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Doctor Referral, Kickback Rules Aim to Boost Coordinated Care (1)

Nov. 20, 2020, 10:12 PMUpdated: Nov. 21, 2020, 12:14 AM

Doctors will have an easier time entering into financial arrangements and coordinating care among shared patients under long-awaited changes to two major laws that fight fraud and corruption in the health-care industry.

Final rules issued Friday provide broad exceptions—or safe harbors—to the Stark law, which prohibits physician self-referrals, and the federal Anti-Kickback Statute, which bars efforts to reward business referrals in federal health programs like Medicare and Medicaid.

Updating the laws has been a cornerstone of the Trump administration’s push to overhaul U.S. health-care delivery by reducing regulatory burden.

Both laws aim to keep caregivers’ personal financial considerations from influencing their medical decisions. But doctors, hospitals, insurers, and health-care attorneys say the laws’ strict provisions are outdated and are slowing the move to value-based care. That’s when patient outcomes and cost efficiency determine provider reimbursement rather than the volume of services provided.

The new revised rules are expected to encourage different financial arrangements among providers that could improve care of shared patients. This could include a hospital rewarding post-acute caregivers for improving patient outcomes and cutting hospital re-admissions. Or a primary care doctor providing a smart tablet to a patient for better communication and monitoring. Or even a health system providing cybersecurity technology to physician practices to help fight cyber threats.

A value-based arrangement could be just two physician practices working to coordinate care for shared patients or a formal or informal network of hospital systems, physician practices, and other providers that do the same.

The final Stark rule provides more clarity on requirements that must be met by physicians to comply with the law. For instance, compensation to doctors by another caregiver must be at fair market value. The new rule explains how to meet the requirement.

The rule also provides new safe harbor exceptions to provide protection for non-abusive, beneficial arrangements between physicians and other providers, according to the Centers for Medicare & Medicaid Services. These new exceptions allow for certain new financial arrangements, such as donations of cybersecurity technology.

In a statement, Mary Grealy, president of the Healthcare Leadership Council, called the new rules “one of the most important health policy achievements of recent years.”

“What these new rules recognize is that we can protect patients from fraud and abuse while still allowing the healthcare system to evolve in a way that benefits patients and achieves greater cost-efficiency,” Grealy’s statement said. She added that the old laws “discouraged innovative patient-focused multi-sector collaborations at a time in which we should be enthusiastically encouraging them.”

Inviting Fraud?

The Stark law prevents physicians from referring patients to medical facilities where they or their immediate family members have financial interests. The Anti-Kickback Statute makes it illegal to “knowingly and willfully” offer, pay, solicit, or receive anything of value for inducing business reimbursed by Medicare.

Supporters of the new exceptions to those laws say providers are unlikely to pad their Medicare bills with unnecessary services when they have a financial incentive to hold down patient costs in a value-based payment model. Major health-care organizations like the American Hospital Association supported changing both laws.

But watchdog groups and some caregivers worry that overhauling both anti-corruption laws could invite new fraudulent activities and undermine the very changes that the rules seek to make.

The National Health Care Anti-Fraud Association, a private-public partnership of health insurers, law enforcement, and regulatory agencies, supports updating both laws. But the group said in public comments it has “witnessed repeatedly that with every new change in the statute, regulation and policy there are inevitably individuals who poke and prod to find areas of weakness that they can exploit for personal financial gain.”

Penalties for violating the Stark law can include $15,000 for each medical service and three times the amount of Medicare payments received for services. Violations of the anti-kickback statute can fetch penalties up to $25,000, a potential five-year prison sentence per violation, $50,000 in civil penalties per violation, and three times the amount of government overpayment.

(Updates with additional detail and comment, starting in the sixth paragraph.)

To contact the reporter on this story: Tony Pugh in Washington at

To contact the editors responsible for this story: Fawn Johnson at; Alexis Kramer at