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Stark Law Changes: A Q&A with Healthcare Lawyer Ayesha Mehdi, JD, MHSA

As of January 19, 2021, long-awaited changes to the Physician Self-Referral Law (Also known as the Stark Law) are in effect. The modernized and clarified rules set forth by the U.S. Department of Health and Human Services (HHS), Office of Inspector General (OIG), and the Centers for Medicare and Medicaid Services (CMS) are part of their “Regulatory Sprint to Coordinated Care.” The new exceptions and safe harbors promote coordinated services among healthcare providers and emphasize value-based payment and collaborative care. They also acknowledge the role of electronic health records (EHR) and cybersecurity technology, allowing providers to share resources. We sat down with healthcare lawyer Ayesha Mehdi, JD, MHSA to unpack what these changes mean for practices.  

What is the Stark Law?

Mehdi: The Stark Law governs the financial relationships between physicians and entities that file claims for certain designated health services. It also defines exceptions for financial relationships that HHS has determined do not post a risk of program abuse.

Why are the Stark Laws changing?

Mehdi: The new changes reflect a movement toward more value-based care and better care coordination. The intention is to improve the entire patient care experience and make it easier on providers. The changes reduce administrative burdens and compliance burdens, and maintain safeguards to protect patients from fraud and abuse.

What is changing about the Stark Laws?

Mehdi: There are three new exceptions and definitions for value-based compensation arrangements between or among physicians, providers, and suppliers. The exceptions include value-based arrangements with full financial risk from a payor for patient care services for a target patient population, value-based arrangements with meaningful downside financial risk for failure to achieve the value-based purposes of the value-based enterprise, and any value-based arrangement that meets those requirements. A “value-based enterprise” is any group of clinicians, providers, or suppliers that have agreed to collaborate and put the patient at the center of their work through greater care coordination, increased efficiencies in the delivery of care, and improvement in patient outcomes.

Another aspect of the changes is that any money paid for service cannot exceed the fair market value or influence a reduction in medically necessary patient services. Additionally, a patient’s expressed preference for a provider supersedes a physician referral. The referral cannot counteract the patient’s preference.

There are also 7 new safe harbor provisions put forth by CMS for certain coordinated care and value-based arrangements. These allow any care coordination arrangements that have a substantial downside financial risk or full financial risk and any value-based arrangements that improve patient care quality, health outcomes, and efficiency without requiring providers, clinicians, or suppliers to assume risk.

How do these changes impact practices?

Mehdi: These changes are meant to push your practice away from fee for service arrangements toward value-based care arrangements. So, it’s based more on quality of care versus volume of services. With these exceptions, certain arrangements that were not legal before will now become legal. For example, a practice can now lease, employees or share employees with hospitals, like nurses. Hospitals can also provide practices IT infrastructure to help with coordination of care between your practice and the hospital. Practices will also now have the ability to enter into gain sharing arrangements.

What action should practices take now?

Mehdi: I recommend you speak with your healthcare attorney or a compliance expert to make sure that your arrangements are compliant and determine what you can do to make the most of these new changes. For example, we now have more clarity on what fair market value and commercially reasonable prices are, which may benefit some practices. This is so new; many practices aren’t sure what to do with the changes. The big thing is raising awareness of the opportunities this opens up. Fortunately, the compliance barrier has been lowered, and there may be opportunity to enter into new arrangements that will benefit your patients and your practices. These changes have the potential to reduce your costs and improve quality of care. Prior to these changes, the Stark Law really paralyzed a lot of our clients because it posed such a strict liability.

Besides the Stark Law changes, are there any other timely compliance issues you recommend practices focus on?

In our post COVID-19 world, everything is more technology focused. The trend is toward making access to care easier in a digital age. I always recommend that my clients ensure their EHRs are compliant and set up to foster seamless coordination between hospitals and other practices. Additionally, I suggest practices be on the lookout for proposed changes to HIPPA rules. They will expand patient rights to inspect private health information (PHI) in person and give them the right to view PHI within 15 days rather than 30 days. Providers will be able to request a 30-day extension, but patients will have the right to get records in 15 days. The proposed HIPPA changes will also reduce the identify verification burden standing between patients and their PHI. In my opinion, these proposed changes are a long time coming and will make it easier to coordinate care in emergencies and for families to access crucial records.


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