Dr Jennifer Nasser (PhD, RD) retweetledi
The Law That Was Supposed to Stop Fraud But Instead Created It
In 1989, Pete Stark identified what he thought was a real problem. Physicians were referring patients to facilities or entities they owned with no checks and balances. Whether or not he was wrong in his assessment, the solution ended up worse than the problem it resolved.
In 2007, Stark himself wrote that his law had done more harm than good. In 2016 his words were entered in the Senate Finance record stating “It gave every shyster and promoter a loophole. We now have to keep rewriting the laws like the tax code.”
Stark laws closed one loophole and opened a bigger one. Before their implementation, a physician faced medical board action, malpractice exposure, and professional sanction for any questionable or unethical behaviors. Those mechanisms still exist today. Hospital systems, private equity firms, and corporate administrators have no medical boards or professional sanctions while largely avoiding malpractice concerns. The CFO building a facility fee structure that drives unnecessary utilization will not face a licensing board. The executive steering referrals to their own physicians, imaging, physical therapy, or hospitals will not be put in front of an ethics board. Instead they will be celebrated and promoted.
Stark laws didn’t create a cleaner system. They created the same financially-conflicted referral relationship with more layers, larger actors, and less accountability at every step. The Department of Justice has recovered over $35 billion under the False Claims Act since 1986, dominated by hospital and health system conduct. Medicare Advantage overpayment to insurers runs an estimated $80 billion annually. None of these are a physician self-referral problem.
When the Stark laws passed, Medicare managed care covered 3% of beneficiaries and prospective prior authorization barely existed. Today Medicare Advantage covers more than 50% of beneficiaries and processes over 50 million prior authorization requests annually. The checks and balances that Stark was designed to substitute for now exist in nearly every medical setting.
The law hasn’t changed but the healthcare system it governs barely resembles 1989.
This week: what Stark modernization actually needs to look like, why the physician-hospital double standard is indefensible, and what a concrete legislative framework for independent practices looks like today.
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