Changes are on the way to a foundational health law known as Stark. The law, now decades-old, restrains aspects of patient care coordination and value-based reimbursement. 

The Stark Law, also known as the physician self-referral law, prohibits a physician from referring Medicare or Medicaid patients for certain designated health services in which that physician (or the physician’s family member) maintains a financial interest. Late last year, the Centers for Medicare & Medicaid Services (CMS) released a sweeping Request for Information (RFI) requesting public comment related to nearly every aspect of the Stark Law. In the RFI, CMS asserted that the Stark Law disincentivizes participation in “integrated delivery models, alternative payment models, and arrangements to incent improvements in outcomes and reductions in cost.” CMS requested comments regarding how the agency may address any “undue regulatory impact and burden” attributable to Stark.

We expect CMS to release a new set of regulations later this year. Physicians and healthcare professionals should monitor these impending Stark Law revisions, which may provide more flexibility for physician referrals.  

Why change the Stark Law now?

When the Stark Law was first enacted in 1989, its goal was to eliminate conflicts of interest related to physician referrals. At that time, physicians were economically incentivized to provide additional care as they were primarily compensated on a fee-for-service basis. The risk of a conflict of interest existed in instances where a physician maintained a financial interest in certain designated health services. However, the risks of such conflicts are not as prevalent today within the framework of the Patient Protection and Affordable Care Act (ACA) and the corresponding federal healthcare reimbursement landscape.

As the industry shifts from volume-based, fee-for-service reimbursement models toward value-based care, physicians are increasingly incentivized to improve outcomes while minimizing patient cost. Under a value-based system, physicians are no longer paid for each applicable intervention.     

Compensation based on minimizing patient cost eliminates an incentive for physicians to make referrals for unnecessary services, including services in which physicians maintain a financial interest. Laws prohibiting physicians from making such referrals may constitute unnecessary safeguards that result in administrative burdens for physicians and healthcare facilities. CMS aims to minimize undue regulatory burden on physicians compensated in a value-based environment.

What changes may we see and how will these changes impact the healthcare industry?

The healthcare industry should expect broad, and potentially extensive, changes to the Stark Law. Based upon CMS response to public comments, the agency may revise the scope and applicability of CMS advisory opinions. Within the RFI, CMS requested feedback regarding the utility of additional exceptions to the Stark Law; the definitions of critical Stark Law terms and concepts, such as “volume or value of referrals,” and “fair market value;” and feedback regarding any regulatory protections that may be necessary to enable coordination and integration of patient care.

 All of these considerations are likely to be addressed in the final publication(s).

The timing and scope of changes to the Stark Law remain unclear. However, in March, CMS Administrator Seema Verma stated that the upcoming release will represent the “most significant changes to the Stark Law since its inception,” while adding that she hopes the changes will “spur better care coordination and help support [CMS’s] work to remove barriers to innovation.”

Specifically, Verma noted that the changes will clarify “regulatory definitions of volume or value, commercial reasonableness and fair market value” and will address “issues such as lack of signature, incorrect dates, or other areas of technical noncompliance.”

Eliminating Stark Law restrictions may stimulate investment in joint ventures, permitting providers to collaboratively expand services and improve efficiency. As rules related to federal reimbursement continue to evolve, providers should expect private payors to follow suit. Consequently, changes to the Stark Law will prominently impact the healthcare industry. Our attorneys and government relations professionals continue to monitor all developments related to the Stark Law. Once CMS finalizes revisions, we will provide additional information regarding significant changes and their impact on healthcare organizations.