Alyssa James

Preparing for the End of Stark Law Blanket Waivers: Insights and Strategies for Health Care Providers

Preparing for the End of Stark Law Blanket Waivers: Insights and Strategies for Healthcare Providers

Hall Render attorneys Alyssa James, Erin Drummy and Joe Wolfe discuss the upcoming end of the declared federal public health emergency (PHE) on May 11, 2023, and its impact on Stark Law blanket waivers and physician arrangements. The blanket waivers were initially issued in March 2020 to help hospitals and health systems with physician contracting and compensation models, staffing issues, and scaling up response to the public health emergency. The blanket waivers provided flexibility to health care providers in ensuring compliance with the Stark Law while addressing the needs of patients for COVID-19 related purposes. The waivers were used to stabilize physician compensation, secure necessary space and equipment, and provide additional items or services to referring physicians. The podcast discusses ways hospitals and health care systems, physician groups and other providers used the waivers over the past three years, and it provides recommendations and considerations to ensure Stark compliance post-PHE.

Podcast Participants

Alyssa James

Attorney, Hall Render

Erin Drummy

Attorney, Hall Render

Joe Wolfe

Attorney, Hall Render

Alyssa James: Hello and welcome to Hall Render’s Practical Solutions Podcast in Healthcare regulatory update. I’m your host Alyssa James, and I’m a shareholder with Hall Render, the largest healthcare focused law firm in the country. Today, we’re here to discuss the upcoming end of the declared federal Public Health Emergency (PHE) that ends on May 11th, 2023, and the impact that it will have on the Stark Law Blanket Waivers and physician arrangements that have relied on those Waivers. So let’s dive right in. Joe, can you briefly tell us about what the end of the PHE and related Blanket Waivers means for healthcare organizations and providers?

Joe Wolfe: Thanks, Alyssa. It’s nice to be able to talk through this now that the Public Health Emergency is coming to an end. The Waivers were initially issued back in March of 2020. They were always set to expire at the end of the declared Public Health Emergency, and they were really helpful for hospitals and health systems and other providers back then. If you recall, there were lots of challenging times around physician contracting, physician compensation models and staffing issues back then. There was a lot of scaling up in response to the public health emergency. So the Waivers were issued again back in March of 2020. They were set up so they could be relied upon for financial arrangements that relate to a COVID-19 purpose and  our arrangements we were analyzing under the Waivers were physician services arrangements where we were pulling together emergency coverage and maybe you weren’t able to get in line the documentation to support fair market value.

One of the Waivers included payments to physicians above or below fair market value for personally performed services. For example, there were some Waiver concepts around space and equipment rentals and rental charges for equipment or office space above and below FMV at that time, there was some Waiver of the medical staff incidental benefits occurrence cap around non-monetary compensation, some discussion of loans. If you recall, the Waiver document back then gave a number of examples. I think there were around 20 of them of specific arrangements that could fall within the scope of these Waivers. It gave healthcare providers some flexibility to look to the Waivers, rely upon them if they needed to, and then they needed to document their use of those safeguards contemporaneously. As we even thought about it back then, it was always a novel concept. We didn’t know how long they were going to stay in place, but they also had remained untested.

We encouraged our clients that if they’re going to rely on those Waivers to get something in the record, definitely before the public health emergency came to an end. So fast-forward to now, the Waivers, it was recently announced that they’re going to end on May 11th, so coming up very soon. So that’s a little background in the Waivers. I saw clients mostly relying on them for the stabilization of physician compensation plans, saw them use them in some coverage situations where maybe there was a hospital-based coverage arrangement where the financial model didn’t work as anticipated. I also saw it used in the lease context, especially where physicians were leasing space from a healthcare entity and needed to build in some flexibility in that area. So that’s a little bit of background on the Waivers.

Alyssa James: Thanks, Joe. Now that we have that background and lay of the land – Erin, can you share some ways that you’ve seen clients use the Waivers and have worked with clients to utilize the Waivers over the past three years that they’ve been available?

