On April 21, 2020, CMS issued explanatory guidance clarifying the scope and application of the previously issued Stark blanket waivers related to COVID-19 physician arrangements (“Waivers”). Our previous alert on the Waivers can be found here.
Action and Timing
The Waivers can be relied upon retroactive to March 1, 2020 but will terminate upon the expiration of the declared public health emergency period. The remuneration for arrangements pursued pursuant to a waiver should be made within this same waiver period. CMS advised that any disbursements of remuneration (e.g., loan proceeds, additional payments for services, space, equipment, or other items) after the termination of the Waivers must satisfy all requirements of an applicable Stark exception. There can be certain obligations such as a loan repayment that were agreed to prior to the termination of the Waivers that may continue beyond the termination of the Waivers without running afoul of Stark. Consequently, if there is any question of whether an entity should pursue a waivered arrangement, review and action should occur now prior to the termination of the Waivers.
Pursuing the Proper Purposes
CMS reminded parties that reliance on the Waivers may be unnecessary because many financial relationships and referrals related to COVID-19 Purposes (as previously defined by CMS in the Waivers) may satisfy the requirements of existing Stark exceptions. We agree with this statement as there are many commercially reasonable responses to arrangements that will be supportable as consistent with fair market value under existing Stark exceptions in light of this unprecedented pandemic. CMS advised that the Secretary of Health and Human Services will work with the Department of Justice to address False Claims Act relator suits (also known as whistleblower suits) where parties using the Waivers have a good faith belief that their remuneration or referrals are covered by the Waivers.
Thus, it is imperative to pursue a waiver for a proper COVID-19 Purpose as outlined in the Waivers. Of significant note is that while the Office of Inspector General (“OIG”) has also issued guidance stating that it will not impose “administrative” sanctions under the Anti-Kickback Statute for certain arrangements under the Waivers, this guidance does not protect criminal actions. Thus a proper purpose (i.e., not pursued in exchange for referrals) for any arrangement is required. Our previous alert on the OIG guidance can be found here.
Amendments
CMS explained that if parties amend the remuneration terms of an existing compensation arrangement during the public health emergency period, the amended arrangement must satisfy all non-waived requirements of an applicable exception.
Following the termination of the Waivers, the remuneration terms of the compensation arrangement may again be modified to return to the original terms of the arrangement or to effectuate additional necessary modifications to the arrangement. However, each time the remuneration terms are amended, the following must exist:
- All requirements of an applicable exception are satisfied;
- The amended remuneration is determined before the amendment is implemented;
- The formula for the amended remuneration does not take into account the volume or value referrals or other business generated by the referring physician; and
- The overall arrangement remains in place for at least one year following the amendment.
Alternatively, CMS advised that it is possible that a “modification” of an existing compensation arrangement could instead be analyzed as a separate additional compensation arrangement between or among the same parties during the term of the public health emergency period. In other words, instead of amending the remuneration terms of a current arrangement, there may be an opportunity to offer some type of other financial support relief (e.g., assistance with operating costs under a lease) under a new arrangement that would expire at the end of the Waivers.
Indirect Compensation Arrangements
CMS advised that the Waivers do not apply to indirect compensation arrangements and that as a practical matter, there may not be a need to use a waiver for arrangements other than direct compensation arrangements because many physicians are deemed or permitted to stand in the shoes of their physician organizations. CMS also reminded parties that they have the option to request an individual waiver for their indirect financial arrangements.
Loans, Recruitment and PSAs
CMS advised that loans do not need to be repaid in cash, but also cautioned that any “in-kind” repayment must be commercially reasonable and that the Waivers do not apply to repayments of such loans. CMS clarified that the aggregate value of any in-kind payments must be consistent with the amount of the loan balance being reduced through the in-kind payments. Physician recruitment arrangement modifications are not part of the Waivers, so an alternative waiver or reliance on an existing Stark exception would need to be utilized to modify compensation and/or to address medical practice interruption for a physician recruited to the community.
Note that for professional services arrangements, a physician practice’s services in the community may be considered “in-kind” services, but CMS cautioned again that relocation services to a community to establish a practice is deemed to be a benefit to the “community” and not to the recruiting hospital. Thus it is imperative to review professional services arrangements in the correct manner and to ascertain whether the arrangement is really for the benefit of the hospital or for the benefit of the community.
Practical Takeaways
Any health care organizations considering pursuit of the Waivers should evaluate their timing and processes for both implementation of the compensation modifications as well as winding down the waivered arrangement upon the termination of the Waivers. In addition to complying with the terms of the Waivers, it is imperative that providers maintain separate documentation that justifies their good faith reliance on the Waivers and pursuit of arrangements for a proper purpose.
If you have any questions or would like additional information, please contact:
- Gregg Wallander at (317) 977-1431 or gwally@wp.hallrender.com;
- Joe Wolfe at (414) 721-0482 or jwolfe@wp.hallrender.com;
- Jennifer Skeels at (317) 977-1497 or jskeels@wp.hallrender.com;
- Brian Betner at (317) 977-1466 or bbetner@wp.hallrender.com;
- Alyssa James at (317) 429-3640 or ajames@wp.hallrender.com;
- Wes Sylla at or (414) 721-0491 or wsylla@wp.hallrender.com; or
- Your regular Hall Render attorney.
Hall Render’s attorneys and professionals continue to maintain the most up-to-date information and resources at our COVID-19 Resource page, through our 24/7 COVID‑19 Telephone Hotline at (317) 429-3900 or by contacting your regular Hall Render attorney.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer specific questions that would be legal advice.
