As the unprecedented early days of the COVID-19 pandemic unfolded, the Centers for Medicare and Medicaid Services (CMS) issued a series of nationwide Stark Law waivers to assist healthcare providers responding to the crisis.
During the public health emergency (PHE), the waivers exempted certain entities from fines and other penalties for violating the Stark Law, which prohibits physicians from referring designated health services to entities with which they have a financial relationship.
In addition to issuing the Stark Law waivers, CMS allowed independent free-standing emergency departments (IFEDs) to enroll in Medicare as hospitals during the PHE. As temporary hospitals, IFEDs could receive reimbursement for services provided to Medicare beneficiaries, increasing treatment capacity and addressing urgent patient needs during the fight against COVID-19.
CMS encouraged IFEDs to serve on the pandemic’s front lines by recognizing them as eligible providers for emergency medicine services for Medicare reimbursement during the PHE.
However, the financial relationship between IFEDs and the physician owners who refer designated health services to those IFEDs was not protected by a Stark Law exception—and CMS did not include IFEDs in the Stark Law waivers.
Ultimately, IFEDs that answered the call to deliver much-needed care during the PHE would have had two choices: 1) refund Medicare reimbursements for designated health services potentially amounting to millions of dollars or 2) self-disclose the violations and settle with CMS through a lengthy, expensive legal process.
A McDermott team, led by Monica Wallace, Amanda Jester and Taylor Hood, discovered this critical regulatory oversight in the Stark Law waivers while advising a number of IFEDs near the end of the PHE in 2023. The team shared its analysis with CMS, arguing the need for CMS to amend the Stark Law waivers to retroactively protect IFEDs.
Following review at the highest levels of CMS and the Department of Health and Human Services, the government recognized the validity of the McDermott team’s argument and agreed with the proposed solution.
CMS issued a new addition to the Stark Law waivers, protecting physician owners of IFEDs who served Medicare patients during the pandemic.
The IFED waiver applied retroactively and extended through April 10, 2023, the end of the national emergency—marking the only time that CMS has modified any component of the COVID-19 Stark Law waivers since their inception in 2020.
The McDermott team attributes the successful outcome to the Firm’s relationships with contacts at CMS, along with a deep understanding of healthcare regulations, the Stark Law waivers and the way in which CMS operates.
The new waiver protects IFEDs and their physician owners from the immediate financial impact of Stark Law violations. It also protects their business interests into the future by helping to prevent questions about regulatory noncompliance during potential transactions.
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