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Relaxed Stark Law: Could it result in increased efficiency but decreased competition?

Relaxed Stark Law: Could it result in increased efficiency but decreased competition?

WASHINGTON - A more relaxed Stark Law could be a double-edged sword for HME providers, says healthcare attorney Jeff Baird.

In a request for information published in the Federal Register on June 25, the Department of Health and Human Services asks for feedback on “how to address any undue regulatory impact and burden of the physician self-referral law.”

Here's what Baird, chairperson of The Health Care Group at Amarillo, Texas-based Brown & Fortunato, had to say about why HHS's decision isn't surprising, and how it could be both good and bad for the HME industry.

HME News: Are you surprised HHS is looking to relax the Stark Law?

Jeff Baird: No, because the Stark Law has been around for more than 30 years now and it's a very rigid law. The intent, of course, was to restrict or prohibit physicians from self-referring, but it contains a number of exceptions, because it hamstrings physicians. Still, there have been physicians and hospital systems that have gotten into trouble under the law and have had to pay civil monetary penalties for technical violations that didn't harm the Medicare program. It has had a lot of criticism.

HME: HHS says it sees some aspects of the Stark Law as “a potential barrier to coordinated care.” What's the link between the law and coordinated care?

Baird: The whole healthcare system is heading toward coordinated care, where providers must show third-party payers they're producing good outcomes. Third-party payers, whether it's the government or a commercial insurer, can't afford to continue paying reimbursement in silos, where you have Provider A doing their thing and doing a good job but they're not coordinating with Provider B, who's not coordinating with Provider C. You have all this money going to different providers and they're not coordinating with each other, so it's not very efficient. Where the rub comes in is, when providers try to work together to increase efficiency, their attorneys tell them, “Well, we can do that but there's some risk under Stark, if there is a financial arrangement.” So it has had a chilling effect.

HME: What's an example of an existing exception under the Stark Law?

Baird: The In-Office Ancillary Services exception says if a physician owns 100% of an ancillary services provider, such as an ambulatory surgical center, and if he is supervising it, the physician can refer patients to the provider because there's a real benefit to the healthcare system if Mr. Smith doesn't have to leave the office to, for example, have blood drawn. That exception applies to almost everything—except DME.

HME: So hypothetically, what might be a scenario that would be OK under a more relaxed law?

Baird: Let's say a physician wants to put together an integrated practice that includes an MD, a PT and an OT, and a DME. So you have this integrated practice owned by various people. Right now, you can't do that because 1.) the physician has to own 100%, and 2.) it can't involve DME. But that's something that could become OK.

HME: That's great news for the DME included in the integrated practice, but not so good news for all the other providers that want to do business with the practice.

Baird: That's tough—loosening the Stark Law could be a double-edged sword. It may increase efficiency, but it may decrease competition. We're seeing this right now with the increase in the number of single-source contracts out there. It's going to be an ongoing conflict and debate, a natural tug-of-war as a result of the push toward coordinated care.


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