On June 25, 2018, the Centers for Medicare and Medicaid Services (CMS) published a request for information, seeking input from the public on how to address any undue regulatory impact and burden of the physician self-referral law (Stark Law) on value-based and other coordinated care arrangements designed to improve quality and lower cost. While the overall focus of CMS’s request for information is on the Stark Law’s actual or perceived barriers to innovation, the request also gives the health care industry a unique opportunity to comment on and request revisions or clarifications for any significant Stark Law provision, including the provisions regarding fair market value, volume or value, and commercial reasonableness, as well as the Stark “group practice” definition.

As part of its focus to shift from a fee-for-service to a value-based health care delivery system, the US Department of Health and Human Services (HHS) launched a “Regulatory Sprint to Coordinated Care,” which is focused on identifying regulatory barriers to coordinated care. CMS identified aspects of the Stark Law that may create obstacles to participation in integrated delivery models, alternative payment models, and other arrangements incentivizing improvements in outcomes and reductions in costs, and is seeking input on revisions or additions to exceptions to the Stark Law.

The Stark Law is largely indifferent to the good faith intentions of health systems to integrate and enter into coordinated care arrangements with physicians, and continues to impose on health systems burdens of proof that the arrangements comply with ambiguous standards like fair market value, volume or value and commercial reasonableness. While financial transactions incident to CMS’s innovative care delivery and payment initiatives, such as accountable care organizations (ACOs), medical homes and bundled payment arrangements can be protected by certain fraud and abuse/Stark Law waivers, there are other common transactions and arrangements with physicians still operating in a fee-for-service environment (such as practice acquisitions, employment, “gainsharing,” service line co-management, pay-for-quality and non-ACO clinically integrated networks) that are not protected by the waivers. CMS’s request for information provides a welcome opportunity for the health care industry to educate CMS on the obstacles the Stark Law presents for innovative coordinated care arrangements with physicians.

In its request, CMS posed 20 specific requests for information on novel financial arrangements and alternative payment models, the applicability of current Stark Law exceptions to such arrangements, and what additional exceptions or revisions to the Stark Law are necessary to protect coordinated care arrangements from Stark Law liability. These requests, however, are so far ranging that they effectively invite comments on just about any Stark Law provision that a stakeholder believes warrants revision or clarification.

Comments are due by 5 pm EDT on August 24, 2018. If you would like assistance in preparing comments, please contact one of the authors or your regular McDermott lawyer.

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Photo of Eric B. Gordon, MD Eric B. Gordon, MD

Eric B. Gordon advises clients on fraud and abuse and compliance issues and health care transactions. He is partner-in-charge of the California Health Industry Practice Group. Eric represents a wide range of clients, including proprietary and tax-exempt hospital systems, medical groups, academic medical…

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