Health Policy$ense

The Tension Between Care Coordination and Conflicts of Interest

Kanter and Pauly on ACOs and the Stark law

Should providers participating in accountable care organizations (ACOs) be exempt from existing regulations that prevent financial conflicts of interest in physician referrals? On the one hand, these regulations, collectively known as the Stark Law, can impede efforts to coordinate care across providers and facilities. On the other hand, ACOs and other alternative payment and delivery models do not necessarily obviate the need for regulations that prohibit physician kickbacks or self-referrals. In a New England Journal of Medicine Perspective, Genevieve Kanter and Mark Pauly argue that exemptions are not the answer to the tension between ACOs and conflict-of-interest laws. Instead, they call for a reevaluation of both care coordination efforts and the Stark law.


Genevieve Kanter, PhD, Research Assistant Professor of Medicine, and Mark Pauly, PhD, Bendheim Professor of Health Care Management

Currently, physicians and organizations participating in ACOs can receive temporary waivers so they are not penalized for violating the law. ACOs, however, want greater certainty in protection against prosecution and want the exemption codified. The Centers for Medicare and Medicaid Services (CMS) is gearing up to reform Stark law rules and may promulgate a regulatory exception for ACOs. Legislation introduced in November may also statutorily exempt providers in ACOs and similar payment and delivery models.

But do the benefits of ACOs outweigh the harms of unnecessary referrals? In theory, ACOs would improve operating efficiencies, control health care costs, and improve outcomes. But, Kanter and Pauly note, there has been little evidence to that effect.

The authors identify three possible reasons for the underwhelming effect:

  1. When physician practices and hospitals combine, both parties are more constrained to keeping patients within network, even if an unaffiliated physician or facility may be better suited to meet a patient’s needs.
  2. Physicians in integrated systems benefit from their affiliated hospital’s profitability, and thus are incentivized to refer patients within their system – the problem the Stark law was trying to address.
  3. There may be no low-hanging fruit for eliminating inefficiencies, or administrative costs associated with implementing such systems are more costly than predicted.

These issues suggest fundamental limitations in the ability of ACOs and other care coordination arrangements to improve outcomes and reduce costs, explain Kanter and Pauly. Adding another Stark law exemption to the existing 30-plus exemptions may ultimately do more harm than good. Instead, they call for large-scale, systematic evaluations of ACOs and other integrated systems that demonstrate sustained cost savings and improved quality of care before policymakers enact permanent ACO-related changes to the Stark law. If there is no net benefit from ACOs, that organizational structure should be discouraged rather than regulated in an unsatisfactory way.

The authors conclude, “The tension between care coordination and conflicts of interest should not be used as a pretext for weakening an already impaired Stark regulation; instead, we think it should be used as strong motivation for reevaluating the way we approach both care coordination and regulation of conflicts of interest.”

Read the full Perspective here.