What Hospitals Need to Know About the Changes to Stark Law

Three healthcare stakeholders spoke with HealthLeaders about the changes to Stark Law and what the impact will be on provider organizations.

Early next year, hospitals and health systems will see the first major changes to the Physician Self-Referral Law, also known as "Stark Law," in more than two decades.

Late last week, the Centers for Medicare & Medicaid Services (CMS) released a final rule that includes policies that establish "permanent exceptions for value-based arrangements" and protection for "non-abusive, beneficial arrangements."

The final rule has additional guidance on "key requirements of the exceptions to the physician self-referral law" and reduces administrative burdens that "drive up costs" by redirecting them to patient care.

The rules prompted positive responses from major healthcare organizations in the following days.

On Tuesday, the American Telemedicine Association (ATA) issued a press release praising the Trump administration's efforts to modernize Stark Law.

“We applaud HHS and CMS for taking an important and urgently-needed step towards modernizing the laws that are critical to the success of the regulatory sprint to coordinated care," Ann Mond Johnson, CEO of the ATA, said in a statement. "These new rulings move us closer to a value-based care model that will allow our healthcare system to reimagine how care is delivered and integrate telehealth with in-person care."

The ATA's comments came days after America's Essential Hospitals (AEH) commended CMS' actions to introduce "new, permanent safe harbor protections and exceptions that support care coordination and value-based arrangements."

Three healthcare stakeholders spoke with HealthLeaders about the changes to Stark Law and what the impact will be on provider organizations.

Kathleen McDermott, a former U.S. assistant attorney, and now a partner at Washington, D.C.-based Morgan Lewis, called the changes a "dramatic shift" in the encouragement of value-based arrangements.

McDermott said the goal of the changes focuses on the structure of care delivery to a concept of coordination that involves the patient and brings them off "the sidelines."

"The design of this [rule] is to incentivize value-based care to achieve good outcomes for patients and authorize patients to participate in these care models by allowing incentives and patient engagement activities," McDermott told HealthLeaders. "A lot of this remains to be seen how it will develop, but it's a green light to allowing different arrangements around important areas, whether it be cardiology, neurology, and [the specialties] that cost a lot of money and require medication management to a more significant degree, particularly chronic illnesses. You'll see an opportunity to incentivize the hospitals, the doctors, and the patients to participate in care coordination activities."

She added that the overhaul benefits most of the healthcare sector, nothing that the rule services as a "catalyst for positive disruption" and a "huge start in innovation."

McDermott added that the Trump administration could've done more with the rule to address the social determinants of health but said that could arrive through another policy announcement.

Stephanie Kennan, senior vice president of federal public affairs at McGuireWoods Consulting, said that the Stark Law changes are likely to create greater flexibility for providers approaching value-based care arrangements.

"CMS is moving towards trying to make sure that value-based arrangements can go forward in an easier manner than they had in the past and this may help create some new arrangements. I think the inverse is true and that current arrangements may have to be tweaked to make sure they're in compliance," Kennan said. "I think there's going to be a general consensus that this was a pretty good effort."

Similarly, Danielle Sloane, a member at Bass Berry & Sims PLC, a law firm based in Nashville and Washington, D.C., highlighted the fact that hospitals are likely to benefit from increased flexibility.

"I think hospitals should be relatively pleased with these rules," Sloane said. "I think CMS was thoughtful and listened to commenters and took into consideration balancing their obligations to protect the federal healthcare programs, provide flexibility, and ease regulatory burdens."

Sloane added that while most hospital leaders remain focused on handling the surge of COVID-19 cases, some organizations may reexamine their policies and procedures regarding compliance processes and discuss any potential adjustments with their contracting physicians.

Editor's note: This story has been updated to include commentary from Danielle Sloane.

Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.