Lawmakers Consider Changes to Physician Self-Referral Law

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By James Swann

Jan. 29 — Lawmakers are seeking input from industry stakeholders on possible changes to the physician self-referral law (known as the Stark law), a Senate Finance Committee aide told Bloomberg BNA Jan. 28.

The Senate Finance Committee and the House Ways and Means Committee have asked for input about how to better handle technical Stark violations and how to integrate Stark law requirements into new value-based payment methods that are being developed under a 2015 law, the Medicare Access and CHIP Reauthorization Act (MACRA).

The Finance Committee aide said stakeholder responses are due by Feb. 5 and said any potential changes would be predicated on the comments received as well as the two committees' overall interest in taking action.

In addition to requesting comments on technical Stark violations and Stark integration with MACRA, the committees also welcomed input on other Stark law challenges. However, the two committees asked that additional comments be limited to a few topics, such as problems with the Stark law, costs of Stark law compliance and disclosure and potential fee-for-service fixes (fair market value, takes into account and commercial reasonableness safe harbors).

The request for comments follows a Dec. 10, 2015, congressional roundtable with 11 industry stakeholders that covered Stark law problems and potential fixes.

The Stark law prohibits physicians from referring Medicare patients to entities with which they or their immediate family members have a financial relationship, though providers can qualify for certain exceptions.

MACRA, which was signed into law in April 2015, replaced Medicare's sustainable growth rate formula with new value-based systems for establishing the annual updates to payment rates for physician services in Medicare .

Congressional Action

Congressional action on the Stark law is both necessary and welcome, Kevin McAnaney, with the Law Offices of Kevin G. McAnaney in New York, told Bloomberg BNA Jan. 29.

“Apparently, Congress recognizes that without changes to the Stark law, the payment initiatives and mandates in MACRA will not work,” McAnaney said.

The new payment models require coordination, cooperation and financial integration among providers, McAnaney said, and the current Stark law prohibits that kind of integration.

“In light of the staggering liabilities in recent False Claims Act cases and settlements, only a fool would offer any financial incentives to physicians to reinvent hospital care,” McAnaney said.

While the Centers for Medicare & Medicaid Services “recognizes the need for change in the regulations, it's hamstrung by a statute that requires that any Stark exceptions have zero risk of program or patient fraud and abuse,” McAnaney said.

McAnaney listed several Stark law changes providers would like to see, including:

  •  a broad payment exception, along the lines of the Medicare Shared Savings Program waivers, that puts the responsibility for determining compliance with a health system's board;
  •  an expansion of the risk-sharing exception covering arrangements between hospitals receiving Medicare and Medicaid fee-for-service diagnosis related group payments, and physicians;
  •  a clarification and definitive guidance on key Stark law terms, such as fair market value and commercial reasonableness; and
  •  an expansion of the CMS's authority to create Stark law exceptions and a requirement to for the CMS to issue advisory opinions on a timely basis.

    Unfair Punishment

    With Congress looking into possible Stark law changes, an area of focus should be on the punitive penalty system, Linda Baumann, an attorney with Arent Fox LLP in Washington, told Bloomberg BNA Jan. 29.

    “Clients feel the Stark law punishments are grossly unfair and the law itself is too complex,” Baumann said.

    Baumann said the Stark law should be based on improper intent, not the current strict liability. For example, if a hospital paid too much to a physician for medically necessary services, they should either recover the money from the physician or pay the money back directly, not have to face high penalties.

    “I'd like to think the larger Stark law problems will be addressed by Congress, but the political realities make it unlikely,” Baumann said. “You're often considered soft on enforcement if you try to correct the inequities within Stark.”

    Stark Changes

    While any changes to the Stark law will have a significant impact on providers, they may be hard to manage, Danielle Sloane, an attorney with Bass, Berry & Sims PLC in Nashville, told Bloomberg BNA Jan. 28.

    “The Stark statute, regulations and related guidance are difficult to navigate now and I am doubtful that layering on additional changes to the current structure of the law will make it less challenging to navigate absent a complete overhaul, but there are certainly things they can do to update it in light of the current healthcare environment,” Sloane said.

    For example, Sloane said urgent care clinics were never contemplated when Stark was enacted, so physician ownership of an urgent care clinic can be a problem unless it's precisely structured.

    Sloane said her clients don't understand why they have to take so many steps to comply with the Stark law just to provide patients with the convenience of onsite labs and X-rays, so a change here would be appreciated.

    New Payment Methods

    Considering how new payments methods would fit into the Stark law, or creating a new Stark law framework, would also be a positive step, Sloane said, allowing providers and suppliers to be innovate.

    Additionally, Congress could clarify the applicability of the Stark law to Medicaid, Sloane said.

    “As for technical issues like an unsigned or expired contract, CMS went a long way to try and alleviate some of those burdens in the 2016 MPFS [Medicare Physician Fee Schedule] final rule, so absent no longer requiring arrangements to be in writing at all, which seems unlikely, I am not sure how much more can be done on that front,” Sloane said.

    The 2018 MPFS included several new Stark law exceptions, including allowing hospitals to help subsidize the hiring of non-physician practitioners.

    Sloane said that if the Stark law continues to be a strict liability statute, then every provider and supplier that bills Medicare or Medicaid and has a financial relationship with a referring physician will have to be in compliance, with failure resulting in substantial financial risk.

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    To contact the editor responsible for this story: Brian Broderick at

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