CMS Issues Blanket Waivers of the Stark Law in Response to COVID-19 Emergency

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In response to the COVID-19 pandemic, on March 30, 2020, Centers for Medicare & Medicaid Services (“CMS”) issued blanket waivers of sanctions under Section 1877 of the Social Security Act (the “Stark Law”). The waivers are effective retroactively as of March 1, 2020. The full text of the blanket waivers is available from CMS at this link: Blanket Waivers of the Stark Law Due to COVID-19 National Emergency. The issuance document from CMS provides the full scope and application of the Stark Law blanket waivers, which we have summarized below.

While the Stark Law blanket waivers are in effect, CMS will pay claims for designated health services (as defined under the Stark Law) that, but for satisfying the conditions of a blanket waiver, would violate the Stark Law. The blanket waivers apply only to financial relationships and referrals that are related to the national emergency that is the COVID-19 outbreak in the United States, as detailed below. Absent compliance with a blanket waiver, the Stark Law and its sanctions still apply as usual. Thus, any arrangement to which the Stark Law applies during the waiver period must satisfy either an applicable Stark Law exception or the requirements of a blanket waiver.

Background - Section 1135 Waivers and the Stark Law

The Stark Law blanket waivers arose from the Secretary of the United States Department of Health and Human Services (the “Secretary”)  invoking the Secretary’s waiver authority under Section 1135 of the Social Security Act (“Section 1135”).

The two prerequisites for the Secretary invoking waiver authority under Section 1135 were met as of March 13, 2020 as a result of the COVID-19 pandemic—the President has declared an emergency or disaster under either the Stafford Act or the National Emergencies Act and the Secretary has declared a Public Health Emergency under Section 319 of the Public Health Service Act. The emergency area in this case is the entire United States. Accordingly, under Section 1135, the Secretary has the authority to grant waivers to ensure (i) that  sufficient health care items and services are available to meet the needs of individuals in the Unites States enrolled in the Medicare, Medicaid, and CHIP programs; and (ii) that health care providers that furnish such items and services in good faith, but are unable to comply with one or more of the specified requirements of the Stark Law as a result of the consequences of the COVID-19 pandemic, may be reimbursed for such items and services and exempted from sanctions for such noncompliance, absent the government’s determination of fraud or abuse.

The Stark Law: (1) prohibits a physician from making referrals for certain designated health services payable by Medicare to an entity with which he or she (or an immediate family member) has a financial relationship, unless all of the requirements of an applicable exception are satisfied and (2) prohibits the entity from filing claims with Medicare (or billing another individual, entity, or third party payor) for designated health services furnished pursuant to a prohibited referral. A financial relationship under the Stark Law includes an ownership or investment interest in the entity or a compensation arrangement with the entity. Exceptions to the Stark Law are set forth at 42 CFR 411.355 through 411.357. To comply with the Stark Law, an implicated arrangement must satisfy each and every requirement of an applicable Stark Law exception. The requirements for a Stark Law exception can be numerous and complex. Because of its general prohibitions and detailed exception requirements, the Stark Law limits the ability of entities that provide designated health services to enter into certain financial arrangements with physicians, as well as the ability of physicians to freely refer patients for designated health services.

Stark Law Blanket Waivers During COVID-19 Emergency

Pursuant to Section 1135, the Stark Law blanket waivers will terminate upon the termination of the President’s declaration of emergency, the termination of the Secretary’s declaration of public health emergency, or termination of a period of 60 days from the date the waiver or modification was first published.  

The Stark Law blanket waivers apply only to financial relationships and referrals that are related to the national emergency that is the COVID-19 outbreak in the United States. Specifically, the remuneration and referrals (i.e., the arrangement to which the Stark Law applies) described in the blanket waivers must be solely related to “COVID-19 Purposes.” For purposes of the blanket waivers, COVID-19 Purposes means:

• 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 services in response to the COVID-19 outbreak;

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

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

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

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

For arrangements entered into for a COVID-19 Purpose, the Stark Law blanket waivers exempt providers from sanctions for noncompliance with the Stark Law only for the types of arrangements specifically enumerated in the blanket waivers. The Stark Law blanket waivers specifically waive Stark Law sanctions and permit reimbursement for referrals and claims related to the following:

• Personally Performed Physician Services – Payment from an entity to a physician that is above or below FMV for services personally performed by the physician to the entity;

• Rent for Space or Equipment – Rental charges for office space or equipment that is below FMV;

• Items or Services Purchased from Physicians – Payments from an entity to a physician that are below FMV for items or services purchased by the entity from the physician;

