Has the Stark Law Outlived Its Usefulness?

MattFisher-whiteBy Matt Fisher, Esq
Twitter: @matt_r_fisher
Host of Healthcare de Jure#HCdeJure

With healthcare gradually (or rapidly) moving from a fee for service (FFS) world to a value-based care world, questions about the laws and regulations governing relationships within healthcare are increasing. The predominant current regulatory framework, exemplified by the Stark Law and Anti-Kickback Statutes, impose limitations on financial relationships between providers, hospitals, and others in the healthcare industry. The byzantine, convoluted, opaque and often impenetrable regulations treat the healthcare industry very differently from almost any other industry and impose many barriers on what may seem like good business ideas. Is it time for a change?

The answer to the change question is not necessarily an easy one. However, the majority staff of the Senate Finance Committee recently produced a white paper entitled “Why Stark, Why Now?” (the Senate Finance Report). The Senate Finance Report suggests that it is time to modify or potentially remove the Stark Law. The Senate Finance Report is the outcome of a roundtable discussion hosted by the Committee on December 10, 2015. The discussion included subject matter experts, but, unfortunately, the Senate Finance Report does not identify the individuals who were invited to participate. Even without knowing the exact participants, or who provided written comments to a subsequent request, the Senate Finance Report provides some interesting food for thought.

Comments were broken into two main categories: (i) changes to assist with implementing MACRA and other alternative payment models, and (ii) how to define technical violations. Both areas would assist the healthcare industry in avoiding the many landmines created by the Stark Law.

The first category, MACRA and alternative payment models, produced a variety of suggestions. The suggestions were: (i) repeal the Stark Law, (ii) repeal the compensation arrangement prohibitions, (iii) create new risk revenue waivers or exceptions, (iv) create new or expand currently restricted waivers, (v) create new exceptions entirely to the Stark Law, (vi) create a special compensation rule to accommodate alternative payment models, (vii) modify existing exceptions, and (viii) expand the Secretary of Health and Human Services’ authority with regard to waivers, exceptions and advisory opinions. A common thread running through all of the suggestions was the inherent difference between FFS and value-based care. FFS arguably rewards increasing the volume of referrals because more billing can occur, whereas value-based care focuses on efficiency and providing the most appropriate care. Arguably, value-based care and the need for close alignment between players in the healthcare industry runs contrary to the things that the Stark Law prohibits. It is worth noting that the Stark Law was initially enacted at a time when FFS dominated the reimbursement side of healthcare.

The second category, defining technical violations, seems intended to put into place views of the private industry that so-called technical violations should not be sanctioned in the same manner as knowing or intentional violations. The suggestions about technical violations considered that violations can arise by not meeting all of the many detailed requirements about documentation, or otherwise inadvertently run afoul of the Stark Laws requirements. Given the complex nature of the Stark Law, it os argued that many relationships that result in fines are not inherently improper or established with bad motivations. Instead, overlooking one of a number of elements creates the problem. If such violations were appropriately addressed, then more could be corrected and organizations would not live in so much constant fear.

The overriding message behind the Senate Finance Report is that the Stark Law seems to be outdated. It was created for a healthcare world that is trying to be replaced. If the underlying world that established the need for the Stark Law is disappearing, why is the same standard not applied to that law?

This is an enticing argument. However, the healthcare industry is establishing relationships for purposes of pursuing value-based care arrangements even in the face of the Stark Law. Such a reality suggests that change is not absolutely necessary. That does not mean such relationships do not come without cost or concern, as a significant amount of time and resources are probably used to fully vet and establish those relationships.

Ultimately, modification or wholesale change to the Stark Law will likely come, though at what point is very unclear. The Stark Law does create many complications and arguably does not achieve its full purpose since many “improper” relationships still occur. Putting a new law into place that condenses or reshapes the Stark Law would potentially make life in the healthcare industry easier. Part of the complication with the Stark Law is the multitude of iterations and concepts that have been enacted over the past twenty plus years. As already mentioned, the fundamental nature of healthe care is in a period of transition, so the laws governing it will need to adapt as well.

The final question of what changes are needed will be a subject open to a lot of interpretation. Every person will likely have a somewhat different viewpoint or suggestion. What will be beneficial and constructive is to engage in an open dialogue and seek to find a consensus point that enables the healthcare industry to adapt and thrive, while also guarding against the fraud and abuse concerns that gave rise to the Stark Law in the first place.

About the author: Matthew Fisher is the chair of the Health Law Group at Mirick, O’Connell, DeMallie & Lougee, LLP, in Worcester, MA. Matt advises his clients in all aspects of healthcare regulatory compliance, including HIPAA, the Stark Law and the Anti-Kickback Statute. This article was originally published on Mirick O’Connell’s Health Law Blog and is republished here with permission.