Published 12/1/2017
Julia Williams

AAOS Works to Reform Stark Law

Efforts focus on removing barriers to care coordination
Self-referral prohibitions in the Social Security Act, commonly known as the Stark Law, were enacted more than 30 years ago to limit the influence of financial relationships on physician referrals. Over the years, however, the prohibitions have failed to keep pace with changes in the healthcare environment, including those that affect orthopaedic surgeons. As a result, AAOS is working to reform the Stark Law.

For example, the Stark prohibitions have increasingly posed barriers to care coordination in innovative payment models such as the new Merit-based Incentive Payment System (MIPS) and Alternative Payment Models (APMs). These value-based programs seek to promote high-quality care and care coordination within individual healthcare entities and across multiple sites of service.

The Stark Law also prohibits payment arrangements that consider the volume or value of referrals, or any other business generated by the participating parties. These prohibitions stifle innovative delivery of care because they inhibit hospitals and physician practices from incentivizing physicians to deliver more effective care to patients.

At times, the Stark Law can also impede coordination and efficiencies between postacute care providers and hospitals. For instance, if a hospital wants to place a hospital case manager or social worker in a postacute care setting, and the postacute provider refers to the hospital, it may be difficult to structure the arrangement so that it meets a current exception and provides the right incentives to coordinate care. Furthermore, when care coordination depends on physician buy-in/alignment, the plan may become ineffective if it's restructured to fit an exception. That's because an incentive plan or the physician component of a care coordination arrangement does not fit within an existing Stark exception.

Reform proposals
AAOS is working to reform the Stark Law so that it will promote care coordination for APMs to improve care delivery in the Medicare program. AAOS believes the Centers for Medicare & Medicaid Services (CMS) should have the regulatory authority to create exceptions under the Stark Law for this type of payment arrangement and to remove barriers to the development of such arrangements.

Specifically, AAOS seeks to provide CMS with the authority to waive the Stark and anti-kickback laws for physicians seeking to develop and operate APMs, the same way Accountable Care Organizations were enabled to do so under the Affordable Care Act. Additionally, the Academy wants to ensure that CMS' use of its current administrative authority promotes care coordination, quality improvement, and resource conservation.

Finally, AAOS wants the "value or volume" prohibition in the Stark Law removed so that practices can incentivize physicians to abide by the best practices and succeed in the new value-based APMs. These provisions are to protect practices in terms of rewarding or penalizing physicians. This protection would apply to practices that are developing or operating an APM, including Advanced APMs, APMs approved by the Physician-Focused Payment Model Technical Advisory Committee, MIPS APMs, and other APMs specified by the Secretary of Health and Human Services.

Legislation that would address these concerns, the Medicare Care Coordination Improvement Act of 2017, was recently introduced with the support of AAOS in the U.S. House of Representatives by Reps. Larry Bucshon (R-Ind.), Raul Ruiz (D-Calif.), Kenny Marchant (D-Texas), and Ron Kind (D-Wis.), and in the U.S. Senate by Sens. Rob Portman (R-Ohio) and Michael Bennett (D-Colo.). It has the full support of more than 26 organizations representing approximately 500,000 physicians and clinicians.

Additionally, the Stark Law currently makes no distinction between technical and substantive violations. The severity of monetary penalties lack appropriateness and the penalties for technical violations can be upwards of millions of dollars. The strict liability standard of the Stark law often results in technical violations where the parties are functioning in accordance with the "spirit" of the rule (ie, unsigned agreements and expired leases), and the assessment of treble damages based on a technical violation seems excessive. The time frame for resolution can also impede a medical group's ongoing business activity. For example, once it has been determined internally that an unintentional violation under the Stark standard may have occurred, the filing for a determination to that affect can take many months, consequently causing a disruption in the practice because the business activity in question is essentially in limbo.

The Stark Administrative Simplification Act, recently passed by the House of Representatives (HR 3726) and supported by AAOS, would create a process for a fixed monetary penalty for the self-disclosure of "technical noncompliance" violations. If the violation is reported to CMS within one year of the date of noncompliance, the penalty assessed is $5,000. If it is reported more than one year from the date of noncompliance, the penalty doubles to $10,000.

The bill also addresses the CMS backlog in considering technical violations. If CMS fails to act within 180 days, the disclosure would be deemed accepted. The fixed penalty structure and simplified self-disclosure process in HR 3726 gives hospitals more certainty and predictability regarding the outcome of a technical and inadvertent noncompliance disclosure.

The Medicare Care Coordination Improvement Act of 2017 and the Stark Administrative Simplification Act will help break barriers to care coordination under the current Stark Law. As health care moves from volume- to value-based care, the 30-year-old law must be reformed to accommodate new models. The AAOS office of government relations is working to make that happen.

Julia Williams is a senior manager in the AAOS office of government relations. She can be reached at jwilliams@aaos.org.