Effort to reform Stark law reflects shift to value-based care

January 30, 2020

"Overall, the modifications to Stark that CMS seeks to implement represent a net win for urology and the vast majority of patients, physicians, and other health care providers," writes the AACU's Yehuda A. Sugarman.

Based on a partnership with Urology Times, articles from the American Association of Clinical Urologists (AACU) provide updates on legislative processes and issues affecting urologists. We welcome your comments and suggestions. Contact the AACU government affairs office at 847-517-1050 or info@aacuweb.org for more information.

One of the most significant regulatory measures in 2019 was the proposed rule from the Centers for Medicare & Medicaid Services (CMS) that would fundamentally alter the way in which the physician self-referral law, or “Stark law,” has traditionally been applied.

In an effort to strengthen the voice of urology and present a united voice, three national urology societies-AACU, AUA, and LUGPA-coordinated their comments to CMS, echoing support for most of the provisions in the rule while also incorporating feedback specific to each group’s advocacy goals.

 

A barrier to value-based care

The Stark law, enacted in 1989, generally prohibits physicians from referring patients for certain services reimbursable by Medicare if they or an immediate family member has a financial relationship with the provider performing the referred service.

The law made sense at a time when Medicare primarily reimbursed physicians based on a fee-for-service payment system. Today, however, Medicare and other payers promote alternative payment models under which physicians are reimbursed based on the value, rather than the volume, of their services. This allows providers to deliver better-quality, lower-cost care.

Related: AACU annual meeting promotes advocacy, unity, political action

Although the Stark law, as it’s currently interpreted, contains certain exceptions for value-based arrangements, the part of the law that prohibits physician referrals is so broad that it discourages many physicians from participating in these types of arrangements out of fear of violating the law and facing stiff penalties.

In a 2015 report to Congress, CMS itself recognized that the law was inhibiting the transition to more innovative care delivery models by preventing physicians from coordinating care with other health care providers and implementing other value-adding activities.

“Although we expect that some arrangements may be structured to satisfy the requirements of an applicable exception to the physician self-referral law and not violate the Federal anti-kickback statute, the fraud and abuse laws may serve as an impediment to robust, innovative programs that align providers by using financial incentives to achieve quality standards, generate cost savings, and reduce waste,” the agency wrote.

Over the last few years, CMS has tried to address this problem by creating a variety of waivers, or exceptions, to Stark that allow providers to participate in the types of clinical and financial integration envisioned by MACRA-the 2015 law that replaced the Sustainable Growth Rate formula. But the process of structuring a financial arrangement to comply with all the requirements of a particular waiver and then demonstrating the legality of that arrangement to CMS creates an “undue impact and burden” of compliance, as the agency has noted in its recent regulatory filings.

 

CMS rule loosens Stark restrictions

In October 2019, CMS issued a proposed rule in support of its “Patients over Paperwork” initiative that would significantly modify the scope of the Stark law and alleviate its compliance requirements.

The proposed revisions would establish new exceptions to Stark, simplify qualification requirements for waivers, and create greater flexibility overall for physicians who participate in value-based arrangements. Notably, the new exceptions under Stark would be permanent and apply to care that is provided not only to Medicare beneficiaries but other patients as well.

The rule also provides guidance and clarification of fundamental Stark law terminology and requirements. For example, the new definition of “commercially reasonable” (compensation arrangements) does not depend on valuation or require profitability. Rather, it recognizes that certain arrangements may be commercially reasonable as long as they “further a legitimate business purpose of the parties,” such as helping a colleague satisfy licensure requirements or fulfilling a community need.

An additional change clarifies the “volume or value” standard-a term that has long vexed both health care providers and enforcement agencies. Under the new rule, CMS would analyze the mathematical formula used to calculate compensation and allow the volume or value of referrals to be taken into consideration only when that formula “includes the physician’s referrals to the entity as a variable” that directly correlates the compensation with the physician’s referrals.

The proposed reforms also include new exceptions for financial arrangements under which a physician receives limited remuneration for items or services they provide, as well as exceptions for donations of cyber-security technology to referring physicians, regardless of whether the physician operates in a fee-for-service or value-based payment system. The rule also broadens and makes permanent the exception for sharing of electronic health records.

There are other provisions, as well, that encourage information sharing among physicians. Under the new rule, specialty physicians would be permitted to share data analytics with a patient’s primary care practice for free. Currently, the law requires primary care doctors to pay for the data if they referred the patient to the specialist. This change will enhance care coordination between physicians and improve the quality of care patients receive.

Next: Urology patients stand to benefitUrology patients stand to benefit

The additional waivers created by CMS’s proposed rule on Stark reflect the need for more pathways for providers to participate in value-based, coordinated care. Urologists in particular apply their expertise to the diagnosis and management of a wide variety of medical conditions and are an integral partner with pathologists, radiologists, oncologists, and various other health care providers. Increasing integration and coordination among these specialists will improve patient care.

Under the current regulations, prostate cancer patients who need to undergo radiation therapy will shuttle back and forth between their urologist’s office and a radiation oncology unit-practices that are usually completely independent of one another. That’s due to the restrictions placed on these practices from entering into joint ventures that create clinical pathways, outcome measures, and greater efficiencies that lower patient costs. The proposed updates to the Stark law may lay the groundwork for new arrangements between urology practices and radiation units in hospitals that allow urologists to receive fair remuneration for their clinical work and risk sharing.

Also see: What’s your opinion of Medicare for All?

The proposed revisions to Stark could also help reduce infectious complications stemming from prostate biopsies. If urology practices are permitted to create episodes of care for prostate biopsies that include pathology and advanced imaging, among other things, it could produce enough cost savings to allow hospitals and providers to develop protocols to reduce the occurrence of sepsis after prostate biopsies. Besides the positive impact on quality of care, minimizing infections would drive down the costs associated with prostate biopsies and further encourage migration to value-based arrangements.

Finally, the proposed rule creates three new exceptions under Stark based on the level of financial risk assumed by the payer. While these exceptions allow for greater flexibility and will accelerate the transition to value-based care, they may also further the consolidation of hospital and specialty physician practices. Independent urology practices, especially in smaller communities, are often unable to take on greater financial risk. If they are acquired by hospitals, it will further diminish competition to consolidated hospital systems, which are generally less convenient and more expensive for patients.

Overall, the modifications to Stark that CMS seeks to implement represent a net win for urology and the vast majority of patients, physicians, and other health care providers. As AACU’s comment letter stated, “the (reforms) will provide additional space for the types of alternative arrangements among physicians that can enhance care coordination, improve quality and reduce costs.”

The proposed rule, with any policy changes, is expected to be finalized as soon as the first quarter of 2020.

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