Temporary Blanket Waivers for Certain Stark Law Penalties

Among the many federal agency actions taken in response to the health and economic consequences of the COVID-19 outbreak is an interesting and much unpublicized one related to the Stark Law, a healthcare fraud and abuse law that prohibits physicians from referring patients for certain designated health services paid for by Medicare to any entity in which they have a “financial relationship.”

On March 30, 2020, the Centers for Medicare and Medicaid Services (“CMS”) unexpectedly announced temporary nationwide Section 1135 blanket waivers (retroactive to March 1, 2020) for certain Stark Law penalties of the Social Security Act. By relaxing some restrictions on payments and referrals, hospitals and healthcare providers should find it easier to collaborate during this time when the healthcare system is confronting an unprecedented pandemic.

The blanket waivers are narrowly tailored and require entities to act in good faith to provide care in response to the United States national emergency declared due to the COVID-19 outbreak. The blanket waivers do not excuse any otherwise illegal  fraud or abuse and those using the blanket waivers must be satisfying one of the six explicitly defined COVID-19 purposes. A further requirement is that the otherwise illegal relationship must fall into the one of the eighteen permitted relationships. Because of these complex requirements the potential use of any waiver will require fact-intensive analysis of each relationships’ circumstances and conditions.

The six explicitly defined purposes are:

  1. Diagnosis or treatment of COVID-19;
  2. Securing services of healthcare provides for COVID-19 patient care;
  3. Ensuring the ability of healthcare providers to address needs due to the COVID-19;
  4. Expanding the capacity of healthcare providers to address needs due to the COVID-19;
  5. Shifting the diagnosis and care of COVID-19 patients to appropriate alternative settings; and
  6. Addressing medical practice or business interruption due to the COVID-19 in order to maintain the availability of medical care and related services.

Generally, the Stark Law prohibits physicians and/or the physician’s organization from making referrals for certain services to an entity with which the physician, physician’s organization, or immediate family member, has a financial relationship unless an exception applies. In addition, the Stark Law forbids entities from submitting reimbursement to payors for good or services provided pursuant to a prohibited referral.

Healthcare providers desiring to use the blanket waivers are neither required to provide advance notice to CMS or receive its approval. However, those utilizing blanket waivers must retain records relating to its use including documentation of the valid COVID-19 purpose and the particular facts and circumstances for each arrangement where the Stark Law waiver applied. And the records must be available for the U.S. Department of Health and Human Services to review upon request.

Further, the blanket waivers do not suspend the Stark Law, but rather apply to only 18 expressly enumerated relationships which are not listed in this article but can be found on CMS’s website. The 18 expressly permitted relationships are divided into a group that address payments (i.e., “Allowed Payments”) and a second group that address referrals (i.e., “Allowed Referrals”). An example of an Allowed Referral is that certain designated health services (“DHS”) need not be provided in the same building as the physician office. An example of an Allowed Payments is that certain payments between the physician (or family member) and the DHS provider are permitted. The contours of the 18 permitted relationships are complex and require an understanding of the existing regulatory framework. Therefore, we encourage careful review to minimize the risk of noncompliance.