Stark Law Waivers During the COVID-19 Pandemic
On March 30, the Secretary of the Department of Health and Human Services (Secretary) issued a waiver related to the Stark Law to enable hospitals and other health care providers to better support one another in responding to the coronavirus (COVID-19). The nationwide waiver issued by the Secretary is retroactive to March 1, 2020 and will remain in effect during the COVID-19 public health emergency.
The Stark Law is a strict liability statute that prohibits (1) a physician from making referrals for designated health services (DHS) payable by a federal health care program to an entity with which he or she, or an immediately family member, has a financial relationship, and (2) an entity from filing claims for DHS furnished pursuant to a prohibited referral. Given the scope of the Stark Law prohibition and its harsh penalties, relationships between physicians and other providers must fit into narrowly defined exceptions to be protected. These exceptions provide little flexibility and do not address some of the beneficial relationships that providers would like to enter into during these unprecedented times.
Recognizing this, the Secretary announced a waiver of sanctions under the Stark Law to help ensure that a sufficient amount of health care items and services are available to meet the community need and that healthcare providers who respond in good faith to assisting those in crisis during this pandemic can seek and receive reimbursement, even when they are not strictly in compliance with the Stark Law.
The waiver applies only to financial relationships and referrals that are related to the COVID-19 pandemic, and remuneration “must be directly between the entity and (1) the physician or 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.” The Secretary specifically defines a COVID-19 purpose to mean:
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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;
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securing the services of physicians or 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;
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ensuring the ability of health care providers to address patient and community needs due to the COVID-19 outbreak in the United States;
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expanding the capacity of health care providers to address patient and community needs due to the COVID-19 outbreak in the United States;
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shifting the diagnosis and care of patients to appropriate alternative settings due to the COVID-19 outbreak in the United States; or
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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 his waiver, the Secretary lists 18 different types of remuneration, referrals and claims that typically would violate the Stark Law, but during the COVID-19 outbreak, will be permitted. For instance, the waiver protects remuneration to a physician that is not fair market value or rental or lease payments that are below fair market value as long as the relationship is for one of the COVID-19 purposes listed above. It also protects loans from an entity to a physician with an interest rate below fair market value and terms that are not available from a lender. Again, the loan must be for one of the COVID-19 purposes like shoring up a struggling community practice that is vital to meeting the needs of its patients and the community. If a physician begins working for a hospital to assist the hospital with its surge, the hospital and physician typically would need a signed agreement documenting the compensation terms before the hospital could pay the physician. To help provide greater flexibility, the waiver enables the hospital to pay the physician before a written agreement is signed. A full list of the relationships protected by the waiver is available here.
If you are a provider who wishes to rely upon one of these waivers, there are several important limitations that must be kept in mind.
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The waivers apply only to direct financial relationships that are “solely related” to one of the defined COVID-19 purposes and strictly comply with “all conditions of the blanket waiver.”
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Providers must remember that the waivers are retroactive only to March 1, 2020 and can be relied upon only during the course of the pandemic.
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The government emphasized that it will apply the waiver to situations that otherwise would violate the Stark Law, but only “absent the government’s determination of fraud and abuse.” This statement leaves open the possibility that the government may review these arrangements in the future.
With this in mind, accurate, thorough, and timely record keeping will be critical if arrangements are questioned in the future. While there is not much guidance offered by the government as to what would be sufficient, parties should take care to document the reasons for entering into certain arrangements and ensure that they are directly related to one of the COVID-19 purposes as defined by the Secretary.
In an effort to avoid the need for parties to undertake a separate legal review under the Anti-Kickback Statute (AKS), the Office of the Inspector General (OIG) issued a policy statement on April 3 (OIG Policy Statement). Under the OIG Policy Statement, the OIG will not impose administrative sanctions relating to the commission of acts described in the AKS, with respect to remuneration covered in the Stark Law blanket waivers #1-11. The OIG Policy Statement applies to conduct occurring on or after April 3 (as compared to the Stark Law blanket waivers which are retroactively applied to March 1, 2020) and terminates the same date as the Stark Law blanket waivers. OIG emphasized that the OIG Policy Statement has no bearing on arrangements that implicate the AKS and are not covered by the blanket waivers #1-11. As such, the intent behind an arrangement will continue to remain important in both AKS compliance (especially for arrangements outside of blanket waivers #1-11) and assessing compliance with Stark Law waivers.
While the Stark Law waiver provides some leeway for health care providers to support one another in the pandemic response, given the complexities of the Stark Law and AKS, providers are strongly encouraged to work with legal counsel when entering into arrangements that may implicate either of these laws.
Troutman Sanders lawyers are staying abreast of developments and are available to assist clients as they navigate this rapidly evolving situation. Please visit the Pepper Hamilton LLP / Troutman Sanders LLP COVID-19 Resource Center for COVID-19-related news and developments, recommendations from leading health organizations, and tools that businesses can use free of charge.