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Our attorneys stay on top of changes in legislation, agency regulations, case law, and industry trends—then craft timely legal alerts to keep clients up to date on legal developments important to their business.

February 17, 2021

Delay in Stark Law Modernization

On November 20, 2020, the Centers for Medicare & Medicaid Services (CMS) issued a final rule to modernize and clarify the Physician Self-Referral Law, also known as the Stark Law, which has posed a significant burden to health care providers since 1989. Indeed, physicians have waited decades for meaningful modernization of the Stark Law, and the news that it was finally happening allowed them to rejoice; however, their celebration may have been a bit premature. Following the outcome of the 2020 election, several health care-related rules promulgated by the Trump administration are now delayed, and it is unclear if they will survive.

The Stark Law generally prohibits a physician from making referrals to an entity that the physician has a financial relationship with. Although this law was enacted to protect patients from physicians who may order services or make referrals based on their own financial interest, instead of the best interests of the patient, since its enactment, it has unfortunately added to administrative costs and impeded the health care system’s move toward value-based reimbursement. However, CMS believes that the American health care system is progressively shifting toward financial arrangements that should reward providers who are successful at keeping patients healthy and out of the hospital, which is why CMS has finalized changes necessary to better benefit this system.

According to the CMS fact sheet, “The final rule supports the CMS ‘Patients over Paperwork’ initiative by reducing the unnecessary regulatory burdens on physicians and other health care providers while reinforcing the Stark Law’s goal of protecting patients from unnecessary services and being steered to less convenient, lower quality, or more expensive services because of a physician’s financial self-interest. Through the Patients over Paperwork initiative, the final rule opens additional avenues for physicians and other health care providers to coordinate the care of the patients they serve—allowing providers across different health care settings to work together to ensure patients receive the highest quality of care.” Notably, the final rule will also ensure that regulations interpreting the Stark Law allow for changes that will help modernize the health care system.

The consequences of noncompliance with the Stark Law in the past have been dire and have resulted in physicians and other health care providers being discouraged from entering into innovative arrangements that would improve quality outcomes, produce health care system efficiencies, and lower costs. The most significant aspect of the final rule is that it creates new, permanent exceptions to the Stark Law for value-based arrangements that will address this issue. The final rule allows for innovative arrangements by permitting physicians and other health care providers to design and enter into value-based arrangements without fear that legitimate activities to coordinate and improve the quality of care for patients and lower costs would violate the Stark Law. The exceptions apply regardless of whether the arrangement relates to care furnished to people with Medicare or other patients.

Although the final rule was supposed to take effect on January 19, 2021, with the exception of revisions to the group practice special rules for profit shares and productivity bonuses that are effective January 1, 2022, it is unclear at this time whether the final rule will go into effect at all. In the final weeks of the Trump administration, several major health care-related rules were issued with unlawful effective dates, including the aforementioned modification of Stark Law. According to the Congressional Review Act, major rules can only take effect 60 days after publication in the Federal Register or after Congress receives them, whichever comes later. The final Stark Law was published in the Federal Register on December 2, 2020, with an effective date of January 19, 2021—one day before President Biden took office. As such, the Biden administration issued a memorandum that specified that these rules will be delayed for at least 60 days while the administration reviews any questions of fact, law, and policy. After the review period, and if the administration finds cause to do so, the final rule could be rewritten, postponed further, or simply not adopted at all.

For more information, please see the CMS Fact Sheet.

If you have any questions regarding the content of this alert, please contact Susan Benz, Health Care & Human Services Practice Area co-chair, at sbenz@barclaydamon.com; Melissa Zambri, Health Care & Human Services Practice Area co-chair, at mzambri@barclaydamon.com; Jen Cruz, law clerk, at jcruz@barclaydamon.com; or another member of the firm’s Health Care & Human Services Practice Area.

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