Erin Drummy: Sure. So at the time that the pandemic was beginning and certainly at the height of the pandemic with the lockdowns and the restrictions on elective procedures, I was actually serving as general counsel for a large national physician group. We, like many other healthcare providers, were experiencing revenue challenges associated with the restraints on elective procedures. Even thereafter, patients were not particularly excited about leaving their home and coming to the doctor’s office for routine elective or preventative services. So one of the early uses of the Waivers that I personally was involved with and am aware of other providers utilizing as well, is seeking rental abatements from landlords and hospital/health system landlords where Stark was implicated.  I think there were a number of providers that were seeking these types of abatements or rental relief and rental reduction to ensure that they could continue to operate even in light of these revenue challenges.

We also saw a desire by hospitals and health systems to provide telehealth equipment to physicians and physician practices at no charge or at a reduced charge. Again, looking to secure services for patients who are reluctant or unable to leave their home to seek medical services. Many hospital and health system clients reached out to ask for advice related to providing items for additional medical staff incidental benefits and other non-monetary items to their referring physicians. Sometimes these were items or services directly related to PPE, things of that nature. Other times it was comfort. Additional meals or having some additional amenities for providers who were spending many, many hours in the hospitals taking care of patients.

One of the other Waiver uses that we’re aware of pertains to the physician owned hospitals. As you likely know, the Stark Law places restrictions on the total number of beds, operating rooms, and procedure rooms that a physician-owned hospital can have, and it can’t expand beyond that number without an exception granted by CMS. But during the public health emergency, there was a Blanket Waiver that permitted a temporary expansion of beds to meet inpatient hospital needs. Then finally, I would note that in the physician group side, the in-office ancillary services exception, there was a Waiver that permitted some additional flexibility around the location requirements for that exception. We’re aware of clients who were looking to provide items or services via mail or in other locations that may or may not have met the location requirements for same building or centralized building under the in-office exception.

Alyssa James: Thanks, Erin. I know a lot of clients that I worked with, particularly early on in the pandemic, seemed to center around either decreases in services due to surgery cancellations and elective surgery terminations and things like that, but wanting to make physicians whole from a RVU and compensation standpoint as well as instances where, depending on the specialty, you also had physicians doing a lot of extra work and extra hours that depending on their compensation model in their original arrangement, they may or may not have gotten adequate credit for.

So many were wanting to increase compensation for that work and having the Waivers to rely on for situations where maybe that additional compensation could have exceeded fair market value, or even just having the comfort of the Waiver without having to go out and seek a new opinion at times when things were moving so quickly. I know a lot of clients were really appreciative of that flexibility and having those opportunities. So along those lines, Joe, can you tell us a little bit more about what you think providers and healthcare organizations that have utilized any of these Blanket Waivers in the past should be doing now to prepare for the termination of the Public Health Emergency and how they can pivot or evaluate any changes they need to make to their arrangements?

Joe Wolfe: Sure, Alyssa. I think first of all, it’s important to think, and Erin and Alyssa, you already described some situations where you went through the regulatory analysis back then, and if we all go back in time, I don’t think it was a free for all back then. There were situations that healthcare organizations were encountering and they were doing the analysis and they were deciding whether they needed to rely on the Waiver. So I think it’s important to know that this isn’t starting. Right now, getting a sense of what occurred isn’t maybe as heavy a lift as we might think because there already is going to be a record back there in time when you made that decision. A lot of strong analysis was developed back as the pandemic unfolded. As healthcare organizations think about winding down and reassessing again, understanding that what occurred in the past is important to go back and start to think about and review that internal documentation to analyze the timing, what actions were taken, how the disbursements of compensation were handled.

It’s likely you relied on an existing exception or safe harbor. Maybe you didn’t even need to look to the Waivers. Maybe you were able to get comfortable looking to Stark or the Anti-kickback Statute. Maybe that’s already reflected in the record. If you go back, you also may have the luxury now of saying, “Look, it also fit in line with the Waivers as well.” If you did rely on a Waiver, I think it’s important to have in the record how that aligned with the COVID-19 purpose. There were six of them identified in the guidance. Ideally, you’d want your arrangement and what actions you took to fit within one of the defined Waivers or one of the actual examples that the government gave. Of course, many won’t, but I think to the extent your documentation reflects that the actions you took were framed and aligned with those Waiver concepts, the better off you’re going to be.

