COVID-19 Public Health Emergency: CMS Issues Blanket Waivers under the Stark Law

March 31, 2020
Firm Publication

To address the ongoing national emergency from the COVID-19 pandemic, on March 30, the Centers for Medicare & Medicaid Services (CMS) issued blanket waivers of the federal Physician Self-Referral Law, otherwise known as the Stark Law. Generally, the Stark Law prohibits hospitals and other entities from billing the Medicare program for certain “designated health services” (DHS) referred by a physician with whom the hospital or other entity has a financial relationship unless the relationship meets a statutory or regulatory exception. Unlike the federal Anti-Kickback Statute, the Stark Law is not intent-based and has a strict liability application – that is, healthcare providers must meet an enumerated statutory or regulatory exception or face draconian penalties, including a refund of any Medicare payments resulting from referrals based on a non-compliant relationship. In light of this, the blanket Stark Law waivers announced by CMS should provide a welcome relief to the healthcare industry, especially hospitals and physicians on the frontline of dealing with the COVID-19 pandemic.

Importantly, the blanket Stark Law waivers are retroactive to March 1, 2020, and apply nationwide. However, the blanket Stark Law waivers are limited in that they must relate solely to activities geared toward addressing COVID-19. To help illustrate, CMS articulated six “COVID-19 Purposes” that would justify a healthcare provider’s reliance on the waivers. These purposes generally relate to facilitating diagnosis or medically necessary treatment of COVID-19 for any patient or individual; securing the services of qualified health care professionals to furnish services during the pandemic; ensuring the ability and expanding the capacity of health care providers to respond to patient and community needs; shifting the diagnosis and care of patients to appropriate alternative settings; and addressing medical practice or business interruptions due to the outbreak.

In credit to CMS, the waiver announcement not only clearly articulates specific waivers meant to address both prohibited remuneration and referrals between hospitals or other DHS entities and physicians under the Stark Law but also includes a non-exhaustive list of examples on the application of these waivers. This non-exhaustive list demonstrates CMS’s goal to provide the flexibility needed by DHS entities and physicians to address specific and ever-changing scenarios arising during this pandemic without the fear of potentially incurring liability under the Stark Law. Some examples of the types of arrangements for which CMS seeks to create flexibility through the promulgation of the blanket waivers include:

  • Compensation of physicians above previously-contracted rates for providing professional services to COVID-19 patients in challenging environments.
  • A hospital providing free use of medical office space on the hospital campus to allow physicians to timely treat patients who present at the hospital but do not need inpatient care.
  • An entity providing free telehealth equipment to a physician practice to facilitate telehealth visits during a social distancing, isolation, or quarantine period.
  • An entity selling or providing personal protective equipment to a physician, or permitting a physician to use space, including a makeshift location, at below fair market value rates or even at no charge.
  • A hospital lending money to a physician practice that provides exclusive anesthesia services at the hospital to offset lost income resulting from the cancellation of elective procedures to ensure capacity to deal with COVID-19 needs.
  • A group practice furnishing medically necessary diagnostic imaging tests in a mobile vehicle, van, or trailer in the parking lot of its office to Medicare patients, thereby obviating the need for such patients to go to the hospital.

Though the requirements of the blanket waivers themselves are technical, the general categories of remuneration, referrals, and conduct otherwise prohibited by the Stark Law to which the blanket waivers apply include the following, among others:

  • Remuneration exchanged between a DHS entity and a physician (or his or her immediate family member) that is below fair market value for the lease of office space or equipment, or the purchase of items or services, from the other party.
  • Remuneration from a DHS entity to a physician (or his or her immediate family member) that is above or below fair market value for services personally performed for the entity.
  • Remuneration to a physician in the form of medical staff incidental benefits or nonmonetary compensation exceeding the regulatory monetary thresholds, which can be used for items such as meals, lodging, transportation, or on-site child care during the long shifts required during this pandemic.
  • Remuneration exchanged between a DHS entity and a physician (or his or her immediate family member) resulting from a loan to the other party that: (1) has an interest rate below fair market value; or (2) is on terms unavailable from a lender that is not in a position to receive referrals from or generate business for the physician.
  • Under specified conditions, referrals by a physician owner of a hospital that: (1) temporarily expands its facility capacity; or (2) converted from a physician-owned ambulatory surgery center to a hospital on or after March 1, 2020.
  • Physician referrals of Medicare patients to home health agencies in which the physician (or an immediate family member) has an ownership or investment interest, even if the agency does not qualify as a rural provider under the applicable regulation.
  • Certain referrals by physicians in a group practice for medically necessary DHS furnished in alternate locations, including the patient’s private home, assisted living facility, or independent living facility.
  • Referrals by a physician to an entity with which the physician (or an immediate family member) has a compensation arrangement that does not satisfy the technical writing or signature requirements of an applicable Stark Law exception, but meets all other requirements of an exception that are not otherwise covered by a blanket waiver.

Importantly, the blanket Stark Law waivers are subject to revision from time to time and shall terminate at the end of the public emergency period, and CMS may issue additional waivers if needed. Lastly, while the use of the blanket waivers doesn’t require parties to submit documentation in advance to CMS, any parties using the blanket waivers must keep records of their use of these waivers. Because such records must be made available to CMS upon request, it is important that healthcare providers wishing to take advantage of the blanket waivers carefully and timely document their reasons for doing so and their compliance with any requirements applicable to the blanket waiver under which they seek to operate.

We encourage you to read the entire Stark Law waiver document and to reach out to the authors of this alert with any questions on how these waivers can help your organization during this public health crisis.