COVID-19, Section 1135 Waivers and the Stark Law

On March 30, 2020, after this article was published, CMS issued blanket waivers of the Stark Law. Read about the blanket waivers. 

Following President Trump’s declaration of a national emergency, Secretary of Health and Human Services Alex Azar announced on March 13, 2020 a waiver pursuant to Section 1135 of the Social Security Act of numerous laws and regulations relating to Medicare, Medicaid and the Children’s Health Insurance Program. Among other Section 1135 waivers, Secretary Azar waived sanctions under the Stark Law “under such conditions and in such circumstances as the Centers for Medicare & Medicaid Services determines appropriate.”

Neither the Department of Health and Human Services (HHS) nor the Centers for Medicare & Medicaid Services (CMS) has issued additional guidance regarding how the Stark Law waiver will be implemented in connection with the COVID-19 emergency declaration.

A year ago, CMS issued FAQs explaining its policies and procedures for Section 1135 waivers. CMS will presumably follow the same policies and procedures during the current national emergency. The FAQs state that CMS will grant Stark Law waivers on a case-by-case basis if it determines that a waiver will help address health care needs necessitated by the emergency:

• “Waivers are generally granted only on a case-by-case basis. Based on the specific facts provided by the requestor, CMS will make a determination to approve or deny the request. For example, a waiver of Stark sanctions might be granted if a hospital in an emergency area needs additional physicians to treat patients immediately and exigent circumstances prevent the parties from executing a written agreement setting forth their arrangement (as required by many Stark exceptions). Unless a determination is made approving a waiver of sanctions, parties must comply with all Stark rules.”
• “In past emergencies, such waivers were granted only upon request and on a case-by-case basis and required specific details concerning the actual or proposed financial relationship between the referring physician(s) and the referred-to entity. Unless and until a 'Stark waiver' is granted to the requesting party(ies), such party(ies) must comply with all physician self-referral (Stark) rules.”

According to the FAQs, hospitals should submit requests for waivers via email to their CMS regional office (the FAQs provide the regional office email addresses), and requests for waivers should be responded to within three days. The FAQs provide no particular format for requests for waivers.

Last week, the American Hospital Association (AHA) urged Secretary Azar and CMS Administrator Seema Verma to eliminate the need for case-by-case determinations, pointing out that hospitals across the country are now seeking to reduce patient referrals and preserve their ability to serve COVID-19 patients.

On March 20, 2020, the AHA asked HHS and CMS to immediately adopt an exception to the Stark Law to cover “any compensation paid to a physician or a physician’s immediate family member in return for a service necessary to the hospital’s response to the COVID-19 public health crisis.” The AHA letter proposed that the government take this action by issuing an interim final rule or by further exercising the Section 1135 waiver authority.

In the same letter, the AHA urged that Anti-Kickback Statute enforcement be suspended for transactions between hospitals and physicians or other referrals sources, or between hospitals and medical supply vendors, if the transaction’s “primary purpose” is “the delivery of supplies or services necessary to the hospital’s response to the COVID-19 public health crisis.”

The AHA also pressed the HHS Office of Inspector General to declare that hospital support for patients necessary to responding to the COVID-19 public health crisis will not face enforcement under either the Anti-Kickback Statute or the beneficiary inducement provisions of the Civil Money Penalties Law. The AHA noted that patients may need assistance with living arrangements and other support in the community in addition to COVID-19 testing and treatment.

We will continue to monitor further developments regarding relaxation of fraud and abuse laws due to the COVID-19 emergency.

As the number of cases around the world grows, Faegre Drinker’s Coronavirus Resource Center is available to help you understand and assess the legal, regulatory and commercial implications of COVID-19.