Then you want to make sure you’ve developed some separate documentation that described the COVID-19 purpose and the scope of the arrangement. There wasn’t one way to do it back then. Like I said, maybe you have something in the record that you can point to. Maybe you developed an amendment and that amendment captures this. Maybe there’s a log. I’ve heard of organizations that developed a COVID log that just identifies in sequence, the actions they took. But outlining what actions you took over time, I think is important. Now that the Public Health Emergency is coming to an end, you still have time to develop that documentation.

You should be thinking about what to do with existing arrangements where you’re still relying on the Waiver. Does it make sense to wind that down? Does it make sense to pivot into some other rationale or regulatory analysis to support staying in that arrangement? You just want to be clear with everyone on the team, your legal team and your compliance team, just where is your defensibility sitting with where you were and if you’re going to stay in that arrangement going forward, what defensibility are you going to rely on? Those are just some thoughts, Alyssa.

Alyssa James: Great. Thanks, Joe. Erin, what have you seen or thought through with respect to … I know there were blanket Waivers that applied specifically to physician owned hospitals and their ability to temporarily expand their number of beds or their footprint in response to the pandemic. What are folks doing in that space to make sure they get back in compliance with the moratorium on expansion, absent the Waivers?

Erin Drummy: Sure. So I think this one, this is an important one because the risk is significant. As I noted, the exception for ownership in a physician hospital requires that the hospital not have expanded its number of beds beyond a certain threshold. So if during the pandemic, the hospital was relying on the Waivers to do so, to convert beds from observation rooms to inpatient beds or otherwise. It will be very important to have those beds switched back and taken off your license if that’s required. It will vary a bit state-to-state in terms of what the process is, but we certainly want to make sure that’s done prior to the end of the PHE so that there’s no violation, which could potentially implicate all of the referrals by your physician owners. So I think this is an important one, and given that it may take some interaction with the state to adjust the license, I think this is one that we would recommend folks get moving on.

There are, in addition to the unwind provisions that Joe mentioned, there are some individual Waiver abilities or flexibilities. CMS has provided a process by which providers can request a Waiver under an ongoing Waiver post PHE. So that may be something for providers to consider if there is something that’s not a easily able to be unwound or if there’s some other justification for something that might satisfy CMSs requirements to permit an ongoing Waiver. That may be something else that parties want to consider. Specific to physician-owned hospitals, there is an exception process that CMS has for those entities. Again, that may be an avenue to consider, but given the timing, I think it’s important to start thinking about, can we convert these beds back to observation status or are there other things that we can do to get ourselves back to pre-pandemic bed counts in order not to violate Stark?

Alyssa James: Absolutely.  That approval process from CMS for possible expansion of physician owned hospitals can be lengthy. So certainly not something that’s going to be in place before the end of the PHE, but something that folks could look to pursue on a parallel track while temporarily, at least for the time being, reducing those numbers back down. So Erin and Joe, what can providers do now if they’re not ready to revert certain arrangements back to their pre Waiver status? I know we’ve touched on this a little bit already, but are there any new or creative options available that provide some flexibility for certain types of arrangements and instances where maybe providers have modified or entered into new arrangements with physicians that they don’t want to end just because the PHE is terminating?

Erin Drummy: Well, one potential option there, Alyssa, relates to a new exception. Hall Render worked with Congress to get a new exception to Stark passed for physician wellness programs. It’s a fairly broad exception that’s available to entities with a formal medical staff. They’re able to offer certain mental health or behavioral health improvements or maintenance programs to physicians in a geographic area that are designed to improve, maintain or prevent mental health issues, including suicide prevention, substance abuse disorders, and things of that nature. I think during the course of the pandemic, we’ve heard a lot about burnout by healthcare providers. I think these mental health concerns can be ongoing. Just because the Public Health Eemergency is ending, these concerns are not. So this is one area where CMS has established a process for a provider to establish via policy, a bona fide program to help prevent and avoid and treat these issues that are being encountered by their medical staff.

This has to be substantive. There’s got to be an evidence-based basis for the program. It’s got to be administered by a qualified healthcare professional. The board needs to approve this. So there are some structural and procedural requirements in order to put one of these programs in place, but that may be an area where providers could consider codifying or formalizing some of the things that they’ve been doing during the pandemic with under the protection of the other blanket Waivers with this new exception. The new exception is available for programs that went into effect beginning at the end of December of 2022. So again, it’s a fairly new program.

