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Physician Self-Referral and Anti-kickback
Laws Pose Threats to Development of Community Health Information
Networks
By Robert
G. Homchick
[Oct. 2004]
Establishing a regional community-based health information organization
(RHIO) exchange presents a host of technical, regulatory, financial
and practical challenges. Most would agree that in order for the
regional health information organization system to be effective,
community physicians must participate. Community physicians, however,
generally do not have an economic incentive to invest in the technology
needed to establish and support the system. This economic reality
has prompted proponents of health information exchanges to explore
methods of developing the network infrastructure that do not require
physicians to make significant economic investment. When health
care providers (such as hospitals or health systems) fund the development
a RHIO, the federal Stark and anti-kickback laws and regulations
can pose a potential barrier. Despite a newly adopted exception,
the Stark Law remains a serious obstacle to many types of health
information systems. The federal anti-kickback statute creates a
different and more fact specific set of risks.
The Stark Law
The Federal Physician Self Referral or (Stark) law prohibits a
physician from referring Medicare patients for certain designated
health services (DHS) to an entity with which the physician has
a financial relationship, unless an exception applies. 42 U.S.C.
§ 1395nn. The Stark Law is notorious for both its breadth and
ambiguity. Given that virtually any remuneration could potentially
create a financial relationship with a physician, Stark Law prohibitions
must at least be considered if the development of the RHIO is directly
or indirectly funded by a hospital or health system. There are essentially
two approaches to addressing Stark issues: (1) construe the establishment
of the network as not constituting remuneration to community physicians;
(2) identify one or more Stark exceptions and structure physicians’
relationship with the network to fit within an exception.
No remuneration
Some industry observers have argued that the establishment of a
RHIO does not change the fundamental obligation of hospitals and
other providers in the community to share information with physicians
and others relating to common patients. Historically, hospitals
have shared information by making copies of records, using the fax
machine and employing other lower-tech methods of transmitting data.
The establishment of a RHIO does not change the fundamental “benefit”
a hospital provides to a physician when it transmits data to a physician
concerning his or her patients.
While this argument has merit, it has limits. The manner in
which the hospital makes information available to providers
in the community must be considered. Providing a complete computer
system for the physician’s office, for example, would
appear to be beyond the pale.
Potential Stark exceptions
At least four Stark exceptions may be useful in the context of
establishing a RHIO. Each exception has its own requirements and
limitations. The specific configuration of the network will determine
which exception is most useful.
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1. |
Non Monetary
Compensation Up to $300
Stark includes an exception for non monetary compensation
up to $300 per year. 42 C.F.R. § 411.357(k). This exception
allows a referring physician to receive compensation from
an entity in the form of items or services (not including
cash or cash equivalents) that does not exceed an aggregate
of $300 per year.
Any form of non monetary compensation can be used under
this exception so long as specific conditions are met, including
that the compensation not be determined in any manner that
takes into account the volume or value of referrals or other
business generated by the referring physician.
If a RHIO sponsor were to rely on the $300 exception to avoid
Stark prohibitions, it may be difficult to value the benefit
of the network to a physician and, once a value is established,
the sponsor would face the additional challenge of ensuring
the $300 limit is not exceeded. |
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2. |
Medical Staff Incidental
Benefits
Stark also includes an exception for certain incidental
benefits provided by hospitals to their medical staffs.
This exception allows compensation in the form of items
or services (not including cash or cash equivalents) from
a hospital to its medical staff provided specific conditions
are met. Centers for Medicare and Medicaid Services (CMS)
recently expanded this exception to non-hospital facilities
that have bona fide medical staffs. 42 C.F.R. §
411.357(m).
In the commentary on the most recent regulations, CMS notes
that the use of a dedicated computer terminal used only
for hospital patients and services would benefit the hospital
and is not considered to have independent value to the physician.
