Senate Hearing Addresses Potential Stark Law Change

In Mid-July, the Senate Finance Committee heard testimony from stakeholders arguing for changes to the Stark Law that could make compliance easier and facilitate new business models that promote value-based, coordinated health care services. The hearing followed a round table held last year and a recent Senate Finance Committee white paper on the self-referral law.

In December 2015, the Senate Committee on Finance and the House Committee on Ways and Means convened a group of experts to discuss the Stark Law, which prohibits physicians from referring Medicare patients for “designated health services (DHS)” to entities with which the physician has a financial relationship. The group considered changes that might be needed to facilitate implementation of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) and keep up to date with an industry shifting to alternative payment models.

At the end of June 2016, the Senate Finance Committee released a white paper, “Why Stark, Why Now? Suggestions to Improve the Stark Law to Encourage Innovative Payment Models,” addressing potential revisions to the law that could make it easier for health care providers to collaborate and pursue alternative payment models that promote the government’s Triple Aim. Senate Finance Committee Chairman, Orrin Hatch (R-Utah), explained in a statement: “This paper reflects critical feedback from the stakeholder community on the law’s ambiguities, its unintended consequences and the need for reform, and I am hopeful it jumpstarts the discussion on how Congress can modernize the law to make it work for patients, providers, and taxpayers.”

At the July hearing, health care executives Ronald A. Paulus, MD, President and CEO of Mission Health System, and Peter B. Mancino, Deputy General Counsel of The Johns Hopkins Health System Corporation explained how the Stark Law generates significant compliance costs because of its complexity and vagueness and complicates efforts to adapt to a changing health care environment. Paulus argued the law had “outlived its usefulness” and suggested the law’s repeal would allow providers to do what the government has asked the industry to do—focus on patients and transform the fee-for-service reimbursement system. Mancino advocated revisions that would eliminate ambiguities, make penalties more reasonable and reform the law to allow innovative arrangements. Health care lawyer Troy A. Barsky, Esq. a partner at Crowell & Moring, LLP provided his perspective as counsel to health care providers, explaining the difficulty in complying with the Stark Law, grave consequences for even inadvertent technical violations, and how it is “diametrically opposed” to goals of new payment systems. He argued Congress should consider repealing the law and if not, make “common sense” reforms such as removing technical requirements or limiting the consequences of technical violations and “removing barriers” to health care reform.

Takeaway: As the health care industry seeks to implement alternative payment models to improve quality and reduce costs, regulators are considering how current regulatory requirements could put up barriers to reform.