Joe Wolfe: Yeah. I would add that I think that’s a great example Erin just gave. Also, there’s some other new opportunities under some recent rule changes. Via the Stark overhaul, the government gave us a new exception for limited remuneration arrangements. Arrangements  at or below $5,000 would not be a Stark violation if you have a services arrangement, even if the remuneration is not documented as long as that services arrangement met the “big three.” Meaning that it does not exceed fair market value, is commercially reasonable and doesn’t take into account the volume or value of referrals. So this is a really helpful exception if we do have situations like we had during the pandemic where you need to ramp up coverage very quickly for emergency situation, and as long as that doesn’t exceed $5,700 under inflation now, that’s going to be a protected arrangement. So that’s an area where I think healthcare organizations could put in place some type of a policy or an expectation that if they do get in an emergency situation, they could look to this limited remuneration exception to help protect that.

As I mentioned earlier, just an offshoot of that. I mentioned earlier some of the exceptions or the Waivers that were issued got into arrangements being above or below fair market value for professional services. I think the government was trying to say, “Look, you could have an emergency situation here where you have to get coverage in place quickly, and maybe that’s going to push the limits of fair market value.” The government also came out in the most recent rule making and said, “With respect to fair market value, that extenuating circumstances are relevant for determining fair market value.”

I do think that some of that commentary that the government came out with around the rule change would play right into the pandemic. If you have an emergency coverage situation, you do have to pay higher rates to get that coverage in place. I think you’ll have some protection potentially under the fair market value standard as well. So those are just the limited remuneration exception and the greater flexibility around fair market value, which I think are two areas that will be helpful if they have to revert to arrangements to pre Waiver status, Alyssa.

Alyssa James: Oh, I think those are both really good call-outs of some new flexibilities that came about while we were in the midst of the pandemic. So things that didn’t necessarily exist, or options that didn’t exist pre-pandemic that hopefully continue some of that flexibility that providers have had during the PHE. Another framework that I think could be useful for some providers is the establishment or expansion of value-based enterprises/value-based arrangements where they can partner with physicians and other organizations to effectuate some of those value-based purposes. But I think a lot of the COVID related arrangements or expansions of arrangements for COVID purposes are things that could very easily dovetail into that value-based framework on a go forward basis. Those exceptions under Stark and Safe Harbors under AKS give providers a lot of flexibility they may not have with some of the other Stark Law exceptions.

So there’s a lot of resources on the Hall Render website about value-based arrangements so that anyone who’s interested in those can look to set those up with or without a lot of downside financial risk to the physicians. There are some monitoring and things like that that are required that may take a little bit to get in place and to effectuate, but I think all of those options discuss the wellness exception, limited remuneration and value-based exceptions hopefully will give providers continued flexibility even after the Waivers are no longer available. Joe, Erin, any final thoughts for our audience today with respect to the end of the PHE and its impact on these blanket Waivers?

Joe Wolfe: I just think doing the analysis sooner rather than later is going to be important. So conduct an audit, it’s likely your compliance team may be made up of people that weren’t even part of the team at the beginning of the pandemic. So do that audit. Contemporaneous documentation is the best situation to be in. But I think even having documentation now before the public health emergency is over is critical because you’re not going to want to be developing a record down the road when you have some type of an enforcement type action. So doing it now, it’s the right time to unpack this while you still have the opportunity. But we wish all … We know that everyone had the best of intentions during the public health emergency and they had to move quickly and now as an opportunity in the next few weeks to get these audits in place and to get the documentation solidified.

Erin Drummy: I would echo Joe’s comment around the timing. These things always take longer than you might think they would in terms of getting an updated fair market value in place and getting documentation signed if there’s an arrangement that’s not documented in compliance with a Stark Law that needs to be post pandemic. So I think thinking about identifying those arrangements and getting all of the I’s dotted and T’s crossed in terms of the supporting documentation amendments agreements in place so that you’re well suited to have an arrangement that fully complies with the law as of May 11th.

Alyssa James: I think those are all really good takeaways for the audience. Thank you all for joining us today. If you’d like to learn more about the Stark Law Blanket Waiver termination or other fraud and abuse and compliance issues more generally, please visit our website at or feel free to reach out to Erin Drummy, Joe Wolfe, or myself, Alyssa James or your regular Hall Render attorney. Please remember that the views expressed in this podcast are those of the participants only and do not constitute legal advice. Thanks.

