TAF Submits Stark Law Comments

Updated: Jan 6

On December 31, 2019, TAF submitted comments on the proposed Stark Law rule issued by CMS in October 2019 (“Modernizing and Clarifying the Physician Self-Referral Regulations”). The letter expresses appreciation for CMS’s stated objective of devising bright-line rules for the interpretation of the Stark Law, but argues that a number of the proposed changes either do not accomplish that goal or risk undermining the statute’s purposes.


The full text of the TAF letter can be found here.


A brief summary of our arguments:


Fair Market Value and General Market Value


TAF strongly opposes the proposed changes to the definitions of “fair market value” and “general market value,” which we believe are inconsistent with the Stark Law’s purpose. The proposal improperly separates “fair market value” from the ability to generate business, and could result in analysis of subject transactions in comparison with other transactions tainted by the value of referrals. In addition, the definition of “general market value” as the value determined by the parties to the subject transaction would mean that fair market value would cease to be an objective assessment of the value of the services without regard to distorting effects. Instead, FMV would be determined based upon a subjective test of how the parties to the transaction value the services.


We argue that the new proposed standard to determine whether a compensation formula takes into account the volume or value of referrals creates significantly more confusion than the current standard, undermining CMS’s stated goal of clarifying the Stark Law. The proposal does not adequately explain what is meant by “includes the physician’s referrals to the entity as a variable” and could allow for abusive compensation arrangements and hamper enforcement efforts.


Commercial Reasonableness


If CMS adopts a rule that includes a definition of commercial reasonableness, we argue that the agency must also implement significant additional safeguards in order to prevent the definition from sheltering abusive arrangements.


Value-Based Arrangements and Value-Based Enterprises


The Proposed Rule does not address any specific, identifiable, beneficial practice that CMS intends to except from the Stark Law, and its vagueness would invite bad actors to attempt to conceal a variety of harmful and presently illegal practices under the veneer of “Value-Based Arrangements,” and would likely lead to an increase in the harms the Stark Law was intended to prevent, including over-utilization of healthcare services and increased costs to Government healthcare programs. Rather than promoting clarity, the rule would severely impede enforcement of the statute, requiring government enforcers to identify and consider the legality of a wide spectrum of complex arrangements on a case-by-case basis. The rule’s deference to healthcare entities’ intentions and “reasonable beliefs” may prevent HHS-OIG and DOJ from addressing remuneration-for-referral arrangements that even the Government believes are abusive. In addition, the uncertainty created by the breadth and vagueness of the rule may make it prohibitively difficult, as a practical matter, to demonstrate knowledge of wrongdoing under the False Claims Act.


Designated Health Services (DHS)

We argue that the exclusion of nearly all Medicare hospitalizations from the proposed definition of “designated health services” cannot be properly evaluated and should not be adopted. CMS asserts that “this proposed rule will have significant, ongoing benefits for the affected physicians and entities and the entire health care system,” but neither the agency nor industry commenters have provided significant guidance with respect to how the proposed changes would promote quality of care or advance the purposes of the statute. We argue that the proposed rule would permit physicians to control hospital services and improperly refer patients to the hospital for those services without Stark Law implications.


Personal Services Arrangements Exception

We oppose the proposed changes to the exception for personal services arrangements because the elimination of the writing requirement contradicts the express purpose of the Stark Law and therefore exceeds the agency’s rule-making authority.


Thank you to Claire Sylvia, Rick Morgan, Mark Simpson, Andy Stone, Tim McCormack, and Marlan Wilbanks for their invaluable assistance working through the issues and drafting our comments.


You can read the full comments below.


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