Proposed Rule on Stark Law Provisions

The federal government’s stated intent to ease healthcare delivery through simplified regulations will address a long-time irritant of physicians: the Stark Law.

Mandated by the Medicare Access and CHIP Reauthorization Act (MACRA), a report to Congress by the Department of Health and Human Services (HHS) included observations on the effects legislation such as the Stark Law were having on the department’s shift to the value-based payment models in healthcare. The report outlined options for amending existing fraud and abuse laws in order to reduce waste and increase efficiency, especially as the Centers for Medicaid and Medicare Services (CMS), through the implementation of the Merit-Based Incentive Payment System (MIPS), has consistently and incrementally been moving away from the long-time model of fee-for-service.  

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As a result of this report, on October 9, 2019, CMS, under the directive of HHS to pursue cost-saving policies, announced a proposed rule to redefine and clarify boundaries regulating the Medicare physician self-referral law, commonly known as “Stark Law.” 

Enacted in 1989, the bill’s official title is the Ethics in Patients Referrals Act. (It was dubbed “Stark I” after the Democrat from California, Representative Pete Stark, who sponsored the initial bill.) When implemented 30 years ago, the statute sought to ban physician self-referral for designated services to Medicare-covered patients that would result in the provider, or an immediate family member, benefitting financially from the referral. In 1995, the original statute was expanded to add provisions for the Department of Health Services and apply aspects of the law to the Medicaid program. The expansion was called “Stark II” and subsequently the entire scope of legislation became known as Stark Law.

The current CMS proposed rules look to update the provisions of the statute by carving out exceptions to some of the regulations that are considered hindering the innovation designed into the value-based models for delivery of care and cost reduction. Aimed at reducing regulatory burden, CMS’ latest “Patients over Paperwork” initiative would be supported by changes to the Stark Law. According to CMS, reducing regulatory burdens and incentivizing coordinated care (highly favored in the era of value-based care), can still further the original intent of law to stop fraud and abuse. The exceptions would apply regardless of whether the arrangements for care are provided to people with Medicare or other federal healthcare programs.

The new proposed rules could deliver a highly anticipated overhaul of these regulations by making it easier for healthcare providers participating in value-based arrangements to coordinate care without fear of consequences from noncompliance with the Stark Law.

As an example, under the proposed rules, specialty physicians could share patient information with primary care physicians to manage care or work with hospitals using data analytics. It also would allow local hospitals to work together on cybersecurity issues without running afoul of data-sharing concerns. In addition, newly created safe harbors would include allowing hospitals to pay physicians incentives as part of CMS-sponsored care models.

By shielding physicians from the steep financial penalties under the Stark Law, the proposal aims to further incentivize physicians to participate in the models of evolving value-based care.  

CMS will be taking comments on the proposed rules until December 31, 2019. 

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Gabriela Villanueva is CAP’s Public Affairs Analyst. Questions or comments related to this article should be directed to