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EKRA Enforcement Developments and Moving Forward

EKRA Enforcement Developments and Moving Forward

Recovery Homes, Clinical Treatment Facilities, and Laboratories must continue to be mindful of the Eliminating Kickbacks in Recovery Act of 2018 (“EKRA”), an all-payor statute enacted in 2018 prohibiting kickbacks related to remuneration for referrals to these entities. EKRA’s passage generated uncertainty surrounding its applicability and enforcement, particularly regarding the statute’s breadth and its interplay with permissible arrangements under existing federal health care laws. However, the Department of Justice announced its first conviction under EKRA at the beginning of 2020, signaling the government’s commitment towards enforcing the statute and emphasizing the importance of structuring compliant arrangements.

Podcast Participants

Alyssa James

Attorney, Hall Render

Gregg Wallander

Attorney, Hall Render

Alyssa James: Hello. Welcome to Hall Render’s Practical Solutions podcast, featuring thoughtful analysis and insightful commentary on the legal issues facing the healthcare industry. My name is Alyssa James and I am an attorney with Hall Render, the largest health care focused law firm in the country. Today my colleague, Gregg Wallander, and I will be discussing the EKRA Law, which stands for Eliminating Kickbacks in Recovery Act of 2018. This law was passed in October of 2018 as part of a larger act known as the Support Act, which focused on substance use, disorder prevention, as well as opioid recovery and treatment. This law was passed with the intention of being a comprehensive law that would combat the opioid epidemic at various levels within the healthcare industry.

Alyssa James: Now, I am going to kick it over to Gregg to give us a little more background and an introductory discussion into EKRA and its implications.

Gregg Wallander: Thanks Alyssa. EKRA was ultimately buried in an opioid law when it was enacted, and really caught a lot of people by surprise. It was not part of the initial drafts of the Support Act, as Alyssa mentioned, but it ended up being buried in there like a peanut butter and jelly in between two slices of bread, and it’s right in the middle there.

Gregg Wallander: We are faced to deal with this law, which is very comprehensive. EKRA is an all-payer statute and it addresses services that are covered by any health care benefit program, so it applies to both federal payers as well as commercial insurers. The reason is because it’s a federal law and applies to programs affecting interstate or foreign commerce. But what it really does is establish criminal sanctions up to $200,000 fines and 10 years imprisonment for kickbacks with respect to services covered by any type of healthcare benefit program, as I mentioned. It prohibits kickbacks regarding the solicitation or receipt of remuneration for referrals to recovery homes, clinical treatment facilities, or laboratories.

Gregg Wallander: Laboratories have received the most scrutiny under this law at this point in time, and EKRA further criminalizes the payment or offer of remuneration to induce a referral. So soliciting or inducing the referral can cause liability under EKRA. This is a very broad statute that impacts the ability to pay, solicit or receive money in exchange for referrals or patronage for recovery homes, clinical treatment facilities, or laboratories.

Gregg Wallander: Now, where we see some of these issues in practice really come into play, what about employees? What about payments for marketing services, payments to independent contractors, those kinds of things?

Gregg Wallander: We have discounts with respect to pharmaceuticals. We have discounts with respect to laboratory services. We have discounts that go across the board in the healthcare continuum. We have employment arrangements and we have services arrangements. There’s a lot to deal with here with EKRA.

Gregg Wallander: Alyssa, let’s talk a little bit about the exceptions with EKRA. Let’s go through them and we can chat about them. As I mentioned, there are discounts across the continuum, but there is an exception under EKRA for discounts as long as they’re properly disclosed and reflected in the entity’s cost or charges. In the supply chain context, there are exceptions for this. There also is exception coverage language for Medicare coverage gap drug discounts. From a discount perspective, EKRA does have those two exceptions to keep in mind.

Gregg Wallander: Alyssa, let’s talk about payments to employees and independent contractors.

