United States: Can Value-Based Programs Work With Stark Law Limitations?

CMS requests industry input on potential modifications to the physician self-referral law

Like the federal health care program anti-kickback statute (AKS), the federal physician self-referral law (Stark Law) was designed for a different, largely fee-for-service world where the principal concern was physicians being financially incentivized to steer patients to particular providers who, in turn, would order medically unnecessary services. 

However, beginning in the mid-1990s—first with the advent of the Medicare managed care program and, more recently, with the development of a host of innovative care models—these health care fraud and abuse statutes, and the Stark Law in particular, have increasingly outlived their usefulness, at least in certain respects and in certain contexts.

Simply put, with the move to more value-based arrangements that reward care coordination, quality care and economic savings—such as arrangements involving accountable care organizations, bundled payments and medical homes—it may now be in the government's interest to encourage arrangements that incentivize the referral of Medicare and Medicaid patients to the care providers participating in such arrangements.

The Centers for Medicare & Medicaid Services (CMS) has been grappling with this "square peg in a round hole" issue for many years. The General Accounting Office (GAO) summarized this history in its 2012 report, "Medicare: Implementation of Financial Incentive Programs under Federal Fraud and Abuse Laws." To date, however, the results have been at best uneven. The GAO's conclusion six years ago remains accurate today:

There are no exceptions and safe harbors specifically for financial incentive programs, and the Stark law's "no risk" requirement for new exceptions, makes it difficult for CMS to craft an exception that allows for innovative, effective programs while ensuring that the Medicare program and patients face no risk from abuses. As such, the constraints of existing exceptions and safe harbors make it difficult to design and implement a comprehensive program for all participating physicians and patient populations.

To its credit, CMS has not given up. On June 25, 2018, the agency intends to publish in the Federal Register a request for information (RFI) seeking—yet again—input from health care industry stakeholders on (i) whether and how the Stark Law imposes obstacles to implementing coordinated care arrangements and (ii) what types of exceptions might be needed to further the development of alternative payment models and protect them under the Stark Law. More specifically, the RFI requests:

  • Detailed descriptions of existing or potential arrangements involving DHS entities and referring physicians participating in alternative payment models. The descriptions should include how each arrangement (i) furthers the purpose of the alternative payment model at issue and (ii) mitigates the financial incentives for inappropriate self-referrals and/or overutilization of items and services, and patient choice.
  • An explanation of any concerns there are regarding the ability of these arrangements to satisfy the requirements of an existing Stark Law exception.
  • Any new Stark Law exceptions that might be necessary to protect these arrangements, such as exceptions to protect (i) accountable care organization models, bundled payment models and two-sided risk models in a FFS environment, and (ii) financial arrangements that involve integrating and coordinating care outside of an alternative payment model.

Interestingly—and of potential importance—the RFI also requests the industry's thoughts on the following:

  • Possible approaches to defining "commercial reasonableness" for Stark Law purposes.
  • Possible approaches to modifying the definition of "fair market value" for Stark Law purposes.
  • When compensation should be considered to "take into account the volume or value of referrals" by a physician or "take into account other business generated" between parties to an arrangement.
  • The application and utility of the "remuneration unrelated to DHS" exception, including any suggestions on how CMS could "interpret this exception to cover a broader array of arrangements."
  • Any other provisions, definitions and/or exceptions for which additional clarification would be useful.

Finally, the RFI requests the industry's thoughts on "the role of transparency" in the context of the Stark Law.

For example, if provided by the referring physician to a beneficiary, would transparency about physician's financial relationships, price transparency, or the availability of other data necessary for informed consumer purchasing (such as data about quality of services provided) reduce or eliminate the harms to the Medicare program and its beneficiaries that the physician self-referral law is intended to address?

Responses to the RFI will be due within 60 days following its publication in the Federal Register, which is scheduled for June 25, 2018. If that date holds, responses will be due on or before August 24, 2018. Please feel free to contact us if you have any questions or require further information regarding the RFI.

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