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Stark Law and Anti-Kickback Statute Waivers for
COVID-19
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Belanger,
Jeremy Erman, Erica
A. Levy,
Jr., Ralph

April
2020

Industry Alerts

In light of the COVID-19 pandemic, on March 30, 2020, the Secretary of the
U.S. Department of Health and Human Services (the “Secretary”) released blanket
waivers (the “Waivers”) under Section 1135 of the Social Security Act (the
“Act”) as to certain referral-related activities that would normally result in
sanctions under the Federal Physician Self-Referral Law, 42 U.S.C. 1395nn (the
“Stark Law”). Shortly thereafter, on April 3, 2020, the Office of the Inspector
General (“OIG”), the entity that enforces the Federal Anti-Kickback Statute
(“AKS”), issued a policy statement that it would not seek “administrative
sanctions” for conduct that complied with certain of the Secretary’s
Waivers.  Health care providers should be aware of the scope and
limitations on these newly announced waivers.

The
Stark Law Waivers

The Stark Law prohibits referrals
between a physician (or immediate family member) and an entity for “designated
health services” paid for by Medicare or Medicaid if there is a financial
arrangement between the entity and the physician or the physician’s immediate
family. Financial arrangements include direct and indirect ownership,
investment, and compensation arrangements. The Stark Law is a strict liability
statute, meaning proof of ill intent is not required for there to be a
violation. However, exceptions protect certain specified arrangements which
strictly meet their requirements. Sanctions that can be imposed under the Stark
Law include denial of payments, requiring refunds, and imposing civil monetary
penalties and exclusions. Similar to the Stark Law exceptions, the Waivers
exempt certain conduct from liability for violation of the Stark law during the
period of the public health emergency.

Under Section 1135 of the Act, the
Secretary can temporarily waive or modify sanctions imposed under the Stark Law.
Recognizing the need for flexibility during this emergency period, the Secretary
has used its authority under Section 1135 to waive sanctions for certain
good-faith arrangements between physicians and entities to provide care that,
under normal circumstances, would not comply with the Stark Law. These Waivers
only apply during the emergency period and if the requirements are met. However,
the Secretary did back date these Waivers to March 1, 2020, so that arrangements
that began on or after that date are protected.

The first requirement to
qualify for any of the Waivers is that the arrangement must be for a “COVID-19
Purpose.” This phrase is broadly defined to mean any one of the following:

Diagnosis or medically necessary treatment of COVID-19, whether or not the
patient is diagnosed with a confirmed case of COVID-19;

Securing the services of physicians and other health care practitioners to
furnish medically necessary services to patients, including services not
related to the diagnosis and treatment of COVID-19;

Ensuring the ability of the provider to address patient and community
needs in response to COVID-19;

Expanding the capacity of health care providers to address patient and
community needs in response to COVID-19;

Shifting the diagnosis and care of patients to appropriate alternative
settings in response to COVID-19; or

Addressing medical practice or business interruption due to COVID-19 in
order to maintain the availability of medical care and related services for
patients and the community.

So long as the conduct is for a “COVID-19 Purpose,” relationships which would
otherwise violate the Stark Law are protected if they comply with one of two
types of Waivers. The Waivers are:

The Remuneration Waivers

Remuneration paid by an entity 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.

Rent paid by an entity that is below fair market value for the entity’s
lease of office space from the physician (or the immediate family member of
the physician).

Rent paid by an entity that is below fair market value for the entity’s
lease of equipment from the physician (or the immediate family member of the
physician).

Remuneration from an entity 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).

Rent paid by a physician (or an immediate family member of a physician) to
an entity for office space that is below fair market value.

Rent paid by a physician (or an immediate family member of a physician) to
an entity for leased equipment that is below fair market value.

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 from the entity.

Remuneration from a hospital to a physician in the form of medical staff
incidental benefits that exceeds $36 for calendar year 2020.

Remuneration from an entity to a physician (or the immediate family member
of a physician) in the form of nonmonetary compensation that exceeds $423 for
calendar year 2020.

Remuneration by an entity resulting from a loan by the entity 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 does not receive referrals.

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 does not generate business for the physician (or the
immediate family member of the physician).

The Ownership
Waivers

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 without prior application and
approval of the expansion of facility capacity.

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 meet the requirements to be a
rural provider; (ii) the hospital enrolled in Medicare as a hospital during
the emergency period; (iii) the hospital meets the Medicare conditions of
participation and other requirements not waived by CMS during the emergency
period; 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.

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; and (2) in which the physician (or an immediate family
member of the physician) has an ownership or investment interest.

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 the in-office ancillary services exception.

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/her private home, an assisted living facility, or independent
living facility when the physician does not generally treat patients in their
private homes.

The referral by a physician to an entity with which the physician’s
immediate family member has a financial relationship if the patient resides in
a rural area.

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 the other requirements of the applicable
exception.

The Secretary’s Waivers are an attempt to provide physicians and entities
greater flexibility to address health care needs in this emergency. Much like
the Stark Law exceptions, these Waivers for COVID-19 Purposes are technical, and
physicians and other health care providers should consult with their health care
attorneys prior to entering into any arrangement that is intended to take
advantage of the waivers.

OIG Policy Statements
Regarding Anti-Kickback Enforcement

Under Section 1135 of the Act, the Secretary has the authority to waive or
modify sanctions under the Stark Law. For consistency, on April 3, 2020, the OIG
issued a policy statement that it would not seek “administrative sanctions” for
conduct that complies with the Secretary’s Waivers regarding remuneration (but
not for the Waivers regarding ownership).

The AKS makes it illegal
for anyone to knowingly and willfully solicit, receive, offer, or pay “any
remuneration (including any kickback, bribe, or rebate) directly or indirectly,
overtly or covertly, in cash or in kind” in return for referring a patient for
any item or service for which payment may be made, in whole or in part, by a
Federal health care program (e.g., Medicare, Medicaid, Tricare, etc.). The AKS
requires an intent to pay remuneration for a referral; however, the AKS is
violated if even one purpose is to induce a referral, regardless of whether
there are other valid reasons for the referral. Like the Stark Law, the AKS has
exceptions, called Safe Harbors, which can automatically protect an arrangement.
Unlike the Stark law, failure to meet the requirements of a Safe Harbor does not
make an arrangement illegal under the AKS.

The OIG has advised that if
conduct that complies with Waivers 1 through 11 described above (the
Remuneration Waivers), it will exercise its discretion and not seek enforcement
of “administrative sanctions.” The sanctions OIG cites that it would not seek
are permissive exclusion or civil monetary penalties. This exercise of
discretion does not apply to the Ownership Waivers. One interesting note is that
the OIG made no mention of the criminal sanctions if conduct complies with the
Waivers, only that is would not pursue two specific administrative sanctions.
Additionally, even though the Waivers are back dated to March 1, 2020, the OIG
stated that it would only exercise its discretion for conduct occurring on or
after April 3, 2020.

Despite the much needed flexibility that the
Waivers provide to respond to COVID-19, like the Exceptions and Safe Harbors,
they create many pitfalls for health care providers and entities to which health
care providers refer patients. Susan Benedict’s health care attorneys can
advise those impacted in how to comply with the
Waivers.

Related Services

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Care

Contacts

Jeremy
Belanger

Associate
Troy

T:248-433-7542

E:[email-masked]

Erica
Erman

Associate
Phoenix

T:602-889-5342

E:[email-masked]

Ralph
Levy, Jr.

Of
Counsel Nashville

T:615-620-1733

E:[email-masked]

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