Blog Post

The Stark Law: Anticipated Changes

The Stark Law Web

Comments made by CMS Administrator Seema Verma earlier this year have raised speculation that a major overhaul of the Stark law could be in the works, and the announced changes could have implications for health systems developing risk-based and value-focused models.

CMS is considering an array of options to offer additional flexibility for health systems to adopt risk-based models. Although there are legislative hurdles and the possibility that the changes won’t be revolutionary, the changes are expected to offer providers a great deal of new guidance. Based on comments from CMS leadership, key announcements from CMS expected later in the summer of 2019 are likely to include the following:

  • Clarity in the regulatory definition of the Stark law’s ban on paying physicians for the volume or value of referrals
  • Definitions of commercial reasonableness and fair market value (FMV) of value-based compensation

Many organizations believe that current CMS guidance is insufficient for them to confidently implement risk-sharing models. Assuming the anticipated rule changes address these concerns, the landscape for developing and determining FMV compensation for providers will be transformed. Aggressive organizations are likely to be rewarded for setting the foundation for taking on financial risk across a vertically integrated network. Further, building risk elements into physician compensation will become much more commonplace under such a landscape, because determining FMV will be easier and more providers will expect to share in the financial rewards.

With these market conditions, organizations need to be prepared to deploy a robust care management infrastructure; have a well-functioning, tightly aligned or employed physician network; and have a compensation structure in place to share value-based payments with physicians.

Additional perspective on the proposed changes can be found here.