On April 21, CMS issued explanatory guidance for the March 29 blanket waivers of the Physician Self-Referral Law (commonly known as the “Stark Law”) that covers financial relationships and referrals related to the COVID-19 pandemic in the United States.
Summary of CMS 4/21/2020 Blanket Waivers Explanatory Guidance
- All other non-waived elements of the applicable exception must be met for the waiver to apply (e.g., if the waiver says payments may be outside fair market value (“FMV”), they still must be “commercially reasonable” and not take into account the volume or value of referrals for the waiver to be applicable).
- HORNE Example – Blanket waiver #1 applies to remuneration to a physician that is above FMV for personally performed services (for example, if the physician is paid more than would otherwise be FMV, to provide patient care services to COVID-19 patients). However, by way of example, the compensation may still need to be set in advance (depending on the exception relied upon), as there is no waiver of the “set in advance” requirement in the applicable exceptions in which that requirement appears.
- Existing arrangements can be amended during the public health emergency (“PHE”) consistent with the waivers, so long as all other elements of the exception are satisfied, the amended remuneration is determined before the amendment is implemented, and the overall arrangement remains in place for at least one year following the amendment. Then, arrangements can be amended again when the PHE has ended, to ensure they are compliant after the PHE, so long as the same conditions apply (i.e., the arrangement will remain in place for at least one year following the 2nd amendment, etc.).
- Noted that, in some cases, it may be possible to confer the equivalent economic benefit without any amendment to the existing arrangement, but rather by entering into a separate new arrangement that meets a blanket waiver and that, for example, subsidizes the physician due to a COVID-19-related need during the PHE.
- HORNE Example: If a call coverage arrangement is amended to increase a physician’s compensation (to a level that may be outside FMV) during the PHE, it is fine so long as the arrangement will continue for at least one year after the amendment, and then it may be amended again after the PHE ends, to modify compensation to be within FMV, so long as the arrangement will continue for at least one year after the 2nd amendment. FMV after the PHE ends may well be different than FMV before and during the PHE.
- Blanket waivers do not apply to indirect compensation arrangements – they are only applicable to direct compensation arrangements or arrangements where the physician “stands in the shoes” of his or her physician organization. But, the waivers do apply to situations where the physician “permissively” stands in the shoes of his or her physician organization, which would apply to any non-owner physician in a physician organization. Therefore, as a practical matter, the fact that waivers cannot be used for indirect compensation arrangements may not matter in some cases.
- Loan repayments need not be cash, and may be made by the in-kind provision of goods, items, office space, or services (including, potentially, an agreement to remain in the community), but the aggregate value of the in-kind items must be consistent with the amount of the loan balance being reduced through in-kind payments, and must be commercially reasonable. CMS also warned that in-kind payments could implicate the Anti-kickback statute (setting up a potential loop with the AKS waivers). CMS indicated that the question of whether an agreement to remain in the community can confer a benefit upon the lender will depend on the facts and circumstances.
- HORNE Example: A hospital loans a physician money, at a below-market interest rate, to help the physician survive the period of decreased volume caused by the pandemic. The hospital allows the physician to repay the loan by providing in-kind services to the hospital after the pandemic ends. The value of the services provided must be consistent with the amount of the loan balance being reduced by the in-kind services.
- Loan repayments may extend after the PHE ends if the repayment terms are “appropriate.” But, any disbursement of loan proceeds after termination of the waivers or additional remuneration provided after the termination of waivers (such as forgiveness of some or all of a loan balance) must satisfy the requirements of an applicable exception.
- HORNE Example: A hospital loans a physician money, at a below-market interest rate, to help the physician survive the period of decreased volume caused by the pandemic. The hospital allows the physician to repay the loan over five years, even though the PHE will end just a few months after the loan is made. Contrast that with a similar loan that the physician is able to repay over 30 years, even though he is only expected to practice medicine for another 10-15 years. In the second loan, query whether the 30-year repayment horizon is commercially reasonable and the terms are “appropriate” under the circumstances.
- The waivers would not apply to modifications of existing recruitment arrangements since the physician has already joined the medical staff and moved to the community, but a separate agreement to loan the same physician money to address business interruption caused by the PHE may, by itself, fit into a blanket waiver and accomplish the same objective.
- HORNE Example: Hospital has an existing recruitment agreement with a physician to pay physician a recruitment stipend equal to 50% of the MGMA median salary. During the pandemic, the physician experiences a drop in volume and asks the hospital for more money (an additional amount equal to 40% of the MGMA median salary). The amount could not be paid by means of a modification to the initial recruitment agreement, as no waiver would exist, but it may be possible to structure the payment as a separate loan agreement that would qualify for a blanket waiver.
We will continue to monitor changes brought on by COVID-19. Have any questions or looking for guidance? Please contact HORNE Healthcare to learn more.