OIG and CMS Adopt Final Regulations Permitting Donation of e-Prescribing and Electronic Health Records Technology
By Gerry Hinkley, Allen E. Briskin and Jill H. Gordon
[August 2006]
 Anti-kickback Safe Harbor Rules for E-Prescribing and Electronic Health Records
Stark Exception Rules for E-Prescribing and Electronic Health Records
The Office of Inspector General of HHS (OIG) and Centers for Medicare and Medicaid Services (CMS), with some prompting from Congress, on Aug. 8, 2006, each published the long-awaited final regulations creating parallel safe harbors to the Anti-kickback Statute (AKS) and exceptions to the Stark law regarding health information technology. The regulations may open the doors to nonmonetary donations of technology to physicians and other health care providers, enabling their adoption of e-prescribing and electronic health records (EHRs). The new rules will become final Oct. 10, 2006. Pending Congressional action to reconcile the health information technology bills passed by the Senate and the House and pre-empt the new rules appears unlikely to occur before Congress adjourns for the November elections.
The e-prescribing portions of the regulations, driven by Section 101 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), provide a relatively straight-forward path to donations of e-prescribing technology—software, hardware, training and support—by a limited number of donor-recipient combinations. These relationships include hospitals to their medical staffs, group practices to their physicians, and Medicare Physician Drug Plan (PDP) sponsors and Medicare Advantage (MA) organizations to prescribing physicians. In light of the EHR regulations, the e-prescribing regulations may be of reduced importance. The e-prescribing rule has a more limited number of donor-recipient combinations and requires that the donated technology be used exclusively for e-prescribing. The broader EHR regulations require permitted EHR technology to include e-prescribing capability.
The sections of the regulations addressing EHRs—although expressly excluding hardware donations and requiring recipients to share in the cost of the technology—will likely have great impact. The regulations define “electronic health record” broadly as “a repository of consumer health status information in computer processable form used for clinical diagnosis and treatment for a broad array of clinical conditions,” which is much wider in scope and captures much more data than what many would describe as an “electronic health record.” The full text of all four regulations and our analysis of the proposed regulations, which were issued Oct. 11, 2005, can be viewed on our website at www.dwt.com/HIT.
Section 101 of the MMA. In connection with the establishment of the Part D Medicare drug benefit under the MMA, Congress directed the Secretary of HHS to establish an AKS safe harbor and required CMS to establish a Stark exception that would permit certain arrangements to foster the adopting of e-prescribing technology. The final e-prescribing AKS safe harbor and Stark exception are pursuant to this direction.
AKS Safe Harbors. The AKS statute imposes criminal and civil money penalties as well as program exclusion penalties for knowing or willful offers, payments, solicitations or receipts of remuneration to induce or reward the referral of business reimbursable under any federal health law program. The safe harbors describe specific business practices and transactions that will not be treated as violations of the AKS. Absent the establishment of a safe harbor, there is a concern that the donation of technology to a potential referral source could be deemed a violation of the AKS. It should be noted that the AKS safe harbors do not pre-empt state laws regulating the same subject matter.
Stark Exceptions. The Stark law prohibits physicians from making referrals to an entity for certain designated health services (DHS) that are covered by the Medicare program if the physician has a financial relationship with the entity. Absent an exception, there is concern that the donation of technology to a physician could create a financial relationship that would prohibit that physician’s referrals to the donor. Like the AKS safe harbors, the Stark exceptions do not pre-empt state laws regulating the same subject matter.
Purpose for Rule-Making. As noted, the Secretary, who delegated responsibility to the OIG, and CMS were directed to promulgate the AKS safe harbor and Stark exception for e-prescribing. In the commentaries that accompany each regulation, the OIG and CMS note repeatedly that their regulatory prerogatives were overshadowed by the express will of Congress. In contrast, the EHR safe harbor and Stark Exception are clearly products of the Bush Administration’s direction to facilitate the adoption of EHRs by 2014. Notwithstanding, both sets of rules are expressly tempered by the OIG’s and CMS’s shared concern that the regulations should not strike an inappropriate balance with the purposes underlying the AKS and the Stark Law, and should provide bright lines to assist in compliance. In introductory remarks, CMS states “we recognize that certain arrangements for the transfer of health information technology between parties with actual or potential referral relationships may further the important national policy of promoting widespread adoption of health information technology to improve patient safety, quality of care, and efficiency in the delivery of health care. We believe the final rule strikes an appropriate balance between promoting the adoption of health information technology and protection against program or patient abuse.”
