CMS Issues Nationwide Blanket Waivers of Stark Law and OIG Issues an AKS Policy Statement

On March 30, 2020, the Centers for Medicare and Medicaid Services (CMS) issued a series of nationwide Section 1135 waivers applicable to the physician self-referral law (the Stark Law) in response to the novel coronavirus (COVID-19) pandemic. The waivers exempt healthcare entities from sanctions under section 1877(g) of the Social Security Act for noncompliance, provided certain conditions are met, and absent the government’s determination of fraud or abuse. Importantly, and discussed further below, CMS has structured the waivers to apply only to arrangements that meet one of several required COVID-related purposes.

On April 3, 2020, the Department of Health and Human Services Office of Inspector General (OIG) issued a Policy Statement stating OIG’s intention not to impose administrative sanctions under the Anti-Kickback Statute (AKS) for remuneration covered by most of the 18 Stark Law waivers.

Background

On March 13, 2020, President Donald Trump declared a national emergency under the National Emergencies Act and made an emergency determination under the Stafford Act. This announcement followed the January 31, 2020, declaration of a public health emergency under the Public Health Service Act by the Secretary of the US Department of Health and Human Services (HHS). These actions opened the door for the authorization of waivers of certain Medicare, Medicaid and Children’s Health Insurance Program (CHIP) requirements as provided by Section 1135 of the Act (collectively, Section 1135 waivers).

Section 1135 of the Act allows the Secretary to temporarily waive certain, but not all, healthcare regulatory requirements in an emergency area during an emergency period. To implement Section 1135 waivers, CMS must determine that a provider has been affected by the emergency that prompted the issuance of the waivers. CMS has the option to issue individual Section 1135 waivers on a case-by-case basis, or CMS can implement “blanket” waivers.

Section 1135 waivers typically end either at the termination of the emergency period or 60 days from the date that the waiver or modification is published. With notice, HHS may provide for additional periods of up to 60 days until the end of the emergency period. It is unclear at this time whether compensation arrangements entered into during the emergency period in reliance on a blanket Stark Law waiver are protected if the arrangement continues after the emergency period. For more information on Section 1135 waivers, see our previous On the Subject.

Generally, the Stark Law prohibits a “physician” from “referring” Medicare beneficiaries to an “entity” for the furnishing of “designated health services” (DHS) if the physician (or one of her immediate family members) has a “financial relationship” with the entity (the DHS Entity), unless a statutory or regulatory exception applies (the Stark Law’s referral prohibition). The Stark Law also prohibits the DHS Entity from billing Medicare or any other person or entity for improperly referred DHS (the Stark Law’s billing prohibition). DHS includes 10 categories of services, including inpatient and outpatient hospital services, clinical laboratory services, and radiology and other imaging services.

Under the national Stark Law waiver, CMS has provided 18 specific blanket waivers that will apply to arrangements in which a DHS Entity conveys a benefit directly to a physician or an immediate family member of a physician, or in which a physician (or immediate family member) conveys a benefit directly to a DHS Entity.

The blanket waivers have retroactive effect to March 1, 2020. CMS notes that the
blanket waivers may be revised, but any revisions that narrow or terminate a blanket waiver will be effective only on a prospective basis. CMS may issue additional blanket waivers. Inquiries regarding the blanket waivers may be sent to 1877CallCenter@cms.hhs.gov. DHS Entities and physicians may also request individual waivers from CMS for arrangements that do not meet the criteria for one of the nationwide blanket waivers.

The Blanket Stark Law Waivers Must Be Related to COVID-19 Purposes

CMS specified certain conditions that apply to the use of any of the new blanket Stark Law waivers. Specifically, the waivers apply only to financial relationships related to the COVID-19 national emergency and the remuneration or referrals described in the waivers “must be solely related to COVID-19 Purposes.” A “COVID-19 Purpose” means any one of the following:

• Diagnosing or providing medically necessary treatment of COVID-19 for any patient or individual, regardless of whether the patient or individual is diagnosed with a confirmed case of COVID-19
• Securing the services of physicians and other healthcare practitioners and professionals to furnish medically necessary patient care services, including services not related to the diagnosis and treatment of COVID-19
• Ensuring the ability of healthcare providers to address patient and community needs due to COVID-19
• Expanding the capacity of healthcare providers to address patient and community needs due to COVID-19
• Shifting the diagnosis and care of patients to appropriate alternative settings due to COVID-19
• Addressing medical practice or business interruption caused by COVID-19 to maintain the availability of medical care and related services for patients and the community.

