Stark Law waivers, HHS-OIG announcement offer health care providers greater flexibility during COVID-19 pandemic

On Monday, March 30, the Centers for Medicare & Medicaid Services (CMS) announced an array of temporary regulatory waivers and new rules to equip the American health care system with maximum flexibility to respond to the COVID-19 pandemic. The temporary waivers will last as long as the public health emergency declaration is in place, and they include a blanket waiver of the sanctions provision of the physician self-referral law or Stark law (Section 1877 of the Social Security Act) for actions related to the pandemic. Simultaneously, Christi A. Grimm, Principal Deputy Inspector General for the Department of Health and Human Services’ Office of the Inspector General (HHS-OIG), released a message on minimizing burdens on providers, stating that, “[f]or any conduct during this emergency that may be subject to OIG administrative enforcement, OIG will carefully consider the context and intent of the parties when assessing whether to proceed with any enforcement action.”

These developments offer significant flexibility for health care providers to provide goods and services necessary to respond to the pandemic without fear that their conduct will be subject to enforcement under the rules that would ordinarily apply.

Stark Law regulatory changes and waivers

Following President Trump’s recent emergency declaration, CMS is temporarily waiving certain regulations to allow hospitals and health systems “maximum flexibility to respond” to the COVID-19 pandemic. CMS’s action is designed to permit hospitals and health systems to expand capacity by temporarily using a variety of off-campus locations – such as ambulatory surgical centers, hotels, and dormitories – to help providers separate COVID-19 patients from those who are not affected and to maintain infection control protocols.

CMS explained in an accompanying Fact Sheet that its March 30 actions should achieve 4 broad goals:

  1. “Increase Hospital Capacity – CMS Hospitals Without Walls”:  CMS is temporarily allowing hospitals and health systems to provide services outside their own buildings to create capacity for an expected surge in COVID-19 patients. Under CMS’s temporary rules, hospitals may transfer patients to outside facilities but still receive Medicare hospital payments. Accordingly, the Stark law Waiver permits doctor-owned hospitals to increase their number of beds without incurring sanctions.
  2. “Rapidly Expand the Health Care Workforce”: CMS is making it easier for providers to enroll in Medicare, and certain providers may be eligible for temporary employment. CMS is also allowing hospitals to provide benefits and support to their medical staffs, including multiple daily meals, laundry service for personal clothing, and child care services. In addition, CMS is permitting wider use of oral orders and is waiving the requirements for a nurse to conduct an onsite visit every two weeks for home health and hospice.
  3. “Put Patients Over Paperwork”: CMS is temporarily waiving certain paperwork requirements, and Medicare will cover respiratory-related devices and equipment for any medical reason.
  4. “Further Promote Telehealth in Medicare”: CMS will now pay for more than 80 additional services furnished via telehealth, including emergency department visits and home visits. Telehealth can now fulfill many face-to-face visit requirements for clinicians to see Medicare recipients in inpatient rehabilitation facilities, hospice, and home health.

The details

Sections 1135 and 1812(f) of the Social Security Act (SSA) allow CMS to issue blanket waivers to help beneficiaries access care. In its March 30 statement (hereinafter, “Waiver”), CMS waived the sanctions for violation of the referral and claims submission prohibitions that are set forth in section 1877(g) of the SSA, under certain conditions. Specifically, to be covered under the Waiver, remuneration and referrals must be:

  • directly between the entity and
    • 1. the physician or the physician organization “in the shoes” of whom the physician stands in the compensation arrangement (see 42 CFR 411.354(c)); or
    • 2. the immediate family member of the physician;
  • furnished “in good faith,” absent a government finding of fraud or abuse; and
  • solely related to “COVID-19 purposes” in the United States.

The Waiver specifies that “COVID-19 purposes” include not only diagnosis or medically necessary treatment of COVID-19, but also work tangentially related to COVID-19, such as expanding the capacity of health care providers due to COVID-19, or addressing medical practice or business interruption due to the COVID-19 outbreak in the U.S.

18 blanket waivers

The Waiver enumerates 18 types of remuneration, referrals, and other charges that it exempts from sanctions under the Stark law, provided they meet the conditions outlined above, generally exempting:

  • Remuneration for goods or services that is below or above fair market value
  • Rental charges for real estate or equipment that are above or below fair market value
  • Medical staff incidental benefits and nonmonetary compensation that exceed statutory limits
  • Beneficial loan terms
  • Referrals that temporarily expand facility capacity above the number of operating rooms, procedure rooms, and beds for which the hospital was licensed on March 23, 2010
  • Referrals by a physician of a Medicare beneficiary for the provision of designated health services to a home health agency in which the physician (or an immediate family member of the physician) has an ownership or investment interest
  • Referrals by a physician in a group practice for medically necessary designated health services furnished by the group practice, either:
    • in a location that does not qualify as a “same building” or “centralized building,” or
    • 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
  • Referrals 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
  • 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

Examples of exempted remuneration, referrals, and conduct

The Waiver offers examples of where its blanket waivers may apply, such as:

  • To accommodate patient surge, a hospital rents office space or equipment from an independent physician practice at below fair market value or at no charge.
  • A hospital provides free use of medical office space on its campus to allow physicians to provide timely and convenient services to patients who come to the hospital but do not need inpatient care.
  • An entity provides free telehealth equipment to a physician practice to facilitate telehealth visits for patients who are observing social distancing or in isolation or quarantine.
  • With state approval (if required), a physician-owned hospital temporarily converts observation beds to inpatient beds or otherwise increases its inpatient bed count to accommodate patient surge during the COVID-19 outbreak in the United States.

OIG announcement

In an announcement dated March 30, 2020, HHS-OIG emphasized that it will provide flexibility to assist the health care community in responding to the COVID-19 crisis. Consistent with the agency’s mandate to protect the integrity of federal health care programs and the safety of beneficiaries, HHS-OIG stated that it is focused on ensuring that patients receive the care they need:

Health care organizations that need extensions of OIG deadlines, such as to produce data for an OIG review or to comply with a Corporate Integrity Agreement, are encouraged to ask their OIG contact. OIG will work with organizations on a reasonable solution.
For any conduct during this emergency that may be subject to OIG administrative enforcement, OIG will carefully consider the context and intent of the parties when assessing whether to proceed with any enforcement action.

While this statement should not be seen as countenancing otherwise high-risk behavior, it does provide comfort that efforts consistent with an intent to address the ongoing public health crisis will not be subject to undue restrictions.

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The temporary Stark Law waivers – which are retroactive to March 1, 2020, and stay in effect through the end of the emergency declaration – combined with the OIG’s message from leadership that indicates the Inspector General will exercise discretion and afford flexibility in evaluating non-safe harbored arrangements that providers devise to react to the COVID-19 crisis, carry broad implications for fraud and abuse rules covering health care providers. If you have any questions about these agency actions, or need assistance navigating the patchwork of temporary regulations arising in response to the novel coronavirus pandemic, please contact any of the authors of this alert or the Hogan Lovells attorney with whom you work most closely.


Authored by Thomas Beimers, Ron Wisor, Michael Theis, Jonathan Diesenhaus, and Matthew J. Piehl


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