Requirements of the Regulations. Because the e-prescribing AKS safe harbor and Stark exception may prove to be of less utility, we first address the EHR safe harbor and Stark exception and then identify significant differences between the EHR and e-prescribing regulations. Because the AKS safe harbor and Stark exception in many respects parallel each other, the discussion that follows will not differentiate except when necessary.
- Permitted Technology. The regulations allow the donation of software necessary and used predominantly for EHR purposes, such as creating, maintaining, sending and receiving EHRs. The software must include e-prescribing functionality, either direct or through connectivity with another program, because of the recognized importance of e-prescribing in achieving the benefits of health information technology. Curiously, computerized physician order entry (CPOE) capability is not mandated. Non-EHR purposes, such as billing and scheduling, are permitted, so long as they do not predominate. Training, maintenance and help-desk services are also permitted, but not direct staffing, such as may be required to migrate paper records to an EHR. Permitted technology also includes systems operating as application service providers.
Hardware and related operating software and storage devices are excluded based on the rationale that it is appropriate for a physician to invest in the hardware as a safeguard against program abuse. Technology used primarily for personal business or business not related to medical practice is not permitted.
Permitted technology does not include information itself as a commodity. While CMS noted that, ordinarily, patient information would not have separate value to a care-giver recipient, it said it could envision situations in which information could have independent value that may impermissibly induce or reward referrals, such as information related to research or marketing.
- Minimum Technology Standards. E-prescribing capability must comply with standards established for Medicare Part D at the time of the donation. At this time, only foundation standards have been published for Medicare Part D.
EHR technology must also be interoperable as further assurance that donated technology will not tie the recipient solely to the donor. “Interoperable” is defined in the regulations to mean that at the time of the donation, the software is “able to (1) communicate and exchange data accurately, effectively, securely, and consistently with different information technology systems, software applications, and networks, in various settings, and (2) exchange data such that the clinical and operational purpose and meaning of the data are preserved and unaltered.” This requirement could be a substantial impediment to large-scale rollouts of donated technology in the near future because interoperable functionality is not now generally available. In recognition of this, the preamble to the Stark exception notes that interoperability is “evolving” and that for software to qualify it should be as interoperable as the prevailing state of technology permits. For a regulatory scheme that professes to provide “bright lines” this is at best a compliance slippery slope, if not a black hole.
Potentially palliative are the regulation’s provisions stating that technology can be deemed interoperable if it is certified by a body recognized by the Secretary of HHS. The process for recognition by the Secretary has recently begun, and presumably one or more organizations, most likely the Certification Commission for Health Information Technology (CCHIT) among them, will be recognized. To be able to rely on “deemed” status, the donated technology must have been certified within the 12 months preceding donation.
At this point, standards for interoperability are nascent if not non-existent and are not expected to be well-developed for technology certification purposes for some time. Meanwhile, deemed interoperability through certification may give a distinct, and potentially unfair, advantage to vendors who have been able to avail themselves of CCHIT certification; and it may disadvantage potential donors of technology (i) that have home-grown systems for which certification is not yet an option or (ii) are related to medical specialties with atypical use cases that may not match early certification models, which focus on more generalized medical practice.
An additional condition related to interoperability is that the donor cannot, directly or indirectly, have taken any action to impair the ability of donated technology to be interoperable.
- Donors. Donors permitted under the AKS safe harbor are providers of Medicare or Medicaid covered services who submit claims or on whose behalf claims are submitted, or health plans. Donors permitted under the Stark exception are any entities that furnish DHS to physicians.
- Recipients. Recipients permitted under the AKS safe harbor are any providers of health care goods or services. Recipients permitted under the Stark exception are physicians.
- Selecting Recipients. Donors may use any method of selection that does not take into account directly the value or volume of referrals from the recipient or other business generated between the parties. The fact that recipient selection criteria are permitted at all is remarkable, inasmuch as a previous Stark exception for community-wide networks required broad participation, but is justified in the Stark exception preamble on the basis that the requirement of interoperability provides enhanced protection against program or patient abuse.
In the CMS commentary to the Stark exception regulation, a number of examples of permitted selection criteria are given with a view to permitting technology donation to physicians who will use it most. Examples of acceptable criteria are total number of prescriptions written, total hours devoted to medical practice, evidence of technology adoptive behavior and medical staff membership. Specifically not permitted as a recipient selection criterion is any that is related to the volume of prescriptions written that are covered by Medicare.
CMS predicts that approximately 61,000 physicians will begin the use of electronic health records each year for the next five years. Of that number, CMS predicts that 20 percent or 12,200 physicians will accept two donations of technology, each of them spending 15 minutes with each donor. CMS estimates that physician representatives (each representing 25 physicians on average) will spend two hours with each donor.
