Stark Law and Anti-Kickback Statute Enforcement: For HHS, It’s Not Business as Usual

The US Department of Health and Human Services recently announced the use of blanket waivers for healthcare providers under the Stark Law, and its Office of Inspector General noted it will exercise enforcement discretion in imposing administrative sanctions related to such blanket waivers under the Anti-Kickback Statute.

The ability to address patient care needs during the coronavirus (COVID-19) pandemic necessitates flexibility in structuring physician relationships without fear of incurring sanctions under the Federal Physician Self-Referral Law, known as the Stark Law, and the Anti-Kickback Statute (AKS). In recognition of this need, on March 30, the secretary of the US Department of Health and Human Services (HHS) issued blanket waivers of the Stark Law, modifying the earlier decision to issue individual waivers on a case-by-case basis. On April 3, the HHS Office of Inspector General (OIG) followed suit, announcing in a policy statement that it “will exercise its enforcement discretion not to impose administrative sanctions under the [AKS] for certain remuneration related to COVID-19 covered by the [Stark Law] Blanket Waivers,” subject to specified conditions.

Stark Law Waiver Evolution

The government’s overall response to the COVID-19 pandemic is constantly evolving, and the HHS secretary’s position on the Stark Law is no exception. On March 13, the secretary announced that providers and others would have the ability to seek individual waivers of the Stark Law. Similar to the agency’s practice in past emergencies, the Centers for Medicare and Medicaid Services (CMS) initially proposed that waivers would be granted only upon request, on a case-by-case basis.

However, perhaps out of necessity and in the recognition of the extraordinary challenges created by the COVID-19 pandemic, the agency revised its position and announced blanket waivers on March 30—retroactive to March 1, 2020. Importantly, these blanket waivers are self-implementing and do not require the submission of documentation or notice prior to use.

Note, however, that the blanket waivers are limited to direct financial relationships—i.e., those between an entity and the physician—without any intervening entities other than the physician organization in whose shoes the physician stands.

Although the blanket waivers do not require the submission of documentation or notice to the CMS in advance of their use, parties are required to prepare records relating to the use of these waivers and must make these records available to the HHS secretary on request.

Conditions for Application of Stark Law Blanket Waivers

The blanket waivers are limited to arrangements that are “solely related to COVID-19 purposes,” which are defined in the CMS waiver document as any of the following:

• Diagnosis or medically necessary treatment of COVID-19
• Securing the services of physicians and other healthcare practitioners to furnish patient care, including care not related to COVID-19
• Ensuring the ability of, and expanding the capacity of, healthcare providers to address COVID-19 related patient and community needs
• Shifting the diagnosis and care to alternate settings
• Addressing medical practice or business interruption due to COVID-19 in order to maintain the availability of medical care for patients and the community

The COVID-19 purposes are broad and should cover most arrangements between designated health services (DHS) entities and physicians and/or their immediate families. Importantly, assistance to a physician or physician organization that is experiencing financial stress as a result of COVID-19 is a recognized purpose, so long as the assistance is for the purpose of maintaining the availability of medical services in the community. We recommend that the records prepared in connection with use of the applicable waiver address how the arrangement meets one of the COVID-19 purposes identified in the CMS waiver document.

OIG Policy Statement

While the Stark Law blanket waivers are a welcome development for providers, questions did arise about AKS enforcement during the COVID-19 pandemic. The OIG responded to these questions by issuing a policy statement to inform the public that it will exercise AKS enforcement discretion during the emergency period, but limited to remuneration related to COVID-19 arrangements covered by the Stark Law blanket waivers.

In short, if parties to an arrangement meet the conditions of a Stark Law blanket waiver, the OIG will exercise enforcement discretion and will not impose AKS administrative sanctions related to the remuneration exchanged as part of the arrangement.

Limitations of OIG Policy Statement

There are limits to the OIG’s policy statement. For example, while the Stark Law blanket waivers are effective as of March 1, 2020, the OIG’s policy statement applies to conduct occurring on or after April 3, 2020, the date the statement was announced. The policy statement will terminate on the same date that the blanket waivers terminate.

