On March 30, 2020, Alex M. Azar II, the Secretary of the Department of Health and Human Services, under the authority given to him under Section 1135(b) of the Social Security Act (42 U.S.C. §1320b-5)[1], issued a series of waivers of the Stark Law (42 U.S.C. §1395nn).[2] Unlike the case-by-case waivers of the Stark Law that Secretary Azar previously gave the Centers for Medicare and Medicaid Services (“CMS”) authority to issue to individual designated health services providers based on their specific request[3], the Stark Law waivers issued by the Secretary on March 30 apply to all designated health services providers. As a result, these Stark Law waivers are referred to as blanket waivers.
The blanket waivers of the Stark Law issued by Secretary Azar on March 30 apply in the geographic area covered by President Trump’s proclamation on March 13, 2020 that the COVID-19 outbreak in the United States constitutes a National Emergency and Secretary Azar’s January 31, 2020 declaration of a Public Health Emergency as a result of the COVID-19 outbreak in the United States. The blanket waivers apply only to financial relationships and referrals that are related to the COVID-19 outbreak in the United States. Any remuneration described in the blanket waivers must be directly between the designated health services provider and: (1) the physician or the physician organization in whose shoes the physician stands under 42 CFR 411.354(c); or (2) the immediate family member of the physician. Further, the remuneration and referrals 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 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.
In particular, under the new Stark Law blanket waivers Secretary Azar waived sanctions under the Stark Law for referrals and claims related to the following actions to the extent they are solely related to a COVID-19 Purpose:
- Remuneration from a designated health services provider 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 designated health services provider.
- Rental charges paid by a designated health services provider to a physician (or an immediate family member of a physician) that are below fair market value for the designated health services provider’s lease of office space from the physician (or the immediate family member of the physician).
- Rental charges paid by a designated health services provider to a physician (or an immediate family member of a physician) that are below fair market value for the designated health services provider’s lease of equipment from the physician (or the immediate family member of the physician).
- Remuneration from a designated health services provider to a physician (or an immediate family member of a physician) that is below fair market value for items or services purchased by the designated health services provider from the physician (or the immediate family member of the physician).
- Rental charges paid by a physician (or an immediate family member of a physician) to a designated health services provider that are below fair market value for the physician’s (or immediate family member’s) lease of office space from the designated health services provider.
- Rental charges paid by a physician (or an immediate family member of a physician) to a designated health services provider that are below fair market value for the physician’s (or immediate family member’s) lease of equipment from the designated health services provider.
- Remuneration from a physician (or an immediate family member of a physician) to a designated health services provider that is below fair market value for the use of the designated health services provider’s premises or for items or services purchased by the physician (or the immediate family member of the physician) from the designated health services provider.
- 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).
- Remuneration from a designated health services provider 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).
- Remuneration from a designated health services provider 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.
- Remuneration from a physician (or the immediate family member of a physician) to a designated health services provider resulting from a loan to the designated health services provider: (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).
- 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).
- 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 this 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 this 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.
- 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.
- 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).
- 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.
- The referral by a physician to a designated health services provider with which the physician’s immediate family member has a financial relationship if the patient who is referred resides in a rural area.
- Referrals by a physician to a designated health services provider 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.
In his description of the new blanket waivers, Secretary Azar provides a number of examples of financial arrangements between designated health service providers, including hospitals, and physicians that will fit within the blanket waivers. He also points out that parties utilizing the blanket waivers must make records relating to their use of the blanket waivers available to the Secretary upon request. He also notes that although the blanket waivers may be used beginning on March 1, 2020 and do not require the submission of specific documentation or notice to the Secretary or CMS in advance of their use, parties should develop and maintain records of their use of the blanket waivers in a timely manner as a best practice.
Overall, the new blanket waivers of the Stark Law issued by Secretary Azar on March 30, 2020 should be helpful to designated health services providers, particularly hospitals, as they grapple with the myriad of challenges raised by the COVID-19 outbreak. That said, the blanket waivers still leave many questions unanswered. As a result, many challenges still remain with respect to the impact of the Stark Law on designated health services providers’ ability to combat the overall impact of the COVID-19 outbreak on the health care industry.
For example, the blanker waivers only apply to direct financial arrangements between designated health services and physicians. What if the financial arrangement in question is an indirect financial arrangement (i.e., the lease of a medical office from a subsidiary of a hospital instead of the hospital itself). Does this financial arrangement not deserve the benefit of the blanket waiver simply because the hospital owns and manages its medical office buildings through a subsidiary instead of doing it directly.
Further, what about financial arrangements which are under financial pressure or at risk of failure due to the economic devastation being caused by the COVID-19 outbreak. For example, what about a physician who is unable to pay his rent to the hospital for his/her medical office space due to the loss of revenue during the COVID-19 outbreak. It is certainly not clear that the hospital’s decision to waive or otherwise modify the physician’s rent in this situation would be classified as having a COVID-19 Purpose for purposes of utilizing the blanket waivers. Quite honestly, in the long run, it seems likely that the Stark Law issues resulting from the economic devastation caused by the COVID-19 outbreak will significantly outnumber the Stark Law issues raised by designated health services providers’ efforts to address the clinical issues raised by the COVID-19 outbreak.
In any event, at a minimum the new Stark Law blanket waivers are a good step in the right direction. Hopefully, Secretary Azar will see fit to take additional steps down this path to provide additional waivers so designated health services providers can address both the clinical and economic impact of the COVID-19 outbreak.
This blog post was drafted by Donn Herring, an attorney in the Spencer Fane LLP St. Louis office. For more information, visit spencerfane.com.
[1] Under Section 1135 of the Social Security Act, the Secretary is given the authority to grant waivers to ensure, to the maximum extent feasible, in any emergency area and during an emergency period that: (1) sufficient health care items and services are available to meet the needs of individuals in the emergency area enrolled in the Medicare, Medicaid, and CHIP programs; and (2) health care providers that furnish such items and services in good faith, but that are unable to comply with one or more requirements described in Section 1135(b) of the Social Security Act, may be reimbursed for such items and services and exempted from sanctions for such noncompliance—including sanctions under the Stark Law—absent any determination of fraud or abuse.
[2] https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/Spotlight
[3] https://www.phe.gov/emergency/news/healthactions/section1135/Pages/covid19-13March20.aspx
