Relaxed Doctor Referral Rules Could Clash With Anti-Kickback Law

April 10, 2020, 5:32 PM

A Trump administration policy waiving penalties for violations of a health-care anti-corruption law may not provide the blanket protection that its name suggests.

Eighteen types of patient referrals and provider financial arrangements are now protected from sanctions through “blanket waivers” issued under the Stark law, which generally prohibits doctors from referring Medicare patients to other health-care providers with whom they have a financial relationship.

But some providers that use the waivers’ regulatory flexibility to help fight the coronavirus pandemic will still have to ensure compliance with the federal anti-kickback statute.

The HHS Office of Inspector General says seven of the Stark law waivers that deal with patient referrals won’t be protected from possible sanctions under the anti-kickback law, which bars efforts to induce or reward business referrals in federal health programs.

The waivers, issued by the Centers for Medicare & Medicaid Services on March 30, apply only to financial arrangements and referrals related to the Covid-19 outbreak. They’re designed to make it easier for doctors and hospitals to provide enhanced care during the pandemic, such as by letting hospitals pay physicians above their contracted rates.

Laws Collide

Some financial relationships implicating the Stark law “also may implicate, and potentially violate the Federal anti-kickback statute,” the Department of Health and Human Services’ OIG said in an April 3 policy statement.

But due to the “unique circumstances” of the pandemic, the OIG won’t impose administrative sanctions when that situation occurs with 11 of the 18 Stark law waivers, the HHS watchdog said.

The seven waivers with no such protection deal with patient referral arrangements involving physician-owned hospitals, home health agencies, and group practices.

Examples cited by the CMS include referrals made by a physician owner of a hospital that temporarily expands beyond its licensed patient capacity, and a physician who refers a Medicare beneficiary to a home health agency in which the doctor has an ownership interest.

But just because those referral arrangements aren’t “protected from enforcement under this OIG policy does not mean that the arrangement would be deemed to violate the AKS,” Randi Seigel, a partner at Manatt Health, said in an email.

She said some of those referral arrangements could be insulated from prosecution under the anti-kickback statute if they fit within one of the law’s safe harbors, which immunizes certain activities from liability.

“But, compliance with a safe harbor is not mandatory and failure to fit within a safe harbor is not a per se violation of the AKS,” Seigel said.

Consult First

The OIG is encouraging providers that want to employ any of the seven waivers to consult with the agency beforehand.

“Please provide sufficient facts to allow for an understanding of the key parties and terms of the arrangement at issue,” according to the OIG’s April 3 policy statement.

That outreach could give providers some “cold comfort” that, even if a waiver won’t apply to their proposed arrangement, the OIG is “not particularly concerned about it as you describe it,” Donald Romano, of counsel with Foley & Lardner LLP in Washington, said. “Of course, if the facts turn out to be different, then all bets are off.”

Knowingly violating the Stark law could bring a false claims action from the federal government or a whistleblower, Romano said. That’s why parties should retain clear documentation of the rationale and circumstances surrounding their use of the waivers, he said.

“It’s important to make sure that parties have explained why it is that they’re bending the Stark rules to help defend against any accusation, later on, that this was a kickback or otherwise an intentional violation,” Romano said.

While hospitals and providers don’t need federal approval to use the blanket waivers, records relating to their usage must be provided to the CMS upon request.

“It’s always more compelling to create that documentation contemporaneously rather than after the fact,” said Joe Wolfe, a Milwaukee-based attorney with Hall Render Killian Heath & Lyman PC.

To contact the reporter on this story: Tony Pugh in Washington at tpugh@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Alexis Kramer at akramer@bloomberglaw.com

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