In the News

Picture a scenario in which a group of surgeons are also investors in a hardware used in spinal fusion. When those doctors tell patients that spine surgery is necessary, and use the product in which they have a financial stake, should patients trust they need to go under the knife, or should they be wary that doctors are trying to make a profit? U.S. law regulates or bans these healthcare arrangements to protect patients and government funds from conflict-of-interest and kickbacks . But recently, medical providers have been pressuring Congress and the Trump administration to take a fresh look at the rules, which have gotten in the way when different parts of the healthcare industry try to work together. It’s one of the grievances health officials hear about more than anything else. Medical groups point out that the laws were created decades ago, at a time when the healthcare system worked differently. They say the mismatch between practices and regulation has worsened since Congress changed how healthcare is paid for in 2015. Now, doctors and hospitals increasingly are rewarded by government programs for how well they care for patients and help them recover. In the past, they were paid according to the number of tests, surgeries, and devices they gave out, no matter the cost or the result.

“It’s the direction of the future. It’s where healthcare needs to go for healthcare to be sustainable,” said Dr. Terry Chang, associate general counsel and director of medical and legal affairs at AdvaMed, which represents medical devices and has been advocating for changes to the anti-kickback laws. Healthcare workers have told Congress and the Trump administration that to fully shift to paying based on quality of care, different parts of the industry have to work together. They say that the way the fraud and abuse laws are written are getting in the way , and that setting up arrangements to work together can bring about scrutiny and require difficult maneuvering. Trump officials are listening. The Centers for Medicare and Medicaid Services queried healthcare providers about potential changes to conflict-of-interest regulations, and the Health and Human Services Inspector General is gathering feedback on the anti-kickback laws. CMS Administrator Seema Verma told the Washington Examiner that her agency would try to put out new regulations by the end of the year on the self-referral rules “to address some of the problems that providers are facing.” “Our goal is to get as far as we can with regulations, but there could be some things after we are done with the process that we would refer to Congress,” she said. The move is part of a broader effort by the Trump administration to cut red tape through the federal government. The self-referral regulations, Verma said, are contributing to the high cost of healthcare. While the current regulations have dozens of exemptions to allow for some collaboration, healthcare providers say they are ambiguous and complex, requiring them to pay expensive fees to attorneys to make sure they aren’t running afoul. If they are, intentionally or not, they’ll face fines and a ban from seeing patients on Medicare or Medicaid. Proponents of keeping the laws in place say they are necessary to protect patients and government funds. And they note that health providers are allowed to seek approval for specific financial arrangement. “It’s not clear that our existing process prevents raising those issues,” said Claire Sylvia, a partner at Phillips & Cohen LLP who represents whistleblowers that bring cases of medical fraud and abuse to the government’s attention. The self-referral law, Sylvia said, is “actually pretty straightforward, but whenever you’re trying to control financial impacts it’s hard to describe all the kinds that could pose a conflict of interest.” Healthcare workers are targeting what are formally known as the Physician Self-Referral Law and the Anti-Kickback Law. Under the self-referral law, doctors aren't allowed to refer Medicare and Medicaid patients for services from entities from which they could benefit from financially, such as labs or hospitals. The law is commonly known as the “Stark Law,” for its author, former Sen. Pete Stark, D-Calif. The other law, the anti-kickback one, makes it illegal for healthcare providers to accept bribes in return for getting business from Medicare and Medicaid. The laws were passed so doctors wouldn't send patients to get unnecessary, costly tests or procedures just so that they could benefit financially. Over the years, various regulations were added that healthcare providers say are daunting. For instance, if a family medicine doctor were to consider sharing an office space with a physical therapist she also refers patients to, she would need to work with a lawyer on extensive paperwork and make sure she falls within all laws. The rules can restrict another type of arrangement, in which a hospital seeks to reward a doctor who usually isn’t on its payroll for working with patients after surgery to keep them from readmission. In that scenario, the doctor would help patients avoid infections, make sure they are taking their medicines correctly, and regularly monitor their weight. On the flip side, without this arrangement hospitals are also unable to penalize doctors who don’t help patients meet these goals, resulting in costly, life-threatening readmissions.

Often, providers shy away from such partnerships because they’re afraid of potential liability. Others are frustrated with the amount of time, money, and energy they put into trying to make sure they’re following the rules. “It’s just that uncertainty that is really problematic,” said Dr. Michael Munger, president of the American Academy of Family Physicians. As Munger describes it, a doctor may think, “Here is a way to improve care and help maintain costs, but maybe I shouldn’t even do it because it may violate current law.” Or, the doctor would need to figure out how to fit into one of the existing carved-out exemptions, but those are laced with specific requirements healthcare providers would need to prove that they have met in the case of a trial. For family physicians who run independent practices on thin margins, hiring a lawyer to look into the arrangement may not be worth the return on investment, Munger said.

Hospitals, medical device companies, doctors, and others also say that the terms used to describe the requirements are vague. One requirement, for instance, says payments for services must be of market value, and not in excess. Healthcare groups differ on what they would like to see changed. Some want to see the self-referral law repealed, saying that it has overlaps with the anti-kickback law. Others say more exemptions are needed, that they should be applied to only certain groups that are coordinating care, or that the administration should be more clear in its wording. Chang from AdvaMed said lawmakers are still considering whether changes are needed to the anti-kickback laws or whether regulatory changes will suffice.

Despite calls for repeal, Verma stressed that the Trump administration views the Stark Law as a valuable safeguard. “We want to make sure at the end of the day that the whole goal in all of this is to reduce healthcare costs, not to increase them,” she said. “We are going to be finding that balance between making sure we are focused on program integrity while also making sure that we are creating flexibility and decreasing administrative costs.” The issue ultimately would be impacted most by what Congress does. A bill from Sen. Rob Portman, R-Ohio, and Sen. Michael Bennet, D-Colo., the Medicare Care Coordination Improvement Act, would direct health officials to exempt more providers from self-referral that create the collaborations rewarding better care at a lower cost. “The hope is that we can maybe structure things in the right way so that the patient can go to the right doctor with the right referral and that there isn't a chilling effect from the Stark Law because providers are hesitant about making referrals,” said a GOP Senate aide. The House version bill, introduced by Rep. Larry Bucshon, R-Ind., has 19 co-sponsors, five of whom are Democrats. Proponents of maintaining the laws point to recent settlements as evidence that oversight is needed to prevent waste and protect patients. One came from Halifax Hospital in Florida. Halifax allegedly paid oncologists a bonus when they referred patients to its facility and was accused of paying for drugs and tests the doctors ordered by billing them to Medicare. It settled with the federal government for $85 million.

In another instance, a South Carolina medical center paid $17 million to settle allegations that they purchased the practices of doctors who referred to it for an excess amount. Sylvia said that those who enforce the laws also should be invited to testify at congressional hearings. “There is an effort to really cut back on Stark, and that is what I would be concerned about because Stark is a really important way of preventing financial interest from clouding healthcare decision making,” Sylvia said.