Providers Gain Substantial Flexibility under New 1135 Waivers

The Big Picture

On March 30, the Centers for Medicare & Medicaid Services (CMS) swept aside dozens of federal healthcare requirements using its emergency waiver authority under Section 1135 of the Social Security Act (SSA). These waivers addressing program requirements under Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP); Stark Law restrictions on physician self-referral; and telehealth are the latest salvo in CMS’s ongoing efforts to support providers and state governments as they respond to the escalating COVID-19 crisis. After briefly reviewing CMS’s authority under Section 1135, this analysis describes CMS’s latest waivers that, for example, enable providers to deliver care in alternate care settings, expand workforce capacity, and take myriad other steps to address ever-growing healthcare needs flexibly and efficiently.

In a separate analysis, Manatt Health takes a deeper dive on the limits of the Section 1135 authority. Later this week, Manatt Health will publish an analysis of CMS’s March 30 interim final rule with comment period (titled “Medicare and Medicaid Programs; Policy and Regulatory Revisions in Response to the COVID-19 Public Health Emergency”), which offers providers additional operational flexibilities not available under Section 1135.

Background: What Is Section 1135?

Section 1135 gives the Secretary of Health and Human Services (HHS) the power to waive or modify certain federal healthcare requirements during a federally declared emergency, with the twin aims of ensuring that beneficiaries in federal healthcare programs have sufficient access to services and that providers have the flexibility they need to deliver those services. HHS and CMS may issue 1135 waivers on a case-by-case basis, or may issue nationwide “blanket” waivers that apply automatically to any entity meeting the enumerated criteria.

The scope of the 1135 authority is broad, but not unlimited; HHS and CMS may issue waivers only with respect to the following federal requirements:

• Program participation requirements for providers in Medicare, Medicaid, or CHIP, including conditions of participation, certification requirements, and in-state licensure requirements
• Required deadlines and timetables under Medicare, Medicaid, or CHIP
• Specific elements of the following federal laws:
  • The privacy rules under the Health Insurance Portability and Accountability Act (HIPAA)
  • Medicare’s restrictions on telehealth services in SSA Section 1834(m)
  • Requirements for hospital emergency departments under the Emergency Medical Treatment and Labor Act (EMTALA)
  • The Stark Law rules governing “self-referrals” by physicians
  • Medicare Advantage reimbursement procedures for services furnished by out-of-network providers, described in SSA Section 1851(i)

This list has some notable omissions. CMS cannot rely on Section 1135 to, for example, expand Medicaid eligibility to new populations or extend Medicare coverage to new types of benefits. (Other federal authorities may be available for these types of program changes, however.) In addition, 1135 waivers do not modify or pre-empt state laws regarding provider licensure, patient confidentiality, or other issues; states seeking to capitalize on federal waivers may need to remove any barriers that exist under state law.

CMS’s March 30, 2020 Blanket Waivers Regarding COVID‑19

HHS Secretary Alex Azar activated his Section 1135 authority on March 13 in light of the COVID‑19 emergency.¹ Since then, both HHS and CMS have issued waivers that relax privacy rules, lift telehealth restrictions, and modify several program requirements in Medicare, Medicaid, and CHIP. CMS took another big step forward on March 30, issuing a sweeping set of new blanket waivers and related regulatory changes aimed at supporting provider efforts to increase capacity and minimize the risk of contagion among patients and practitioners.² These waivers—addressing program requirements under Medicare, Medicaid, and CHIP; Stark Law restrictions on physician self-referral; and telehealth—represent a bold new direction in CMS’s use of the 1135 authority.

All these waivers are retroactive to March 1 and apply automatically to all eligible entities without the need for individualized requests or notifications to CMS. The full text of these waivers and flexibilities is available on the CMS Coronavirus Waivers & Flexibilities landing page.

Conditions of Participation and Other Requirements under Medicare, Medicaid, and CHIP

In a 26-page fact sheet, CMS aggregates dozens of new and previously approved blanket waivers applicable to individual practitioners as well as hospitals, long-term care (LTC) facilities, home health agencies, hospice, and (for the first time) end-stage renal disease facilities. In addition to the fact sheet, CMS has published summaries of the waivers that are most relevant for each provider type.

Taken together, these waivers appear to prioritize the following elements of provider flexibility:

• Providing care in alternate or temporary sites, allowing providers to better accommodate surges in demand and implement isolation measures that segregate COVID-19 and non-COVID-19 populations. Relevant waivers here allow providers to use existing spaces in new ways (e.g., converting an ambulatory surgical center into a hospital) and to quickly stand up new sites of care without satisfying the normal certification conditions and procedures. In addition, CMS lifted certain restrictions on the redirection or transfer of patients with respect to both hospital emergency departments and LTC facilities. (Manatt Health prepared an EMTALA infographic, which summarizes four circumstances in which hospitals may legally divert patients away from the emergency department and toward alternative screening sites.)
• Reducing paperwork and administrative burden. To minimize the time that providers must spend on noncrucial activities, these waivers expand the permissible use of verbal orders and relax or suspend numerous requirements for documentation, reporting, and patient notification. Particularly noteworthy are the waivers that streamline the procedures for transitioning patients from one level of care to another (e.g., from hospital to LTC facility or home-based care).
• Enhancing practitioner capacity. CMS relaxed the minimum qualifications for certain services (subject to the limits of state laws on scope of practice) and also suspended several requirements for physician supervision.
• Suspending certain patient rights. During the emergency period, healthcare facilities need not comply with certain provisions defining patient rights, including the right to receive visitors, rights against involuntary seclusion, rights that guarantee certain LTC and hospice services, and the right to receive certain written notices and other updates.

