Will Centers for Medicare & Medicaid Services (CMS) Really Make Changes to the Stark Law?
By Ruder Ware Alumni
February 26, 2018
If you navigate to the American Hospital Association (AHA) Interactive Town Hall of January 17, 2018, you can view a video in which Seema Verma, the current Administrator of the Centers for Medicare and Medicaid Services, discusses some of the efforts currently underway at CMS to ease the burden of applicable regulations through the Medicare and Medicaid programs. The interactive Town Hall opens with a statement from the current president of the AHA, Richard J. Pollock, in which he discusses the overwhelming burden hospitals face to comply with the voluminous regulations that apply to their operations. During Mr. Pollock’s presentation, you cannot help thinking, “dude, she is sitting right there.” Mr Pollock lambasts the massive regulatory burden imposed on hospitals. About half way through his introduction, you begin to realize there must be something big coming.
Mr. Pollock’s presentation is a perfect setup for Administrator Verma who begins her presentation, and after a few opening remarks, announces that CMS is establishing an inter-agency group that will review the existing Stark Law. Anyone who works in the health care industry will have heard of the Stark Law. The law generally prohibits physicians from making referrals for certain services, known as “designated health services,” to any entity in which the physician or certain designated family members have a prohibited ownership or other financial relationship. The Stark Law is draconian in situations where it applies. Not only is the physician referral prohibited, but the designated health services flowing from the prohibited referral cannot be billed to the Medicare program. Billing and receipt of prohibited reimbursement results in an overpayment which, if not promptly repaid, ripens into a violation of the False Claims Act (FCA). This is where things get dicey because the FCA imposed triple damages, plus $11,000 to $22,000 per claim. These damages add up very, very quickly.
The Stark Law is a strict liability statute. There is no wiggle room. If an improper referral occurs, the statute is violated. Period. This makes the various exceptions that apply to permit certain strictly interpreted arrangements very important and the subject of much scrutiny and analysis. One of the problems is Stark Law regulations are oftentimes unclear in application. Adding to the confusion, CMS has been inconsistent in comments it has issued when adopting and amending various regulations. This leaves us with a law that creates very substantial penalties often very difficult to interpret. The obvious cases are relatively clear. It is on the marginal arrangements the Stark law is difficult to apply. The ambiguity of some of the Stark Law provisions has given many compliance officers and health care attorneys many sleepless nights.
So, now, CMS is setting up this inter-agency group to review the Stark Law as part of its “Patients Over Paperwork” initiative. What the outcome of this effort will be is anyone’s guess. We have the agencies responsible for enforcement conducting the review. It is fairly well publicized these agencies have an 800% return on every dollar they spend on health care fraud and abuse enforcement. Admittedly, the stated purpose of the “Patients Over Paperwork” initiative is to reduce burdensome regulations. This is in alignment with President Trump’s stated objectives of decreasing regulations on businesses.
Even so, it is difficult to see significant revisions coming that will open the door to potential abusive arrangements originally served as the impetus for enacting the Stark Law. It is also difficult to envision federal enforcement agencies voluntarily relinquishing some of the provisions and interpretations of the Stark Law that provide them with teeth in their enforcement efforts. That being said, one area we might see some regulatory reform involves the interplay between the Stark Law and new value-based reimbursement that is being transitioned into the Medicare program. Congress has already held a hearing on how the Stark Law may impede the ability to align the interests of various components of the health care system. It is this type of alignment that is contemplated and, in fact needed, to make cost savings gains under the new value-based reimbursement structures. This area is essentially hanging ripe on the vine for change. Still, significant issues remain as to whether this new CMS inter-agency group has the authority to harmonize Stark Law and value-based reimbursement. Some of the relevant issues cut to the core of the original Stark Law and might not be able to be solved by regulatory actions alone. If congressional action is required, all bets are off and the glimpse of potential relief that is represented by the AHA Town Hall meeting of January 17, 2018, might be fleeting at best.
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