CMS Seeks Feedback on Physician Self-Referral Law

Kerry Dooley Young

June 22, 2018

Federal officials are seeking feedback on how a 1989 law against physician self-referrals may be impeding the drive toward greater coordination of healthcare treatments.

Physicians, healthcare executives, and some lawmakers have for many years complained that the so-called Stark Law blocks the kind of collaborations needed to drive Medicare away from its fee-for-service approach.

In a formal request for information announced on June 20, the Centers for Medicare & Medicaid Services (CMS) said it is particularly interested in comments on how the Stark Law affects the operation of alternative payment models. Under these models, CMS seeks to tie physician reimbursement to judgments about the quality of care provided.

"We are looking for information and bold ideas on how to change the existing regulations to reduce provider burden and put patients in the driver's seat," said CMS Administrator Seema Verma in a statement. "Dealing with the burden of the physician self-referral law is one of our top priorities as we move towards a health care system that pays for value rather than volume."

The Stark Law prohibits physicians from referring patients for certain health services covered by Medicare to businesses or firms with which they or an immediate family member has a financial relationship, unless an exception applies, CMS said in the request for information.

CMS explained in the request how the Stark Law can aid patients and physicians, as well as healthcare organizations that are seeking to establish themselves in new markets. Without such a restriction, patients might be "steered to less convenient, lower quality, or more expensive providers of health care that are sharing profits with, or providing other remuneration to, the referring practitioner," CMS said.

"Where referrals are controlled by those sharing profits or receiving other remuneration, the medical marketplace suffers since new competitors may have more difficulty generating business on superior quality, service, or price alone," the agency said.

The formal request for information does not commit CMS to taking any action on the physician self-referral law. But President Donald Trump included a proposal in his fiscal 2018 budget request to Congress that would establish a new exception for self-referral law for arrangements that arise because of participation in alternative payment models, CMS said.

Senate Finance Chairman Orrin G. Hatch (R-UT) already has signaled an interest in revising or undoing the Stark Law.

The law was meant to provide a "bright-line rule" to help the healthcare community avoid financially questionable self-referrals, Hatch said at a July 2016 hearing. Instead, a cottage industry has sprung up around the measure, according to Hatch.

"The Stark Law has become increasingly complex and created more and more challenges for legitimate health-care arrangements," Hatch said. "The health-care world is populated by scores of legal experts who strive to keep up with the sprawling compendium of statutes, regulations, and federal advisories known collectively as the Stark Law."

The formal request for comments on the Stark Law and information about how to comment will be published in the Federal Register on June 25. Public comments are due by August 24.

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