Verma: Update to Stark Law coming later this year

Federal law prohibiting physician self-referral must be modernized to address the industry’s move from fee-for-service to value-based payment, says CMS Administrator Seema Verma.

Speaking on Monday at the 2019 Federation of American Hospitals Public Policy Conference in Washington, Verma said the agency is poised to make the most significant changes to the Stark Law since it was enacted in 1989.

The Stark Law specifically prohibits referral by a physician of a Medicare or Medicaid patient to an entity providing designated health services if the physician has a financial relationship with that entity.

“In a largely fee-for-service context, you could see why that would make sense,” Verma told the audience. However, she hastened to add that “in a system where we’re paying for value, where the provider, ideally, is taking on some risk for outcomes and cost overruns, we don’t have nearly as much need to interfere with who’s getting paid for what service—the government and the patient are paying for outcomes, not individual services.”

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Seema Verma, Centers for Medicare and Medicaid Services administrator nominee for U.S. President Donald Trump, speaks during a Senate Finance Committee confirmation hearing in Washington, D.C., U.S., on Thursday, Feb. 16, 2017. Verma, the businesswoman Trump selected to oversee Medicaid, the health care program for 74 million low-income Americans, has said the program is structurally flawed by policies that burden states and foster dependency among the poor. Photographer: Pete Marovich/Bloomberg

As a result, Verma said that CMS is actively working on an update to Stark regulations to be issued later this year.

“Some of the changes include clarifying the regulatory definitions of volume or value, commercial reasonableness and fair market value; addressing issues such as lack of signature, incorrect dates or other areas of technical noncompliance; and updating the regulation to address a world in which there are cybersecurity and electronic health records requirements,” she noted.

Last year, the American Hospital Association responded to a request for information from CMS on reducing the regulatory burdens of the Stark Law. In its letter, the AHA highlighted the obstacles hospitals and physicians face in transitioning to value-based care while having to comply with the law.

In particular, AHA made the case that under new models of payment providers are financially responsible for creating an efficient care team that achieves lower costs and higher quality, while improving health outcomes.

“To do so, care teams need ready access to the information necessary to make informed decisions about patient care,” AHA said in its Aug. 3, 2018, letter to CMS. “In today’s world, that requires building and maintaining electronic systems for securely transmitting information and making it available to support those caring for the patient across sites of care, among professionals and over time.”

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Although investment in health IT infrastructure is a pre-condition for implementing new payment models, the group complained that “current regulations place unreasonable constraints on how hospitals finance needed infrastructure, and there are no exceptions for a hospital to provide data analytic tools to assist physicians in making treatment decisions for patients.”

To address this regulatory hurdle, AHA called for a new exception designed specifically for value-based payment.

“Remuneration falling within the exception should include incentive payments, shared savings payments based on actual cost savings, and infrastructure payments or in-kind assistance (including, but not limited to, electronic health records technology, cybersecurity resources, data or clinical analysis tools, and start-up support),” according to AHA.

While Verma’s speech on Monday referenced updating the Stark Law as it relates to EHRs and cybersecurity, she did not provide any further details on what the agency has in mind for these technology areas.

Nonetheless, Verma concluded that ultimately changes to the regulation will “help spur better care coordination and help support our work to remove barriers to innovation, while continuing to provide appropriate safeguards for our programs.”

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