Stark Section 1135 Waivers

When the President declares a disaster or emergency under the Stafford Act or National Emergencies Act and the Secretary of the Department of Health and Human Services (the “Secretary”) declares a public health emergency, the Secretary is authorized to temporarily waive or modify certain regulatory requirements related to reimbursement and other matters. The Secretary declared a public health emergency on January 31, and President Trump declared the COVID-19 pandemic to be a national emergency on March 13. The Secretary has since utilized this authority to issue a number of Section 1135 waivers.

Until recently, the extent to which the Secretary waived the Stark law under Section 1135 was largely unclear. Importantly, on March 30, the Secretary issued a number of blanket waivers applicable to the Stark law (the “Stark Waivers”). A few important points related to the Stark Waivers:

• To take advantage of the Stark Waiver, providers do not need to formally notify or apply with CMS. They are self-effectuating.
• The Stark Waivers are retroactive to March 1, 2020 and can only be modified or terminated prospectively by CMS.
• To receive protection, the arrangement must be for “COVID-19 Purposes”. COVID-19 Purposes are as follows: 
  • Diagnosis or medically necessary treatment of COVID-19, whether or not the patient or individual is diagnosed with a confirmed case of COVID- 19;
  • Securing the services of physicians and other health care practitioners and professionals to furnish medically necessary patient care services, including services not related to the diagnosis and treatment of COVID-19, in response to the COVID-19 outbreak in the United States;
  • Ensuring the ability of health care providers to address patient and community needs due to the COVID-19 outbreak in the United States;
  • Expanding the capacity of health care providers to address patient and community needs due to the COVID-19 outbreak in the United States;
  • Shifting the diagnosis and care of patients to appropriate alternative settings due to the COVID-19 outbreak in the United States; or
  • Addressing medical practice or business interruption due to the COVID-19 outbreak in the United States in order to maintain the availability of medical care and related services for patients and the community.

While not all “COVID-19 Purposes” require a direct link to the pandemic, there must in some way be a causal relation to the pandemic.

• Provided that a proposed arrangement addresses a COVID-19 Purpose, a number of fact-specific waivers are available. Some highlighted arrangements addressed by the Stark Waivers are as follows:
  • Above or below fair market value (“FMV”) compensation arrangements, such as paying above a previously contracted rate for services to treat COVID-19 patients.
  • Above or below FMV space and equipment rental arrangements.
  • Above or below FMV purchases or sales of items or services, such as PPE, telehealth equipment and other supplies to assist in providing care to COVID-19 patients or to provide care to patients who are self-isolating.
  • Medical staff incidental benefits in excess of the $36 per instance limit, such as the provision of meals or clean clothing to physicians working long hours at the hospital treating COVID-19 patients.
  • Non-monetary compensation in excess of $423 per year. 
• CMS provides a number of examples of waived arrangements in the waiver document. It is important to note how CMS links the arrangements in its examples to a COVID-19 Purpose.
• CMS does not require any particular documentation to take advantage of a Stark Waiver. However, as a best practice:
  • Providers should develop a file to describe how the arrangement arises due to a COVID-19 Purpose and how the facts and circumstances satisfy one of the Stark Waivers.
  • We also suggest that the arrangement be reduced to writing either prior to, or as soon as possible after, entering into the arrangement. 

Even though there is no particular documentation requirement, CMS does require that any books and records the hospital has related to the use of a Stark Waiver must be made available to the Secretary upon request. 

• The Stark Waivers are only available during the Section 1135 waiver period, which is the shorter of (i) termination of emergency or disaster, (ii) termination of the public health emergency, or (iii) 60 days. The Secretary has the authority to extend the waivers for additional 60 day periods. The authority to utilize a Stark Waiver expires at the end of the waiver period. Arrangements that are entered into solely in reliance on a Stark Waiver should be terminated or modified at the end of the waiver period. 

The Stark Waivers should provide some level of flexibility to providers. However, CMS ultimately believes that many arrangements that arise due to COVID-19 responses will be able to satisfy Stark exceptions. Because the ability to utilize the Stark Waivers terminates at the end of the waiver period, we recommend that reasonable efforts first be made to satisfy a standard Stark exception. If a Stark Waiver is needed and relied upon, providers should be prepared to terminate and/or modify the arrangement at the end of the waiver period.