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Bringing Stark Into the 21st Century

July 11, 2016

In the changing health care marketplace, and with the shift towards value-based alternative payment models, many in the health care community believe that the Stark law (42 U.S.C. § 1395nn) has become an impediment to moving forward with innovative ways to provide high quality healthcare. Recognizing this concern, Senate Finance Committee Chairman Orrin Hatch released a white paper on June 30, 2016, discussing possible changes to the current Stark law. The white paper noted that compliance with the Stark law has become increasingly complex and unnecessary with respect to implementation of value-based models that Congress, CMS, and insurers have promoted, such as the Medicare Shared Savings Programs, the Bundled Payments for Care Improvement Initiative, and Accountable Care Organization Programs.

The Finance Committee recognizes that, while the Stark law plays an important role in a fee-for-service environment, it is unnecessary and burdensome on innovative models focusing on quality, efficiency, and cost-effectiveness. In particular, the white paper refers to the law as a “minefield for the health care industry” based on its “strict liability regime, huge penalties, and the breadth, complexity, and ambiguities” of the law. In fact, the paper suggests that, under the current Stark law, alternative payment models would be impossible to implement without violating the law and facing severe penalties.

Recognizing these difficulties, the Senate Finance Committee, along with the House Committee on Ways and Means, held a round table discussion in December of 2015 with stakeholders in the health care community and legal experts. The purpose of this round table was to solicit comments and facilitate discussions on the difficulties and complications resulting from the Stark law. Specifically, the objective was to gain an understanding from industry insiders about whether changes to the Stark law were necessary and, if so, what options would regulate the current fee-for-service model while permitting value-based alternative payment models.

Numerous comments were received on how the Stark law should be modified to help facilitate alternative payment models such as MACRA. Some of the key alternatives noted in the white paper include:

  • Repeal. Many commenters suggested that the Stark law should be repealed in its entirety, arguing that the Anti-Kickback Statute can sufficiently address any issues that may arise.
  • Repeal Compensation Arrangement Prohibitions. Commenters suggested that limiting the Stark law to ownership and investment interests (i.e., not compensation arrangements) would permit alternative payment models.
  • Create New or Expand Currently Existing Waivers. The largest number of commenters suggested extending waivers that currently apply to certain CMS programs to all payers, particularly expanding the Medicare Shared Savings Program waivers to other alternative payment models. In addition, many commenters suggested that HHS should be given broader authority to create regulatory waivers.
  • Create New Exceptions. A significant number of commenters suggested that a new Stark law exception should be created to permit financial arrangements that allow risk-sharing and gainsharing when appropriate safeguards are in place.

These proposed alternatives garnered the most support within the comments, but there are numerous other proposed changes discussed. Based on all comments received, the Senate Finance Committee stated that it intends to evaluate and develop proposed changes to the Stark law.

For a more detailed discussion on the proposed alternatives or other Stark law compliance issues, please contact Jim Daniel, Mike Newby, or Mark Watson.

The information contained in this advisory is for general educational purposes only. It is presented with the understanding that neither the author nor Hancock, Daniel, Johnson & Nagle, PC, is offering any legal or other professional services. Since the law in many areas is complex and can change rapidly, this information may not apply to a given factual situation and can become outdated. Individuals desiring legal advice should consult legal counsel for up-to-date and fact-specific advice. Under no circumstances will the author or Hancock, Daniel, Johnson & Nagle, PC be liable for any direct, indirect, or consequential damages resulting from the use of this material.