Alyssa James: Sure. Thanks Gregg. As you mentioned, there are several exceptions to EKRA. I think one thing that just kind of more broadly is important to note is that some of the exceptions under EKRA are less forgiving, or permit fewer activities than would be permitted under the federal Anti-Kickback Statute. I think it’s important to kind of keep in mind when you’re thinking through these types of arrangements that something may be permissible under the Anti-Kickback Statute but not permissible under EKRA, and so that’s an important distinction. To your point, Gregg, regarding payments to employees and independent contractors, there is an exception for that under EKRA, but that exception requires that the compensation that’s paid to those employees or independent contractors not be determined by, or vary based on: the number of individuals that are referred to a particular entity that’s a part of the arrangement, or outside of the arrangement; the number of tests or procedures that are performed; or the amount that is billed or collected from health care benefit programs.

Alyssa James: And so when you read the plain language of that exception, and then review the exceptions to the exception, if you will, EKRA on its face prohibits the commission-based payments that are very common, especially in the laboratory space for sales reps and similar positions. The types of arrangements that maybe would be permissible under the Anti-Kickback Statute, for example, don’t meet the corollary exception to EKRA because of those caveats of what those payments to employees and independent contractors cannot be based upon. EKRA really is trying to focus more on fixed-fee compensation for employees and independent contractors, which generally speaking is a pretty big shift for the industry as far as what would be permitted for those types of relationships.

Gregg Wallander: That’s spot on. We’ve spent a lot of time, as you know, dealing with questions from clients across the country. Every conversation seems to be, “Is this really true? Can we not pay a commission anymore? Can we not pay incentive for achievement in this regard? Every sales person is compensated in this manner.” We agree and understand this sentiment. It does seem very unrealistic that the intent was to be this broad when you’re dealing with the private commercial insurance world. But, as Alyssa mentioned payments to employees and independent contractors that are not determined by, or vary with individuals referred, number of tests performed, or amount billed, really cut off a lot of mainstream and accepted sales arrangements.

Gregg Wallander: There are already laws on the books as well as industry guidelines, like the Pharmacode and AdvaMed Guidelines, which govern institutional relationships and sales relationships between entities to remove issues of inducement. So there are already safeguards on the books, but yes, we’ve had to advise that this law is broad and it potentially implicates a number of commission-based and other sales relationships.

Gregg Wallander: I think there are entities saying, “Wait, it’s just really hard to believe that this can be intended in this manner.” We certainly empathize with that. I think a lot of folks have been saying, “Hey, let’s see how this develops and see if Congress changes its mind or realizes that this was really an overreach.” We’ve talked with our DC office folks about this, and it’s not clear that really there is an intent to revisit this.

Gregg Wallander: It can be politically expedient on either side of the aisle to say, “Hey, we’re against opioid abuse, and so we’re not going to touch any of these laws for fear of looking weak,” or some other term. Again, our interest is in making sure we get this right, but it’s not clear that this law is going away anytime soon.

Alyssa James: I think that’s exactly right, Gregg. In the law itself, there are references to regulations that may be promulgated in the future, and we’ve seen nothing to that effect. We have this law that on its face seems overly broad and much more restrictive than existing laws, and not just in the sense that it also applies to commercial patients in addition to federal health care program patients, but also just in the conduct that on its face, it permits.

Alyssa James: In the year-and-a-half since it has been issued, we’ve seen no proposed regulations or any discussion about forthcoming proposed regulations that would maybe help clarify or fine-tune a little bit the intent and maybe give some additional framework for healthcare organizations, especially labs and entities that contract with labs, to maybe give a little more flexibility, or at least move the needle a little bit back to where it was before. When we’re talking about this, even though we’re talking about this in the context of an opioid law, it’s important to remember that it applies to all laboratory services, not just those related to opioid testing and treatment.

Alyssa James: So it’s very broad, and I think there are a lot of stakeholders in the industry who maybe aren’t aware of how broad it is. Or, like you said, Gregg, just waiting to see what happens before they take action to restructure all of their compensation arrangements that they may have with employees or independent contractors, specifically, at least with regard to that exception. So far, we haven’t seen any sort of guidance or inkling from Congress or regulators that would help to narrow down that scope a little bit or provide any more clarity.

Gregg Wallander: In moving forward, let’s round out a few of the final exceptions, and then we’ll move on to enforcement. There is an exception for: waivers or discounts of certain co-payments or co-insurance as long as it’s in good faith and not routine; certain transfers to federally-qualified health centers under the Anti-Kickback Statute safe harbor; and remuneration made pursuant to approved alternative payment models, meaning different kinds of payment programs for the government.

