Kusserow on Compliance: Stark Law continues to be questioned

CMS kicked off the New Year by announcing plans to convene an inter-agency group to focus on how to minimize the regulatory barriers of the Stark Law that began in 1989 and underwent expansion in the 1990s. Providers have raise concerns from the beginning of the implementation of the Stark Law. The agencies involved in the review will include: CMS, the HHS Office of Inspector General (OIG), HHS General Counsel, and the Department of Justice (DOJ). Since the announcement, there has been considerable speculation as to how serious this effort will be and how soon something will materialize from it. The subject came up during a hearing on March 21 concerning the implementation of physician payment policies under the Medicare Access and CHIP Reauthorization Act (MACRA). CMS called for the need to consider such reforms as the agency pushes toward a value-based healthcare system. The Stark Law has been viewed by much of the industry as creating real barriers to meeting new government policy objectives.

CMS testimony noted that the Stark Law “has a really big impact on how relationships are structured in the healthcare space, which prohibits physicians from referring a Medicare or Medicaid patient to a provider with which the physicians have financial ties.” The testimony went on to state that the health care system has so many fractured silos with many rules and regulations that govern every part of the health care system and that both MACRA and Stark are important pieces of it. It was noted that the President’s budget proposal for fiscal year 2019 includes a line item calling for the “physician self-referral law” to be reformed “to better support and align with alternative payment models [APM] and to address overutilization.”

The Stark Law prohibits doctors from referring Medicare patients to hospitals, labs and colleagues with whom they have financial relationships, unless they fall under certain exceptions. It also prevents hospitals from paying providers more when they meet certain quality measures, such as reducing hospital-acquired infections, while paying less to those who miss the goals. The result is the law is viewed as making it difficult for physicians to enter innovative payment arrangements because they are not susceptible to fair market value assessment, a Stark requirement. These prohibitions are seen as interfering with key factors related to value-based care. Unlike the Anti-Kickback Statute, which is enforced by the OIG, the Stark law is considered regulatory and falls under CMS jurisdiction. From a regulatory standpoint, there is only so much that CMS can do to make substantive changes. Any real changes in the law will have to come from Congress.

This is not the first time the CMS has tried to move the easing of rules concerning the Stark law.  In 2015, CMS published a Proposed rule relaxing aspects of the Stark law, including easing of some of the strict liability features of the law and CMS’ burden in dealing with the interpretation of key terms, requirements, and other issues.  After reviewing an enormous amount of self-disclosures, CMS realized that a large part of its docket involved arrangements that may technically violate the statute but do not actually pose significant risks of abuse. Therefore, it appears that CMS seeks to reduce the number of self-disclosures reported. However, the proposed update is also intended to account for recent changes relating to health care reform and advancements in patient care and payment methodologies. CMS wanted to ensure that Stark does not inhibit Affordable Care Act (ACA) reforms and these are the same concerns driving the latest initiative.


Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2018 Strategic Management Services, LLC. Published with permission.