Senate Finance Eager to Reform Physician Self-Referral Law

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By James Swann

July 12 — The Senate Finance Committee hopes to introduce legislation reforming the physician self-referral law by the end of 2016, the panel's chairman said at a hearing July 12.

Chairman Orrin Hatch (R-Utah) said changes to the physician self-referral law, or Stark law, would address doctors' concerns, such as excessive penalties for technical violations and a lack of clarity over the law's provisions.

Hatch said the Stark law has become too complex and has created obstacles to new health-care reimbursement arrangements. Ranking member Ron Wyden (D-Ore.) said the health-care system is moving toward more coordination among physicians on patient care, which can run afoul of the Stark law.

The Stark law generally prohibits doctors from referring patients to facilities, such as labs and imaging centers, where they have ownership interests. It initially was intended to curb overutilization in the Medicare and Medicaid programs.

The hearing follows a June 30 report from the Senate Finance Committee that compiled Stark reform ideas from health-care stakeholders (127 HCDR, 7/1/16).

Provider Concerns

Troy Barsky, an attorney with Crowell & Moring LLP, Washington, testified that the Stark law has moved far from its original purpose, which was to remove financial incentives from medical decisions.

Barsky said Stark has transformed “into a tortured web of confusing standards, ambiguous and conflicting definitions and volumes of regulations that require countless lawyers and valuation experts to ensure compliance.”

As the health-care system moves away from a fee-for-service payment model and into value-based payments, Barsky said, the Stark law becomes increasingly unnecessary. Stark was designed to target overutilization, Barsky said, which won't be an issue within a value-based payment model.

Congress should consider repealing the Stark law entirely, Barsky said, but at the very least should remove Stark's prohibition on compensation arrangements. Compensation arrangements refer to any financial relationships by or between a physician and an organization providing designated health services, such as offering incentive payments for providing a certain level of patient care.

Barsky also urged Congress to terminate the in-office ancillary services exception, which can cause overutilization. Closing the exception would encourage providers to move toward value-based payment models, Barsky said.

The exception allows physicians to provide certain services in their offices that normally would be prohibited under the Stark law, including imaging and physical therapy. Proponents of the exception say this is cheaper and more convenient for patients, allowing them to receive their medical services at one location.

Momentum for Change

Speaking to Bloomberg BNA after the hearing, Barsky said he was pleasantly surprised at the committee's receptiveness to removing the Stark law's compensation arrangement requirements.

“I definitely think there's momentum to do more than tinker around the edges,” Barsky said.

Congressional support is especially needed, Barsky said, because the Centers for Medicare & Medicaid Services doesn't have the necessary authority to create regulatory Stark exceptions to allow for innovative payment models.

“We need broader Stark waivers to really allow health-care reform to take off,” Barsky said.

Barsky also said he was glad to hear the discussion over a complete Stark repeal. If Stark is repealed, there are other legal protections against fraud and abuse, such as the anti-kickback statute, Barsky said.

The hearing revealed bipartisan support for the value-based payment models contained in the Medicare Access and CHIP Reauthorization Act of 2015, Barsky said, noting that this year especially, members are looking for common ground and legislation they can support.

“I'm optimistic there will be some reform; the question is how broad it will be,” Barsky said.

Compensation Arrangements

If a full repeal of the Stark law is off the table, eliminating the law's prohibition on compensation arrangements would make sense, Ronald Paulus, president and chief executive office of Mission Health, Asheville, N.C., said.

Paulus said the Stark law requires that any physician incentive program distribute payments to all participating physicians, regardless of how the physicians perform. “I should reward the people that perform, and not the people that don't perform,” Paulus said.

In addition to its negative impact on provider compensation arrangements, Paulus said, the Stark law also has a negative impact on patient care.

For several years, Mission Health geneticists have met with pregnant mothers who have learned their babies will die soon after birth, Paulus said. The visits are intended to help the mother understand the genetic complications and are done at the obstetrician's office where the woman is receiving care, and the geneticists don't charge the patient or the obstetrician.

“However, when this compassionate suggestion was brought to the attention of Mission Health's attorneys, they immediately became concerned that the service could be seen as providing something of financial value to the obstetrician's practice,” Paulus said.

Since no Stark exceptions cover situations like this, the attorneys barred having the free geneticist-patient conversation at the obstetrician's office, Paulus said.

Since the Stark law is a strict liability statute, the attorneys believed Mission Health couldn't take the risk of a violation, even though there was no abusive intent behind the program, Paulus said.

To contact the reporter on this story: James Swann in Washington at

To contact the editor responsible for this story: Kendra Casey Plank at

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