The benefit of COVID-19 waivers to Stark Law, anti-kickback statute

On October 19, 2020, the Administrator of the Centers for Medicare & Medicaid Services (CMS) highlighted recent actions taken by the federal government to criminally charge, and revoke billing privileges of, health care providers nationwide for alleged involvement in fraudulent schemes. The recent crackdown resulted from coordination between the Department of Justice (DOJ), the Office of Inspector General (OIG) and CMS, and demonstrates the government’s continued focus on enforcing federal fraud and abuse laws and targeting abusive arrangements despite relaxations of such laws in response to the COVID-19 pandemic. To the extent the fraud and abuse waivers have the potential to lead to lasting flexibilities under current fraud and abuse regulations, the proliferation of abusive arrangements could threaten the prospect of long-term change.

Fraud and Abuse Waivers and Flexibilities in Response to COVID-19

CMS and OIG have worked together from the onset of the COVID-19 pandemic to relax regulatory restrictions under fraud and abuse laws to facilitate pandemic response efforts. Specifically:

• On March 30, 2020 (with retroactive effect to March 1, 2020), CMS issued blanket waivers of the Stark Law, also known as the physician self-referral law, applicable to financial relationships and referrals related to the COVID-19 national emergency. In follow-up guidance, CMS emphasized the flexibility providers have to enter into and amend compensation arrangements that might otherwise result in technical violations of the strict liability statute. CMS stated that the waiver potentially may apply to a number of possible arrangements, including:
  • A hospital paying physicians above their contracted rate for professional services for COVID-19 patients in particularly hazardous or challenging environments;
  • A hospital allowing physicians to use on-campus office space for free to enable timely and convenient services for patients presenting at the hospital who do not need inpatient care;
  • The provision of telehealth equipment for free to a physician practice to facilitate the provision of telehealth services to patients who are observing social distancing or in isolation or quarantine;
  • A hospital providing medical staff incidental benefits in excess of Stark-mandated annual limits for physicians spending long hours at the hospital responding to COVID-19; and
  • Hospital loans to contracted service providers to offset income reductions due to cancellation of elective procedures to ensure capacity for COVID-19 services.
• OIG followed up with a Policy Statement dated April 3, 2020, announcing it would not sanction providers for potential Anti-Kickback Statute (AKS) violations for certain arrangements covered by the Stark Law waivers to allow providers to focus “on delivering needed patient care” in response to COVID-19.
• OIG also has issued a “Message from leadership on minimizing burdens on providers” conveying the high priority it places “on providing the health care community with the flexibility to provide needed care during this emergency” and has published informal FAQ feedback addressing the regulatory risk of specific COVID-19-related arrangements. In the non-binding FAQ responses, OIG has indicated, among other things, that:
  • Clinical laboratories may offer free COVID-19 antibody testing to patients who at the same time are receiving other medically necessary blood tests with certain safeguards in place;
  • A hospital may suspend rental charges and interest accrual for a Federally Qualified Health Center (FQHC) Look-Alike entity where such suspension is set forth in writing, not conditioned on referrals, and certain other safeguards are in place; and
  • Provider groups may provide modest, in-kind transportation assistance to established patients for transport to alternative care locations in response to COVID-19, as long as certain safeguards are established.

Department of Justice Scrutiny of COVID-19 Fraud

At the same time, DOJ is heavily scrutinizing COVID-19-related fraud, including via its Disaster Fraud Hotline, and in particular has warned consumers about antibody-testing fraud schemes, COVID-19-vaccine fraud schemes, and fraud targeting disaster relief programs. As noted above, DOJ also has announced a series of enforcement actions, with the largest alleged fraud loss arising from “schemes involving telemedicine” that purportedly involved payments to providers for unnecessary durable medical equipment, diagnostic testing, and pain medication without properly evaluating the patient. In tandem, CMS revoked the billing privileges of 256 medical providers for involvement in the telemedicine schemes.

Lessons for Providers and Policymakers

The federal government has made significant efforts to extend flexibilities to providers under otherwise-stringent fraud and abuse laws to facilitate the delivery of care to patients during the COVID-19 emergency. The Stark Law waivers give providers an opportunity to address the pandemic’s immediate challenges with new arrangements, which may include short-term rental arrangements or licenses to allow for safe provision of in-person care, the provision of additional telehealth technology to promote access to care while social distancing (which may be particularly useful for addressing mental health issues arising from the pandemic), and arrangements that may fall outside fair market value, but are essential to ensure continued capabilities for facilities on the front lines of the COVID-19 crisis.

While the waivers provide regulatory relief in the short run to enable providers to respond to the COVID-19 pandemic, in the long run they may present an opportunity to influence policymaking related to fraud and abuse laws and regulations. At the end of August 2020, CMS extended until August 2021 its self-imposed deadline for issuance of new and amended Stark Law regulations as it continues to work through issues raised by industry stakeholders. This means that CMS will be reviewing the new regulations while observing the impact its waivers have had on the delivery of health care items and services and health care program costs during COVID-19. Successful implementation of arrangements that comply with the Stark Law waivers and OIG guidance could demonstrate that certain flexibilities present a low risk of abuse, have potential long-term systemic benefits, and can be adopted permanently.

At the same time, abusive arrangements that seek to take advantage of regulatory flexibilities, including those that use COVID-19 as cover to improperly influence referrals, may threaten the flexibility the waivers provide to hospitals and physicians who implement novel arrangements in good faith to improve access and quality of care without improperly skewing medical decision-making. The systemic risk of abusive conduct appears particularly high for telehealth services, which have been greatly expanded during COVID-19. The extensive benefits of telehealth during the COVID-19 pandemic and beyond – including for access to care and specialists, reduced infection risk, and more efficient scheduling – may be jeopardized by bad actors that capitalize on new flexibilities to promote fraudulent schemes.

It remains to be seen how illegal arrangements will affect the government’s willingness to permanently codify additional flexibilities under fraud and abuse laws and regulations. But the implementation of waivers during the pandemic may be a first step in the government acknowledging that greater flexibility may be beneficial in certain instances – and identifying areas where it can be achieved without significant risk of abuse.

Conor Duffy and Peter Struzzi are attorneys with Robinson & Cole LLP.