Blanket Stark Waivers & FMV: Immediate Reaction & Key Valuation-Related Takeaways

VMG Health is not a law firm and is not qualified to give legal advice. It is highly recommended that the readers of this article seek legal advice from qualified attorneys.

1. These Waivers (issued March 30, 2020) only apply to the Stark Law, and not to AKS [1] or other federal laws or regulations unless it is otherwise referenced within each specific Waiver. It is notable that the waivers reference FMV but do not discuss commercial reasonableness.  In addition, many states have laws similar to Stark and federal AKS and these Waivers relate only to federal law.
2. It applies only to COVID-19 related issues. Specifically: “The remuneration and referrals described in the blanket waivers must be solely related to COVID-19 Purposes.”
3. The purpose of the Waivers is to provide needed healthcare services to address the COVID-19 pandemic. Specifically: “Addressing medical practice or business interruption due to the COVID-19 outbreak in the United States in order to maintain the availability of medical care and related services for patients and the community.”
4. The Waivers are temporary only, with the effective date retroactive to March 1, 2020, and will remain in effect in general until the termination of the declaration of the emergency or disaster for the coronavirus pandemic or 60 days from the date the Waivers are published (unless this 60 day period is extended). Therefore, it is very important for any provider that chooses to implement these Waivers to closely follow the future status of the Waivers and when they will end.
5. Several of the Waivers deal with rental arrangements that are below FMV, not necessarily above.
6. Several of the Waivers deal with permitted referrals that could increase the cashflow to hospitals and other healthcare facilities and practices.
7. Several of the Waivers deal with permitted loan arrangements that can help healthcare businesses address financing and liquidity needs.
8. In considering whether to pursue any of these Waivers, managers should also consider any unintended consequences to its existing compensation models and business operating agreements beyond the temporary period covered under the Waivers.

As the COVID-19 pandemic continues to affect healthcare transaction activity, VMG Health is actively monitoring regulatory guidance and the most recent market data relevant to fair market value opinions.  The Waivers provide specific exceptions that the parties to a transaction and the valuation professional may need to consider.  Each of the 18 Waivers affects different valuation categories, including Business or Ownership Interests, Real Estate, Machinery & Equipment, and Services.  VMG Health has developed the following Exhibit which identifies the applicability of each Waiver to the relevant valuation category.  Please contact VMG Health if you wish to discuss the Waivers or other valuation-related concerns.

[1] The OIG issued a Policy Statement on April 3, 2020 in which the OIG states that it “will exercise its enforcement discretion not to impose administrative sanctions under the Federal anti-kickback statute for certain remuneration related to COVID-19 covered by the Blanket Waivers of Section 1877(g) of the Social Security Act (the Act) issued by the Secretary on March 30, 2020 (the Blanket Waivers), subject to the conditions specified herein.”  The Policy Statement applies to conduct occurring on or after April 3, 2020 and will terminate on the same date as the Blanket Waivers terminate.  Furthermore, the Policy Statement states explicitly that it has no bearing on arrangements that are not covered by the Blanket Waivers.