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Bipartisan Efforts to Modernize the Stark Law and Investigate Hospital Consolidation Bipartisan Efforts to Modernize the Stark Law and Investigate Hospital Consolidation

Bipartisan Efforts to Modernize the Stark Law and Investigate Hospital Consolidation

It is no surprise that the current majority in Congress and the administration are actively looking for ways to rethink federal health care programs and policies. One of the major themes of the President's campaign was repealing the Affordable Care Act (ACA). Following the President's inauguration, there have been ongoing, highly partisan efforts to substantially modify, repeal and/or replace the ACA. On May 4, 2017, the U.S. House of Representatives passed the American Health Care Act (AHCA), the House Republicans' plan to repeal and replace the ACA. In July 2017, the Senate debated the AHCA and drafted the Better Care Reconciliation Act and several other Republican-authored plans but failed to pass any of the proposals. The federal government announced on October 12, 2017 that cost-sharing reduction (CSR) payments established under the ACA would end, effective immediately, unless Congress appropriated the funds to cover the CSR. Additionally, on December 22, 2017, the President signed the Tax Cuts and Jobs Act into law which repealed the individual mandate, the provision in the ACA that requires individuals to have health insurance or face a financial penalty fee.

However, in addition to the polarizing partisan efforts focused on the ACA, there have also been, surprisingly, several bipartisan efforts in Congress to reform other well established areas of health care law and policy.

The federal Stark Law prohibits physicians from referring patients for certain designated health services paid for by Medicare to any entity in which they have a “financial relationship.” The House of Representatives' Ways and Means Committee Subcommittee on Health indicated it is committed to modernizing the Stark Law in a hearing held in July 2018. A number of witnesses from industry and government testified that the Stark Law, as currently drafted and enforced, creates significant roadblocks to value-based care. The Subcommittee's members appear to agree that the Stark Law must be modified in order to support the shift away from traditional fee-for-service reimbursement.

In addition to the Congressional discussions regarding modernizing the Stark Law, the Centers for Medicare and Medicaid Services (CMS) issued a Request for Information on June 20, 2018 asking for input from industry regarding reductions to the regulatory burdens of the Stark Law. CMS is specifically looking for feedback regarding unique structures that utilize alternative payment models, revisions to existing exceptions or additional exceptions, and terminology related to alternative payment models and the Stark Law.

The bipartisan efforts in Congress are not focused only on the Stark Law; there have bipartisan questions regarding how hospital consolidations impact government reimbursement. On August 30, 2018, the House of Representatives' Energy and Commerce Committee sent a letter to the Medicare Payment Advisory Commission (MedPAC) requesting MedPAC conduct research into hospital consolidation and its financial impact on Medicare patients.

Specifically, the letter asks MedPAC to examine (1) recent trends in hospital consolidation and to what degree current federal policies may accelerate consolidation; (2) implications of hospital consolidation on hospitals' costs and on patients' costs; (3) whether markets with higher levels of hospital consolidation have higher commercial prices than markets with lower levels of hospital consolidation; (4) whether markets with higher levels of hospital consolidation result in similarly-situated Medicare beneficiaries facing higher spending for drugs or other treatment and services; (5) how the integration between physicians and hospitals has affected Medicare payments for physician services; and (6) whether the availability of 340B drug discounts can create incentives for hospitals to choose more expensive products in some cases.

Members of the Energy and Commerce Committee stated in the letter "[t]hrough its public hearings, the committee has heard differing views from experts on the extent to which consolidation is a cost driver in the Medicare program and the degree to which payment policies of the Medicare program encourage such consolidation. Some have questioned the merit of concerns over consolidation and have instead highlighted the beneficial efficiencies and economies of scale that can be accomplished through consolidation. For example, in testimony before the Energy and Commerce Health Subcommittee on May 21, 2014, during a hearing entitled 'Keeping the Promise: Site-of-Service Medicare Payment Reforms,' which examined various site-neutral prospective policy changes, one witness argued that site-neutral payment policies could not be viewed in a vacuum and instead must be viewed along with the totality of services provided, populations served and recognizing that 'hospitals are subject to significant regulatory and quality requirements.'"

On the other hand, the Energy and Commerce Committee stated, "…other witnesses have made data-driven arguments that much hospital consolidation can increase spending for the program and patients. For example, on February 14, 2018, the Oversight and Investigations Subcommittee of the Committee on Energy and Commerce held a hearing on consolidation in the health care industry. One witness highlighted how 'extensive research evidence shows that consolidation between close competitors leads to substantial price increases for hospitals, insurers, and physicians, without offsetting gains in improved quality or enhanced efficiency.' The witness noted that 'evidence shows that patient quality of care suffers from lack of competition' and suggested 'policies are needed to support and promote competition in health care markets [which] includes policies to strengthen choice and competition, and ending distortions that unintentionally incentivize consolidation.'"

In the current highly polarized political environment, bipartisan efforts seem few and far between, but where they exist it creates expectations of optimism for movement rather than gridlock related to those particular issues and policies. Although there will likely be false starts as this is an election year, modernizing Stark and policy changes based on the analysis of hospital consolidation appears to be possible as there is support from both political parties to look at these issues. As such, they should be monitored closely as any updates in policy will likely impact hospitals, health systems, and other providers significantly.

For more information, contact James Banister at or 317-236-5812.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.

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