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The Center for Medicare and Medicaid Services (CMS) recently issued new guidance waiving the threat of sanctions under the federal Physician Self-Referral law, commonly known as the “Stark Law,” for certain arrangements between healthcare providers battling the COVID-19 pandemic. Here are details regarding the breadth of the new guidance as well as additional considerations for interested providers.

The Stark Law generally prohibits physicians from referring certain designated health services (such as inpatient and outpatient services, clinical laboratory services and prescription drugs) to an entity with which the physician has a financial relationship, unless an exception applies. While numerous exceptions to the Stark Law exist, many are technical and require careful consideration and precise structuring for arrangements to avoid scrutiny and sanctions by CMS.

Under the new CMS “Blanket Waivers,” financial relationships or referral arrangements established after March 1, 2020 will be exempt from CMS sanctions regardless of whether they meet a Stark Law exception, if the arrangements are designed to combat the COVID-19 pandemic. The blanket waivers will remain in effect until the termination of the COVID-19 national emergency declaration by President Trump.

In issuing the blanket waivers, CMS has enabled healthcare providers to engage in creative solutions to address the COVID-19 crisis, even if they are, in good faith, unable to first comply with the sometimes byzantine requirements of a Stark Law exception.

The Waivers

The blanket waivers cover numerous arrangements and provide significant flexibility to healthcare providers in addressing the COVID-19 crisis. These include, with illustrative examples:

  • Easing the requirement that payments to a physician for items or services be “fair market value,” for example allowing a physician to discount or donate his or her time or equipment or allowing an institution to pay above-market rates to address shortfalls.
  • Providing flexibility in rental charge amounts for leases of space and equipment between entities and physicians.
  • Allowing hospitals or entities to provide additional incidental, nonmonetary benefits, such as housing in close proximity to where they are treating COVID-19 patients.
  • Permitting loans between entities and physicians at interest rates below fair market value and on terms not generally available to the public, for example to allow for emergency infusions of capital.
  • Lifting prohibitions on increasing the number of beds in physician-owned hospitals in existence before the 2010 moratorium on new physician-owned hospitals.
  • Permitting certain physician-owned ASCs to convert to physician-owned hospitals after March 1, 2020, in order to provide hospital services to patients.
  • Providing flexibility in referring patients to physician-owned home health agencies temporarily providing designated health services.
  • Permitting group practices to refer to locations that would not qualify as the “same building,” for example to temporary spaces set up by the practice to address influxes of patients or quarantine concerns.
  • Allowing group practice physicians who do not normally treat patients in the patient’s home to provide services in private homes, assisted living facilities or independent living facilities.
  • Providing that compensation arrangements that otherwise meet the requirements of a Stark Law exception do not need to be reduced to writing or signed by the parties in order to be compliant.

CMS also provided a number of its own examples of permissible arrangements under the blanket waivers, noting the breadth of flexibility under the guidance, including situations where:

  • To accommodate patient surge, a hospital rents office space or equipment from an independent physician practice at below fair market value or at no charge.
  • A hospital’s employed physicians use the medical office space and supplies of independent physicians in order to treat patients, who are not suspected of exposure to COVID-19, away from their usual medical office space on the campus of the hospital in order to isolate patients suspected of COVID-19 exposure.
  • An entity provides free telehealth equipment to a physician practice to facilitate telehealth visits for patients who are observing social distancing or in isolation or quarantine.
  • An entity provides 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 in the United States, supplies, food or other grocery items, isolation-related needs (for example, hotel rooms and meals), child care or transportation.
  • A group practice furnishes 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.
  • A physician provides call coverage services to a hospital before the arrangement is documented and signed by the parties.
  • A physician with in-office surgical capability delivers masks and gloves to the hospital before the purchase arrangement is documented and signed by the parties.

Practical Takeaways and Effective Use of the Blanket Waivers

While the blanket waivers are broad and will likely provide some much needed regulatory cover for providers facing the extreme challenges of the COVID-19 pandemic, some considerations apply. Specifically, the blanket waivers only apply to those arrangements necessary to address the pandemic and apply “absent the government’s determination of fraud or abuse.” Thus, CMS reserves the right to review suspicious, overbroad or potentially nefarious arrangements regardless of whether the relevant providers are delivering COVID-19 care.

CMS also notes that the blanket waivers are reserved for situations in which providers are acting “in good faith” but are “unable to comply. ” Many of the examples (such as physicians providing services before being able to reduce them to writing) suggest that providers should at least attempt in good faith to structure their arrangements in accordance with a Stark Law exception to the extent possible under the circumstances.

Although burdensome at this time of crisis, it is important that providers keep detailed records related to the circumstances surrounding any conduct that does not precisely meet a Stark Law exception. This applies particularly  to any attempts to structure the arrangement in a compliant manner, any roadblocks to compliance they experience (for example, timing considerations around reducing an arrangement to writing) and especially the necessity of the arrangement to combat the COVID-19 pandemic.

Buchanan’s Healthcare Team can help you evaluate any arrangements to ensure compliance under the blanket waivers.

For more cutting-edge perspectives on the legal and business implications of COVID-19, visit our COVID-19 resource center.