Nation’s Transition to Value-Based Healthcare Necessitates Modernization of Fraud, Abuse Laws

In Statement to Senate Finance Committee, Healthcare Leadership Council Says Current Laws Impede Improvements in Care Quality, Patient Safety, Cost Containment

WASHINGTON – In a statement submitted to the Senate Finance Committee, the Healthcare Leadership Council (HLC) has called upon Congress and the administration to make improvements to federal healthcare fraud and abuse laws in order to better enable a transformation from fee-for-service care to a value-based system.

The statement was issued in conjunction with the Finance Committee’s July 12 hearing on “Examining the Stark Law:  Current Issues and Opportunities.”  The Healthcare Leadership Council is an alliance of chief executives of the nation’s leading healthcare companies, representing all health sectors.

In its statement, HLC recommended a number of legislative and regulatory changes to the Physician Self-Referral (Stark) Law, Federal Anti-Kickback Statute and Civil Monetary Penalties Law.  The changes are needed because, HLC wrote, “To improve quality of care and reduce costs, new care delivery and payment models are designed to encourage greater integration and coordination of care and payment between and among providers and industry stakeholders… However, these models may still align financial interests in ways that trigger the current fraud and abuse legal framework.”

HLC wrote, “Changes to the current framework may be necessary to make it more compatible with healthcare delivery system transformation while retaining appropriate protections against fraud and abuse.”  HLC’s statement makes the point that legal frameworks must allow cross-sector collaboration in appropriate patient-serving care delivery and payment models in order to strengthen healthcare quality and reduce cost growth rates.

Among the legislative actions HLC is recommending are ‘safe harbors’ from legal action that are consistent with efforts to increase healthcare quality and decrease costs.  For example, exceptions to current law could be created to allow risk-sharing arrangements between and among healthcare manufacturers, providers and payors to incentivize improvements in clinical outcomes or reductions in cost.  HLC is also advocating a measure requiring the Secretary of Health and Human Services to review whether fraud and abuse laws are creating barriers to integrated care delivery and payment models, a step that could lead to additional actions.

On the regulatory side, HLC said liability under the Anti-Kickback Statute should only be imposed if the Inspector General can prove actual financial harm from overutilization of healthcare services or harm to patients that outweighs benefits.  For example, HLC’s statement said, federal regulations should allow healthcare providers to work with pharmaceutical or medical device manufacturers on pre- and post-operative care plans to achieve swifter recoveries, fewer hospital readmissions and better health outcomes.

HLC also recommended that waivers to the Stark Law and Federal Anti-Kickback Statute should be created for alternative payment models, including Accountable Care Organizations that meet certain conditions.

The changes HLC is suggesting to federal fraud and abuse laws stem from a series of reforms the organization recommended earlier this year, in conjunction with a number of patient advocacy organizations and other healthcare entities, through its National Dialogue for Healthcare Innovation initiative.  Those recommendations can be found at

In its statement to Finance Committee members, HLC said it is essential for the nation to shift to value-based healthcare models “provided that public policy allows participants to innovate in their quest to provide the highest quality, highest value care.”