The Great American Health Care System and the Dire Need for Change
Authors: Uzdavines Marilyn 
Published: May 2020

Health care reform is one of the hottest topics in America. One need look no further than this year’s election cycle to see that health care reform was one of the main platforms for nearly every candidate for the 2020 election. Why is this the case? Healthcare costs amount to 17.9% of the overall Gross Domestic Product (“GDP”). This figure is shockingly high, especially when compared to health care costs of similarly situated countries. As it currently stands, the United States ranks at the top of per capita health care spending. Therefore, it should sadden the soul of our nation that our health care outcomes are among the lowest in the world. In addition to this cost inefficiency and ineffective care, millions of Americans are without affordable health insurance options. Emergency rooms have become the only option for medical treatment, which has exacerbated the rising costs of health care. Every person, whether directly or indirectly, is affected by health care costs. Solving this problem will take a multifaceted approach, and there are countless opinions on the best strategy to correct the direction of American health care.

One approach that has gained popularity with health-industry stakeholders and regulators alike is value-based payment reform. Value-based payment models encourage integration and coordination of care across all levels of participation in the care team. Instead of a traditional fee-for-service payment model, the value-based payment models incentivize collaboration by the sharing of savings or increased profits with the healthcare team. The healthcare team realizes incentive-based payments only if there is accompanying proof that the patient care is improving while saving the federal program money. While there have been a handful of limited opportunities for this type of collaboration among providers, this program has not been widely adopted due to regulatory barriers that have impeded this type of reform. Health care fraud and abuse laws are one of the main barriers that limit the business arrangements and financial relationships that exist between hospitals, physicians, and other health care service providers, thus limiting new payment options to support a value-based payment model.

The Anti-Kickback Statute (“AKS”), the Physician Self-Referral Law, and the False Claims Act (“FCA”) are three of the main health care fraud and abuse laws that are used to deter fraudsters from abusing Medicare and Medicaid programs. The AKS statute prohibits the payment or receipt of remuneration in exchange for health care referrals. The Physician Self-Referral Law, also known as the “Stark law” (“Stark”), prohibits a physician from referring patients for a designated health service to an entity that has a financial relationship with the physician or one of the physician’s immediate family members. The FCA is used to bring a claim against a person who submits a false or fraudulent bill to the government for reimbursement. These three laws work in tandem to prevent fraud and abuse of the Medicare and Medicaid programs. Alleged violations of the AKS and the Stark law are often litigated through the use of the FCA, which allows for qui tam actions. While these laws serve an essential role in protect- ing patients from unnecessary medical treatment, overutilization of services, unfair competition, and general abuse of the federal programs, these laws are also blocking innovation in health care required to address the need for alternative models for health care delivery and payment.

Additionally, compliance with these health care fraud and abuse laws is often difficult, even for the well-meaning who in good faith attempt to understand the requirements under the law. Numerous regulations and interpretive laws have been created in an effort to clarify how to implement and interpret these fraud and abuse laws. Guidance from both the Centers for Medicare and Medicaid Services (“CMS”) and the Office of Inspector General (“OIG”) has been very limited due to the relatively small number of advisory opinions issued over the years. Moreover, there is evidence that the guidance has been misused by the Department of Justice (“DOJ”). There is scant case law on many of the possible health care arrangements because stakeholders either shy away from entering into these arrangements for fear of violating a vague and ambiguous rule, or they settle with the DOJ to avoid litigation for fear of ruinous financial consequences of fighting the government. The law must be reformed to provide clarity and opportunity for innovation.

As health care has dramatically evolved over the last three decades, so must the laws that were meant to prevent abuse in the health care system. Laws that were once relevant based on the traditional payment models are now largely irrelevant and an impediment to necessary change that will improve health care costs and outcomes.

Due to the incredibly complex and numerous business relationships that exist in any given health care system, initiating change will be difficult. However, one approach that will alleviate the stress on hospitals and providers is to reform the Stark law to create an exception for value-based payment models, as well as to provide clarity for language currently included in the Stark law. I contend that these regulatory changes would enable hospitals and providers to create new arrangements that would focus on patient care, unobstructed by the myriad regulations that have prevented this type of collaboration.

In Part II of this Article, I will examine the United States’ health care crisis and how it led to increased enforcement of the fraud and abuse laws that help deter the abuse in the system. Part III will center on the analysis of the fraud and abuse laws mentioned above and on how these laws work together to help prevent fraud in health care. In Part IV of this Article, I will discuss several necessary changes to the Stark law to help correct the direction of our health care spending and outcomes. I propose that a value-based exception be added to the current exceptions, as well as discuss the need for clarity of several critical terms to understand how to comply with the Stark exceptions. Additionally, I propose that the rules regarding advisory opinions should be amended to provide more guidance to the health care industry on these complicated issues. These changes, I contend, will relieve the barriers that are blocking the health care industry from making transformative changes and meeting the goal of higher quality care and increased efficiency.