Because the policy statement applies only to arrangements covered by the Stark Law blanket waivers (which are arrangements namely involving DHS entities and physicians), the statement does not apply to “financial relationships between pharmaceutical or device manufacturers and physicians, or between providers where no physician is involved.” The OIG may modify or terminate the policy statement at any time.

Arrangements Afforded Dual Protection

The OIG specified that its policy statement applies to 11 of the 18 identified Stark Law blanket waivers. These include blanket waivers for the following arrangements:

• Remuneration from an entity (e.g., hospital) to a physician or immediate family member that is above or below FMV for the services personally performed by the physician
• Rental charges paid by an entity to a physician or immediate family member that are below FMV for the entity’s lease of office space from the physician
• Rental charges paid by an entity to a physician or immediate family member that are below FMV for the entity’s lease of equipment from the physician
• Remuneration from an entity to a physician or immediate family member that is below FMV for items and services purchased from the physician
• Rental charges paid by a physician or immediate family member to an entity that are below FMV for the physician’s lease of office space from the entity
• Rental charges paid by a physician or immediate family member to an entity that are below FMV for the physician’s lease of equipment from the entity
• Remuneration from a physician or immediate family member that is below FMV for use of an entity’s premises or for items or services purchased by the physician from the entity
• Remuneration from a hospital to a physician in the form of medical staff incidental benefits that exceed the limit of $36 per instance
• Remuneration from an entity to a physician or immediate family member in the form of nonmonetary compensation that exceeds the limit of $423 per year
• Remuneration from an entity to a physician or immediate family member resulting from a loan to the physician with an interest rate that is below FMV or on terms not available on the open market (i.e., only available from the entity)
• Remuneration from a physician or immediate family member to an entity resulting from a loan to the entity with below FMV interest rate or on terms not available on the open market

The CMS waiver document provides several examples of blanket waivers, including the following:

• A hospital renting office space or equipment from a physician practice to accommodate patient surge at rates below fair market value (FMV)
• A DHS entity selling personal protective equipment (PPE) to a physician at rates below FMV or providing PPE at no cost
• A hospital providing free use of office space on campus to allow physicians to provide timely and convenient services to patients who come to the hospital but do not need inpatient care
• A hospital loaning money to a physician at an interest rate below FMV or on terms unavailable from a general commercial lender

As demonstrated above, the blanket waivers permit various arrangements where the compensation paid is below FMV. However, DHS entities do not have much latitude with respect to the payment of compensation that is above FMV.

There is only one blanket waiver that permits payment of above FMV compensation to a physician: remuneration from an entity (e.g., hospital) to a physician or immediate family member that is above (or below) FMV for the services personally performed by the physician.

Accordingly, while a hospital may be able to pay a physician above a previously contracted rate for furnishing services to COVID-19 patients, a hospital would not be able to purchase PPE from a physician for an above FMV price.

Waivers Not Covered by OIG Policy Statement

The seven blanket waivers not covered by the OIG policy statement generally relate to physician referrals to entities in which the physician or an immediate family member has an ownership interest. For example, the policy statement does not apply to the waiver for referrals by a physician owner to a hospital that temporarily expands facility capacity in response to COVID-19, or referrals by a physician in a group practice for designated health services furnished in locations that do not qualify for the Stark Law in-office ancillary services exception, such as a mobile van or the patient’s home. These excluded blanket waivers generally do not include a direct exchange of remuneration between a physician and a DHS entity.

Transition Out of COVID-19

The Stark Law blanket waivers and the OIG policy statement are welcome developments that demonstrate the agency’s willingness to make appropriate accommodations in response to the unprecedented COVID-19 pandemic. Not surprisingly, the development of these blanket waivers has prompted additional questions regarding their application and scope, such as the status of arrangements established in reliance on a blanket waiver that continue beyond the expiration of the COVID-19 pandemic. The agency is aware of these questions, and we believe it is likely to publish further guidance thereon. We will continue to monitor the agency’s guidance on these areas and alert you of any new developments.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact the authors or any of the following:

Washington, DC
Michele Buenafe
Kathleen McDermott
Scott Memmott
Albert Shay
Howard Young
Jacob Harper

Houston
Greg Etzel
Scott McBride
Sydney Reed

Boston
Mark Stein