October 05, 2006
Health Law Alert
Our most recent alert summarizes rules recently published by the Department of Health and Human Services and the Office of Inspector General. These rules become effective on October 10, 2006 and concern exceptions to the federal anti-kickback and physician self-referral laws for donation of items and services to be used for electronic prescribing and electronic medical records.
On August 8, 2006 the Centers for Medicaid and Medicare Services (“CMS”) and the Office of the Inspector General (“OIG”) simultaneously established rules creating an exception to the Physician’s Self-Referral Law (“Stark”) and a new safe harbor to the Anti-Kickback Statute. The rules become effective on October 10, 2006. The rules were implemented in response to a provision in the Medicare Modernization Act (“MMA”) that directed the Secretary of Health and Human Services (“HHS”) to adopt standards for electronic prescribing and to create an exception to help promote widespread adoption of e-prescribing. They are intended to support and promote physician adoption of e-prescribing and electronic health records (“EHRs”). In general, the rules provide that donations of technology will not violate the Stark Law and the Anti-Kickback Statute if certain conditions are met.
The e-prescribing regulations are more limited than the EHR regulations and allow donations of e-prescribing technology from hospitals to physicians who are members of the medical staff, group practices to physicians who are members of the group and/or Medicare Physician Drug Plan (“PDP”) sponsors, or Medicare Advantage (“MA”) organizations to prescribing physicians. The donation can include hardware, software, and training services that are necessary and used solely to receive and transmit electronic prescription information. In addition, the donated technology must meet applicable standards under Medicare Part D. Because of the limited nature of the e-prescribing regulations, the broader EHR regulations are of more significance, as the EHR regulations include e-prescribing technology in the EHR donation.
Under the new EHR regulations, it is permissible for hospitals, group practices, physicians, nursing and other facilities, pharmacies, laboratories, community health centers, dialysis facilities, health plans, ancillary service providers, and durable medical equipment suppliers to donate software, information technology, training services, and help desk support that are necessary and used predominantly to create, maintain, transmit, or receive EHR, to physicians, group practices, physician assistants, nurse practitioners, nurses, therapists, audiologists, pharmacists, nursing and other facilities, community health centers, laboratories, other suppliers, and pharmacies.
The EHR software must include an e-prescribing capability that meets the Medicare Drug Benefit Standards and may include billing, scheduling, and other administrative functions, as long as the core function remains EHR. The software must be interoperable, with the ability to: 1) communicate and exchange data accurately, effectively, securely, and consistently with different IT systems; and 2) exchange data so the clinical or operational purpose and meaning of the data are preserved and unaltered. The donor may not take any action to limit or restrict the ability of the donated items or services to be interoperable with other health information technology. Interoperable software certified by the Certification Commission for Healthcare Information Technology (“CCHIT”) can be accessed at www.cchit.org and should meet the requirements set forth in the regulations.
The EHR rules require that the donor and donee of the software execute a written agreement that outlines the terms of the donation. Although the final rules do not impose a cap on the value of the donation, there is a cost-sharing requirement that the recipient must pay 15 percent of the donor’s cost of the donated items and services. In addition, donors may not finance the recipient’s 15 percent payment of the costs and services. We recommend that the parties accurately document the donor’s cost of the technology in the written agreement.
The rules provide that donors may not take into account, directly or indirectly, the volume or the value of the physician’s referrals or other business generated when determining which physicians are eligible to receive the donation. The criteria that can be considered to determine appropriate recipients of the donation include: 1) total number of prescriptions written by the physician; 2) size of the physician’s medical practice; 3) the total number of hours that the physician practices medicine; 4) physician’s overall use of automated technology in his or her medical practice; 5) whether the physician is a member of the donor’s medical staff; 6) the level of uncompensated care provided by the physician; or 7) any reasonable or verifiable manner that does not directly take into account the volume or value of referrals or other business generated between the parties.
Penalties for violating the Stark Law are civil fines and penalties up to $100,000 per violation and exclusion from federal health-care programs. Penalties for violating the Anti-Kickback Statute are criminal – the offense is a felony and is punishable by fines of up to $25,000 and imprisonment of up to five years, civil monetary penalties, program exclusion, and liability under the False Claims Act. Accordingly, due to these stiff penalties and fines, it is important that, if you are considering entering into an agreement for the donation of e-prescribing or EHR technology, you structure the agreement appropriately to fall within the exceptions outlined above.
The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.