Several large health systems executives urged Congress Tuesday to repeal or rework the so-called Stark law, Modern Healthcare reported.

“A total Stark repeal would not only help health systems do what we need to do, but precisely what [lawmakers] have asked us to do, which is focus on what's best for patients and transform our outdated fee-for-service system to a value-based care system,” said Dr. Ronald Paulus, CEO of Mission Health.

The Stark law prohibits referrals of designated health services for Medicare and Medicaid patient if the referring physician has a financial relationship with that entity. Such services include clinical laboratory services, physical therapy, occupational therapy, radiology, durable medical equipment, home health, outpatient prescription drugs and hospital services.

Intent of wrongdoing is not required to prove liability under Stark, and offenders face potential civil and monetary penalties.

Peter Mancino, deputy general council for Johns Hopkins Health, noted that the law makes it difficult for physicians to enter into innovative financial relationships because they are not susceptible to fair market assessment, a requirement under Stark. The law also would prevent paying providers more for meeting certain quality measures, while paying providers less for missing a target.

“Therefore, we support reforming Stark to allow hospitals to make incentive payments to physicians based on the physicians' achievement of quality metrics and cost-reduction targets,” Mancino said. 

Senate Finance Committee Chairman Orrin Hatch (R-Utah) responded: “If, as some have claimed, the Stark law is impeding the implementation of recently passed health reforms like the Medicare Access and CHIP Reauthorization Act and preventing better integration in the delivery of medical treatment, we should address that.” Hatch said the committee would address concerns about Stark by the end of the year.

Our Take: CMS made some modifications to Stark last year within the Medicare physician fee schedule that offered providers more flexibility. But the measures, largely covering leasing arrangements among providers, didn’t go far enough.

Stark laws, in the context of the move to value-based care, are obsolete. It is dumbfounding, for example, that hospitals offer patients needing home care a list of potential providers, rather than choosing the highest quality provider. By creating an artificially competitive landscape, in some instances—by definition—Medicare is unnecessarily paying for lower quality care.

We still need protection from bad actors, so it is unlikely that Stark will be repealed entirely. If Congress can get its act together, look for mild tinkering to the law that takes into account our nation's push toward value-based care.

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