On March 30, 2020, the Secretary of the U.S. Department of Health and Human Services issued temporary but broad blanket waivers of certain requirements of the Stark Law in order to allow healthcare providers additional regulatory flexibility to address the COVID-19 crisis.  The waivers were granted pursuant to the Secretary’s authority under Section 1135 of the Social Security Act (the “Act”), which authority (and such waivers) will terminate on or before the end of the COVID-19 national emergency/public health emergency.  The waivers are effective retroactively to March 1, 2020.  The full text can be found here.

The Physician Self-Referral Law (Section 1877 of the Act), more commonly known as the “Stark Law”, generally prohibits a physician from referring a Medicare patient for certain “designated health services” (or “DHS”)[1] to any health care facility or entity in or with which the referring physician (or an immediate family member of the physician) has a direct or indirect financial relationship[2], unless the financial relationship satisfies one or more specific Stark Law exceptions.  The Stark Law also prohibits the entity furnishing the DHS from presenting claims to Medicare, the beneficiary or any other third party for DHS that are furnished as a result of a prohibited referral.

The Stark Law is a strict liability statute, meaning that the statute is automatically violated whenever a prohibited referral occurs between parties to a financial relationship that does not meet a Stark Law exception, regardless of the parties’ intent.  Parties that violate the Stark Law are subject to, among other things, denial of payment of claims related to prohibited referrals, refund/repayment of amounts collected for such claims, civil money penalties for knowing violations of the prohibition and potential False Claims Act liability.

The blanket waivers apply only to remuneration directly between a DHS entity and either a physician, a physician organization (where a physician is permitted to “stand in the shoes” of such organization), or an immediate family member of the physician.  In addition, such remuneration and referrals must also be solely related to one or more “COVID-19 Purposes” listed below:

  • 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 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;
  • Ensuring the ability of health care providers to address patient and community needs due to the COVID-19 outbreak in the United States;
  • Expanding the capacity of health care 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; or
  • 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.

Absent a determination of fraud or abuse, all sanctions and penalties (including non-reimbursement) are waived with respect to non-compliance with the Stark Law solely related to one or more “COVID-19 Purposes” in the following contexts:

  1. 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) to the entity.
  2. 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).
  3. 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).
  4. 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).
  5. 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.
  6. 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.
  7. 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.
  8. 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).
  9. Remuneration from an entity to a physician (or the immediate family member of a physician) in the form of nonmonetary compensation that exceeds the limit set forth in 42 CFR 411.357(k)(1).
  10. 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.
  11. 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).
  12. 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 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 December 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 CFR 411.362(b)(2) and (c).
  13. 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, provided that: (i) the hospital does not satisfy one or more of the requirements of section 1877(i)(1)(A) through (E) of the Act; (ii) the hospital enrolled in Medicare as a hospital during the period of the public health emergency described in section II.A of this blanket waiver document; (iii) the hospital meets the Medicare conditions of participation and other requirements not waived by the Centers for Medicare & Medicaid Services (“CMS”) during the period of the public health emergency described in section II.A of this blanket waiver document; 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.
  14. 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 an immediate family member of the physician) has an ownership or investment interest.
  15. The referral 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 a “same building” or “centralized building” for purposes of 42 CFR 411.355(b)(2).
  16. 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.
  17. 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.
  18. 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 blanket waivers set forth above.

The full text of the waivers (available here) provides various illustrative examples of situations where the foregoing waivers might be employed.

Although no prior approval, notice or submissions are required for parties to use the foregoing waivers, the parties must nevertheless develop and maintain records regarding the waiver arrangements that are available to the Secretary upon request.

The foregoing waivers apply nationwide but are only temporary in nature.  However, CMS has stated that any narrowing or termination of the waivers will apply on a prospective basis only.  Nevertheless, parties making use of such waivers should be aware that any arrangements that would otherwise be non-compliant with the Stark Law will presumably need to be restructured or undone (perhaps quickly) once the waivers are terminated or expire, noting further that it is not clear how much advance notice of termination/expiration CMS will provide.  Therefore, it may be advisable to build unwind or modification provisions into any updated agreements, or, instead, have agreements automatically terminate or revert back to their prior structure, where appropriate, upon termination/expiration of the waivers.

[1] DHS are defined in 42 C.F.R. §411.351 to include the following services that are payable, in whole or in part, by Medicare:  (i) clinical laboratory services; (ii) physical therapy, occupational therapy, and outpatient speech-language pathology services; (iii) radiology and certain other imaging services, including (but not limited to) MRIs, CAT scans,  ultrasound services and nuclear medicine; (iv) radiation therapy services and supplies; (v) durable medical equipment and supplies; (vi) parenteral and enteral nutrients, equipment, and supplies; (vii) prosthetics, orthotics, and prosthetic devices; (viii) home health services; (ix) outpatient prescription drugs; and (x) inpatient and outpatient hospital services.

[2] A “financial relationship,” for purposes of the Stark Law, is defined as either an ownership or investment interest, or a compensation arrangement, whether direct or indirect.  A compensation arrangement “is any arrangement involving remuneration, direct or indirect, between a physician (or a member of a physician’s immediate family) and an entity.”  42 C.F.R. §411.354(c).