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Lab Industry Players Squabble Over Possible Changes to Stark Law


NEW YORK (360Dx) Discussions and comment letters about the physician self-referral law, also known as the Stark Law, this summer have highlighted the different and sometimes clashing perspectives of various constituents in the lab industry on the law.

Both the Centers for Medicare & Medicaid Services and Congress are revisiting the Stark Law to assess whether it is compatible with the health industry's shift to a value-based payment. The House Ways and Means Health Subcommittee held a hearing in July on ensuring "the successful transition from volume to value in the Medicare program." CMS issued a request for information in June with an emphasis on collecting information on "the structure of arrangements between parties that participate in alternative payment models or other novel financial arrangements" and on the need for revisions to the law related to alternative payment models.

Opinions on the law, which was enacted in 1989 to help protect Medicare and its beneficiaries from unnecessary costs, vary widely, even within the laboratory community.

Alliance for Integrity in Medicine (AIM), a coalition of organizations that includes the American Clinical Laboratory Association, the American Society for Clinical Pathology, the College of American Pathologists, and three other medical specialty organizations, issued a statement this summer calling for a tightening of the in-office ancillary services exception, which allows certain "within practice" referrals.

"We believe that narrowing the [in-office ancillary services] exception to exclude advanced diagnostic imaging, anatomic pathology, physical therapy and radiation therapy services will improve patient care and coordination, while preserving valuable Medicare resources and the integrity of the program," the AIM Coalition stated.

The stance is consistent with CAP's position on its website that the in-office ancillary services exception was implemented to provide patients the opportunity to receive medical testing that informs treatment or diagnosis at the time of their physician office visit, but anatomic pathology, is rarely performed at the time of the office visit.

"This exception opens the door for physicians to over-order and utilize AP services to maximize their profits with no benefit to patients," CAP's issue brief states. ACLA and ASCP declined comment on the issue beyond the AIM statement.

But some physician groups say the law is already too burdensome.

"The Stark Law has been a terrible disaster for independent physicians' offices. For one thing, it is so complex and the penalties are so draconian," said Jane Orient, executive director of the American Association of Physicians and Surgeons and a solo practice general internal medicine doctor. "Physicians have a very difficult time figuring out what is allowable and what is not. You can hire lawyers and accountants but the doctor is still responsible if the federal government finds something unsatisfactory."

Because the law allows referral to certain in-house ancillary services but prohibits referral to external services that a medical practitioner might have a financial stake in, Orient views the law as favoring large corporations that can afford to bring ancillary services inhouse.

"It does nothing at all to stop all this vertical integration and consolidation. The huge corporations, they self-deal all the time," she said. "It just seems like it is upside down and backwards. It is loaded to favor the corporate giants and to punish the independent physician."

Orient favors disclosure and transparency requirements over ancillary services restrictions.

"You would think that if a doctor owns a lab, or an imaging facility, it would be enough to let the patient know what the arrangements are and if he is offering a good price, then the patient should be able to choose his facility," Orient said.

The American Hospital Association, however, favors loosening compensation regulations that it asserts inhibit the move to value-based care, while keeping the current ownership bans in place.

"The Stark Law was enacted years ago and in its current form may prohibit relationships that are designed to enhance care coordination, improve quality and reduce waste," the association's general counsel Melinda Reid Hatton wrote in the opening letter of a 23-page submission to CMS.

The first phase of the law, named after former US Rep. Pete Stark, D-Calif., who sponsored the initial bill, took effect nearly 30 years ago.

Outside of Medicare, the AHA submission stated, health systems are exploring partnerships with physicians and innovative payment systems designed to improve the quality and efficiency of healthcare. Within Medicare, "uncertainty about the application of the Stark Law and the potentially devastating consequences it imposes for being wrong have impeded those efforts," the AHA comment letter stated.

The AHA argues for an exception specific to value-based payment arrangements that would promote accountability, manage care for patients across and among different providers, and encourage infrastructure investment such as data and analytic tools that could assist physicians in making treatment decisions.

The hospital association also called on CMS to eliminate redundant requirements, such as the Stark Law requirements that compensation arrangements not violate the anti-kickback statute or federal or state billing or claims submission rules. These rules are overly burdensome and unnecessary because health entities still have obligations to comply with these requirements independent of the Stark Law, according to the letter.

The Stark law is significant to the lab industry because concern over physician-owned labs fueled the law's creation, according to Scott Grubman, an attorney with Chilivis Cochran Larkins & Bever.

"The Stark Law was literally started specifically related to labs. That was the core of why the Stark Law was passed, because of physician-owned laboratories, and now of course it was expanded into all sorts of designated health services," he said during a presentation at the American Society for Clinical Laboratory Science conference in Chicago earlier this month.

The law can be severe because it carries stiff penalties and because unlike the anti-kickback statute, where prosecutors must show there was intent to violate the statute, the Stark Law is "strict liability," he noted.

"If you do the thing that it prohibits you to do, whether you know it's wrong or not, you have violated the Stark Law," Grubman said.

It is unclear when the next steps will be taken to potentially change or modify the law. The comment period for the CMS RFI ends at 5 p.m. today.

During the House Ways and Means Health Subcommittee meeting held in July, US Rep. Peter Roskam, R-Ill., who chairs the subcommittee suggested that legislators were looking to enact changes that would modernize the law to accommodate value-based care.

"The big question is how do we move forward and modernize this? How do we update this?" he asked. "Regulation and legislation just tend to lag. It's just sort of the nature of the system. Now we've recognized that with this transition, we have to update this."