Navigating COVID-19 Contracting, the Stark Waivers and Why Providers Need to Act Now

Navigating COVID-19 Contracting, the Stark Waivers and Why Providers Need to Act Now

Alyssa James and Joe Wolfe chat about the latest guidance on the Stark Law waivers and why timing and documentation are critical for health care organizations that intend to rely on the waivers. 

Podcast Participants

Alyssa James

Attorney, Hall Render

Joe Wolfe

Attorney, Hall Render

Alyssa James: Hello and welcome to Hall Render’s Practical Solutions podcast featuring thoughtful analysis and insightful commentary on the legal issues facing the healthcare industry. I’m Alyssa James, an attorney with Hall Render, the largest healthcare focused law firm in the country, and today my colleague Joe Wolfe and I will be discussing the explanatory guidance that was recently issued by CMS in order to clarify certain aspects of the COVID-19 Stark Blanket Waivers and discuss how providers can respond to the waivers and the explanatory guidance in order to better modify their relationships with their physicians if they so desire.

Alyssa James: On April 21st CMS issued explanatory guidance to further clarify and elaborate on its intent when it issued the Stark Blanket Waivers that we discussed in an earlier podcast several weeks ago. Those waivers were issued at the end of March in response to the COVID-19 pandemic of course. But before we dive into our discussion today about the details of the explanatory guidance and other recommendations for providers, Joe is first going to give us a quick recap of the Stark Waivers and the types of situations in which they may be relied upon in order to set the stage for our discussion today.

Joe Wolfe: Yeah, thanks Alyssa and thanks to everyone listening to today’s podcast. Alyssa and I have been working through this kind of analysis around the Stark Waivers for hospitals and health systems nationwide as they react and continue with their physician contracting and fraud and abuse and related compliance issues. And on top of that, we’ve also been working with healthcare organizations to help develop documentation supporting reliance on these waivers. And as Alyssa hit on already, these waivers were initially issued back on March 30th, were made retroactive to March 1st, so they do cover any activities that fall within their scope going back to that March 1st timeframe. And I think providers were happy to see that retroactivity. Now they’re set to expire at the end of the declared public health emergency period, and so that tells us a bit about our timeframe we’re talking about, going back to March 1st through the end of the national emergency.

Joe Wolfe: This recent guidance that was issued on April 21st spoke a lot about the importance of timing. Essentially, the government said that if you’re going to rely on these waivers, the amounts you’re paying should be made within the waiver period. I think more than anything that means that healthcare organizations need to do their analysis and need to move quickly. And that’s because any payments or disbursements, whether it’s in the form of a loan proceed or additional payments for services or space or equipment or other items that occur after the termination of the waivers are likely going to have to meet the requirements of an actual Stark exception. And for many of our clients, we’ve always recommended they try to meet a Stark exception. But if they’re going to try to rely on these waivers for potentially more aggressive compensation terms or if they’re looking to pay above previously contracted rates, they might still want to look to these waivers.

Joe Wolfe: There could be some room for analysis here if some obligations are going to fall after that waiver period. The government gave an example of loan repayments that were agreed to prior to the termination still being okay if they fell after the termination of the waivers without being problematic. That example seemed to be where you would have a repayment of an obligation falling after the termination rather than a new disbursement, and that may open up the opportunity for reconciliation type payments or recapture payments after the waiver period. However, again, those new disbursements of money likely will need to be analyzed more carefully and you may need to look to existing exceptions.

Joe Wolfe: I think the bottom line here is for healthcare organizations that are listening to this podcast, if you’re going to rely on a waiver, you should do the analysis. If you have an arrangement that may not fit squarely within an existing exception, you may want to take steps now to address questions to try to understand whether you could pursue a wavered arrangement. Now you’d want to get contemporaneous documentation in place. The government has said that you should be ready to produce that documentation if the government asks for it, so you should be taking those steps now. I think all of that will help reduce future headaches. The government has said it would work with the Department of Justice to address False Claims Act relater suits or whistleblower suits after the fact here, where parties have acted with a good faith belief that they’re falling under the waivers, and that’s where this really fits into the overall compliance part. If you’re going to take actions now, if you line up reliance on the waivers and you have a good faith reliance on those waivers, it could help you avoid future whistleblower suits or hopefully the government would step in to move towards a dismissal if there is a future whistleblower suit.

