At a July 12, 2016 hearing entitled “Examining the Stark Law: Current Issues and Opportunities,” members of the U.S. Senate Finance Committee expressed openness to potentially significant amendments to the Stark Law aimed at alleviating the threat of potentially devastating liability the Stark Law can impose on health care providers that pursue value-based payment models.
The Stark Law, 42 U.S.C. § 1395nn, generally prohibits a physician from referring Medicare patients for services from a health care entity with which the physician has a financial relationship, and prohibits care providers from submitting for payment a Medicare claim for services rendered as a result of a prohibited referral. Stark Law compliance is complex—widely acknowledged as a trap for the unwary. As one judge has stated, “even for well-intentioned health care providers, the Stark Law has become a booby trap rigged with strict liability and potentially ruinous exposure—especially when coupled with the False Claims Act.” United States ex rel. Drakeford v. Tuomey, 792 F.3d 364, 395 (4th Cir. 2015) (Wynn, J., concurring).
Legislators and policymakers are increasingly recognizing that some aspects of the Stark Law no longer fit the fundamental economics of the contemporary health care system. First enacted in 1989, the law was drafted at a time when physicians generally were paid according to the volume of services provided, and its restrictions on self-referral were aimed at curbing the incentive for physicians to refer patients for unnecessary services in order to generate income. But, as explained in a white paper released by Finance Committee Chairman Orrin Hatch prior to the July 12 hearing, the “risk of overutilization, which drove the passage of the Stark Law, is largely or entirely eliminated in alternative payment models. When physicians earn profit margins not by the volume of services but by the efficiency of services and treatment outcomes, their economic self-interest aligns with the interest to eliminate unnecessary services.” Now, the unintended consequences of the Stark Law are legal obstacles for health care providers who seek to pursue alternative payment models aimed at increasing efficiency and quality of care—goals that are in the best interests of all stakeholders.
The Senate Finance Committee received suggestions from a variety of commenters advocating changes to the Stark Law ranging from additional exceptions to outright repeal. While senators at the July 12 hearing did not disclose concrete plans for legislation, the hearing revealed increasing support for Stark Law reform, which may be coming soon—Chairman Hatch closed the hearing by stating the Committee would try to “do something about this before the end of the year.” Health care providers will want to keep a close eye on these developments, which could fundamentally change the landscape for Stark Law and False Claims Act compliance.
