News & Events

CMS Issues Blanket Stark Law Waivers

This article was also posted as a guest column in the Memphis Business Journal.

On March 30, 2020 (retroactively effective as of March 1, 2020), CMS issued blanket – nationwide – waivers of sanctions under the Stark Law in response to the COVID-19 public health emergency.

Overview of the Law

When the President of the United States declares an emergency or disaster under the Stafford Act or the National Emergencies Act, and the Secretary of the Department of Health and Human Services (the “Secretary”) declares a Public Health Emergency under the Public Health Service Act, the Secretary may invoke his authority to waive or modify certain Medicare, Medicaid, Children’s Health Insurance Program, and HIPAA requirements. The blanket waivers issued by CMS on March 30th deal with the Stark Law, which prohibits a physician from making referrals for certain designated health services (“DHS”) payable by Medicare to an entity with which the physician (or the physician’s immediate family member) has a financial relationship, unless an exception applies. Furthermore, the Stark Law prohibits the entity from submitting claims for DHS furnished pursuant to a prohibited referral.

Key Takeaways and Examples

  • The Stark Law blanket waivers only apply to financial relationships and referrals that are related to the COVID-19 public health emergency: Specifically, remuneration and referrals described in the blanket waivers must be “solely related” to COVID-19 Purposes, which means: (1) diagnosis or medically necessary COVID-19 treatment for any patient or individual, regardless of whether the patient or individual is diagnosed with COVID-19; (2) securing medically necessary patient care services, including services unrelated to COVID-19, in response to this public health emergency; (3) ensuring the availability and expanding the capacity of health care providers to address patient and community needs due to COVID-19; (4) redirecting patients to appropriate alternative settings for treatment due to COVID-19; or (5) addressing medical practice or business interruption due to this public health emergency to maintain medical care and services for patients and the community.  Parties seeking to utilize a Stark Law blanket waiver should carefully assess whether a particular arrangement is sufficiently related to the COVID-19 public health emergency.
  • The Stark Law blanket waivers apply only to direct financial relationships between an entity and a physician, physician organization or immediate family member.  With respect to physician organizations, the physician must “stand in the shoes” of his or her physician organization to create a direct financial relationship with the entity.  Importantly, based on the plain language of CMS’s blanket waiver, it does not apply to indirect financial relationships with so-called “intervening entities” between the physician and the entity (e.g., a hospital lease with a “propco” owned by a physician that is not a physician organization).
  • Set forth below are some examples of the blanket waivers to the Stark Law, pursuant to which CMS will continue to make payment for DHS and waive sanctions:
    • Space and Equipment Leases: Remuneration from an entity to a physician or an immediate family member that is below fair market value for the lease of office space or equipment.  Importantly, CMS has provided several examples regarding these categories, including:
      • A hospital rents office space from an independent physician practice at below fair market value or for free in order to accommodate patient surge; or
      • A hospital’s employed physicians use independent physicians’ medical office space and supplies to treat patients without COVID-19 exposure away from their usual medical office space on the hospital campus to isolate patients with potential COVID-19 exposure.
      • It is worth pointing out that CMS did not include a waiver allowing an entity to pay a physician above fair market value to lease space or equipment, but a physician may pay an entity less than fair market value to space or equipment from the entity.
    • Service Arrangements:  Remuneration from an entity to a physician or an immediate family member that is above or below fair market value for personally performed services.  An example from CMS includes a hospital paying a physician above the originally-contracted rate for professional services to COVID-19 patients as “combat pay.”
    • Medical Staff Incidental Benefits and Non-Monetary Compensation: During the period of this public health emergency, CMS will allow for medical staff incidental benefits paid by a hospital to a physician to exceed $36 per instance and nonmonetary compensation from an entity to a physician or a physician’s immediate family member to exceed $423 per year.  These benefits include, for example, meals, change of clothes, on-site child care, groceries, and transportation.
