Stark Self-Disclosure Proposals in Healthcare Reform Bills

Two healthcare reform bills may offer some relief to providers in addressing Stark law violations. Both proposals would create a self-disclosure process allowing hospitals to report Stark violations, including unintentional ones, and in return allow for compromise settlements at less than the total amount of reimbursement forfeiture authorized by the Stark law. The Stark law prohibits reimbursement relating to referrals by physicians to entities in which the physician or an immediate family member have a financial relationship, unless the arrangement meets an exception. Satisfaction of exceptions often requires compliance with complex regulations that may lack clear interpretive guidance, or documentation requirements subject to human error in large organizations, raising the risks of inadvertent violations.

First, Rep. Jim McDermott (D-WA) introduced a bill to establish a Stark self-disclosure process for hospitals to voluntarily self-report when they discover possible Stark law violations. The bill, H.R. 3556, would require the Centers for Medicare & Medicaid Services (CMS) to establish a self-disclosure protocol that would allow for negotiated settlements of Stark violations that do not involve fraud.

The bill addresses the March 24, 2009 open letter from HHS OIG stating that OIG would no longer accept self-disclosures of Stark violations unless the violation involved an anti-kickback statute violation. Further, for self-disclosure of anti-kickback-related submissions, the letter requires a minimum $50,000 settlement amount to resolve the matter.

Glen Reed, King & Spalding healthcare partner and former president of the American Health Lawyers Association, noted the importance of McDermott’s bill in authorizing the HHS Secretary to relax the “automatic reimbursement forfeiture” approach in the Stark law that denies 100% of affected reimbursement regardless of the circumstances that led to the alleged violation and the remedial actions taken by the providers. “This is sorely needed, since the Stark law, combined with the complexity of the regulations and the whistleblower laws, has set everyone up for inadvertent technical violations with disastrous financial consequences,” said Reed.

The American Hospital Association also supports McDermott’s bill. “Your amendment would provide necessary clarification to hospitals that face uncertainty over how to comply with existing requirements under the Stark law,” AHA said in a letter of support.

McDermott hopes to attach his proposal to the House’s healthcare reform bill (H.R. 3200) as an amendment. McDermott’s bill has been referred to the House Committee on Energy and Commerce, and in addition to the House Committee on Ways and Means.

Second, Chairman Max Baucus (D-MT) has proposed a similar Stark self-referral provision in the Senate Finance Committee’s healthcare reform bill. Like the McDermott bill, Baucus’ plan would require CMS to establish the protocol within six months, and would be modeled on the HHS OIG provider self-disclosure protocol.