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Former Congressman Dr. Phil Gingrey provides public policy and government relations counsel to clients on a variety of issues. Here at Phil on the Hill, Phil draws upon his long career in public service to provide perspective and context on policy topics such as health care, the federal budget, annual appropriations, regulatory reform, and life sciences.

Anti-Kickback Statutes Need to Adapt to Value-Based Care

Monday, July 16, 2018

Imagine it’s your first day in a college class only to discover that the sole book on the reading list was written by the professor. Similarly, picture yourself in the front seat of a tow truck with the driver assuring you that his cousin runs the best body shop in town. In these instances, it’s pretty easy to question if you’re getting the best. However, when that person is wearing a white lab coat and saying long words in Latin, that judgment call becomes a lot harder.

This is why we have strong health care anti-kickback and self-referral laws in the United States that are intended to prevent providers from benefiting financially when they refer patients. We recognize that a system that allows for that sort of behavior is vulnerable to abuse and could harm both patients and the health care community. Without ensuring unbiased access to accurate health care information and assessments, patients simply will not receive the best possible care and protections against inappropriate utilization/referrals.

The main federal laws that govern patient referrals are the Stark Physician Self-Referral Law, originally enacted in 1989, and the Anti-Kickback Statute. Many states have analogous laws as well. I will spare you the minute details of laws like Stark II or III, but suffice it to say they cover most basic forms of hospital-physician financial relationships that could inappropriately influence physician decision-making in the context of the Medicare and Medicaid payment programs.

As is the case with many pieces of good or well-intended legislation, these anti-kickback and self-referral laws have failed to keep pace with the modern world and do not reflect recent developments in health system delivery reform. Some provisions, which at the time seemed wise, now actually hamper the ability of doctors and health systems to provide the best possible and most efficient and coordinated care. This effect is most obvious when one examines the drive to transform the nation’s health care system from one based on volume, to one centered on the provision of coordinated and value-based care—addressing the needs of the whole patient, not just episodes of care.

Statutes like the Stark Law often prohibit physicians from referring patients to any institution where the physician has a financial relationship. In today’s increasingly interconnected medical world, where coordination can be key, current law can do more harm than good. We want to encourage coordination and integration of health care, not collusion. If a loosening of where a physician can refer a patient will increase the value of care, then this is an option is worth exploring. With more and more health systems and providers entering into “at-risk” financial arrangements where providers can be financially penalized for inappropriate referrals or over-utilization, the incentives are shifting from volume to value. As such, there are new checks and balances on inappropriate utilization and over-consumption of care that appear to be making some of these laws obsolete.

In fact, former Representative Pete Stark (D-CA), the author of the “Stark Law” (official title is The Ethics in Patient Referrals Act of 1989), has indicated he favors repealing the current version of the law and reverting to the law’s initial narrower and clearer focus. In August 2013, Modern Healthcare interviewed him and reported, “(Rep.) Stark has heard the critics’ calls to repeal the Stark law over the years, and he says he’s come to agree with them.”

Recognizing this need to review and update federal regulations to reflect today’s health care system CMS recently issued a “Request for Information (RFI) Regarding the Physician Self-Referral Law.” Through the RFI, the agency is seeking “input from the public on how to address any undue regulatory impact and burden of the physician self-referral law.” Many of our clients – hospitals, health systems, provider associations, and patient organizations – are excited at this opportunity to help CMS identify “regulatory requirements or prohibitions that may act as barriers to coordinated care, assessing whether those regulatory provisions are unnecessary obstacles to coordinated care.”

They are interested in helping to inform future agency actions with respect to new guidance or regulatory revisions “to address such obstacles and, as appropriate, encouraging and incentivizing coordinated care.”

Also worth examining, is the impact of these statutes on cost. Under the current laws, a physician may be prevented from admitting a patient to a particular hospital if he or she has a financial relationship with the hospital, even though that hospital may be far cheaper and just as good as the next hospital where he or she has no financial relationship. Again, it’s a good idea in general to ensure that financial considerations do not unduly influence physician decisions, but too often because of anti-kickback or self-referral restrictions, doctors are forced to recommend a more expensive care plan, site of care, or treatment option. In these cases, where cost can be reduced without compromising value, physicians and their patients should have more options.

In addition to HHS’s efforts, I am pleased that my former colleagues in Congress also are examining ways to reduce regulatory burdens and otherwise modernize rules that govern health care providers. Building upon work done earlier this year and in response to the HHS RFI, Ways and Means Health Subcommittee Chairman Peter Roskam (R-IL) is hosting a hearing tomorrow (Tuesday, Julye 17th) titled “Modernizing Stark Law to Ensure the Successful Transition from Volume to Value in the Medicare Program.” Through both regulatory and legislative action, we should modernize the self-referral and anti-kickback statutes to facilitate, not hinder, the shift to value-based care. We always want to apply downward pressure to cost while applying upward pressure to value. Given recent important developments in our nation’s health care system, it likely will do patients and providers a world of good to realign these laws and regulations to reflect and support emerging payment models that reward quality over quantity.