Senate Finance Committee Chairman Releases White Paper Examining Potential Reforms to the Stark Law

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On June 30, 2016, Senate Finance Committee Chairman Orrin Hatch released a white paper examining potential reforms to the Federal Stark law.  The white paper, entitled “Why Stark, Why Now?  Suggestions to Improve the Stark Law to Encourage Innovative Payment Models,” was issued following input from stakeholders and legal experts.  King & Spalding was invited to provide input and organized the Stark Reform Coalition, a group of health systems representing over 200 hospitals across the country, to participate in this legislative process. 

The white paper acknowledges that “the Stark law has become increasingly unnecessary for, and a significant impediment to, value-based payment models that Congress, CMS, and commercial health insurers have promoted.  The risk of overutilization, which drove the passage of the Stark law, is largely or entirely eliminated in alternative payment models.  When physicians earn profit margins not by the volume of services but by the efficiency of services and treatment outcomes, their economic and self-interest aligns with the interest to eliminate unnecessary services.”  Key suggestions identified in the white paper to address the shift to value-based payment models include:

  • Changes to the Stark law to allow providers to implement new payment models, including potential new waivers or exceptions, expansion of existing waivers or exceptions, broadening CMS’s regulatory authority, repealing the compensation arrangement prohibition, or repealing the law in its entirety;
  • Changes to implement the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), with options for payment systems that include both fee-for-service and alternative payment models; and
  • Making Stark law technical violations (of form rather than substance) subject to separate sanctions and limited liability.

The King & Spalding Stark Reform Coalition submitted comments that supported congressional efforts to reform the law to allow for easier implementation of innovative payment models and to address the inequity of high-dollar sanctions for technical violations.  But the Stark Reform Coalition also made the case that the current Stark enforcement environment is untenable and, therefore, Congress should consider broader and more wide-ranging Stark law reforms in the short-term beyond addressing alternative payment models.  The Senate Finance Committee white paper picks up on some of these suggestions and discusses the need to amend Stark law definitions such as “fair market value,” “volume and value of referrals,” and “commercial reasonableness” and to take other actions identified in the white paper designed to mitigate the potential for harsh and indiscriminate Stark law impacts even on healthcare providers that have invested heavily in Stark law compliance.

The white paper, available here, also discusses stakeholder perspectives on the impact of the Stark law and highlights the law’s complexity, the severity of its penalties, its significant compliance costs, and its effect on efforts to integrate health care delivery.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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