The Centers for Medicare and Medicaid Services (CMS) has issued the final rule on the Stark law regarding kickbacks. CMS clarified some points, but left questions unanswered.
The final rule establishes two new waivers intended to accommodate accountable care organizations (ACOs), as well defining some regulatory terminology and requirements. (The rule is available online at http://tinyurl.com/o8f8f3x.)
The Stark law has long been a source of frustration and confusion within the healthcare industry, with its provisions widely regarded as overly complex, unwieldy, and open to differing interpretations that make compliance difficult, time-consuming, and expensive, notes Karl Thallner, JD, partner with the law firm of Reed Smith in Philadelphia.
CMS touted the pending changes as finally providing long-sought clarity to the regulations governing physician referrals, relaxing various technical requirements, and creating exceptions to help ease the regulatory burden for providers seeking to comply, Thallner says. “Yet with CMS now on the verge of issuing its final rules as part of its update to the Medicare Physician Fee Schedule for 2016, it appears the new rules will fail to simplify key areas of the law and it will remain, in the words of a recent federal appeals court opinion, a ‘booby trap,’” Thallner says.
Thallner offers this summary of the uncertainty in key areas:
• Uncertainty over how to apply the law’s requirements.
Many Stark Law exceptions require that compensation cannot “take into account” the volume or value of referrals. The recent Fourth Circuit decision in Drakeford v. Tuomey Healthcare System highlights the uncertainty as to how this requirement should be applied to commonly used productivity-based physician compensation methodologies.
• Risks to hospitals that employ physicians.
Many Stark Law exceptions require that an arrangement with a physician must be “commercially reasonable.” Recent settlements of False Claims Act/Stark Law cases suggest that the government believes that it is commercially unreasonable for hospitals to employ physicians in situations in which the collections of professional service fees are insufficient to cover the costs. This view creates a significant risk for many hospitals because hospital-owned physician practices typically do lose money.
• Expensive settlements for unproven allegations under the False Claims Act.
In recent years, violations of the Stark Law have been increasingly used as the basis for False Claims Act actions. The potential penalties for violating the Stark Law already are inordinately high, but when combined with the penalties available under the False Claims Act, they become catastrophic. For this reason, hospitals agree to settle these cases for millions of dollars, rather than challenge the government’s interpretation of the law.
• Inhibiting efforts to improve quality and reduce healthcare costs. Fear of violation of the Stark Law impairs other priority objectives of the government.
Health reform initiatives have aimed for higher quality care delivered more efficiently by encouraging integration of providers across the continuum of care. If hospitals and physicians are reluctant to develop financial relationships that will foster collaboration for fear of violating the Stark Law, the objective of health reform will be thwarted