This last COVID-19 Purpose (addressing medical practice or business interruptions caused by COVID-19) raises some questions of what degree of financial assistance may be provided to physicians simply to address interruption of their business, similar to the business interruption suffered by virtually all businesses. This COVID-19 Purpose also requires that that the activity or arrangement maintain availability of services for patients in the community. The actions that meet this Purpose may change over time, but currently, simply giving financial assistance to physicians to soften the financial blow of business interruption may not meet this Purpose. In contrast, financial assistance contingent on the physician providing a reciprocal benefit to the hospital or community likely would be deemed related to a COVID-19 Purpose. For example, permitting delays in or (perhaps) abatement of rent, or furnishing space, equipment or personnel, when necessary for the practice to continue to safely and affordably furnish services to COVID-19 and/or non-COVID patients, is arguably protected. We also note that some of the other Purposes more directly address COVID-19 responses, and therefore may be more commonly used, such as “ensuring the ability of health care providers to address patient and community needs due to COVID-19.” Under this Purpose, and under the specific waivers discussed below, DHS Entities could provide free or below-FMV priced personal safety equipment to physicians to enable the physicians to continue to provide in-person care to patients.

CMS also requires that any remuneration described in the blanket waivers be a direct financial relationship between a DHS Entity and a physician, a physician organization in whose shoes the physician stands, or a physician’s immediate family member. This limitation would make the waivers unavailable whenever the DHS Entity’s financial relationship is with an entity other than the physician’s medical practice. It is not clear why the waiver would not be available for a relationship between, for example, a hospital and a physician-owned business such as a real estate holding company. This and other questions about the waivers perhaps will be clarified in the future.

The 18 Blanket Stark Waivers

CMS provided 18 specific blanket waivers that will apply to scenarios in which a DHS Entity makes payments to a physician or an immediate family member of a physician, or in which a physician provides payments to a DHS Entity.

Waivers on Fair Market Value (FMV) Requirements for Leases, Services, Purchases and Loans

The broadest waivers apply to payments made either by a DHS Entity or by a physician, where the payments are for space or equipment rental, or for the purchase of items or services, and the payments or purchases are not in line with FMV. The waivers apply to the following scenarios:

• Payments by a DHS Entity to a physician, or an immediate family member of a physician, for services personally performed by the physician, where the remuneration is above or below fair market value for services performed
• Payments made between a DHS Entity and a physician, or an immediate family member of a physician, for space or equipment rental, where the remuneration is below FMV for the lease
• Payments made between a DHS Entity and a physician, or an immediate family member of a physician, for items or services purchased, where the remuneration is below FMV for the items or services
• Remuneration resulting from a loan between a DHS Entity and a physician, or an immediate family member of a physician, where the interest rate is below fair market value or on terms that are unavailable from a bank or other commercial lender.

Incidental Benefits and Non-Monetary Compensation Waivers

A hospital or other DHS Entity may provide non-monetary remuneration to a physician (or an immediate family member of a physician) in the following circumstances:

• Medical staff incidental benefits that exceeds the 2020 limit of $36 per occurrence
• Non-monetary compensation that exceeds the 2020 limit of $423 per calendar year.

In-Office Ancillary Services Exceptions/Group Practice Waivers

CMS also issued two blanket waivers applicable to physician group practices, effectively waiving the “location test” of the in-office ancillary services exception:

• The referral by a physician in a group practice for medically necessary DHS 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)
• The referral by a physician in a group practice for medically necessary DHS furnished by the group practice to a patient in his 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.

Physician-Owned Hospital and ASC Expansion Waivers

CMS provided two waiver provisions addressing physician-owned hospitals and ASCs that are meant to expand the capability of physician-owned entities to provide care to patients in light of the COVID-19 pandemic. Specifically, referrals by a physician owner to a hospital temporarily expanding its bed capacity or an ASC converted to a temporary hospital are permitted. Without the waiver, physician-owned hospitals are generally prohibited from expanding their bed capacity, and physician-owned ASCs are generally prohibited from converting an ASC to a hospital. A physician-owned ASC that is considering temporarily converting into a hospital must comply with additional requirements, however, in line with Medicare conditions of participation and other hospital enrollment requirements that are not waived by CMS under Section 1135 waivers. For additional details on the Section 1135 waivers, click here.

Physician Home Health Ownership Waiver

CMS will permit physicians to refer patients to a home health agency in which the physician (or an immediate family member of the physician) has an ownership or investment interest, regardless of whether the home health agency qualifies as a rural provider.

Writing and Signature Requirement Waiver

CMS will permit referrals to a DHS entity with whom a physician has a financial relationship where the compensation arrangement does not satisfy the writing or signature requirements of a Stark Law exception, but satisfies all of the other requirements of the applicable exception. However, CMS clarified that a provider may rely on another Stark Law blanket waiver in addition to relying on the waiver exempting the writing and signature requirements. For example, this permits a healthcare provider to effectively rely on waivers related to payments that are both (1) above or below fair market value, as applicable, and (2) not documented in a signed writing.

