Locke Lord QuickStudy: CMS Creates Greater Flexibility for Arrangements Through Stark Law Waivers

Pursuant to CMS’s authority during this National Emergency arising from the COVID-19 outbreak, on March 30, 2020, the Centers for Medicaid and Medicare Services issued Blanket Waivers of Section 1877(g) of the Social Security Act (i.e., the “Stark Law”) to be retroactively effective as of March 1, 2020 (the “Stark Law Waivers”).  The Waivers are effective until the termination of the National Emergency declared by the President on March 13, 2020 and provide some protection for arrangements with physicians during the COVID-19 pandemic.  The Stark Law is a strict liability statute that prohibits physician referrals for certain designated health services if the physician has a financial relationship with the health care entity and unless an exception is met.  The Stark Law Waivers are intended to create greater flexibility on a temporary basis to health care entities and physicians to enable them to have more freedom in order to effectively respond to the pandemic and provide needed health care services to patients.  

Additionally, on April 3, 2020 the Office of the Inspector General Issued a Policy Statement Regarding Application of Certain Administrative Enforcement Authorities Due to Declaration of Coronavirus Disease 2019 (COVID-19) Outbreak in the United States as a National Emergency (the “OIG Policy Statement”).  In this Policy Statement, the OIG stated the following:

“. . . we are committed to protecting patients by ensuring that health care providers have the regulatory flexibility necessary to respond adequately to COVID-19 concerns. Ordinarily, some financial relationships that implicate the physician self-referral law also may implicate, and potentially violate, the Federal anti-kickback statute. However, recognizing the unique circumstances of the COVID-19 outbreak, OIG will not impose administrative sanctions under sections 1128(b)(7) or 1128A(a)(7) of the Act, as those sections relate to the commission of acts described in the Federal anti-kickback statute, with respect to remuneration that is covered by section II.B.(1)-(11) of the Blanket Waivers.  All of the conditions and definitions that apply to the Blanket Waivers shall apply to this Policy Statement.”

Thus, in OIG’s view, a financial relationship permitted by the Blanket Waivers of the Stark Law will not violate the federal Anti-Kickback Statute during the National Emergency.  While this Policy Statement is not binding on the U.S. Department of Justice, it is anticipated that the Department will follow the OIG’s guidance in this regard.

The Stark Law Waivers only apply to financial relationships and referrals that are “solely related to COVID-19 Purposes.”  These purposes are limited to one or more of the following:

• Diagnosis or medically necessary treatment of COVID-19 for any patient or individual, whether or not the patient or individual is diagnosed with a confirmed case of COVID-19;

• Securing the services of physicians and other health care practitioners and professionals to furnish medically necessary patient care services, including services not related to the diagnosis and treatment of COVID-19, in response to the COVID-19 outbreak in the United States;

• Ensuring the ability of health care providers to address patient and community needs due to the COVID-19 outbreak in the United States;

• Expanding the capacity of health care providers to address patient and community needs due to the COVID-19 outbreak in the United States;

• Shifting the diagnosis and care of patients to appropriate alternative settings due to the COVID-19 outbreak in the United States; or

• Addressing medical practice or business interruption due to the COVID-19 outbreak in the United States in order to maintain the availability of medical care and related services for patients and the community.

CMS has specified eighteen financial relationships that, if entered into for one of the enumerated COVID-19 Purposes discussed above, will not result in prohibited referrals and claims under the Stark Law, despite the fact that in ordinary circumstances, these relationships would fall outside of any Stark Exception:

1. Remuneration from an entity to a physician (or an immediate family member of a physician) that is above or below the fair market value for services personally performed by the physician (or the immediate family member of the physician) to the entity.
2. Rental charges paid by an entity to a physician (or an immediate family member of a physician) that are below fair market value for the entity’s lease of office space from the physician (or the immediate family member of the physician).
3. Rental charges paid by an entity to a physician (or an immediate family member of a physician) that are below fair market value for the entity’s lease of equipment from the physician (or the immediate family member of the physician).
4. Remuneration from an entity to a physician (or an immediate family member of a physician) that is below fair market value for items or services purchased by the entity from the physician (or the immediate family member of the physician).
5. Rental charges paid by a physician (or an immediate family member of a physician) to an entity that are below fair market value for the physician’s (or immediate family member’s) lease of office space from the entity.
6. Rental charges paid by a physician (or an immediate family member of a physician) to an entity that are below fair market value for the physician’s (or immediate family member’s) lease of equipment from the entity.
7. Remuneration from a physician (or an immediate family member of a physician) to an entity that is below fair market value for the use of the entity’s premises or for items or services purchased by the physician (or the immediate family member of the physician) from the entity.
8. Remuneration from a hospital to a physician in the form of medical staff incidental benefits that exceeds the limit set forth in 42 CFR 411.357(m)(5).
9. Remuneration from an entity to a physician (or the immediate family member of a physician) in the form of nonmonetary compensation that exceeds the limit set forth in 42 CFR 411.357(k)(1).
10. Remuneration from an entity to a physician (or the immediate family member of a physician) resulting from a loan to the physician (or the immediate family member of the physician): (1) with an interest rate below fair market value; or (2) on terms that are unavailable from a lender that is not a recipient of the physician’s referrals or business generated by the physician.
11. Remuneration from a physician (or the immediate family member of a physician) to an entity resulting from a loan to the entity: (1) with an interest rate below fair market value; or (2) on terms that are unavailable from a lender that is not in a position to generate business for the physician (or the immediate family member of the physician).
12. The referral by a physician owner of a hospital that temporarily expands its facility capacity above the number of operating rooms, procedure rooms, and beds for which the hospital was licensed on March 23, 2010 (or, in the case of a hospital that did not have a provider agreement in effect as of March 23, 2010, but did have a provider agreement in effect on December 31, 2010, the effective date of such provider agreement) without prior application and approval of the expansion of facility capacity as required under section 1877(i)(1)(B) and (i)(3) of the Act and 42 CFR 411.362(b)(2) and (c).
13. Referrals by a physician owner of a hospital that converted from a physician-owned ambulatory surgical center to a hospital on or after March 1, 2020, provided that: (i) the hospital does not satisfy one or more of the requirements of section 1877(i)(1)(A) through (E) of the Act; (ii) the hospital enrolled in Medicare as a hospital during the period of the public health emergency described in section II.A of the blanket waiver document; (iii) the hospital meets the Medicare conditions of participation and other requirements not waived by CMS during the period of the public health emergency described in section II.A of the blanket waiver document; and (iv) the hospital’s Medicare enrollment is not inconsistent with the Emergency Preparedness or Pandemic Plan of the State in which it is located.
14. The referral by a physician of a Medicare beneficiary for the provision of designated health services to a home health agency: (1) that does not qualify as a rural provider under 42 CFR 411.356(c)(1); and (2) in which the physician (or an immediate family member of the physician) has an ownership or investment interest.
15. The referral by a physician in a group practice for medically necessary designated health services furnished by the group practice in a location that does not qualify as a “same building” or “centralized building” for purposes of 42 CFR 411.355(b)(2).
16. The referral by a physician in a group practice for medically necessary designated health services furnished by the group practice to a patient in his or her private home, an assisted living facility, or independent living facility where the referring physician’s principal medical practice does not consist of treating patients in their private homes.
17. The referral by a physician to an entity with which the physician’s immediate family member has a financial relationship if the patient who is referred resides in a rural area.
18. Referrals by a physician to an entity with whom the physician (or an immediate family member of the physician) has a compensation arrangement that does not satisfy the writing or signature requirement(s) of an applicable exception but satisfies each other requirement of the applicable exception, unless such requirement is waived under one or more of the blanket waivers set forth above.

CMS provides some examples of permissible arrangements in the Stark Law Waivers for illustrative purposes only.  These examples include the following:

• A hospital or other health care entity pays physicians above their previously-contracted rate for furnishing professional services for COVID-19 patients in particularly hazardous or challenging environments.

• To accommodate patient surge, a hospital rents office space or equipment from an independent physician practice at below fair market value or at no charge.

• A hospital or home health agency purchases items or supplies from a physician practice at below fair market value or receives such items or supplies at no charge.

• A hospital provides free use of medical office space on its campus to allow physicians to provide timely and convenient services to patients who come to the hospital but do not need inpatient care.

• An entity provides free telehealth equipment to a physician practice to facilitate telehealth visits for patients who are observing social distancing or in isolation or quarantine.

• An entity sells personal protective equipment to a physician, or permits the physician to use space in a tent or other makeshift location, at below fair market value (or provides the items or permits the use of the premises at no charge).

• A hospital provides meals, comfort items (for example, a change of clothing), or onsite child care with a value greater than $36 per instance to medical staff physicians who spend long hours at the hospital during the COVID-19 outbreak in the United States.

• An entity provides nonmonetary compensation to a physician or an immediate family member of a physician in excess of the $423 per year limit, such as continuing medical education related to the COVID-19 outbreak in the United States, supplies, food, or other grocery items, isolation-related needs (for example, hotel rooms and meals), child care, or transportation.

• A hospital lends money to a physician practice that provides exclusive anesthesia services at the hospital to offset lost income resulting from the cancellation of elective surgeries to ensure capacity for COVID-19 needs

Additional examples can be found in the Stark Law Waivers.  These waivers are located here. 

We recommend that any arrangement entered into or revised pursuant to one of the Stark Law Waivers be documented to the extent practicable such that the arrangement is transparent in the event of a review in the future as to why the arrangement was amended or entered into and tying the arrangement to the Stark Law Waivers, OIG Policy Statement and the COVID-19 outbreak.  This could be contained in an amendment, letter agreement or even in email correspondence between the parties and the parties should maintain the documentation in their records.

In addition, individual waivers of sanctions under section 1877(g) of the Act may be granted by CMS upon request.  This is helpful for requests for a waiver that is outside of the specific waivers contained in the Stark Law Waivers.  Requests for individual waivers may be sent via email to 1877CallCenter@cms.hhs.gov and should include the words “Request for 1877(g) Waiver” in the subject line.  All requests should include the following minimum information:

• Name and address of requesting entity

• Name, phone number and email address of person designated to represent the entity;

• CMS Certification Number (CCN) or Taxpayer Identification Number (TIN) of the requesting entity; and

• Nature of request.

Importantly, the Stark Law Waivers and OIG Policy Statement are only effective during the National Emergency and physicians and health care entities must be careful to end or revise any arrangements at the conclusion of the emergency to bring the arrangements into full compliance with the Stark Law and regulations following termination of the waivers.  This could include terminating or amending the arrangements or taking other action to bring the arrangements into compliance.  Therefore, we recommend a compliance review of all such arrangements upon the termination of the waivers.

Your Locke Lord contacts and the authors of this article would be happy to help you navigate the Stark Law Waivers and their implications as it relates to the health care industry.

Visit our COVID-19 Resource Center often for up-to-date information to help you stay informed of the legal issues related to COVID-19.