Hallelujah! We Have Waited 30 Years for Stark and AKS Reform. Sadly, it Still Is Not Enough.

Blog Post | 108 KY. L. J. ONLINE | November 12, 2019

Hallelujah! We Have Waited 30 Years for Stark and AKS Reform. Sadly, it Still Is Not Enough.

Brenton Hill

The Stark and Anti-Kickback (AKS) statutes started out with a simple desire, to prevent unnecessary spending on testing that could raise healthcare costs.1 Accordingly, Stark law prohibits a physician from referring to a certain entity for designated health services if he/she (or any immediate family member) has a financial relationship with that entity, unless an exception applies.2 Similarly, AKS, a criminal statute, prohibits “knowing and willful remuneration to induce referrals or generate business involving any item or service payable by Medicare, Medicaid or other federal healthcare program.”3While sound in their intent, these laws give increasing headaches for General Counsel offices in health systems who incessantly investigate any and every physician benefit that is received for free. In an effort to ease this burden, the Department of Health and Human Services (HHS) has offered proposed changes to Stark and AKS to clarify the archaic law and align it with value-based purchasing arrangements.4

While the breadth and depth of all Stark and AKS law are too much to explore in this post, the new changes that HHS and Centers for Medicare and Medicaid Services (CMS) have proposed are important to note. Moreover, since HHS is soliciting public discourse on the subject for the next 75 days I feel inclined to comment generally with my limited knowledge and perspective as a student.5 One of the most important proposed changes is the ability to better share data across the healthcare continuum because physicians could receive incentives to share this data with hospitals.6 For example, a specialty physician practice could share its “data analytic services with a primary care practice.”7 Also included in the possibly permissible conduct would be the ability for the hospital to potentially provide care coordinators, data analytic services, and remote monitoring to physicians to help better coordinate patient care.8 Even more timely, a hospital could donate cybersecurity software to each physician that refers patients to that hospital.9

Another important change to the Stark law is further clarification of what fair market value (FMV) means when compensating a physician.10 Since each physician is required to be paid within a certain range calculated with multiple variables, further clarification in the proposed changes could define the distinct categories of general application, equipment rentals, and office space rentals to help in the calculation of FMV.11 Physicians could even be allowed to receive up to $3,500 dollars per year in exchange for services or items.12 While these new changes to the Stark and AKS law seem to be improvements to outdated regulations, one still asks the question, why aren’t these purported “changes” already in place? Isn’t it obvious that different medical facilities should be able to share data to assist in well-rounded patient care? Why couldn’t a hospital provide patient centered initiatives to physicians for free from the inception of Stark and AKS? What if a physician has a legitimate reason for referring a patient to a clinic which he/she has some stake in?

Herein lies my greatest confusion with these laws, why is it that hospitals and physicians can’t use incentives like any other industry in the U.S.? One thought may be that there is an inherent distrust of physicians and administrators alike, which is why fraud and abuse laws are so strict. It could also be that there is over $1 trillion spent by the government on national healthcare expenditures, making it a very protected resource.13 Currently, over 50% of physicians reporting signs of burnout and the repercussions costing the healthcare system $4.6 billion dollars.14 Maybe we should ease up even more than these proposed regulations on the men and women that strive diligently to keep our population healthy and allow them to receive incentives for the great work they do without fear of breaking the law. I do not propose eradicating Stark and AKS, but I do think it could much more simplified to match the quality-based incentives that hospitals and physicians are currently being reimbursed for.

While the goal of these changes is to ultimately increase flexibility for hospitals and physicians, the Department of Justice (DOJ) has collected $2 billion dollars in fraud settlements per year for the last nine years.15 For example, a Detroit, Michigan hospital was fined $84 million dollars after it provided eight physicians with discounted office space much below FMV in exchange for patient referrals.16 What seemed like a mutually beneficial relationship for both parties and no mention of patient or community harm by the DOJ, turned out to be a major blow for an urban hospital system.17Instead of collecting large sums for mutually beneficial arrangements, we should ultimately limit the focus on fraud and abuse to reduction in population and patient welfare for which these health systems are responsible for.       

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1 Ayla Ellison, 15 Things to Know About Stark Law, Becker’s Hosp. Review (Feb. 18, 2017), https://www.beckershospitalreview.com/legal-regulatory-issues/15-things-to-know-about-stark-law-021717.html.

2 Physician Self-Referral (Stark) Law, Med. Grp. Mgmt. Ass’n https://www.mgma.com/advocacy/issues/federal-compliance/physician-self-referral-stark-law.

3 Id.

4 HHS Proposes Stark Law and Anti-Kickback Statute Reforms to Support Value-Based and Coordinated Care, U.S. Dep’t of Health and Human Services (Oct. 9, 2019) https://www.hhs.gov/about/news/2019/10/09/hhs-proposes-stark-law-anti-kickback-statute-reforms.html [hereinafter HHS Anti-Kickback Statute].

5 James Cannatti, Tony Maida & Daniel Melvin, HHS Proposes Substantial Changes to Stark Law and Anti-Kickback Statute Regulations, The Nat’l Law Review (Oct. 9, 2019), https://www.natlawreview.com/article/hhs-proposes-substantial-changes-to-stark-law-and-anti-kickback-statute-regulations.

6 Alex Kacik & Michael Brady, Stark, Anti-Kickback Rules Aren’t Only Obstacles to Volume-to Value Transition, Modern Healthcare (Oct. 11, 2019), https://www.modernhealthcare.com/policy/stark-anti-kickback-rules-arent-only-obstacles-volume-value-transition.

7 HHS Anti-Kickback Statute, supra note 4.

8 Id.

9 Cannatti, supra note 5.

10 CMS Makes Value the Centerpiece of Proposed Stark Rules, Health Law News Blog Hall Render (Oct. 10, 2019), https://www.hallrender.com/2019/10/10/cms-makes-value-the-centerpiece-of-proposed-stark-rules/.

11 Id.

12 Id.

13Nat’l Health Expenditure Fact Sheet, Centers for Medicare and Medicaid Services, https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html.

14 Pien Huang, What’s Doctor Burnout Costing America?, NPR (May 31, 2019) https://www.npr.org/sections/health-shots/2019/05/31/728334635/whats-doctor-burnout-costing-america.

15 Kacik, supra note 6.

16 John Commins, Michigan Hosp. to Pay $84.5M to Settle Stark Law, Kickback Claims, Health Leaders Media (Aug. 3, 2018),  https://www.healthleadersmedia.com/clinical-care/michigan-hospital-pay-845m-settle-stark-law-kickback-claims.

17 Detroit Area Hospital System to Pay $84.5 Million to Settle False Claims Act Allegations Arising from Improper Payments to Referring Physicians, United States Dep’t of Justice (Aug. 2, 2018), https://www.justice.gov/opa/pr/detroit-area-hospital-system-pay-845-million-settle-false-claims-act-allegations-arising.