Senate committee discusses changes to physician self-referral law

The Stark law, which prohibits physician referrals for Medicare services to entities with which they share a financial relationship, is due for an overhaul, according to a report released by Senate Finance Committee Chairman Orrin Hatch, R-Utah.

Following up on discussions held in December 2015, the white paper from the committee’s Republican majority said liability for providers under the Stark law, and the potentially confusing exceptions carved out for certain services, may be discouraging the growth of value-based care, which the report argued is a solution to the problems the original law sought to address among fee-for-services (FFS) models.

“The risk of overutilization, which drove the passage of the Stark law, is largely or entirely eliminated in alternative payment models,” the report said. “When physicians earn profit margins not by the volume of services but by the efficiency of services and treatment outcomes, their economic self-interest aligns with the interest to eliminate unnecessary services.”

The report said comments collected from healthcare professionals and attorneys asked for refinements in relation to overlapping laws, like the False Claims Act and the Anti-Kickback Statute (AKS). Reimbursement changes may also help, according to commenters summarized in the report, like decreasing payments for ancillary services provided through a group practice.

Others went as far as to suggest the law be repealed, either immediately or in the near future.

“These commenters argue that the AKS in its current form can address the conduct that the Stark law seeks to curtail,” the report summarized. “However, some commenters noted that the Stark law addresses conduct that may not fall under the AKS. Additionally, while the FFS payment model is being phased out, it will continue in some form for many years. With this in mind, some commenters advocating repeal recommended that the Stark law be sunset once Medicare had transitioned to alternative payments to a meaningful extent.”

Other suggestions included limiting the law to a physician’s ownership and investment interests, creating a waiver for providers takes on a greater amount of risk, and expanding the authority of the HHS Secretary to create waivers, exceptions, and issue advisory opinions.

Outside groups which participated in the discussion said the liability and penalties under the Stark law may hinder the implementation of the Medicare Access and CHIP Reauthorization Act (MACRA).

“There is undoubtedly a need to modernize this legislation,” American Federation of Hospitals CEO Chip Kahn said in a statement. “Right now it is costly, unwieldy and burdensome, often leading to disproportionate penalties for providers.  It also needs to keep pace with the future of health care payment and delivery models.”

The white paper doesn’t offer its own recommendations or say which suggestions might make it into legislation. The report concluded with the promise that the committee will “consider them all” in crafting reforms to the Stark law.