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Published On October 7, 2019

POLICY WATCH

Saving Stark

Can the embattled reform law adapt to a newer model of health care?

The 1980s saw both a steady expansion of Medicare and a bipartisan concern about its rising costs. One of the era’s signature pieces of reform legislation came from a California congressman, Pete Stark, who proposed a commonsense rule: Physicians should not refer their Medicare patients to another provider if the transaction would benefit the physicians financially. Several statutes built around that idea became known, collectively, as the Stark Law.

“Financial interest can corrupt decision-making,” says Claire Sylvia, a partner in the San Francisco office of Phillips & Cohen, a law firm that has handled a number of Stark cases. “That’s particularly a problem when a person’s health is at stake, and the money being spent is taxpayer money.”

Yet while the law has been successful at curbing misconduct, it has also recently run headlong into a different reform movement: the drive to shift health care away from payment for individual services and toward bundled, or “value-based,” care.

The Stark Law often butts up against a signature creation of the Affordable Care Act: the accountable care organization, or ACO. These voluntary associations of practitioners coordinate services to reduce costs in return for a cash incentive from Medicare. For instance, the 70 physicians who make up the cardiology section of Illinois-based AMITA Health Medical Group are part of an ACO that includes certain nursing homes and home care agencies, with whom they partner for seamless care.

“We can’t direct patients to these specific organizations within our ACO, even if that helps us deliver better patient care—because of Stark,” says Cathie Biga, president and CEO of Cardiovascular Management of Illinois, which helps to administer the program. “Instead, we have to give Medicare beneficiaries and their families a list of post-acute-care facilities in the area and let them make a choice.”

To ease such conflicts, legislators over the years have loaded up Stark with numerous exceptions, waivers and workarounds. But many of these amendments apply only to federally sponsored ACOs, which are not the only efforts to build bridges and reduce costs.

Even with waivers, however, ACOs often worry that they might run afoul of some part of the byzantine law, says Kevin McAnaney, a lawyer who helped draft the original Stark rules. Compliance burdens are costly and there remain areas of legal uncertainty. “Stark is definitely holding back the adoption of value-based payment models,” he says. “Health care systems aren’t willing to take the risk.” This has led some erstwhile Stark proponents—including Pete Stark himself, who served in Congress until 2013—to call for repealing the law entirely.

Yet Stark still fulfills its original purpose, which is to penalize those who try to game the Medicare system. Last year, Health Management Associates, formerly a U.S. hospital chain headquartered in Naples, Florida, agreed to pay more than $260 million for compensating physicians who referred patients to them, among other charges. William Beaumont Hospital in Detroit paid $84.5 million to settle allegations that it provided free or substantially discounted office space and staff to reward physicians for patient referrals.

Last year, the U.S. Department of Health and Human Services said that reexamining the Stark rules was a top priority, and the federal Centers for Medicare & Medicaid Services opened the issue for comment. It received 375 letters from concerned parties, including the American Medical Association and other industry leaders. Many asked for additional exceptions for value-based payment arrangements and models for coordinating care, which they said are needed to reduce costs and deliver higher quality care. This past spring, CMS Administrator Seema Verma indicated the Stark Law would receive a major update sometime this year, with what she characterized as “the most significant changes” to the law since its inception.

There is a similar push to reform the law on the legislative front, with Congress considering two bills that pursue different objectives. The Medicare Care Coordination Improvement Act of 2019, pending before the House Subcommittee on Health, proposes eliminating some Stark restrictions. But the Promoting Integrity in Medicare Act of 2019, also pending, would tighten the law—altering exceptions it sees as having gone too far, including one that allows physicians in some specialties to refer patients to imaging, radiation and other therapies that are provided in their offices and in which they have a financial interest. Closing that loophole alone could save an estimated $3.3 billion in Medicare reimbursements over a 10-year period, according to a 2017 analysis conducted by the nonpartisan Congressional Budget Office.

Some experts worry that the current push for change could jeopardize what Stark has accomplished. Genevieve Kanter, an economist and assistant professor at the Perelman School of Medicine at the University of Pennsylvania points to research showing that ACOs and other care coordination programs may turn out to be not as good at improving care and reducing costs as proponents had estimated. Gutting Stark to help those groups “could lead to few gains and substantial losses,” Kanter says. “Stark is badly in need of critical reexamination, but there are a lot of open questions. Consumer protection still needs to be a priority.”