HIGHLIGHTS:

• In order to encourage value-based reimbursement and care delivery, the Centers for Medicare & Medicaid Services (CMS) has published a Request for Information (RFI) seeking public input on how to address any undue regulatory impact and burden of the physician self-referral law, or "Stark" law.
• The RFI is part of an ongoing CMS effort to address regulatory impediments to a new value-based model. Notably, it is the most recent in a series of regulatory developments calling into question the Stark law's impact "as a potential barrier to coordinated care."
• Stakeholders looking to take advantage of this process and submit comments must do so within 60 days of June 25, 2018.

The Centers for Medicare & Medicaid Services (CMS) on June 25, 2018, published a Request for Information (RFI) seeking "input from the public on how to address any undue regulatory impact and burden of the physician self-referral law." Passed in the late 1980s, the Stark law, is a potent, strict liability law aimed curbing over-utilization and fraud in physician referral arrangements. The RFI is part of an ongoing CMS assessment of "alternative [value-based] payment models and novel financial arrangements" and its efforts to address the regulatory impediments to a new value-based model. Notably, it is the most recent in a series of regulatory developments calling into question the Stark law's impact "as a potential barrier to coordinated care."

Stark Law Background

The Stark law prohibits physicians from referring Medicare patients to an entity for the furnishing of designated health services (DHS) if the physician (or an immediate family member) has a financial relationship with the entity. It also prohibits the DHS entity from submitting a claim to Medicare for DHS furnished pursuant to a prohibited referral.¹ Penalties for violations include recoupment of improper payments, civil monetary penalties and exclusion from federal healthcare programs. In addition, claims submitted to Medicare in violation of the Stark law are considered "false claims" for purposes of the federal False Claims Act.

Stark law compliance has been the a source of frustration since its passage. As the U.S. Court of Appeals for the Fourth Circuit noted in a 2015 decision, "even for the well-intentioned healthcare provider, the Stark law has become a booby trap rigged with strict liability and potentially ruinous exposure – especially when coupled with the False Claims Act." The current shift from volume-based reimbursement models to value-based models (e.g., pay-for-performance, gainsharing, bundled payments or outcome measures) has further complicated compliance.

Alternative payment models such as Accountable Care Organizations (ACOs) or shared savings do not neatly fit existing Stark law exceptions. Furthermore, other models may tie physician payments to the volume or value of physician referrals, placing these arrangements squarely within the Stark law's prohibitions. The RFI is a preliminary step in the CMS effort to mitigate legal obstacles to the adoption of value-based reimbursement methodologies

RFI Highlights

This week's RFI is part of a larger effort called the "Regulatory Sprint to Coordinated Care." This program is focused on identifying and removing regulatory barriers to coordinated care.

Per the RFI, CMS seeks stakeholder input on potential Stark law reform or clarification as to the following issues:

• existing or potential arrangements that involve DHS entities and referring physicians that participate in alternative payment models or other novel financial arrangements (even those outside of CMS purview) that should be accounted for going forward
• additional Stark law exceptions necessary to protect financial arrangements between DHS entities and referring physicians who participate in alternative payment models
• suggestions for redefining important Stark law terminology such as "commercial reasonableness" and "fair market value"
• suggestions for defining new terminology such as "alternative payment model," "care coordination," "gainsharing" and other terms necessary to account for a value-based care model

Stakeholders looking to take advantage of this process and submit comments must do so within 60 days of June 25, 2018.

Notes

¹ See 42 C.F.R. §411.353(a), (b).