Foley & Lardner LLPOn March 30, 2020, United States Health and Human Services Secretary Alex M. Azar II (the Secretary) exercised emergency authority under Section 1135 of the Social Security Act (Act) and issued blanket waivers of sanctions under the federal Physician Self-Referral Law (Section 1877 of the Act), commonly known as the Stark Law. The blanket waivers are for eighteen enumerated types of remuneration and referrals that would otherwise violate the Stark Law. That is, the Stark Law requirements are not waived entirely, but only for the enumerated types of remuneration and referrals. In addition to the blanket waivers, CMS may also issue waivers under Section 1135 on a case-by-case basis upon request by a provider or supplier.

As a result of the blanket waivers, hospitals and other health care providers gained some much needed flexibility and comfort to address rapidly evolving staffing needs and financial realities posed by the COVID-19 pandemic. The blanket waivers are effective as of March 1, 2020 and will extend for the duration of the national health emergency previously declared by the Secretary (on January 31, 2020) and the national emergency declared by President Trump (on March 13, 2020). The blanket waivers (as opposed to the case-by-case waivers) are self-implementing, meaning that no additional action is required for health care providers to avail themselves of the waivers. 

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 is a direct or indirect ownership or investment interest in the entity or compensation arrangement with the entity. Exceptions to the physician self-referral law are set forth in section 1877 of the Act and regulations at 42 CFR 411.355 through 411.357. The Stark Law is a strict liability statute so strict compliance with an exception is required in order to avoid sanctions, make referrals, and submit claims. Sanctions for violation of the referral and claims submission prohibitions are set forth in section 1877(g) of the Act. 

The blanket waivers temporarily waive sanctions under Section 1877(g) of the Act for eighteen enumerated types of remuneration and referrals that would otherwise violate the Stark Law, if made or paid in good faith and due solely to a “COVID-19 Purpose.” A “COVID-19 purpose” includes not only the diagnosis and medically necessary treatment of COVID-19 and securing the services of physicians or other health care practitioners—including for services not related to the diagnosis and treatment of COVID-19—but also ensuring the ability of health care providers to address patient and community needs due to COVID-19, expanding the capacity of health care providers to address patient and community needs, shifting the diagnosis and care of patients to appropriate alternative settings, and addressing medical practice or business interruption in order to maintain the availability of medical care and related services for patients and the community.

The eighteen blanket waivers include, among others, remuneration above fair market value for physician service arrangements; rental rates below fair market value for the lease of space or equipment; nonmonetary compensation that exceeds the limit set forth under the applicable regulatory exception for nonmonetary compensation under the Stark Law; a loan with an interest rate below fair market value or on terms that are unavailable from a lender that is not in a position to gain referrals from the borrower; referrals by a physician owner of a hospital that temporarily fail to meet certain Medicare conditions of participation due to its COVID-19 response; referrals by a physician in a group practice for medically necessary designated health services furnished by the group practice that do not meet certain location requirements of the in-office ancillary services exception under the Stark Law; and compensation arrangements that do not satisfy the writing or signature requirement(s) of an applicable exception. 

The Secretary’s blanket waiver issuance also sets forth a number of examples of remuneration, referrals, or conduct that may fall within the scope of the blanket waivers that will likely be instructive for providers considering strategies for addressing shifting staffing, space, capacity, and patient needs due to the COVID-19 pandemic. The examples illustrate a number of straightforward practical applications of the blanket waivers, such as increasing pay for physicians, renting space or equipment at below fair market value, the provision of meals and other comfort items and childcare services for physicians who work excessive hours, and taking swift action to enter into arrangements to secure staffing, space, and resources without first entering into a formal written contract. 

Aside from these types of payments and arrangements that will directly expand the capacity of hospitals and other providers to deal with a surge of COVID-19 patients, the blanket waivers also recognize that the COVID-19 pandemic will have far-reaching impacts on physicians in the health care delivery system that will need to be addressed to sustain patients and their communities. For instance, specialty physician groups often rent office space from a hospital or hospital-owned medical office building and also derive much of their income from elective procedures performed at that hospital. Given the restrictions on elective procedures that have been widely enacted to expand capacity for COVID-19 patients, these specialty practices will likely struggle to pay their rent and meet other expenses. The blanket waivers would give hospitals some flexibility to provide short-term support or financial relief for their physician practice tenants and providers, such as a rent reduction, or abatement, or short-term loan. 

The Secretary’s issuance contemplates that the blanket waivers apply only to the extent CMS determines there is an absence of fraud and abuse, and the Secretary has the right to request documentation relating to the use of the blanket waivers. Therefore, it is recommended that clear and contemporaneous documentation be prepared to evidence the rationale and circumstances relating to the use of blanket waivers. At the conclusion of the national emergency, remuneration, arrangements, and conduct that were implemented under the blanket waivers will need to be terminated or modified to come into compliance with the Stark Law. 

Health care industry stakeholders, such as the American Hospital Association and the Federation of American Hospitals, had increasingly been calling on the Secretary to relax the Stark Law and the federal Anti-Kickback Statute to expand the capacity of hospitals and other providers to respond to COVID-19. The blanket waivers deal with the Stark Law, but similar action has not been taken with respect to the Anti-Kickback Statute. Accordingly, any action taken in reliance on the blanket waivers still needs to account for compliance with the Anti-Kickback Statute and any state law corollary. However, provided an arrangement is undertaken in good faith reliance on the blanket waivers and without an intent to induce referrals or general health care business, the Anti-Kickback Statute risk is likely mitigated. 

For additional web-based resources available to assist you in monitoring the spread of the coronavirus on a global basis, you may wish to visit the websites of the CDC and the World Health Organization.

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