- Payment for Technology. Donors cannot pay more than 85 percent of the cost of the donated technology and recipients are required to pay at least 15 percent of the donor’s cost. This is recognized in the preamble to the regulations as an important element, which is intended to reduce the risk of program abuse, since recipients are more likely to use technology they have paid for. The cost-sharing requirement also applies to related services such as training, help-desk and maintenance. The cost-sharing requirement may prove to be a troublesome condition in certain situations. For example, it may be difficult to establish the cost of home-grown technology, partially customized technology or technology that is integrated into large legacy systems. In addition, cost-tracking may be difficult when donations are tiered, for example, if a hospital system were to donate EHR technology to an IPA, which in turn donates the technology with IPA-specific add-ons to participating physicians. Expenditures by physicians for technology unrelated to the donated technology cannot be counted toward the physician share.
The Stark exception preamble cautions that it will scrutinize the methods of cost allocation to be certain no shifting of costs occurs that provides an impermissible benefit to recipient physicians. The preamble also warns that differences in cost sharing requirements imposed on separate physicians could support a determination that value or volume of referrals has been taken into account in selecting recipients, thus negating the exception.
- Expiration. The AKS safe harbor and Stark exception sunset on Dec. 31, 2013. The agencies explain that this expiration is consistent with the President’s enunciated goal of wide-spread EHR adoption by 2014, and that limiting the window for donation of goods and services that could potentially influence referral behavior makes sense from an AKS and Stark compliance perspective. Moreover, the agencies repeat the Administration’s position that the adoption of health information technology should be a normal cost of business to the industry and should not require extraordinary support or arrangements.
- Technology Not Duplicative. Donated technology that would duplicate a recipient’s pre-existing technology does not satisfy the “necessary for” test of the regulation. Furthermore, the donor must have no actual knowledge, or act in reckless disregard or deliberate ignorance, of a recipient’s possession of technology that is functionally or technically equivalent to the technology to be donated. While the regulations do not require a recipient attestation, the preamble cautions that some inquiry by the donor would be prudent. The prohibition on duplication does not prohibit access to inpatient systems that may provide some duplicative functionality to ambulatory EHRs. The AKS safe harbor and Stark exception do not take into account publicly available software. Nor does the prohibition on duplication preclude updates of pre-existing systems to make them more current or compliant with new functionality standards, particularly interoperability.
- Technology Usable for All Patients and Payors. Donated technology must be usable for all patients regardless of payor, and the donor cannot take any action to restrict a recipient’s right or ability to use the technology for any patient.
- Physician Condition. Physicians cannot condition their doing business with a potential donor on the donation of technology.
- Documentation. The regulations require that donated technology and its cost to the donor, as well as the recipient’s contributions, must be documented prior to the donation in order to qualify for the respective safe harbor and exception. Documentation is to take the form of an agreement to which the donor and the recipient are parties. Attestation of cost by vendors is not a required portion of the documentation, but the commentary to the Stark exception notes that it “may be a prudent business practice.”
CMS predicts that most donating entities will utilize a model donation agreement that will take 1.5 hours to create and 15 minutes to tailor to each recipient. CMS also predicts that each physician will spend 15 minutes reading and signing the agreement, “including the time spent listening to an explanation from the group practice manager or other physician representative.”
Differences Between e-Prescribing and EHR Safe Harbors and Stark Exceptions. Because it is mandated by the MMA, the e-prescribing AKS safe harbor and the Stark exception have certain provisions that are different from the EHR AKS safe harbor and Stark exception. They can be summarized as follows:
- e-Prescribing technology can only include that which is “necessary and used solely for e-prescribing.”
- e-Prescribing technology must be compliant with Part D standards, including interoperability, at the time the items and services are donated.
- e-Prescribing technology can also include hardware and operating systems.
- Permissible donor and recipient relationships are hospitals to their medical staffs, physician practices to their physician members and PDP sponsors, and MA organizations to prescribing physicians.
- There is no recipient cost-sharing requirement.
For more information, please contact:
Other DWT contacts:
Ingrid Brydolf, Portland, (503) 276-5804, ingridbrydolf@dwt.com
Rebecca L. Williams, Seattle, (206) 628-7769, beckywilliams@dwt.com
This advisory is a publication of the Health Information Technology Group of Davis Wright Tremaine LLP. Our purpose in publishing this advisory is to inform our clients and friends of recent developments in health law. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations.
Copyright 2006, Davis Wright Tremaine LLP.
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