CMS' impending overhaul of the Stark law can only go so far, experts say

Seema Verma
CMS Administrator Seema Verma has hinted that the agency is pushing to get out a proposed overhaul of the Stark law this year. (HIMSS)

The healthcare industry has been pressing the Trump administration to overhaul the Stark law, but legal experts say the agency can only go so far without turning to Congress.

The Centers for Medicare & Medicaid Services can put out regulations to clarify definitions or make new exceptions under Stark, which was created in 1989 to ban doctors from offering self-referrals, but action to get rid of the law’s stiff penalties will need Congress.

Industry wants CMS to adopt new regulations on Stark because the law has had a chilling effect on participation in value-based payment agreements.

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“It thwarts the creativity necessary and risk to implement some of these value-based systems and quality incentives that are going to be integral into what we expect to see in the future,” said Andrew Wachler, an attorney and partner with the law firm Wachler & Associates.

CMS issued a request for information last summer to solicit ideas on what needs to change regarding the law, and CMS Administrator Seema Verma has said the agency aims to put out a proposed rule this year.

Several legal experts said that while CMS has a wide latitude to interpret the law, key parts of it will require congressional intervention.

The most likely change that CMS can make to Stark is via exceptions.

“If they think it is appropriate and they can craft an exception that people think is useful and workable that has broad application but also protects against abuse then they could do that,” said Charles Oppenheim, a partner at the law firm Hooper, Lundy & Bookman and the author of the American Health Law Association’s Stark guide.

But industry stakeholders hoping for a broad exception could be disappointed.

“People are always going to be looking for the broadest possible exception to use,” Oppenheim said. “CMS is always going to be nervous and put in safeguards.”

Right now the way that the law is written there is more latitude given to hospitals and larger entities when it comes to exceptions, said Lee Little, partner with the law firm Hamil Little.

CMS has also floated changing regulatory definitions for volume, value and commercial reasonableness. Verma also wants to address areas that have triggered noncompliance like a lack of signature or incorrect dates.

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However, CMS will require Congress to make any changes to the penalties that providers face from Stark.

“The penalties are severe,” said Little. “They are $15,000 per wrongful claim. If you went to a certain fine or penalty model that didn’t charge for every single violation that is an area that Congress could speak to.”

So far, Stark reform hasn’t gotten momentum in Congress. Lawmakers in prior congressional sessions have introduced bills to adopt reforms, but in the latest Congress most attention has been on drug prices and surprise billing.

“I would anticipate the law would remain complex and I would anticipate it will continue to be daunting,” Little said. “But hopefully the changes that will be made will be clear and uniform so that they can open up the opportunity for individual physician groups to participate in value-based care as meaningfully as hospitals and health systems.”

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