Annals of Health Law
VALUE BASED PURCHASING
Monetary Penalty, 128 these waivers have not been extended to other
providers that are making changes to their health care delivery model in an
attempt to reduce cost and improve quality. 129 These waivers should apply
to providers participating in the Program and the Initiative. With the
Initiative being voluntary, the waivers may be the extra push that providers
need to opt into the program.
Furthermore, the Civil Monetary Penalty Law should be rewritten to
ensure that providers who are effectively and successfully participating in
an episodic payment or pay for performance reimbursement model will not
be penalized for participating in a program that reduces costs and improves
quality. The Stark Law also should be rewritten so that the scope of the
Stark Law will be limited, and compliance be made easier, by revising the
Stark Law to prohibit only certain specified relationships, such as physician
ownership of clinical laboratories, outpatient diagnostic imaging facilities,
and similar ancillary services which may be particularly subject to over-utilization. The current version of the Stark Law, with its blanket
prohibition of referrals on almost all types of services, can unnecessarily
punish hospitals and discourage cooperative agreements among various
providers that may be critical to reducing costs and improving quality in
health care. The financial penalties under the Civil Monetary Penalty and
the Stark Law should not be trebled unless there has been shown to be
intentional violation or bad faith by the provider. These hefty fines
unnecessarily drive up costs. Likewise, financial penalties beyond
restitution should not apply under Stark Law when the services provided
were medically necessary.
D. Self-Serving Behavior by Providers
One of the major problems with these programs is that they ignore the
human nature of providers. Arguably, the Value-Based Purchasing
Program does a better job of acknowledging this problem by reducing
payments to those participants who do not meet predetermined quality and
cost benchmarks. Even then, the bonus pool is still only one percent of
total payments. 130 While hospitals often run on razor thin profit margins, 131
the time, effort and money required to meet or exceed all of these
benchmarks might wipe out any significant profit from pay for performance
128. See 42 U.S. C. §§ 1320a-7a(a)( 5); 42 U.S. C. §§ 1320a-7a(b); 42 U.S. C. §§ 1320a-
7b(b)( 1); 42 U.S. C. §§ 1395nn.
129. 42 C.F.R. § 425 (2012).
130. RAU, supra note 59.
131. Maggie Fox, Update 1-US Hospital Profits Fall to Zero, REUTERS (Mar. 3, 2009),