CMS Seeks Input on the Impact and Burden of the Stark Law

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adrienneBy Adrienne Dresevic, Esq. and Isaac Sternheim, Esq. of The Health Law Partners, P.C.

On June 19, CMS issued a Request for Information (RFI) seeking public input on how to address any undue impact and burden of the physician self-referral law, 42 U.S.C. § 1395nn (the Stark Law).

By way of background, the Stark Law attempts to address the concern that healthcare decision making can be unduly influenced by a profit motive, and when physicians have a financial incentive to refer patients for healthcare services, overutilization in medical services may result. To counter such concerns, unless an exception applies, the Stark Law prohibits physicians from referring Medicare and Medicaid patients for certain designated health services (DHS) to an entity with which the physician (or the physician’s family member) has a financial relationship. The Stark Law also prohibits the DHS entity (eg, a radiology facility) to which the improper referral was sent from billing for the service provided. DHS includes radiology services such as MRIs, CT scans, ultrasounds, and x-rays. For more information on how the Stark Law is applicable to radiology providers and suppliers, see, for example, our December 2010 Link article and December 2015 Link article.

Penalties for violating the Stark Law can be severe and include denial of payment, refund of payment, imposition of a $15,000 per service civil monetary penalty, and imposition of a $100,000 civil monetary penalty for each arrangement considered to be a circumvention scheme. Healthcare providers also should bear in mind that violations can be raised in the context of civil false claims suits brought by whistleblowers.

The current RFI is in line with ongoing efforts by the Department of Health and Human Services (DHHS) to remove unnecessary government obstacles to care coordination and to accelerate the transformation of the healthcare system from a volume-based system into one that pays for value. In furtherance of such transformation, DHHS is focused on identifying regulatory requirements acting as barriers to coordinated care, assessing whether they are unnecessary obstacles, issuing guidance or revising regulations to address such obstacles, and, as appropriate, encouraging and incentivizing coordinated care.

In connection with DHHS’s objectives, CMS is interested in thoughts on potential obstacles to coordinated care relating to issues that include the structure of arrangements between parties that participate in alternative payment models or other novel financial arrangements, the need for revisions or additions to exceptions to the Stark Law, and terminology related to alternative payment models and the Stark Law.

The comments requested by CMS with respect to alternative payment models are also in part as a result of the legislative proposal that was included in the President’s budget for FY 2019 to establish a new exception to the physician self-referral law for arrangements that arise due to participation in alternative payment models. The RFI requests specific information regarding the terms of the arrangement, including the types of parties, which parties bear risk, the scope and timeframe of the arrangement, items/services provided under the arrangement, how the arrangement furthers the purpose of the payment model, and how the arrangement mitigates the financial incentives for inappropriate self-referrals, and/or overutilization of items and services and patient choice. The RFI also requests, among other things, ideas for additional exceptions to the Stark Law relating to alternative payment models.

“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,” says CMS Administrator Seema Verma. “Dealing with the burden of the physician self-referral law is one of our top priorities as we move towards a healthcare system that pays for value rather than volume.”

Radiology providers and suppliers interested in submitting comments must do so by August 24, 2018.

For more information on the Stark Law, please contact Adrienne Dresevic, Esq. at (248) 996-8510 or by email at adresevic@thehlp.com.


Adrienne Dresevic, Esq. is a Founding Shareholder of The Health Law Partners, P.C., a nationally recognized healthcare law firm with offices in Michigan and New York. Practicing in all areas of healthcare law, she devotes a substantial portion of her practice to providing clients with counsel and analysis regarding compliance, Stark Law, Anti-Kickback Statute, and compliance related issues. Ms. Dresevic serves on the American Bar Association Health Law Section’s Council, which serves as the voice of the national health law bar within the ABA. Ms. Dresevic also serves as the ABA Health Law Section’s Co-Chair of the Physicians Legal Issues Conference Committee, Vice Chair of the Programs Committee (Executive Leadership), and Vice Chair of the Sponsorship Committee. She is licensed to practice law in Michigan and New York, and can be contacted at adresevic@thehlp.com. 

Isaac S. Sternheim is an associate attorney at The Health Law Partners, P.C. Mr. Sternheim concentrates his practice on regulatory and transactional matters including federal (Stark) and state self-referral laws, federal and state anti-kickback laws, reimbursement regulations, entity formation and healthcare-related transactional agreements. Mr. Sternheim’s experience includes representing healthcare entities and individuals in contract and shareholder disputes.

The authors are members of The Health Law Partners, P.C. and may be reached at (248) 996-8510 or (212) 734-0128, or at www.thehlp.com.

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