The “Regulatory Sprint” to Value-Based Care: Adjusting Stark Law and the Anti-Kickback Statute

Jessica Sweeb

Associate Editor

Loyola University Chicago School of Law, JD 2019

The current Deputy Secretary of the Department of Health and Human Services and former Loyola University Chicago School of Law professor Eric D. Hargan was sworn into his position as the Deputy Secretary on October 6, 2017. Since then, he has been working on assisting providers to help them better understand the intricacies of the Stark law by gathering provider concerns about present governing efforts. All of this work is being done in an effort to shift the healthcare system away from fee-for-service care and towards value-based care in what Hargan is calling the “Regulatory Sprint to Coordinated Care.” Hargan stated that “removing unnecessary government obstacles to care coordination is a key priority for this Administration.”

The history of the Stark law – 30 years in the making

Section 1877 of the Social Security Act (42 U.S.C. 1395nn) is generally known as the Stark law. This physician self-referral law was enacted in 1989 and originally only applied to physician referrals clinical laboratory services. This was expanded in 1993, when Congress stated that the physician self-referral law also applied to certain provisions of the Medicaid program. In 2003, Congress created an exception to the law for particular arrangements where a physician can get non-monetary compensation which is used only to send and receive electronic prescription information.

In 2010, the Stark law underwent significant changes due to the Affordable Care Act. The Medicare self-referral disclosure protocol was published, which lets providers and suppliers self-disclose real or potential violations of the Stark law. Another subsection of this protocol gives the Department of Health and Human Services Secretary the discretion to reduce the amount owed for Stark violations. In addition to this, the protocol allows the Centers for Medicare and Medicaid (“CMS”) to adjust the repayment amounts.

CMS seeks guidance from the provider community

In late June 2018, CMS published a Request for Information (“RFI”) in an effort to obtain commentary from the public on how the Department of Health and Human Services can address any burdens or issues perceived by physicians in regard to the Stark law. CMS received approximately 2,600 comments, where providers expressed that complying with the Stark law and any regulations associated with it was a huge burden. Due to this, CMS began to review the existing regulations under the Stark law to determine where the administration could lessen some of the specified burdens.

Once these regulations were identified, Eric Hargan, Deputy Secretary of the Department of Health and Human Services, and CMS began to work together to seek more input from the provider community about the arrangement structures of those who participate in alternative payment models, any revisions to the current Stark law exceptions which providers think are needed, and any updated language requested regarding alternative payment models and the Stark law. Some commenters believed that Congress should align the Stark law with the anti-kickback statute. One commenter in particular recommended that if a compensation agreement is allowed under an anti-kickback statute safe harbor, then it should also be exempt from the Stark law.

Some argue in support of the reform claiming the Stark law only addresses problems that arise out of a fee-for-service model. A report written by Majority Staff Chairman, Orrin Hatch, discusses that financial incentives, which elicit a Stark law or anti-kickback statute concern in a fee-for-service payment model, are essentially eliminated in an alternative payment model.

Hargan’s next steps

Hargan announced on February 1, 2019 that the two new proposed rules, which would modify Stark law and the anti-kickback statute, could be available as early as this year. Hargan is now asking for feedback on HIPAA through the form of another RFI, since comments were due back to CMS and the Department of Health and Human Services on the Stark and the anti-kickback statute in August 2018. “This [HIPAA] RFI is another crucial step in our Regulatory Spring to Coordinated Care, which is taking a close look at how regulations like HIPAA can be fine-tuned to incentivize care coordination and improve patient care, while ensuring that we fulfill HIPAA’s promise to protect privacy and security,” stated Deputy Secretary Hargan. These public comments on HIPAA are due in mid-February 2019.

The effects of the Regulatory Sprint

The healthcare industry has been shifting towards value-based care over the last few decades. However, Hargan’s plan to roll back huge regulations and laws, such as HIPAA, the Stark law, and anti-kickback, could have significant implications on how providers are currently complying with the law. A regulatory overhaul of this magnitude will involve a huge shift in the healthcare compliance realm and will involve a substantial amount of planning and restructuring to assess how providers will be held accountable if Hargan’s proposed rules are finalized.