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CMS announces historic changes to physician self-referral regs

CMS has finalized changes to the Physician Self-Referral Law. The law prohibited physicians from making referrals to an entity, for certain health care services, if the physician had a financial relationship with the entity.

The Centers for Medicare & Medicaid Services announced the changes to outdated federal regulations it says have burdened health care providers with added administrative costs and impeded the health care system’s move toward value-based reimbursement.

The Physician Self-Referral Law, also known as the “Stark Law,” generally prohibits a physician from sending a patient for many types of services to a provider that the physician owns, is employed by, or otherwise receives payment from—regardless of what that payment is for. The old federal regulations that interpret and implement this law were designed for a health care system that reimburses providers on a fee-for-service basis, where the financial incentives are to deliver more services. However, the 21st century American health care system is increasingly moving toward financial arrangements that reward providers who are successful at keeping patients healthy and out of the hospital, where payment is tied to value rather than volume.

Concerns regarding the Stark rule’s bureaucratic barriers to value were one of the top concerns raised by providers when CMS held listening sessions in 2017 as part of its “Patients over Paperwork” initiative. The millions of dollars and hundreds of hours of time spent complying with the administrative burden of the rule were cited as a significant burden which impeded patient care. With providers taking on the accountability for the total cost of care for their patients, the risks regarding self-referral have changed. However, ambiguities in the Stark law have frozen many providers in place, fearful that even beneficial arrangements might violate the law, which can come with dire and costly consequences. This has resulted in healthcare providers spending millions of dollars complying with arcane regulations instead of putting those dollars toward patient care. It has also impeded the move toward value, not just in Medicare, but across all payers, including Medicaid and private health plans.

With this final rule, CMS is ensuring the regulations interpreting the Stark Law allow for changes that will help modernize the healthcare system. The rule finalizes many of the proposed policies from the notice of proposed rulemaking issued in October 2019, including:

  • Finalizing new, permanent exceptions for value-based arrangements to that will permit physicians and other health care providers to design and enter into value-based arrangements without fear that legitimate activities to coordinate and improve the quality of care for patients and lower costs would violate the physician self-referral law. This supports CMS’ broader push to advance coordinated care and innovative payment models across Medicare, Medicaid, and private plans.
  • Finalizing additional guidance on key requirements of the exceptions to the physician self-referral law to make it easier for physicians and other health care providers to make sure they comply with the law.
  • Finalizing protection for non-abusive, beneficial arrangements that apply regardless of whether the parties operate in a fee-for-service or value-based payment system—such as donations of cybersecurity technology that safeguard the integrity of the health care ecosystem.
  • Reducing administrative burdens that drive up costs by taking money previously spent on administrative compliance and redirecting it to patient care.

More information on the final rule may be found at









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