Concurrent with the termination of the COVID-19 Public Health Emergency, various regulatory flexibilities will also come to an end, including the blanket waivers to the Stark Law and related enforcement discretion under the Federal anti-kickback statute. Accordingly, healthcare providers should promptly assess the ongoing compliance of all financial arrangements with physicians relying on these regulatory flexibilities and remediate or terminate such arrangements as appropriate.
On January 30, 2023, the Biden administration announced that the COVID-19 Public Health Emergency (PHE) would officially end on May 11, 2023. In conjunction with that announcement, various regulatory agencies, including the Centers for Medicare & Medicaid Services (CMS) and the US Department of Health and Human Services’ Office of Inspector General (HHS OIG), issued guidance that many of the regulatory flexibilities that healthcare providers have relied on throughout the pandemic will terminate concurrently with the PHE on May 11, 2023.
Specifically, on February 24, 2023, CMS confirmed that healthcare providers will no longer be able to avail themselves of the Stark Law blanket waivers (Stark Blanket Waivers) following termination of the PHE and thereafter must comply with all Stark Law requirements. HHS OIG’s enforcement discretion under the Federal anti-kickback statute (AKS) with respect to certain remuneration covered by the Stark Blanket Waivers will also come to an end on that date.
With the end of the PHE and termination of the Stark Blanket Waivers and related AKS enforcement discretion fast approaching, healthcare providers that have relied on these regulatory flexibilities in structuring financial arrangements with physicians should evaluate whether these arrangements will remain compliant with the Stark Law and AKS requirements after the pandemic-era regulatory flexibilities fall away and these regulatory regimes return to normal, and, as necessary, remediate or terminate arrangements that will become noncompliant as of May 12, 2023.
On March 30, 2020, CMS promulgated the Stark Blanket Waivers, which were effective retroactively to March 1, 2020. The agency then issued additional explanatory guidance addressing the scope and application of the Stark Blanket Waivers on April 21, 2020. Though HHS OIG did not introduce similar waivers with respect to AKS compliance, the agency published a policy statement on April 3, 2020, explaining that HHS OIG would exercise its enforcement discretion to not impose AKS-related sanctions for certain remuneration protected by the Stark Blanket Waivers. In contrast to the Stark Blanket Waivers, this enforcement discretion was effective only prospectively and HHS OIG noted that its policy statement would expire on the same date the Stark Blanket Waivers terminate.
Under the Stark Blanket Waivers, healthcare providers were exempted from satisfying certain requirements under Stark Law exceptions without fear of sanctions, absent any determination of fraud or abuse, and could also be assured of similar treatment under the AKS with respect to remuneration under most (but not all) of the Stark Blanket Waivers. For example, the Stark Blanket Waivers allowed for below fair market value remuneration with respect to a number of exceptions, for medical staff incidental benefits and nonmonetary compensation to exceed the applicable annual limits, and for compensation arrangements that did not satisfy the writing or signature requirement(s) of an applicable exception during the PHE, among other waivers.
Similar to other regulatory flexibilities provided during the PHE, the Stark Blanket Waivers and related AKS enforcement discretion were aimed at allowing healthcare providers to prioritize providing necessary care during the unprecedented PHE over technical regulatory compliance requirements. These flexibilities were well received by providers dealing with the day-to-day challenges of the COVID-19 crisis and particularly notable for their broad scope—especially with respect to the strict liability Stark Law, which generally requires full compliance with all elements of an applicable exception without regard to the parties’ intent.
Importantly, to benefit from the Stark Blanket Waivers, it was required that the arrangement be “solely related” to certain “COVID-19 Purposes,” specifically:
Notably, the Stark Blanket Waivers were implemented on a good faith standard with no requirement that parties utilizing these flexibilities submit documentation or notice of their use in advance to CMS. However, the agency encouraged parties to develop and maintain records regarding their use of the Stark Blanket Waivers and required that these records be made available to the Secretary of HHS upon request.
For additional background on the Stark Blank Waivers and related AKS enforcement discretion, refer to our previous guidance from April and May 2020.
As the end of the PHE and expiration of the Stark Blanket Waivers and related AKS enforcement discretion near, healthcare providers that have relied on these relaxed rules in structuring arrangements with physicians should assess whether these arrangements will remain compliant with the Stark Law after the regulatory flexibilities available during the PHE come to an end. As necessary, providers should then take appropriate steps to remediate or terminate arrangements that may become noncompliant.
Specifically, in advance of the end of the PHE, providers that have relied on the Stark Blanket Waivers should promptly perform the following.