Relying on the medical staff benefits exception in the context
of a RHIO, however, is not always feasible. The exception would
not solve the Stark issues for providers who do not have bona
fide medical staffs. Moreover, this exception’s application
to health information networks may also be limited by some of
the requirements, i.e., that the “communications devices”
must be used “exclusively” to gain access to hospital
records. |
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3. |
Payments at Fair Market
Value
If the RHIO charges (or imposes some concrete obligation on)
physicians for participation in or use of the network it may
be possible to fit the arrangement within the Stark Law exception
for payments by a physician for items or services at fair market
value. 42 U.S.C. 1395nn(e)(8). As the name of the exception
suggests, the key issue would be to determine whether the network
charges are in fact fair market value for the services provided.
Whether the charge takes into account the cost of system development
or is limited to the incremental costs associated with the physician’s
use of the network is a factor in this analysis. |
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4. |
Community-Based Health
Information Exchange
Earlier this year, CMS introduced a new exception that permits
a hospital or other DHS entity to provide items or services
“of information technology” to a physician to
allow access to electronic health care records and complementary
drug information systems, general health information, medical
alerts, and related information for patients. C.F.R. §
411.357(u). The new exception is intended to encourage use
of electronic technology. To qualify for this exception:
- Items or services must be principally used by the
physician as part of the community wide health information
system;
- The items or services must be provided to the physician
in a manner that does not take into account the physician’s
volume or value of referrals;
- The health information system (including both hardware
and software) must be “community wide”,
that is, it must be available to all providers, practitioners
and residents of the community who desire to participate;
and
- The arrangement does not violate the anti kickback
statute or any federal or state laws or regulations
governing billing or claims submission rules.
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CMS warns that the DHS entity may only provide items and services
that are necessary to enable the physician to participate in
the health information system. Thus, for example, if a physician
already owns a computer, it may only be necessary to provide
software or training specific to the health information system.
To provide more items or services than necessary will not only
not comply with the new exception, but could implicate the anti-kickback
statute.
This new Stark exception is useful but a number of ambiguities
remain. For example, network sponsors are struggling with obligations
created by the requirement that the system be made “available”
to providers in the community. Another troubling aspect of the
exception is the requirement that the system be available to
community “residents.”
The Anti-kickback Statute
The anti-kickback statute prohibits the payment or solicitation,
offer or acceptance of any remuneration in cash or in kind in
exchange for referring or recommending the referral of items
or services to be paid for by a federal health care benefit
program. The language of the statute is incredibly broad and,
in general, the courts have liberally interpreted its provisions.
To violate the anti-kickback statute, however, requires the government
to establish a defendant’s nefarious intent. In the context
of the establishment of a RHIO, the purpose of the network, its
design and function and the level of benefit the sponsors bestow
on potential referral sources will be critical components in determining
the level of anti-kickback risk. Clearly, conditioning access to
the network on referrals or providing different levels of support
depending upon the volume or value of referrals to the network sponsor
would significantly increase the anti-kickback risk associated with
the venture.
The anti-kickback statute includes a number of regulatory “safe
harbors.” If an arrangement fits within a safe harbor
it is immune from attack under the anti-kickback statute. Compliance
with safe harbor requirements, however, is not required. Arrangements
that do not fit within a safe harbor are subject to a facts
and circumstances analysis to determine if they run afoul of
the statute’s prohibitions.
It would be difficult to structure a RHIO to fit within an anti-kickback
safe harbor. If the network charges physicians for their use of
the system, however, it may be possible to satisfy many of the requirements
of the safe harbor for services contracts. Although an arrangement
that is close to a safe harbor is not immune from attack under the
anti-kickback statute, structuring a network in this fashion should
reduce the anti-kickback risks.
For more information, please contact any of the following
attorneys:
Ingrid
Brydolf, Portland, (503) 276-5804, IngridBrydolf@dwt.com
Gerry
Hinkley, San Francisco, (415) 276-6530, GerryHinkley@dwt.com
Thomas
E. Jeffry, Los Angeles, (213) 633-6882, TomJeffry@dwt.com
Paul
T. Smith, San Francisco, (415) 276-6532, PaulSmith@dwt.com
Kent
B. (Bernie) Thurber, Portland, (503) 778-5202, BernieThurber@dwt.com
Rebecca
L. Williams, Seattle, (206) 628-7769, BeckyWilliams@dwt.com
This Advisory is a publication
of the Health Law Department 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 © 2004, Davis Wright
Tremaine LLP.
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