Joe Wolfe: The waivers themselves, as we hit on in the earlier podcast, they’re not just a free pass. If you’re going to use them, you should identify a COVID-19 purpose. There were six of them identified in the waiver documents. Second, you should fit within one of the Stark Waivers. There were 18 of them identified in the first go round. And then you should develop the documentation supporting the use of those waivers. For those first six COVID-19 purposes, they fell in a number of different categories. The first focused on diagnosis or medically necessary treatment of COVID-19 for patients or individuals. The second focused on securing the services of physicians and healthcare providers to furnish medically necessary services.  Third, ensuring the ability of health care providers to address patient and community needs.  Fourth, expanding capacity of health care providers to address patient and community needs. Fifth, shifting the diagnosis and care of patients to alternative settings of care. Then a final number six, a very broad category that discussed addressing medical practice or business interruption due to the COVID-19 outbreak. That really gets at the scope of some of these COVID-19 purposes that you should align with. And as a threshold matter, you should figure out which of those you actually line up with.

Joe Wolfe: The new guidance we’re here to talk about mostly today discussed some different areas that did need some clarification around action and timing of relying on these waivers, about amendments to the waivers, the application of the waivers, indirect compensation arrangements and special issues related to loan, recruitment and professional service agreements. Alyssa and I are going to step through some of that guidance in this podcast. So Alyssa, I’ll turn it to you to start the discussion on some of the explanatory guidance.

Alyssa James: Thanks, Joe. That was a great recap and I completely agree with the examples that you provided in that discussion thus far. As Joe said, now we’re going to walk through some of the explanatory guidance and specific parameters and examples that CMS set forth. Something that’s important to keep in mind as we evaluate the waivers and the corresponding explanatory guidance. In that in that recent explanatory guidance, CMS reiterated that financial arrangements and relationships with physicians and referrals from physicians must still satisfy all of the non-waived requirements of the applicable Stark exception. Because many of the waivers may only weigh one or a few components of an applicable Stark Law exception, healthcare organizations need to ensure that their arrangements with physicians continue to comply with the remaining non-waived components of those exceptions. So, it’s just important to keep in mind that the waivers are not a broad brush to do whatever you would like in your physician relationships. We need to really, as Joe hit on as well, clearly focus on what those waived requirements are and then make sure that we’re satisfying any other requirements of an exception that may not be waived in a particular scenario.

Alyssa James: CMS also issued guidance on how to amend certain compensation arrangements in light of the waivers if required for your particular circumstance while still remaining in compliance with Stark. Due to the fact that so many Stark exceptions require that compensation arrangements with physicians be in place for at least one year, CMS has received some questions from industry stakeholders in response to their issuance of the blanket waivers regarding the ability to amend a compensation arrangement to account for those COVID-19 adjustments that they may be considering. And then along with that, the ability to potentially amend those arrangements again in order to, for example, revert back to the standard compensation terms that were in place prior to the COVID-19 pandemic adjustments and wanting to make those adjustments back to the standard compensation terms at the end of the public health emergency period.

Alyssa James: And so, in its discussion CMS reiterated some old guidance from the 2009 IPPS final rule that allows subsequent amendments of compensation terms of arrangements, even if those occur within the first year, so long as those modifications are set in advance, otherwise comply with the requirements of the Stark exception. For example, they can’t take into account volume or value of referrals of course, and things of that nature. And then the overall arrangement must remain in place for at least one year after the amendment. Therefore, healthcare organizations and providers could amend an arrangement to change compensation in light of that organization’s response to COVID-19 and then amend the arrangement again at the end of the public health emergency period or any time prior to the end of the public health emergency period if they don’t desire to continue that modified arrangement throughout the entire declared emergency and revert back to the existing compensation terms. So, CMS has acknowledged there’s some flexibility there, not necessarily in conjunction with the waivers but just in conjunction with their guidance and interpretation of that one year requirement more broadly.

Alyssa James: A more practical solution I think that we’re seeing rather than amending an arrangement to adjust for COVID-19 and then amending again and that we’ve seen a lot of clients doing would be to maybe include language in the initial amendment that states that the compensation will revert back to the prior compensation structure at the end of the declared public health emergency period if that’s your desired timeframe. This eliminates the need for two separate writings to document the change and then shift back to the prior fee structure, which just can help streamline things and make it a little more practical for providers and their physicians. We typically find that if we can limit the number of signatures that need to be obtained, for example, and the number of documents, it just sets the parties up for success as far as not having to spend so much time preparing documents and signing things and such.

