The Stark Law, passed in 1989, aimed to prevent conflicts of interest by prohibiting doctors who participate in Medicare from referring patients to facilities they own.
On paper, this law was meant to ensure doctors put patients first—not profits.
But in practice, the Stark Law has become a flawed and easily circumvented policy, one that often fails to protect the very patients it was designed to serve.
What the Stark Law Was Supposed to Prevent
The intention behind the Stark Law was to eliminate financial incentives that could bias doctors’ decisions.
Specifically, it aimed to avoid:
- Cherry Picking: Treating only patients with high-paying commercial insurance while avoiding those covered by lower-paying Medicare and Medicaid.
- Lemon Dropping: Refusing to treat complicated, harder-to-manage patients who are less financially lucrative.
- Overutilization: Ordering unnecessary tests and procedures to maximize profits, which inflates healthcare costs.
By limiting self-referral, the Stark Law sought to remove these perverse incentives.
However, the law’s loopholes and the evolution of healthcare systems have rendered it ineffective.
How the Stark Law Is Routinely Circumvented
Despite its intentions, the Stark Law has become a “joke” in modern healthcare due to several common workarounds:
- Safe Harbors for Proceduralists: Surgeons and specialists, such as gastroenterologists, can self-refer to ambulatory surgery centers they own, bypassing the restrictions.
- Joint Ventures: Hospitals and doctors co-own facilities where physicians hold minority stakes. This arrangement allows financial incentives to remain, undermining the spirit of the law.
- RVU-Based Compensation: Hospitals pay doctors based on Relative Value Units (RVUs)—a system that rewards the quantity of services provided rather than patient outcomes. This essentially mirrors the financial incentives the Stark Law was meant to eliminate.
The Real Question: Who Puts Patients First?
The problem isn’t just whether doctors or hospital administrators own facilities. It’s whether those in charge prioritize patients over profits.
Both doctors and administrators have the capacity to put patient care first—or to neglect it in favor of financial gain.
What’s the Solution?
If we want to ensure that patients come first, we need meaningful reforms that address the underlying issues the Stark Law fails to resolve.
Here are two critical steps:
- Transparency in Compensation:
Healthcare providers and administrators must disclose how compensation is structured.
While the exact dollar amounts don’t need to be public, the financial incentives driving decisions should be clear.
For example, if doctors are paid based on the number of tests or procedures performed, patients deserve to know. - Accountability in Policy Decisions:
The individuals setting clinical policies at hospitals and insurance companies should be publicly identified and held accountable.
Similar to how CEOs must “sign off” on financial statements under the Sarbanes-Oxley Act, these decision-makers should take responsibility for their policies and their impact on patient care.
Putting the Patient First
At its core, the issue isn’t about ownership. It’s about trust, transparency, and accountability.
The Stark Law, as it stands, fails to ensure that patients are the priority.
By demanding greater transparency and holding decision-makers accountable, we can move closer to a healthcare system that truly puts patients first.
