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Joan Krause, Health Law and Policy Institute at the University of Houston

Is the Stark Law Still Meeting its Original Intent?

When Congress passes a bill, any necessary regulations usually follow within a reasonable time. Otherwise, the law's in limbo. When it comes to the Stark Law, you might say that its evolution has been in stark contrast to conventional lawmaking, and that's only one of the reasons why the law keeps physicians and their attorneys up at night.

"This is the law that some people have jokingly referred to as The Full Employment Act for Lawyers," said Joan Krause, professor and co-director of the Health Law and Policy Institute at the University of Houston. Krause will be teaching this spring at the University of North Carolina.

Named for its sponsor, Pete Stark (D-Calif.), the Stark Law took effect on Jan. 1, 1992. It initially prohibited physician self-referrals of Medicare patients for clinical laboratory services owned by the physician. Yet it wasn't until August 1995 that the final rule was published for what by then was known as Stark I. That unusual delay was only the first problem. By the time physicians and their attorneys had regulations to follow regarding Stark I, Stark II provisions, which expanded the prohibition to other service categories, had been effective for eight months.

"I would say I don't believe it's doing what people hoped it would do originally," Krause said of Stark. "It's not clear that that's the fault of the original drafters. I think it was a good and worthwhile goal, and the question is whether this has become too complicated or is too much like a moving target."

James Blumstein, Vanderbilt University professor of constitutional law and health law and policy, described Stark's continual changes this way: "There's an old joke: In the United States, everything is permitted except that which is prohibited. But in the old Soviet Union, everything was prohibited except that which was permitted. So this law is a little bit like the old Soviet Union." Stark began with a broad prohibition, and in the close to two decades since, it has become a complex series of exceptions.

"The reason it's complicated is that it is a law that has competing values, and every time you have competing values, you want to open the door a little bit but not too far," Blumstein said. As an example, physicians with X-ray equipment in their office would initially have been prohibited by Stark to refer their patients to the next room for an X-ray. But the inconvenience to patients outweighed the risk of some physicians ordering too many X-rays, thus an exception was crafted. Of the two competing values, patient convenience won out.

Effective this year are several changes to Stark II that are apt illustrations of the continued tweaking the law undergoes. Changes impact fundamental exceptions to in-office procedures, physician-service contracts and the "stand-in-the-shoes" provisions particularly. Some specialties, such as radiology and sleep medicine, are hit particularly hard. Relationships between physicians and entities that provide designated health services may have to be restructured to comply with Stark changes.

"Anytime you take a complex situation and try to take care of it with regulations, it never quite fits right and always has unintended consequences, even when it starts out with good intent," said Scott Stringer, MD, associate vice chancellor for clinical affairs at the University of Mississippi Medical Center. Stringer, who also has a master's in administrative medicine, added, "I don't know that it's something that got off track with Stark as much as it's trying to regulate through a Congress that can't possibly understand such a complex healthcare environment. There's a saying: If you've seen one medical center or one physician group, you've seen one."

While acknowledging that overutilization ramps up healthcare costs, Stringer said there are good reasons for hospitals, physicians and ancillary facilities to work together, and the result can be better care at a lower cost. Thus, the seemingly never-ending trail of exceptions.

One of those is the academic medical center exception, which essentially recognizes that, while academic medical centers are several operations legally structured in different ways, they should be viewed as one entity. Stringer said they actually could use "more clear recognition of our unified status" than currently exists.

As for Blumstein, he said, "I think the law needs some updating and some fine-tuning, but you won't get consensus because of the strong interest groups involved about what the right fix is." He pointed to the issue of large general hospitals versus specialty hospitals. "I'm not sure that I agree with the far-reaching position of some of the advocates for general hospitals, which is to get rid of the physician ability to refer to their own specialty hospital that they own," he said, but he added that perhaps payments to specialty hospitals should be less.

Could Stark be simplified? Krause said ideas "have been floated" to split Stark, taking it back to its original intent of prohibiting referrals to entities with which the physician has an ownership interest. When Stark went down the road of physician compensation instead of just ownership, that's when things got messy, she said. She suggested that the compensation side could be handled by the Anti-kickback Statute.

"You don't have these problems with the Anti-kickback Statute. You have safe harbors that are confusing, but at most, ever since 10 years ago, the government caught up and finalized the things that had been pending a while. At most, you have one or two of them that are under consideration at a time for being changed," she said.

Meanwhile, is Stark even enforced? "It is enforced, but not in the way that you would think," Krause said. "One of the oddest things about Stark is that it's hard to find cases where the federal government is actually using the enforcement structure in Stark itself. … The way it's mostly been enforced is somebody bringing a False Claims Act suit."

Added Blumstein, "I think the practical way this gets enforced is partway through professional norms. These deals that used to be rampant have dried up."

Tags:

Full Employment Act for Lawyers, James Blumstein, Joan Krause, Pete Stark, Stark II, Stark Law

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