Stark Law Prohibitions on Physician Self-Referral

CMS also issued blanket waivers of the Physician Self-Referral Law, also known as the Stark Law (SSA Section 1877), related to referrals and financial arrangements for “COVID-19 Purposes.” The Stark Law and its implementing regulations prohibit physicians from referring Medicare patients for certain designated health services to any entity with which the referring physician (or an immediate family member) has any direct or indirect financial relationship, unless an exception applies. Medicare will not reimburse for any services provided pursuant to a prohibited referral.

In the blanket waiver, CMS adopts a broad definition of “COVID-19 Purposes” that includes, among other things, diagnosis or treatment for COVID-19; securing services of physicians and other professionals to provide medical services, including those not related to the diagnosis or treatment of COVID-19, but in response to such outbreak; and addressing medical practice or business interruption due to COVID-19 in order to maintain the availability of medical care for patients in the community. Absent fraud, CMS waives sanctions for violating the Stark Law as part of its broader effort to ensure that sufficient healthcare items and services are available to meet the needs of individuals enrolled in the Medicare, Medicaid, and CHIP programs.

CMS waives sanctions associated with 18 types of financial arrangements that would otherwise be prohibited, and includes practical examples of arrangements that are permitted under the waiver. These newly permissible scenarios include:

• Remuneration to a physician that is above or below fair market value (FMV) for services performed. For example, a hospital pays physicians above their previously contracted rate for furnishing professional services for COVID-19 patients in particularly hazardous or challenging environments.
• Below-FMV rent or sales price for a physician. For example, an entity sells personal protective equipment to a physician, or permits the physician to use space in a tent or other makeshift location, at less than FMV (or provides the items or permits the use of the premises at no charge).
• Below-FMV equipment leases to a physician. For example, an entity provides free telehealth equipment to a physician practice to facilitate telehealth visits for patients who are observing social distancing or are in isolation or quarantine.
• Incidental benefits for medical staff that exceed current limits. For example, a hospital provides meals, comfort items (such as a change of clothing), or onsite child care with a value greater than $36 per instance to medical staff physicians who spend long hours at the hospital during the COVID-19 outbreak in the United States.
• Nonmonetary compensation that exceeds annual limits. Such nonmonetary compensation offered to a physician (or the physician’s immediate family) could include supplies, food or other grocery items, isolation-related needs (for example, hotel rooms and meals), child care, transportation, or continuing medical education related to the COVID-19 outbreak in the United States. These nonmonetary benefits may exceed the current annual limit of $423 per year.
• Loans to physicians with below-FMV interest rates, or on terms that are otherwise unavailable for a traditional lender.
• Referrals to affiliated home health agencies. A physician may refer a Medicare beneficiary to a home health agency in which the physician (or an immediate family member) has an ownership or investment interest, whether in an urban or rural setting.

Parties taking advantage of these blanket waivers must keep records documenting their use of these flexibilities. These records need not be proactively submitted to CMS, but must be made available upon request.

Telehealth

The March 30 announcement highlights steps CMS has taken to expand access to telehealth services in Medicare, effective March 1. Over the past few weeks, CMS has used its Section 1135 authority to relax certain Medicare requirements to promote the use of telehealth, including by eliminating originating site requirements and permitting providers licensed out of state to provide services (subject to state licensure decisions). For an overview of measures CMS has taken to date, see Manatt Health’s overview of Telehealth Service Expansion Related to COVID-19.

The new flexibilities that CMS highlighted this week are not the result of new 1135 waivers. Instead, they stem from flexibilities included in CMS’s new interim final rule to help improve access during the emergency period, as defined by Section 1135.³ Manatt Health will provide a detailed summary of that rule later this week. With respect to telehealth, the changes include expanding the list of eligible telehealth services, providing flexibility to providers in waiving co-pays, expanding the list of eligible types of providers who can deliver telehealth services, introducing new coverage for remote patient monitoring services, reducing frequency limitations on telehealth utilization, and allowing telephonic and secure messaging services to be delivered to both new and established patients.

What Are the Next Steps for Healthcare Providers and States?

Providers can immediately begin implementing these new waivers absent any barriers that may exist under state law. States, for their part, may wish to ensure that they have addressed any such barriers, in terms of both direct regulation of healthcare providers (such as conditions of licensure) and Medicaid reimbursement policies (such as conditions of payment).

Providers and states should also keep track of any potentially helpful flexibilities that have not yet been granted, whether under an 1135 waiver, the interim final rule, or some other authority. CMS has now addressed some of the most commonly requested flexibilities, whether in blanket waivers or in the Medicaid-specific waivers that have now been issued to approximately 40 states. As the COVID‑19 crisis continues to unfold, however, healthcare stakeholders may follow up on prior requests that remain pending or devise new strategies that require CMS action.

_{¹ HHS, Waiver or Modification of Requirements Under Section 1135 of the Social Security Act (Mar. 13, 2020),} 

_{² CMS, COVID-19 Emergency Declaration Blanket Waivers for Health Care Providers (Mar. 30, 2020), https://www.cms.gov/files/document/summary-covid-19-emergency-declaration-waivers.pdf; CMS, Blanket Waivers of Section 1877(g) of the Social Security Act Due to Declaration of COVID-19 Outbreak in the United States as a National Emergency (Mar. 30, 2020), https://www.cms.gov/files/document/covid-19-blanket-waivers-section-1877g.pdf.}

_{³ Certain components of the interim final rule are linked to the duration of HHS’s declaration of a public health emergency, which could, in some circumstances, remain in effect past the expiration of HHS’s emergency authority under Section 1135.}