Gregg Wallander: If you’re outside of the employment context and you’re looking at discounts or other kinds of payments, there are some other exceptions to examine and find out if you fall within those. The main question we’ve gotten after looking at the exceptions relates to enforcement, and with respect to all federal laws, usually when they get put on the books, there’s a time lag for enforcement as the Department of Justice gets its arms around it and as everyone in the industry kind of gets their arms around it. It looks like we’ve had to wait about a year and a couple of months for enforcement. EKRA was enacted in 2018, but just this year at the start of 2020, we finally have an enforcement action. Alyssa, you want to chat a little bit about that and go from there?

Alyssa James: Sure. As you mentioned, we’ve seen one enforcement action back in February. That enforcement action involved an office manager of a substance abuse clinic in Kentucky. That office manager was allegedly soliciting kickbacks from the CEO of a toxicology lab in exchange for urine screening drug testing referrals.

Alyssa James: The period of time in which the alleged conduct occurred was from around December of 2018 to August of 2019. In the period of time after EKRA was enacted, of course, but not an overly long-standing arrangement before it was under investigation. The office manager who allegedly received a check of $4,000 from the CEO of the toxicology lab as a part of a larger package of promised inducements (that were not actually received) ended up being sentenced to five months in prison followed by an additional five months of home detention, and was assessed a fine $55,000.

Alyssa James: Although the alleged inducement or kickback was really only valued at $4,000, her fine there was $55,000 plus time in prison, which is obviously significant. It doesn’t go up to the maximum allowable under EKRA which is up to $200,000 in fines and up to 10 years in prison. But certainly, it would appear that the government is trying to let folks know that the enforcement under EKRA, if you find yourself in that position, will not be taken lightly given the prison time and the fine assessed in the one enforcement action that we do have.

Gregg Wallander: Yes. This is significant, as again, when we wait for a law to be enforced, and people have wondered, “Can the government really mean this?” Well yes, they do. It is going to be a law that is going to be prosecuted in some manner. My sense is that we’ll see some sporadic enforcement. I think it’s going to take some sort of a marketing relationship, or some sort of sales commission relationship that has been very commonplace and deemed very legal forever, that rises to a level to see if in fact there would be congressional action.

Gregg Wallander: I think everybody needs to understand and to respect EKRA. There is an enforcement now on the books, it’s there. There was a $4,000 inducement situation which resulted in a $55,000 fine and five months in jail. Pretty significant given what the issue was.

Gregg Wallander: We’re going to have to continue to monitor this. Our advice is to continue to monitor EKRA. I think folks need to be aware of the scope of EKRA and that you can’t just assume that because it’s not government, that you don’t need to review all your relationships. You do need to review them. Again, don’t assume that if it’s just commercial, that you can move forward. Again, the government’s recent enforcement action underscores the need to remain keenly aware of the statute and maintain compliant arrangements.

Alyssa James: I think that’s exactly right. I know we’ve seen an increase recently in the necessity of EKRA-related analyses in light of the COVID-19 pandemic, for example, and proposed arrangements with labs related to COVID testing. Again, EKRA is not limited to opioid-related services and testing and there was a flurry of new arrangements and continue to be, to some extent, as a result of the pandemic that we’re currently facing. It’s important to keep EKRA in mind there as well and the implications that it may have on those arrangements.

Alyssa James: Of course, I think when folks are faced with very time-sensitive analysis and arrangements because of the nature of COVID and wanting to get that testing up and running, it’s easy to quickly put those arrangements in place without vetting out some of the regulatory implications, especially those like EKRA that folks may not be as familiar with. While there have been waivers issued for certain fraud and abuse regulations related to COVID treatment and responses, which we’ve discussed on previous podcasts, there have been no published waivers that are corollary to that for EKRA. So, it’s something to keep in mind. Just because something is in response to the pandemic doesn’t mean that these regulatory implications may not still be there.

Gregg Wallander: Exactly. In wrapping up, if you’re dealing with recovery homes, clinical treatment facilities, and laboratories, be aware of all of your relationships. Take a good inventory of them. Talk with counsel and see if any modifications are necessary. Appreciate everyone listening today and hope you are all safe during this time.

Alyssa James: Thanks everyone.

Gregg Wallander: Thank you.

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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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