Alerts

CMS Issues Stark Law Waivers for COVID-19 Purposes

Alerts / April 1, 2020

To enable healthcare entities to address the unique and exigent circumstances created by the COVID-19 public health emergency, the secretary of the Department of Health and Human Services (HHS) issued waivers of sanctions under the Stark Law (Waivers) on March 30. The Waivers are retroactive to Mar. 1 and may be renewed during the declared COVID-19 national and public health emergency (the Emergency) under § 1135(e) of the Social Security Act. HHS may modify or terminate the Waivers on a prospective basis. Notices of any change or termination will be posted on the Centers for Medicare and Medicaid Services (CMS) website.

The Waivers are limited only to remuneration or referrals solely related to “COVID-19 Purposes,” which are defined as:

  • 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 healthcare 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 healthcare providers to address patient and community needs due to the COVID-19 outbreak in the United States.
  • Expanding the capacity of healthcare 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.
  • 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.

The Waivers are also limited only to remuneration directly between the designated health service provider entity and (1) the physician or the physician organization in whose shoes the physician stands under 42 C.F.R. § 411.354(c), or (2) the immediate family member of the physician. Therefore, it will be important to confirm that any arrangements addressing COVID-19 Purposes entered into between ACOs, CINs or other organizations that may serve as intervening entities either (i) do not create an indirect financial relationship, or (ii) fit within another exception under the Stark Law.

Parties utilizing the Waivers are not required to submit any documentation or notice to HHS or CMS in advance of their use. However, as a best practice, the parties should develop and maintain timely records relating to their use of the Waivers and must make such records available to the secretary of HHS upon request.

Given the indirect impacts of COVID-19 on medical practice operations and financial performance due to interruptions in routine care and delayed elective procedures, entities may desire to structure arrangements that rely on a Stark Law Waiver addressing a medical practice or business interruption as described above. Such arrangements should be carefully evaluated and implemented.

The Waivers address the following Stark exceptions:

1. Office Space Exception.

a. The Waivers will allow rental charges paid by an entity to a physician (or an immediate family member of a physician) that are below fair market value for the entity’s lease of office space from the physician (or the immediate family member of the physician).

For example, to accommodate patient surge, a hospital can rent office space or equipment from an independent physician practice at below fair market value or at no charge.

b. Rental charges paid by a physician (or an immediate family member of a physician) to an entity that are below fair market value for the physician’s (or immediate family member’s) lease of office space from the entity will also be covered by the Waivers.

For example, a hospital can provide free use of medical office space on its campus to allow physicians to provide timely and convenient services to patients who come to the hospital but do not need inpatient care.

2. Equipment Rental Exception.

a. Rental charges paid by an entity to a physician (or an immediate family member of a physician) that are below fair market value for the entity’s lease of equipment from the physician (or the immediate family member of the physician) are included in the Waivers.

b. In addition, rental charges paid by a physician (or an immediate family member of a physician) to an entity that are below fair market value for the physician’s (or immediate family member’s) lease of equipment from the entity will be covered by the Waivers.

For example, an entity can provide free telehealth equipment to a physician practice to facilitate telehealth visits for patients who are observing social distancing or in isolation or quarantine.

3. Employment and Personal Services Exceptions. Remuneration from an entity 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) for the entity will not trigger the Stark Law during the Emergency.

For example, a hospital can pay physicians above their previously contracted rate for furnishing professional services for COVID-19 patients in particularly hazardous or challenging environments.

4. Written Agreement Requirements. Referrals by a physician to an entity 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 Waivers set forth above, will not run afoul of the Stark Law during the Emergency.

For example, a compensation arrangement that commences prior to the arrangement being documented in writing and being executed by the parties, but that satisfies all other requirements of the applicable exception, will not trigger the Stark Law during the Emergency. For example:

  • A physician can provide call coverage services to a hospital before the arrangement is documented and signed by the parties.
  • A physician with in-office surgical capability can deliver masks and gloves to the hospital before the purchase arrangement is documented and signed by the parties.
  • A physician can establish an office in a medical office building owned by the hospital and begin treating patients who present at the hospital for healthcare services but do not need hospital-level care before the lease arrangement is documented and signed by the parties.
  • The daughter of a physician can begin working as the hospital’s paid COVID-19 outbreak coordinator before the arrangement is documented and signed by the parties.

5. Fair Market Value Exception.

a. Remuneration from an entity to a physician (or an immediate family member of a physician) that is below fair market value for items or services purchased by the entity from the physician (or the immediate family member of the physician) will not trigger the Stark Law during the Emergency.

For example, a hospital or home health agency can purchase items or supplies from a physician practice at below fair market value or receive such items or supplies at no charge.

An entity can also, for example, sell personal protective equipment to a physician, or permit the physician to use space in a tent or other makeshift location, at below fair market value (or provide the items or permit the use of the premises at no charge).

b. Remuneration from a physician (or an immediate family member of a physician) to an entity that is below fair market value for the use of the entity’s premises or for items or services purchased by the physician (or the immediate family member of the physician) from the entity will also be subject to the Waivers.

For example, a hospital’s employed physicians can use the medical office space and supplies of independent physicians, away from their usual medical office space on the campus of the hospital, to treat patients who are not suspected of exposure to COVID-19 in order to separate them from patients suspected of COVID-19 exposure.

