CMS changes to Stark Law appear largely positive, experts say

by Bailey Amber
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CMS recently finalized changes to Stark Law regulations that will go into effect Jan. 19, and healthcare law experts generally believe that these changes will make it easier for hospitals and physician groups to comply with the law, and provide them with greater flexibility as they move toward value-based care.

Stark Law, also known as the Physician Self-Referral Law, was initially enacted in 1989. It prohibits physicians from referring patients to an entity for certain healthcare services if the physician has a financial relationship with the entity. But as the healthcare industry evolved and started moving toward a value-based care model, many in the industry worried that the move would be hindered by Stark Law regulations.

“The government has recognized the need to update the Stark regulations that were originally developed at a time when the unnecessary volume of services was of primary importance,” Philip Sprinkle, a healthcare partner at Akerman LLP, said in an email. “The concepts of value-added services, cost savings, systemic efficiencies and overall quality outcomes were just in their naissance.”

According to CMS, the changes finalized Nov. 20 aim to alleviate the administrative burden of complying with the law. The reforms will “modernize the regulations that interpret the Stark Law while continuing to protect the Medicare program and patients from bad actors,” a press release states.

Tim Fry, a healthcare associate at McGuireWoods LLP, said in a phone call that the changes update Stark Law regulations in three primary ways:

1. CMS has adopted new exceptions for value-based enterprises and goals. If a healthcare provider has a value-based or care coordination goal and there are certain hallmarks in place, such as a governing board or contracts, they can “share revenue in novel ways, in ways that are not based off of a fair market value fee-for-service model,” Fry said. The exceptions will allow physicians and other healthcare providers “to design and enter into value-based arrangements without fear that legitimate activities to coordinate and improve the quality of care for patients and lower costs would violate the Stark Law,” a CMS factsheet states.

2. The changes include new exceptions to protect “non-abusive, beneficial arrangements” between physicians and other healthcare providers. These include exceptions for sharing technology providing cybersecurity, Fry said. For example, a hospital would be permitted to help provide cybersecurity provisions to physician groups they share EMRs with that may not have enough resources to protect against cybercrime on their own.

3. CMS has also provided helpful clarifications and guidance on various parts of the law, many of which have led providers in the past to think they violated the statute, Fry said. This includes guidance on how to determine if the compensation being given to physicians is at fair market value, a CMS factsheet states.

“We’re still digesting the 600-plus pages that [CMS] put out,” Fry said. “But some of our initial feelings and views are that the final rule is going to be helpful in reducing some of those questions [we get from clients], providing more clarity and hopefully allowing the industry to avoid things that CMS thinks is improper.”

Kathleen McDermott, a partner at law firm Morgan Lewis and former assistant U.S. attorney, agrees with Fry, and said via email that she believes the Stark Law changes provide “greater flexibility” for physician arrangements and compensation. The changes also encourage collaboration in patient care activities, she said.

Though Sprinkle also said that the new regulations will help ease anxiety around complying with Stark Law in many cases, he noted that the changes could add pressure on physicians still involved in the traditional fee-for-service operations of Medicare.

“[The changes will] impose additional pressure on these traditionalists to become part of a managed care network undermining, in the opinion of at least some of these physicians, their independence,” he said. “In addition, it is not clear that previously approved programs that did not require the physician partners to assume risk will be included in these exceptions. To that extent, those physicians may feel that they have been unfairly treated.”

But all three lawyers expect the changes to be implemented next year. None of them think the changes will facing hurdles related to the presidential transition of power, with McDermott nothing that the changes to the law have bipartisan support.

Photo credit: smolaw11, Getty Images

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