Alyssa James: So, if you know at the outset of your COVID-19 adjustments when you’re doing that initial amendment that you’re going to want things to revert back at the end of the declared public health emergency and not prior to that, again they can’t continue beyond that, but within that time period and you’re going to want to revert back to what the compensation was prior to COVID-19, you could go ahead and include that structure in the initial amendment and potentially alleviate the need to do a subsequent amendment a few months or however long down the road.

Alyssa James: And now Joe is going to talk us through some of the additional guidance that CMS provided regarding things like indirect compensation arrangements and loan arrangements with physicians.

Joe Wolfe: Yeah, thanks Alyssa. First, one question that emerged from the initial Stark Blanket waiver guidance was how does this work with respect to indirect arrangements? And for those of you familiar with a Stark analysis, you know that an indirect arrangement is triggered if you have an unbroken chain of financial arrangements between a healthcare organization and a physician. And there is a more granular analysis around aggregate compensation that varies with the volume or value of referrals and if the entity has knowledge of the indirect financial relationship. And so, as healthcare organizations do the analysis around indirect arrangements, they would obviously like to know if they can rely on these Stark waivers. The government came out and said that the waivers do not apply to indirect compensation arrangements, and that is a practical matter there may not even be a need to look to the waivers because in many instances physicians will be deemed, if they’re owners of a physician organization, they’ll be deemed to stand in the shoes of their physician organization, or if they’re an employed position they may be permitted to stand in the shoes of their physician organization. So as a practical matter, many of those arrangements that may be indirect actually would become direct once you look to those deeming or permissive stand in the shoe rules.

Joe Wolfe: The government also pointed out that parties have the option to request individual waiver for their indirect financial arrangements if they have concerns about them fitting within a Stark exception and they’re unable to rely on the waivers. So again, the government here clarifying that these really are intended, the waivers are intended to protect direct financial arrangements including situations where physician stand in the shoes.

Joe Wolfe: The new guidance also spoke to the issue of repayment options for loans between entities and physicians. The government actually gave a significant amount of flexibility, noting that loans do not need to be repaid in cash. And in fact, healthcare organizations could look to in kind repayment as long as those in kind repayments are commercially reasonable. If there are situations where repayments are not commercially reasonable, those repayments may not fall within the waivers themselves. The government spoke about the need for the aggregate value of any in kind payments to be consistent with the amounts of the loan balance that’s being reduced through those in kind payments. And so, I think healthcare organizations that are going to look to in kind repayments should really do their work to make sure that they understand why the services they’re using to reduce that balance line up with any reduced payments.

Joe Wolfe: There also was some discussion around having a physician practice remaining in the community considered as in kind services. CMS did caution that relocation services to a community to establish a practice may be deemed to be a benefit to the community and not to the recruiting hospital. And I think that’s an important distinction that we’ve seen arise in prior commentary, that if the situation is one where the community is benefiting from those in kind services that may not be as appropriate to look at that as a viable in kind service that would reduce any outstanding payments. So again, the government did provide some alternatives here beyond just standard loan repayment.

Joe Wolfe: The government also talked about the repayment of loans, some of the timing issues that may arise as we think about the practical usage of these waivers. The government talked about in this guidance disbursements of remuneration after the termination of the waiver period having to satisfy an applicable Stark exception. That’s something Alyssa and I have both talked about, that if you’re going to have disbursements of loans or additional payments for services that are going to extend after the waiver period year, it’s going to be very challenging to rely on the waivers. That’s why you need to be doing some analysis using the facts and circumstances of your arrangement and really thinking about the timing and whether it’s going to be appropriate to continue to rely on those waivers. And if you’re, again considering these, you’re going to consider pursuing a wavered arrangement, you should do your review and your analysis and prepare that documentation now before the waiver period is over. And so, really this is some very helpful government guidance speaking to the timing and the ability to rely on the waivers and offering up some potential for in kind services to help reduce what liabilities are out there.

Joe Wolfe: I’m going to turn things back to Alyssa to step through a bit more of the guidance and then to close out the podcast.