Example Scenarios

CMS provided a list of examples of remuneration, referrals or conduct that may fall within the scope of the blanket waivers. CMS pointed to these as examples only and noted that other scenarios could qualify for the waiver of sanctions. For instance, CMS offers the example of a DHS entity paying physicians above their previously contracted rates for furnishing professional medical services to COVID-19 patients in hazardous or challenging settings. Another example includes an entity selling personal protective gear to a physician practice at no cost or below FMV. The examples provided by CMS may be helpful to providers determining whether the Secretary would deem an arrangement with a physician to satisfy one of the “COVID-19 Purposes.”

CMS provided additional examples in a fact sheet for physicians and other practitioners related to the new waivers. For example, a hospital may provide space on hospital grounds at no charge to a physician who is willing to treat patients who seek care at the hospital but are not appropriate for emergency department or inpatient care. Alternatively, a physician in a group practice may order medically necessary DHS furnished to a patient in the patient’s home and contemporaneously provide a physician service by telehealth to the patient.

Record Keeping

CMS emphasized that parties using the blanket waivers must make records relating to the blanket waiver use available to CMS upon request. The Stark Law blanket waivers may be used retroactively to March 1, 2020, and CMS encourages providers to develop and maintain records relating to financial relationships between DHS Entities and physicians as a best practice.

OIG’s AKS Policy Statement

Recognizing the public health emergency created by COVID-19, the OIG published a Policy Statement on April 3, 2020, indicating that it will not seek to impose administrative sanctions for remuneration protected under any of the first 11 (of 18) Stark Law blanket waivers. The OIG has authority under 42 U.S.C. §§ 1320a-7(b)(7) and 1320a-7a(a)(7) to exclude from participation in federal healthcare programs, or to impose civil monetary fines on, any person found to have violated the AKS. While OIG’s policy statement does not extend to all of the Stark Law blanket waivers, it covers the situations that are most likely to implicate the AKS from OIG’s perspective, including payments made either by a DHS Entity or by a physician where the payments are for space or equipment rental, or for the purchase of items or services, as well as direct remuneration to physicians in the form of non-monetary compensation or medical staff incidental benefits, or loans at below FMV or with terms that are not commercially available.

All of the conditions and definitions that apply to the Stark Law blanket waivers apply to the OIG’s Policy Statement. This extends to the requirement that the blanket waivers apply only to financial relationships that solely relate to at least one of the CMS “COVID-19 Purposes,” discussed above.

The OIG’s Policy Statement and its exercise of discretion regarding the imposition of administrative sanctions will apply only to conduct occurring on or after April 3, 2020, and will terminate concurrently with the Stark Law blanket waivers. While the Policy Statement is not retroactive to March 1, 2020, on its terms, it seems reasonable to conclude that OIG would also not impose sanctions on arrangements that met a Stark Law blanket waiver prior to April 3, 2020.

The OIG is accepting questions about the application of its administrative sanctions authority to the remaining Stark Law waivers that are not covered in the Policy Statement. Questions may be submitted to OIGComplianceSuggestions@oig.hhs.gov and should include facts about the key parties involved and terms of the arrangement involved. OIG is also publishing FAQs related to the COVID-19 pandemic online, available here.

Key Takeaways

The blanket Stark Law waivers may provide welcome relief at a time when hospitals and other providers are confronting an unprecedented pandemic. However, given that the waivers are narrowly tailored and require the relevant entity to satisfy a “COVID-19 Purpose,” potential use of any waiver will require fact-intensive analysis to determine applicability. Moreover, while the waivers provide relief from the FMV requirement of key compensation exceptions and the dollar value limits included in the medical staff incidental benefits and non-monetary compensation exceptions, the waivers do not appear to relieve DHS Entities from compliance with the other elements of Stark Law exceptions, such as the “set in advance” requirement.

While healthcare providers are not required to notify CMS before using a Stark Law blanket waiver, providers should document both a valid COVID-19 Purpose and the particular facts and circumstances for each arrangement where the provider believes a Stark Law waiver applies. Providers should ensure that non-FMV or otherwise commercially unreasonable arrangements are entered into solely for a COVID-19 Purpose, and not to extend charity to significant referral sources. In light of the uncertain status of arrangements entered into in reliance on a Stark Law waiver that continue after the emergency period ends, providers should include traditional “change of law/illegality” provisions should such clauses be needed to later modify or end an arrangement.

Finally, it is important for providers to recognize that OIG’s Policy Statement requires compliance with all of the requirements of the applicable Stark Law waiver, including the requirement of a COVID-19 Purpose. Limiting the Policy Statement to the Stark Law waivers also means that arrangements between non-DHS Entities (such as pharmaceutical or device manufacturers) and physicians are not covered by the Policy Statement. However, these non-DHS Entities are also a critical part of addressing the COVID-19 pandemic and may have legitimate reasons to engage with physicians or others in efforts to address the crisis. Thus, arrangements not covered by the Stark Law waivers require a careful examination of the facts and circumstances to assess AKS risk.