• Payments from Physicians for Use of Premises/Purchase of Items and Services – Payments from a physician to an entity that are below FMV for the use of the entity’s premises or for items or services purchased by the physician;

• Medical Staff Incidental Benefits/Nonmonetary Compensation – Remuneration to a physician that exceeds the current medical staff incidental benefits amount ($36 per occurrence) or annual nonmonetary compensation limit ($423);

• Loans – Loans to or from physicians: (1) with an interest rate below FMV; 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;

• Physician-Owned Hospitals – Referrals by a physician-owner of a hospital that temporarily expands its facility capacity above its amount allotted under the physician-owned hospital exception or that converted from a physician-owned ambulatory surgical center to a hospital on or after March 1, 2020, provided that the hospital meets certain requirements;

• Home Health – Referrals to a home health agency that does not qualify as a rural provider when the physician has an ownership in the home health agency;

• Group Practices – Referrals by a physician in a group practice for medically necessary designated health services furnished by the group practice: (1) in a location that does not qualify as a “same building” or “centralized building”; or (2) 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 home;

• Rural Areas – Referrals 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; and

• Technical Noncompliance – Referrals by a physician to an entity with whom the physician has a compensation arrangement that satisfies the substance of an applicable exception but is not in writing or signed as required by the exception (unless the arrangement is already covered by another waiver).

For each Stark Law blanket waiver, the waiver of the Stark Law is limited to the circumstances described in the individual waiver, and health care providers must satisfy all conditions of the waiver in order to rely on the waiver. Each arrangement should be carefully reviewed to ensure that the financial relationships and/or referrals are consistent with the Stark Law blanket waivers. To provide guidance on the application of these Stark Law blanket waivers, CMS has provided detailed list examples of arrangements that could fall within the scope of a waiver. These examples are available in the CMS issuance document linked above.

Implementing the Stark Law Blanket Waivers

Any party who utilizes Stark Law blanket waivers must make records relating to the use of the blanket waivers available to the Secretary upon request. Thus, CMS encourages parties to develop and maintain records in a timely manner as a best practice. The blanket waivers may be used without the submission of specific documentation or notice to the Secretary or CMS in advance of their use; however, the requirement to keep records related to such use is mandatory. While CMS does not expound on what records should be kept, documentation related to the use of a Stark Law blanket waiver should presumably include details regarding the compliant purpose of the arrangement and its permissible scope. 

CMS makes clear that the Stark Law blanket waivers are still subject to the government’s determination of fraud or abuse. The definition of COVID-19 Purposes and examples provided by CMS should be instructive as to the proper, compliant aims of an arrangement under the waivers. This general fraud and abuse qualification confirms that CMS is authorized to and likely will take action against participants in arrangements that may seek to take advantage of the COVID-19 emergency for some improper purpose under the guise of a COVID-19 Purpose.  

CMS also makes clear that the Stark Law blanket waivers are intended to be additional safeguards and that reliance on the waivers may be unnecessary because many financial relationships related to COVID-19 Purposes will still satisfy the requirements of existing exceptions to the Stark Law. If possible, all arrangements should be structured to fit within existing Stark Law exceptions because the blanket waivers are temporary and there is no guiding precedent for their implementation and enforcement.

Additionally, each arrangement should be reviewed to ensure that it does not violate other applicable state and federal laws. Importantly, with respect to compliance with the federal Anti-Kickback Statute (“AKS”), the Office of Inspector General (“OIG”) released a Policy Statement on April 3, 2020 indicating that the OIG will exercise its enforcement discretion not to impose administrative sanctions under the AKS for certain financial arrangements related to a COVID-19 purpose that are covered under the Stark Law blanket waivers.  The purpose for this Policy Statement, the OIG indicated, is to avoid the need for parties to conduct a separate AKS legal analysis for those arrangements protected under the Stark Law blanket waivers. The OIG’s Policy Statement is available at this link: OIG 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 Policy Statement applies as of April 3, 2020 and terminates on the same date as the Stark Law blanket waivers.

The Stark Law blanket waivers may be revised from time to time as determined necessary by the Secretary and posted on the CMS website. Any revisions that narrow a blanket waiver, and any termination of the blanket waivers, will be effective on a prospective basis only. CMS may issue additional blanket waivers which will have the effective date stated in such additional blanket waivers.

Contact Us

If you have any questions or would like more information on the applicability and implications of the Stark Law blanket waivers or the Stark Law generally, please contact Chandler Martin, at 803-540-2161 or cmartin@maynardnexsen.com, or your regular Nexsen Pruet attorney.

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