Inventory Current Financial Arrangements Relying on Regulatory Flexibilities
The first step is to inventory all ongoing and historical financial arrangements with physicians that have relied on the Stark Blanket Waivers, and to then assess each arrangement individually to determine if any will become noncompliant upon termination of the PHE and available regulatory flexibilities.
As HHS has highlighted in its guidance, it is worth considering whether reliance on the Stark Blanket Waivers was necessary for a particular arrangement in the first place. If the arrangement otherwise satisfies all requirements of an applicable exception, then it is unnecessary for the parties to remediate or terminate the arrangement in advance of the end of the PHE.
Likewise, the completion of obligations under an arrangement after its expiration will not necessarily result in Stark Law noncompliance. For example, if a compensation arrangement was compliant under the Stark Blanket Waivers and terminates on May 11, 2023, but a final invoice and payment will be processed after that date, the arrangement will still be considered compliant. In contrast, any disbursement of loan proceeds after May 11 or additional remuneration related to office space, equipment, items, or services furnished by or to a DHS entity or physician must fully satisfy an applicable exception following termination of the Blanket Stark Waivers.
CMS emphasized that it only waived certain elements of particular Stark Law exceptions, and that financial arrangements must otherwise satisfy all nonwaived requirements of an applicable exception in order to avoid triggering the Stark Law’s referral and billing prohibitions. Accordingly, it is important to confirm that each arrangement at issue has satisfied all nonwaived requirements of an applicable exception during the PHE.
Correspondingly, each arrangement must be assessed for future compliance with all elements of an applicable exception effective May 12, 2023. In other words, providers must evaluate whether each arrangement will also satisfy the requirements waived by the Stark Blanket Waivers when those elements come back into play upon termination of the PHE (or if the arrangement can be remediated to satisfy such requirements, as discussed in more detail below).
Providers should also carefully evaluate whether financial arrangements relying on the Stark Blanket Waivers tie back to one or more COVID-19 Purposes as required. Note also that what may have been a legitimate COVID-19 Purpose at the beginning of the PHE may not have continued to be a COVID-19 Purpose throughout the entire PHE. If there was not a good faith COVID-19 Purpose underlying a particular arrangement (and the arrangement would not otherwise satisfy all elements of an exception), the parties should consider whether the arrangement might meet another exception.
Ensure Appropriate Record-Keeping Is in Place
Parties that relied on the Stark Blanket Waivers should also revisit their records to ensure appropriate documentation is in place for financial arrangements relying on the relaxed regulatory requirements during the PHE. Critically, records for each arrangement relying on the Stark Blanket Waivers should describe the specific COVID-19 Purpose(s) underlying the need for the arrangement. If the parties did not create contemporaneous records, they should develop such records now and maintain them in a centralized location.
Remediate or Terminate Arrangements Determined To Be Noncompliant
After inventorying and evaluating all financial arrangements relying on Stark Law Blanket Waivers, providers should, as necessary, remediate or terminate any arrangements determined to be noncompliant. The appropriate form of remediation will vary by arrangement. While some financial arrangements may be properly amended in order to fully satisfy a Stark Law exception, others may simply need to be terminated in advance of May 11, 2023. In other cases, it may make the most sense to renegotiate and enter into a new compliant arrangement.
In its explanatory guidance, CMS clarified that following the termination of the PHE, the compensation terms of an arrangement may be modified as necessary—provided that (1) all requirements of an applicable exception are satisfied, (2) the amended compensation terms are determined prior to implementation of the amended arrangement, (3) the formula for the amended compensation terms does not take into account the volume or value of referrals or other business generated by the referring physician, and (4) the arrangement remains in place for at least one year following the amendment.
In any case, providers should be sure to terminate or remediate all affected arrangements on or before the end of the PHE. Relatedly, parties should ensure that all DHS billing for arrangements that will become noncompliant on May 11 is stopped in advance of the termination of the Stark Blanket Waivers.
Notwithstanding the temporary Stark Blanket Waivers, the Stark Law is a strict liability statute prohibiting referrals of and billing for DHS unless the applicable financial relationship fully satisfies an exception. Both the Stark Law and the criminal AKS can result in significant civil penalties and exclusion from participation in Federal healthcare programs, including Medicare and Medicaid.
Violations of the Stark Law and AKS can also form the basis for Department of Justice or whistleblower claims under the False Claims Act. Accordingly, healthcare providers are well advised to step back to confirm historical and prospective compliance with the Stark Law and AKS as the pandemic-era regulatory flexibilities under these laws come to an end and these regulatory regimes return to normal.
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If you have any questions or would like more information on the issues discussed in this LawFlash, including assessing Stark Law and AKS compliance for existing arrangements and remediating arrangements in light of the termination of the Stark Blanket Waivers and related AKS enforcement discretion, please contact any of the following Morgan Lewis lawyers: