacle to health care delivery and reimbursement reform.

Ronald A. Paulus, M.D., President and CEO of Mission Health, a safety net health system in western North Carolina, explained the problems his organization faces with Stark law compliance. He said that the Stark law affects the health system’s ability to fully implement pay-for-performance programs, and affects day-to-day patient care in significant, negative ways. Paulus added, the law “creates a choking fog of uncertainty” and often “creates truly absurd outcomes that directly cause patient harm.” Further, he noted that CMS does not have the authority to address the problems with the Stark law, and called on Congress to act.

Lastly, Peter B. Mancino, Deputy General Counsel of the Johns Hopkins Health System Corporation, discussed the costs of compliance with the Stark law, including regular audits, training programs, and tracking programs. He discussed the organization’s roles as payor and provider, both at academic medical centers and community hospitals, which gives it a unique perspective. Mancino called the Stark law “the top compliance risk of our health system” and asked for “common-sense revisions that will make Stark more understandable and less burdensome to providers.”