6. Medical Staff Incidental Benefits. During the Emergency, remuneration from a hospital to a physician in the form of medical staff incidental benefits that exceeds the limit set forth in 42 C.F.R. § 411.357(m)(5) shall not trigger the Stark Law.

For example, a hospital can provide meals, comfort items (for example, a change of clothing) or on-site child care with a value greater than $36 per instance to medical staff physicians who spend long hours at the hospital during the COVID-19 outbreak.

7. Nonmonetary Compensation Exception. Remuneration from an entity to a physician (or the immediate family member of a physician) in the form of nonmonetary compensation (apart from the medical staff incidental benefits noted above) that exceeds the limit set forth in 42 C.F.R. § 411.357(k)(1) will not be subject to Stark liability during the Emergency.

For example, a hospital can send a hospital employee to an independent physician’s practice to assist with staff training on COVID-19, intake and treatment of patients most appropriately seen in a physician’s office, and care coordination between the hospital and the practice.

An entity can also provide, for example, nonmonetary compensation to a physician (or an immediate family member of a physician) in excess of the $423 per year limit (per physician or immediate family member), such as continuing medical education related to the COVID-19 outbreak, supplies, food or other grocery items, isolation-related needs (for example, hotel rooms and meals), child care, or transportation.

8. Below Market-Rate Loans.

a. Remuneration from an entity 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, will not be subject to Stark liability during the Emergency.

Examples include a hospital lending money to a physician practice that provides exclusive anesthesia services at the hospital in order to offset lost income resulting from the cancellation of elective surgeries to ensure capacity for COVID-19 needs, and a hospital covering a physician’s 15 percent contribution for electronic health record (EHR) items and services in order to continue the physician’s access to patient records and ongoing EHR technology support services.

b. The Waivers expressly include remuneration from a physician (or the immediate family member of a physician) to an entity resulting from a loan to the entity (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)

For example, a physician owner of a hospital can lend money to the hospital to assist with operating expenses of the hospital, including staff overtime compensation, related to the COVID-19 outbreak.

9. Physician Hospital Ownership Exceptions.

a. The Waivers during the Emergency protect referrals 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 Dec. 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 C.F.R. § 411.362(b)(2) and (c).

For example, with state approval (if required), a physician-owned hospital can temporarily convert observation beds to inpatient beds or otherwise increase its inpatient bed count to accommodate patient surge during the COVID-19 outbreak.

b. Similarly, 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, are protected by the Waivers, provided that (1) the hospital does not satisfy one or more of the requirements of section 1877(i)(1)(A) through (E) of the act; (2) the hospital enrolled in Medicare as a hospital during the period of the Emergency described in the Waivers; (3) the hospital meets the Medicare conditions of participation and other requirements not waived by CMS during the period of the Waivers; and (4) the hospital’s Medicare enrollment is not inconsistent with the Emergency Preparedness or Pandemic Plan of the state in which it is located.

For example, if consistent with its state’s Emergency Preparedness or Pandemic Plan, a physician-owned ambulatory surgical center can enroll as a Medicare-participating hospital, even if it is unable to satisfy the requirements of Section 1877(i)(1) of the act, in order to provide medically necessary care to patients during the COVID-19 outbreak.

10. Home Health Services Ownership. The referral by a physician of a Medicare beneficiary for the provision of designated health services by a home health agency (1) that does not qualify as a rural provider under 42 C.F.R. § 411.356(c)(1); and (2) in which the physician (or an immediate family member of the physician) has an ownership or investment interest will not be subject to Stark liability during the Emergency.

For example, a physician can refer a Medicare beneficiary to a home health agency owned by an immediate family member of the physician because there are no other home health agencies with capacity to provide medically necessary home health services to the beneficiary during the COVID-19 outbreak.

11. Group Practice Exceptions.

a. The Waivers expressly expand the scope of referrals allowed by group practices to include referrals 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 the “same building” or a “centralized building” for purposes of 42 C.F.R. § 411.355(b)(2).

For example, a group practice can furnish medically necessary magnetic resonance imaging (MRI) or computed tomography (CT) services in a mobile vehicle, van or trailer in the parking lot of the group practice’s office to Medicare beneficiaries who would normally receive such services at a hospital, but should not go to the hospital due to concerns about the spread of the COVID-19 outbreak.

b. 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, will not trigger the Stark Law during the Emergency.

For example, a physician in a group practice whose principal medical practice is office-based can order in-home radiology services that are furnished by the group practice to a Medicare beneficiary who is isolated or observing social distancing.

12. Patients Residing in a Rural Area. During the Emergency, the referral by a physician to an entity with which the physician’s immediate family member has a financial relationship will not run afoul of the Stark Law if the patient who is referred resides in a rural area.

For example, a physician can refer a Medicare beneficiary who resides in a rural area for physical therapy furnished by the medical practice that is owned by the physician’s spouse and located within one mile of the beneficiary’s residence.

While HHS and CMS have significantly relaxed Stark Law requirements during the Emergency, it will be important for parties utilizing the Waivers to ensure that the arrangements end or are reconfigured when the Waivers expire or are modified. In addition, it is important that the parties confirm that remuneration and referrals are solely related to COVID-19 Purposes and that they maintain records relating to the use of the Waivers that can be made available to the secretary of HHS upon request.

Authorship Credit: Robert M. Wolin, Kristen McDermott Woodrum and Kaitlyn Appleby

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