Stark Law: Flexibility for value-based care

The well-intentioned but complex Stark Law has gotten some updates recently. The changes give healthcare providers greater flexibility, especially with value-based care. 

The Stark Law was introduced in 1989 by United States Congressman Pete Stark (D-CA). It aims to protect Medicare and Medicaid from paying for services that may trigger conflict-of-interest concerns. This includes certain healthcare services for which physicians referred their Medicare/Medicaid patients to an organization with which they have a financial relationship. Referrals like this trigger questions about whether the patient really needed the service and raises concerns of physicians referring for their own financial benefit.  

Take, for example, a physician who refers a Medicare/Medicaid patient for an x-ray to a medical imaging facility. The facility then bills Medicare for that service. This may seem appropriate unless the physician has a financial interest in the medical imaging facility.  

The law faced criticism, however, for being too rigid. According to Henry Casale, partner at Horty Springer, “providers have found that the Stark Law is deceptively simple to summarize, but compliance has proven to be difficult and complex.” 

Casale went on to say that “Stark said that ‘the only way to protect healthcare consumers from unnecessary referrals is to impose a bright line rule.’ The Stark Law prohibits a physician from making referrals for certain Designated Health Services (DHS) payable by Medicare or Medicaid to an entity with which the physician (or an immediate family member) has a direct or indirect financial relationship (ownership or compensation). It also prohibits the entity from filing claims with Medicare or Medicaid for those referred DHS, unless the financial relationship complies with an exception to the Stark Law.”  

New value-based exceptions 

New exceptions under Stark allow for physicians to refer Medicare/Medicaid patients to entities they have a financial relationship with and that are part of a value-based program, in some cases. Additionally, the physician may receive remuneration, such as cost savings payments, so long as the requirements of the new exception are met.  

According to Casale, “The Stark value-based rules cover both cash and in-kind remuneration and do not include the term ‘Fair Market Value’.”  These rules have a number of requirements, but those requirements decrease as the value-based physician participants assume more financial risk.  The greatest flexibility is when the physician participants agree to assume full financial risk. (This includes capitation and global budget payment arrangements.) The requirements increase if the physician participants assume only “meaningful” financial risk. (The physician is responsible to repay or forego no less than 10 percent of the total value of the remuneration the physician receives under the value-based arrangement.) The requirements are greatest where the physicians are not at financial risk. 

“The Stark value-based rules are a significant improvement,” Casale said. “But they do leave a number of questions unanswered.” They also differ markedly from the OIG’s value-based safe harbor regulations that were published the same day, especially where the physicians are not at financial risk.  Here the OIG only provides safe harbor protection for in-kind remuneration while the Stark rules permit both cash and in-kind remuneration.  

“So while the Stark rules provide guidance and significant flexibility,” Casale said, “providers need to also consider the OIG’s much more narrow view of value-based arrangements.”   

RelatedDiscover how CMS is improving patient care while reducing administrative burden for providers. 

Rules related to Stark and anti-kickback legislation have been evolving for decades. These recent changes reflect an effort to add greater flexibility with value-based care and help keep the law responsive to current business practices in healthcare.  

How is your healthcare system adapting to keep up with changes to rules from the Stark Law and other fluid regulations?  Read more about how YouCompli can help you stay on top of regulatory changes or schedule a demo. 

Jerry Shafran

Jerry Shafran is the founder and CEO of YouCompli. He is a serial entrepreneur who builds on a solid foundation of information technology and network solutions. Jerry has founded, managed, and sold software and content solutions that simplify complex work. His innovations enable professionals to focus on their core business priorities.

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