Alyssa James: Yeah, thanks Joe. That was a great discussion of some of the additional guidance and options that providers may have. The last item that CMS addressed in its supplemental explanatory guidance is the concept of whether or not providers could potentially restructure income guarantees and other terms associated with existing physician recruitment arrangements with independent physicians and or physician groups in their communities. As you may be aware, there are instances where hospitals will enter into recruitment arrangements to relocate a physician to their service area and community, and that physician may be practicing completely independently or may be employed by another third party group practice. And so, those arrangements can be a great benefit for the community in order to get providers recruited to that area that may otherwise not have the means to relocate and start up a new practice in a service area that may have a needy population there.

Alyssa James: And so, there’ve been some questions CMS has received regarding whether or not those recruitment arrangements could be modified to potentially, for example, increase the income guarantee associated with that in response to the hospital and the physician practice’s COVID responses. In this explanatory guidance, CMS reiterated its long standing position that recruitment arrangements really should not be able to be amended to provide additional or potentially additional compensation to the recruited physician, because the purpose of that recruitment arrangement exception under Stark is to permit a physician to relocate to the community. If you’re amending a recruitment arrangement, CMS takes the position that that physician is already there and so they’ve already relocated their medical practice and the recruitment arrangement exception is not appropriate then to modify compensation terms midway through.

Alyssa James: That said, CMS did also note that there may be instances where other Blanket waivers would be appropriate to assist a physician or physician practice whose practice was experiencing interruption or struggling due to the COVID-19 pandemic. For example, providers could consider reduced rental rates to help these physicians or possibly below fair market value loans, those options that Joe described earlier, in order to assist the physicians in the community without restructuring their existing recruitment arrangement. So, all in all in this explanatory guidance, CMS has taken some follow-up questions that they’ve received from industry stakeholders and tried to clarify how the Blanket Waivers may or may not be applied to certain arrangements, which I think is helpful for providers and healthcare organizations as they look to utilize the waivers as well as maybe evaluate whether or not the utilization of a waiver is or isn’t appropriate for their organization and a particular physician arrangement.

Alyssa James: We hope that this discussion today has been helpful and has helped to interpret and discuss this additional guidance provided by CMS. When we’re evaluating modifications to various physician arrangements during the pandemic, of course it’s always important to remember to always pursue any compensation modifications or other arrangements with the proper purposes. Joe talked at the beginning about these proper purposes, but it’s just always important to keep that in mind with any sort of physician relationship. Also, remember to take action now to evaluate, potentially implement, and then also to prepare to wind down any compensation adjustments or modifications or new arrangements that you’re entering into during this COVID-19 time in order to ensure compliance with the waiver requirements regarding timing. As we’ve discussed, that timing element is very specific and very important when relying on the waivers, and so to make sure that you’re doing what you can now in order to make sure that you comply with those timeframes down the road. And as always, ensure that your organization’s strategic goals during this time are in line with the legal and compliance guidance and recommendations that have been issued by CMS and that we’ve discussed here today as well as on prior podcasts and articles that we’ve written in order to ensure that those strategic goals are in line with the legal requirements and vice versa. Joe, do you have anything else to add? Closing thoughts before we wrap up here today?

Joe Wolfe: Thanks everyone for listening to this podcast. As we’ve hit on a number of times, the time to act, to ensure compliance is now. We think that it’s important to act within the waiver period and documentation is always more compelling if it’s created at the time you were entering into the arrangements. And so, we think developing that documentation in writing right now is critical, whether it’s in the form of an amendment or a separate written agreement or some other type of supporting documentation. We’ve seen all of those approaches. We recommend that you do that now. You may want to capture the parties and the term, the type of the financial arrangement that you’re entering into, likely the proper COVID-19 purpose that you’re looking to, and the applicable waivers you’ve relied on. And Alyssa and I are hoping a number of healthcare organizations do that kind of analysis and we’re pointing healthcare organizations to developing best practices and making sure you have the tightest record that can help you down the road should you ever have to show that to the government or have to navigate a later compliance issue. And so again, thanks for listening in. I’ll turn things back to Alyssa to sign off.

Alyssa James: Thanks Joe, and thank you everyone for joining us today. If you’d like to learn more about topics that you heard in today’s episode, please feel free to visit our website at or reach out to either Joe or me via email. Joe can be reached at and I can be reached at Please remember that the views expressed in this podcast are those of the participants only and do not constitute legal advice. Thank you very much for joining us.

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