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Enacted in 1989, the Stark Law has turned into an outdated set of legal requirements inhibiting and blocking the ability to move into value-based care. This is important to learn about as it will change our future healthcare delivery system.

In February 2018, Congress passed and President Trump signed into law H.R. 1892, the Bipartisan Budget Act of 2018 (the “Budget Act”), which included changes to the federal physician self-referral law (commonly known as the “Stark law”). Among these revisions are allowing indefinite holdovers in two notable exceptions to the Stark law:

1) Personal services arrangements.

2) Rental (i.e., leases) of equipment and office space. Such “holdover” allowances had previously been limited to six (6) months by regulation. The Budget Act also codified regulatory language and guidance regarding “in writing” and signature requirements.


The title of a July 17 House Ways and Means Health Subcommittee hearing clearly indicates the direction this powerful committee where Medicare law originates is taking: “Hearing on Modernizing Stark Law to Ensure the Successful Transition from Volume to Value in the Medicare Program.”

Add to that congressional interest in the so-called physician self-referral law named after its originator then-Rep. Fortney “Pete” Stark (D-CA) is a White House with a mission to reduce regulatory burdens throughout the economy, and with a specific focus on healthcare, Medicare, and Medicaid.

Both Congress and the administration have been in the process of fielding suggestions for reform via legislation or regulation: The Ways and Means hearing the most recent example, and another a Centers for Medicare & Medicaid Services (CMS) June 25 notice “Medicare Program; Request for Information (RFI) Regarding the Physician Self-Referral Law seeking public comments.”

Ways & Means Witnesses Include Advocate Aurora Health Official

The Stark Law was enacted in 1989 “to address concerns about physician self-dealing,” as Michael Lappin, Advocate Aurora Health Chief Integration Officer told the Ways and Means hearing in his prepared statement. “In a fee-for-service environment, physicians have financial incentive to inappropriately self-refer patients or over-utilize certain services. The law’s intent was to counteract these inherent problems of a volume-based system to ensure medical professionals place patient care over profit.

“Yet, as our healthcare system is changing with new laws and regulations driving towards value-based care, the Stark Law has turned into an outdated set of legal requirements that is now inhibiting innovation and blocking ability to realize the benefits of value-based care.”

“The risk of overutilization is largely or entirely eliminated in models where physicians are paid on value and not by the volume of services. In this new environment, the Stark Law is now impeding our ability to efficiently coordinate care, rather than helping our patients.”

“Potential solutions,” Lappin added, would include: providing exemptions for value-based arrangements, thus adding to existing waivers; addressing strict liability, in the process addressing substantive versus technical violations; clarifying “fair market value” and other definitions; and, providing HHS/CMS with new rulemaking authority under Stark and related Medicare laws “to create a cohesive regulatory regime” that could protect patients while still allowing for innovative care arrangements.

Advocate Aurora Health (Advocate Aurora) is the 10th largest not-for-profit, integrated health care system in the United States.

CMS’s Request for Information

Through internal discussion and input from external stakeholders, CMS has identified some aspects of Stark as potential barriers to coordinated care, according to CMS’s June 25 RFI Federal Register notice.

Issues mentioned in the 4-page notice include, but are not limited to, the structure of arrangements between parties that participate in alternative payment models or other novel financial arrangements, the need for revisions or additions to exceptions to the physician self-referral law, and terminology related to alternative payment models and the physician self-referral law.

Powerful Chairman of the Ways and Means Committee Kevin Brady (R-TX) applauded Verma’s RFI: “The administrative and regulatory burdens the Stark Law is creating for our providers are costly, unnecessary, and ultimately unfair to patients.” The panel’s Health Subcommittee has held four roundtables in 2018--with provider groups, hospitals, post-acute care medical professionals, and physicians--focused on how lawmakers and HHS/CMS can work to cut red tape in the Medicare program to help these groups provide better care to their patients. “At each roundtable discussion, the burdens of the Stark Law were stressed multiple times,” Brady noted.

In The CMS Blog June 20, Verma wrote that over the past year, CMS has engaged with the provider community in a discussion about regulatory burden issues. “One of the top areas of burden identified in the over 2,600 comments received was compliance with the physician self-referral law” and its accompanying regulations.

Ronald M. Schwartz, Contributing Writer, The Remington Report

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