Issue link: https://beckershealthcare.uberflip.com/i/731691
35 POPULATION HEALTH Stark Law: The 27-Year-Old Act Killing Healthcare Reform Before It Can Begin? By Ayla Ellison E nacted more than two decades ago to curb physician self-refer- ral, Stark Law has evolved to become so complex that health sys- tem CEOs and even the law's namesake are calling for its repeal. In 1989, Congress passed the Ethics in Patient Referrals Act, which was dubbed Stark I aer Congressman Pete Stark (D-Calif.), who spon- sored the initial bill. e original statute was quite simple. It sought to ban physician self-referral for designated services when a patient was covered by Medicare or another government payer. Self-referral oc- curs when physicians refer patients to hospitals, labs and other entities from which they benefit financially. e intention was to eliminate any financial motivation for physicians to send patients for unnecessary testing that could raise overall healthcare costs. e original statute was expanded in January 1995, when Stark II went into effect. Over the next decade, CMS published a series of regula- tions implementing the physician self-referral law. Fast-forward to 2016, and there is a sprawling group of regulations and statutes collectively named Stark Law. Today, the physician self-referral law has numerous exceptions, each of which carries its own detailed requirements. e complexity of Stark has le hospital executives, Congress and CMS struggling with the boundaries of the legislation — especially as the healthcare industry replaces traditional fee-for-service medicine with value-based care. Call for repeal During a Senate Finance Committee hearing in July, Chairman Or- rin Hatch (R-Utah) said Stark Law has become too complex, creating obstacles in the transition from the antiquated fee-for-service model. His views were echoed by several healthcare leaders, including Ronald Paulus, MD, CEO of Asheville, N.C.-based Mission Health. Dr. Paulus said problems with the physician self-referral law can't be fixed by tin- kering around the edges. He believes a full repeal is necessary to allow health systems to move forward with population heath efforts. "As a physician executive, I am absolutely convinced that it is sim- ply not possible to transform healthcare without a strong partnership between health systems and physicians. e Stark Law makes this re- markably difficult," said Dr. Paulus. Like many of his colleagues, Dr. Paulus believes Stark Law has created unnecessary red tape. During his testimony before the Senate com- mittee, he discussed how health systems are at constant risk of violat- ing Stark because it is a strict liability law, meaning proof of specific intent to violate it isn't required. erefore, systems can violate Stark even when there are no motives involved. Stark requires physicians receive only fair-market prices for their ser- vices, and the serious costs associated with technical violations of the law have made hospitals hesitant to move forward with pay-for-per- formance initiatives. Any provider organization that violates Stark must repay all Medicare funds paid under the improper arrangement, which could total tens of millions of dollars. e organization could face Medicare exclusion and False Claims Act liability as well. If claims are submitted to government payers through an arrangement that violates Stark, the claims are rendered false or fraudulent, creating liability under the False Claims Act. Most of these cases are filed by whistle-blowers under the qui tam provision of the False Claims Act. Whistle-blowers have a lucrative incentive to pursue these actions, as they are entitled to up to 30 percent of the government's recovery in False Claims Act cases. e penalties authorized under the False Claims Act were recently raised to a range of $10,781 to $21,563 per claim. "e feeling across the country is hospitals and health systems are nervous," says Colin H. Luke, a partner at Waller who assists health systems, hospitals and other providers with regulatory compliance matters involving Stark, Anti-Kickback Statute and various other reg- ulations. Before the Senate Finance Committee, Dr. Paulus said Stark Law has impeded Mission's efforts to transition to pay-for-performance. He said that under Stark, the system has to reward a physician who saw a dramatic increase in his infection rate exactly the same as a physician who eliminated all infections. "In most industries shareholders and watchdogs are demanding outcome-based pay for performance. In healthcare, Stark specifically prohibits it," said Dr. Paulus. He also provided a specific example of how it negatively affects patient care. Dr. Paulus said that for a number of years Mission genetic counselors have met with expectant mothers who are carrying a child who will die shortly aer birth to discuss what to expect before and aer deliv- ery. Genetic counselors want to have these conversations at no charge to the parents at the OB/GYN office. However, Dr. Paulus said Mission's lawyers advised that the meetings could be seen as interactions that could lead to financial gain for the OB/GYN's practice. "Unfortunately, Stark's strict liability makes it so we cannot take that risk even during this difficult time in these fami- lies' lives," he said. Like Dr. Paulus, longtime Congressman Pete Stark has called for a re- peal of his landmark law. Mr. Stark believes some type of self-referral statute should be in its place, one much simpler than the law that ex- ists today. The need for modernization Short of a full repeal, many in the industry believe Stark Law at least needs to be updated to accommodate for the broad reimbursement changes taking place in healthcare. ere has been a strong push for Stark Law reform in recent years, and the enactment of the Medicare Access and CHIP Reauthorization Act and other health reforms has made an even stronger case for updates. "Because medicine and medical reimbursement is evolving so rapidly, it's essential that Stark is at least tweaked," says Mr. Luke. As is, he says Stark is an impediment to more innovative payment models.