    • Loans: An entity (e.g., a hospital) may loan money to a physician practice with an interest rate below fair market value or on preferential terms, related to a COVID-19 purpose.  CMS provides an example of a hospital lending money to a physician practice that provides exclusive anesthesia services at the hospital to offset lost income resulting from the cancellation of elective surgeries to ensure capacity for COVID-19 needs.  While not explicitly stated, it stands to reason based on CMS’s example that a hospital should have a pre-existing relationship with an independent medical practice and that CMS would not intend to make hospitals the preferred lending institutions for otherwise unrelated physicians/physician organizations during this public health crisis.
    • Hospital Converted from Ambulatory Surgery Center: Referrals and ownership by a physician to an ambulatory surgical center that converts to a hospital on or after March 1, 2020, as permitted by the state’s Emergency Preparedness or Pandemic Plan.
    • Group Practices:  Physicians making referrals to their group practices for medically necessary DHS performed in a location that is not the “same building” or “centralized building.”  For example, a physician organization that otherwise meets the Stark Law definition of “group practice” may furnish medically necessary MRI or CT services in a mobile vehicle, van, or trailer in the group practice office parking lot to Medicare beneficiaries who would normally receive such services at a hospital, but should not go to the hospital due to concerns about COVID-19.
    • Writing and Signature Requirements: A compensation arrangement may commence even if it does not satisfy the writing or signature requirements of an applicable exception, as long as the arrangement satisfies all other requirements of an applicable exception.  For example, a physician may provide on-call coverage to a hospital before the agreement is memorialized in writing and signed, but the compensation must be set in advance, commercially reasonable and not take into account the volume or value of referrals. Based on the CMS blanket waiver, however, the hospital could pay the physician more than fair market value for these personally performed services during the COVID-19 pandemic.
  • Effective April 3, 2020, the Office of Inspector General (the “OIG”) will not impose sanctions under the federal Anti-Kickback Statute (the “AKS”) for remunerative arrangements covered by Stark Law Blanket Waivers. The OIG issued a Policy Statement on April 3, 2020, noting certain financial relationships that implicate the Stark Law could also potentially implicate and/or violate the AKS. Recognizing the unprecedented circumstances of the public health emergency, the OIG will not impose AKS sanctions for arrangements protected by the Stark Law blanket waivers. Significantly, the Policy Statement applies only to conduct occurring on or after April 3, 2020. Meanwhile, as stated above, the Stark Law blanket waivers are retroactively effective March 1, 2020. As a result, there is a period between March 1, 2020 and April 3, 2020 where the OIG could technically impose AKS sanctions for financial relationships structured to meet the Stark Law blanket waivers that could otherwise violate the AKS.  For example, if an “entity” pays a physician more than fair market value for services, or if a physician pays below fair market value to lease space, for a so-called “COVID-19 Purpose,” which would be protected under the Stark Law blanket waivers since March 1, the OIG could nevertheless impose sanctions for those arrangements between March 1 and April 2 if “any one purpose” is to induce or in return for patient referrals in violation of the AKS.  We hope this is purely an academic exercise and that OIG would ultimately apply a practical approach during this COVID19 crisis, especially considering the OIG’s indication that the Policy Statement is intended “to avoid the need for parties to undertake a separate legal review under the [AKS] for arrangements protected by the [blanket waivers].” Nevertheless, parties utilizing the Stark Law blanket waivers should be aware of and account for this technical discrepancy when assessing arrangements under the AKS.

Practical Considerations and Conclusion

The Stark Law blanket waivers will undoubtedly serve as a crucial tool to providers and facilities struggling to fully comply with the technical and some substantive elements of Stark Law in the midst of the COVID-19 public health emergency. Parties utilizing the Stark Law blanket waivers should be aware that they are effective retroactively to March 1, 2020 and will not end until the public health emergency ends.  There does not appear to be a grace period, however, to unwind temporary arrangements after the COVID-19 pandemic subsides. Accordingly, entities and physicians should consider practical implications of using the blanket waivers, such as an automatic termination or reversion to prior contract terms. Furthermore, while fair market value requirements have been waived in certain circumstances, parties should still conduct a risk assessment under the Anti-Kickback Statute and other applicable federal and state fraud and abuse laws, rules, and regulations.  Finally, providers may seek an individual Stark Law waiver from CMS by submitting a request to