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Let’s Stark the New Year Right – Updates to Stark Law

Posted in Inside Health Law

Guest blogger: Laurie E. Weinstein is managing counsel at The Permanente Medical Group, Inc. She is also the hospitals/providers subcommittee co-chair of the ACC Health Law Committee. She can be reached at laurie.e.weinstein@kp.org.

On November 16, 2015, as part of the 2016 Physician Fee Schedule update, Centers for Medicare & Medicaid Services (CMS) released final revisions to Section 1877 of the Social Security Act (42 U.S.C. 1395nn), also known as the physician self-referral law and commonly referred to as the “Stark Law.” These are arguably, the biggest changes in the Stark Law since 2009.

As we welcome the New Year, it seems appropriate to take a look at these latest changes. I can hear you groaning now… Because this law has been the bane of health system and provider in-house (and outside) counsel for so many years now, it is hard to imagine that the new rules might, in fact, be helpful — or at the very least — be a sign that CMS is beginning to address some of the more onerous and unjustified aspects of the Stark Law, which routinely result in costly so-called “technical” violations. Perhaps this is a belated recognition by CMS of a view widely held in the industry — namely certain Stark Rules no longer (if they ever did…) seem designed to achieve legitimate compliance goals, but instead remain traps for the unwary.

For the past several years, providers have been self-disclosing potentially non-compliant arrangements to CMS under the Medicare Self-Referral Disclosure Protocol (SRDP), hoping under the statutory settlement authority granted to CMS for some measure of leniency (i.e., a penalty significantly less than the full theoretical recoupment amount).

As CMS became inundated with these SRDP filings, CMS discovered: 1) many arrangements reported were not Stark Law violations at all; 2) many were unnecessary; and 3) many were likely filed out of an abundance of caution due to lack of clarity in the current regulations.

The recent changes to the Stark Law are a welcome change in direction. In recent years, the failure of the Stark Law to move in a direction consistent with our industry’s rapid changes in health care delivery and payment has imposed a significant and unjustified — from a policy perspective — burden on health systems struggling to achieve the core purposes of the Patient Protection and Affordable Care Act (PPACA). Even with these improvements, the Stark Law remains deeply flawed.

Does CMS now have enough flexibility in its administration of the law to keep pace with an industry aggressively making much-needed delivery and payment reforms? Has Stark Law —even with these improvements — outlived its usefulness?

The fundamental question remaining is how will our health care system continue to strive to provide real and meaningful protections against abusive self-referrals, while affording the industry the ability to effectively manage the transition from fee-for-service (FFS) to value-based payments? Only time will tell.

For additional discussion and materials related to the recent Stark Law changes, please visit the ACC Health Law Committee page — and in particular, access the materials from the Legal Quick Hit entitled, “Let’s Stark the New Year Right: Updates to Stark Law.” The committee will also be presenting a session at the 2016 ACC Annual Meeting in San Francisco relative to Stark Law, these recent changes, and any future changes/interpretations.