Proposed Stark Rules: What They Mean for Health and Wellness Practitioners

by Joe Forward, Esq.

As wellness professionals, you may have read recent headlines about proposed changes to federal “Stark” law rules. The Stark law applies to physicians, including medical doctors, osteopathic physicians, dentists, chiropractors, and optometrists.

Also known as the physician self-referral law, the Stark law prohibits physicians from referring patients for certain “designated health services” payable by Medicare or Medicaid to entities in which the physician – or a family member – has a financial relationship, unless an exception applies. Physicians face stiff civil monetary penalties by benefitting from financial arrangements that can influence medical judgment.

On its face, the Stark law does not impact health and wellness professionals who are not physicians or health care entities owned or partially owned by physicians.

But proposed changes to Stark law regulations could open doors for the wellness industry to become participants in value-based arrangements with physicians.[1]

For instance, the Stark law applies to physical or occupational therapy services if a physician has referred such services to an entity in which the physician has a financial interest, such as a physical therapy clinic offering Medicare reimbursable services.

Under a fee-for-service model, a physician’s financial success may be tied to the volume of patients self-referred to the clinic, which is what the Stark law is designed to prevent. The patient may not need such services, or may be better served by a different entity. Unless an exception applies, such self-referrals may violate the Stark law.

Value-Based Arrangements

Proposed changes to the Stark law would create new exceptions for certain value-based arrangements (VBAs). The Centers for Medicare & Medicaid Services (CMS) issued proposed changes in October 2019, noting the current Stark law regulatory prohibitions may discourage modern innovation that could improve quality outcomes, produce efficiencies, and lower costs through coordination and value-based care.[2]

Value-based payment systems are tethered to quality outcomes than can be measured, rather than the number of procedures performed or the volume of services. Care coordination means coordination between physicians and other health care providers.

Proposed changes to Stark law regulations would create self-referral exceptions for value-based enterprises –- networks of clinicians, providers, and suppliers that agree to collaborate for increased efficiency and improved outcomes for target populations.

Importantly, for the health and wellness industry, the proposed rules do not limit participants in value-based enterprises to Medicare clinicians, providers, and suppliers.

With possible exceptions, “[n]o person, whether or not a provider or supplier in the Medicare program, would be precluded from participating in and contributing to a value-based enterprise.”[3]

In theory, this means that health and wellness providers could participate in the value-based enterprise in which physicians have a financial interest, even if the services provided by the health and wellness provider are not reimbursed by Medicare.

Physician self-referrals to such value-based enterprises will not violate the Stark law and regulations if the arrangement satisfies the requirements of the value-based exception.

The goal of value-based arrangements is coordinating care, improving the quality of care, reducing costs, and transitioning to value-based health care delivery. Wellness providers and vendors could be a crucial component to ensure value-based outcomes.

For instance, physical and occupational therapy clinics could incorporate wellness initiatives, such as daily activities or weight loss programs that physicians and clinics can monitor to compliment traditional physical and occupational therapy services.

Physician ownership of such clinics would not preclude physician self-referrals so long as the value-based arrangement satisfies certain requirements and the value-based entity (the clinic, for example) achieves the purposes of the arrangement.

Wellness programs could become “value-based participants” if they engage in at least one “value-based activity” that is reasonably designed to achieve at least one “value-based purpose,” including “improving the quality of care” for a targeted population.[4]

The proposed value-based exception to self-referrals could promote innovation in this area, especially since the exception contemplates that physicians will take on some financial risk for failure to achieve the purposes of the value-based enterprise.

The proposed rule states a goal “to remove regulatory barriers, real or perceived, to create space and flexibility for industry-led innovation in the delivery of better and more efficient coordinated health care for patients and improved health outcomes.”[5]

Such innovation could include wellness providers well-positioned for possible participation in value-based arrangements. Wellness programs and vendors that demonstrate an understanding of laws and regulations that apply to value-based arrangements will be best positioned to take advantage of such opportunities.

That could include health technology companies that use data to drive value-based outcomes. The regulations are not finalized and regulators will be looking at whether health technology companies can be participants in value-based enterprises.

[1] U.S. Department of Health and Human Services, HHS Proposes Stark Law and Anti-Kickback Statute Reforms to Support Value-Based and Coordinated Care (Oct. 9, 2019); See also Proposed Rule at 84 Fed. Reg. 55766 (Oct. 17, 2019).

[2] 84 Fed. Reg. 55766, 55768 (Oct. 17, 2019).

[3] Id. at 55776.

[4] Id. at 55773.

[5] Id. at 55776.