CMS Issues Guidance on Blanket Stark Law Waivers During COVID-19 Crisis

When the President has declared a national emergency under authorizing legislation, the Secretary of the U.S. Department of Health and Human Services is authorized to grant waivers to certain prohibitions under the Social Security Act, which includes the Stark Law, during a declared public health emergency in order to ensure (i) sufficient health care items and services are available to individuals in emergency areas, and (ii) health care workers who furnish such items and services, but would otherwise be unable to meet one or more requirements under the law, can be reimbursed for such items and services and have their non-compliance exempt from sanctions, provided that they furnish the items and services in good faith and do not engage in any fraud or abuse. Utilizing this authority, the Secretary has issued blanket waivers to the Stark Law in response to the COVID-19 crisis.

The Stark Law generally prohibits physicians from making referrals for designated health services payable by a federal health care program to an entity in which the physician or their immediate family member has a financial interest, and it prohibits such entity from submitting claims to federal programs for reimbursement for services furnished as a result of a prohibited referral, unless a specific Stark Law exception applies with respect to a referral.

The Secretary has issued the following Stark Law waivers:

1.  Personally Performed Services – The Stark Law prohibition will not apply to remuneration from an entity to a physician (or a physician’s immediate family member) that is above or below fair market value for services personally performed by the physician (or the immediate family member) to the entity.
2. Rental of Office Space or Equipment – The Stark Law prohibition will not apply to rental charges paid by an entity to a physician (or a physician’s immediate family member), or by a physician (or a physician’s immediate family member) to an entity, that is below fair market value for the lease of office space or equipment.
3. Purchase of Items or Services – The Stark Law prohibition will not apply to remuneration from an entity to a physician (or a physician’s immediate family member), or from a physician (or a physician’s immediate family member) to an entity, that is below fair market value for the purchase of items or services.
4. Medical Staff Benefits – The Stark Law prohibition will not apply to 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) (i.e., less than $25).
5. Nonmonetary Compensation – The Stark Law prohibition will not apply to remuneration from an entity to a physician (or a physician’s immediate family member) in the form of nonmonetary compensation that exceeds the limit set forth in 42 CFR 411.357(k)(1) (i.e., $300 per calendar year).
6. Loans – The Stark Law prohibition will not apply remuneration from an entity to a physician (or a physician’s immediate family member), or from a physician (or a physician’s immediate family member) to an entity, that results from a loan: (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 (or the immediate family member), or is not in a position to generate business for the physician (or the immediate family member).
7. Referrals by Physician Owners of Hospitals – The Stark Law prohibition will not apply to 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 it was licensed without prior application and approval of such expansion as required by law.
8. Referrals by Physician Owners of ASCs Converted to Hospitals – The Stark Law prohibition will not apply to the referral 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: (1) the hospital does not satisfy one or more of the requirements of section 1877(i)(1)(A) through (E) of the Social Security Act; (2) the hospital enrolled in Medicare as a hospital during the COVID -19 public health emergency; (3) the hospital meets the Medicare conditions of participation and other requirements not waived by CMS during the COVID -19 public health emergency; 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.
9. Referrals by Physician to Home Health Agency – The Stark Law prohibition will not apply to 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 physician’s immediate family member) has an ownership or investment interest.
10. Referrals by Physician in a Group Practice – The Stark Law prohibition will not apply to the referral by a physician in a group practice for medically necessary designated health services furnished by the group practice (1) in a location that does not qualify as a “same building” or “centralized building” for purposes of 42 CFR 411.355(b)(2), or (2) in the patient’s private home, 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.
11. Referrals of Patients Residing in Rural Areas – The Stark Law prohibition will not apply to the referral by a physician to an entity with which the physician’s immediate family member has a financial relationship if the patient who is referred resides in a rural area.
12. Waiver of Signed Writing Requirement for Other Stark Law Exceptions – The Stark Law prohibition will not apply to the referral by a physician to an entity with which the physician (or physician’s immediate family member) has a compensation arrangement that does not satisfy the writing or signature requirement(s) of an applicable Stark Law 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.

Any remuneration covered by these waivers must be “directly between the entity 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.”  Furthermore, these waivers only apply to remuneration and referrals related solely to “COVID -19 Purposes”, defined as: (i) diagnosis or medically necessary treatment of COVID -19 for any patient, regardless of whether such patient is diagnosed with a confirmed case of COVID -19; (ii) securing services of physicians or other health care practitioners to furnish medically necessary services, including services not related to diagnosis and treatment of Covid-19, in response to the COVID -19 outbreak; (iii) ensuring health care providers have the ability to address patient and community needs due to the COVID -19 outbreak; (iv) expanding capacity of health care providers to address patient and community needs due to the COVID -19 outbreak; (v) shifting diagnosis and care of patients to appropriate settings; and/or (vi) addressing medical practice or business interruption due to the COVID -19 outbreak. CMS will pay for claims that, but for satisfying the terms of the blanket waivers, would violate the Stark Law and hence be non-reimbursable.

The waivers were issued on March 30, 2020, but apply retroactively as of March 1, 2020. Further, these waivers will only apply for so long as the COVID -19 outbreak continues, and “may not be used after the expiration of the Secretary’s authority to grant waivers for the COVID-19 outbreak in the United States,” pursuant to 42 U.S.C. § 1135(e). Although no special authorization request is required in advance of relying on the waivers, the Secretary recommends that health care providers and entities maintain sufficient records and documentation relating to their use of a waiver “in a timely manner as a best practice.” All such records and documentation must be made available to the Secretary upon request.  Further, given the carefully defined circumstances under which the waivers may be used, such documentation could become important later in justifying reliance on a waiver if it is ever challenged.

Notwithstanding the availability of these blanket waivers under the federal Stark Law, however, providers and entities should also take into consideration state anti-referral laws and whether any similar waivers have been enacted by applicable state authorities.