Tag: Anti-Kickback

Fair Market Value Defensibility Analysis: Why is It Different from a Fair Market Value Opinion?

Fair market value is a pinnacle issue for compliance under the Stark Law and Anti-Kickback Statute. Compensation arrangements that are required to be representative of fair market value under Stark/AKS include employment, independent contractor, medical directorships, exclusive service arrangements, call coverage, quality reviews, medical staff officer stipends, etc.

Many consulting firms provide fair market value opinions relying extensively on the application of benchmark data. Based upon CMS’s statements in the Stark Law Final Rules, although application of benchmark data is a resource that can be utilized, fair market value can and should include the application of market/service area issues (i.e., deficiency of specialty) or physician-specific issues (i.e., expertise, productivity).

Commercial reasonableness is a separate concept from fair market value under Stark/AKS. Commercial reasonableness also entails whether the application of benchmark/market factors are defensible.

When analyzing the defensibility of compensation arrangements, it is important to view fair market value and commercial reasonableness as if advocating the facts and circumstances of the proposed compensation arrangement before a governmental entity (i.e., CMS, OIG, DOJ). When an attorney is rendering a fair market value defensibility analysis, not only will the analysis be protected under the attorney-client privilege, but the analysis will also include references and attachments to all of the applicable documentation and relevant information in case the compensation arrangement is ever required to be defended.

Article By Bob Wade of Nelson Mullins

For more healthcare legal news, click here to visit the National Law Review.

Copyright ©2022 Nelson Mullins Riley & Scarborough LLP

New York Compounding Pharmacy Settles Fraudulent Billing and Kickback Allegations in Whistleblower Lawsuit

Upstate New York pharmaceutical companies FPR Specialty Pharmacy (now defunct) and Mead Square Pharmacy, along with their owners, agreed to pay $426,000 to settle fraudulent claims and kickback allegations brought forth by a whistleblower. According to the U.S. government, the pharmacies submitted fraudulent claims for reimbursement to federal healthcare programs for compounded prescription drugs in violation of the False Claims Act and the Anti-Kickback Statute. The pharmacies allegedly sold prescription drugs to federal healthcare program beneficiaries in states without a license, improperly induced patients to purchase expensive custom compounded medications by waiving all or part of the substantial co-payments required under the federal healthcare programs, and paid sales representatives per-prescription commissions to illegally induce writing more prescriptions.

“The rules governing federal healthcare programs require pharmacies dispensing prescriptions to their members to be licensed with the appropriate state authorities to request reimbursement for the cost of the medications.  The pharmacies violated the False Claims Act by dispensing and requesting reimbursement for hundreds of prescriptions of “Focused Pain Relief” cream dispensed to federal healthcare program beneficiaries located in states where the pharmacies were not licensed to operate by the appropriate state authorities, and by failing to disclose that they were not licensed.  The Pharmacies also violated the False Claims Act by billing federal healthcare programs for prescriptions dispensed in states where they had obtained their state licenses under false pretenses, including by failing to inform state authorities that they had previously dispensed drugs in the states without a license and by failing to disclose” one of the pharmacy owners’ “criminal history on pharmacy license applications.”

Additionally, the pharmacies violated the Anti-Kickback Statute by engaging in two separate illegal practices, according to the government.  First, the pharmacies regularly charged federal healthcare program beneficiaries co-payments substantially below program requirements (which often exceeded $100) to induce them to purchase its pain cream, “Focused Pain Relief,” for which the federal healthcare programs paid hundreds and sometimes thousands of dollars each.  Second, the Pharmacies often paid illegal kickbacks to their sales representatives by giving sales commissions for the number of prescriptions written by the physicians the sales reps marketed.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Pharmacies, like other participants in the healthcare industry, must follow the rules.  The defendants here brazenly flouted basic rules on licensing and kickbacks to line their pockets with dollars from federal healthcare programs.  That is a prescription for intervention by my office and our partners.”

Similar to this case, there have been many instances in which whistleblowers exposed company fraud against the Medicare system.

© 2020 by Tycko & Zavareei LLP

Offered Free Cyber Services? You May Not Need to Look That Gift Horse in the Mouth Any Longer.

Cyberattacks continue to plague health care entities. In an effort to promote improved cybersecurity and prevent those attacks, HHS has proposed new rules under Stark and the Anti-Kickback Statute (“AKS”) to protect in-kind donations of cybersecurity technology and related services from hospitals to physician groups. There is already an EHR exception1 which protects certain donations of software, information technology and training associated with (and closely related to) an EHR, and HHS is now clarifying that this existing exception has always been available to protect certain cybersecurity software and services. However, the new proposed rule explicitly addresses cybersecurity and is designed to be more permissive then the existing EHR protection.

The proposed exception under Stark and safe harbor under AKS are substantially similar and unless noted, the following analysis applies to both. The proposed rules allow for the donation of cybersecurity technology such as malware prevention and encryption software. The donation of hardware is not currently contemplated, but HHS is soliciting comment on this matter as discussed below. Specifically, the proposed rules also allow for the donation of cybersecurity services that are necessary to implement and maintain cybersecurity of the recipient’s systems. Such services could include:

  • Services associated with developing, installing, and updating cybersecurity software;

  • Cybersecurity training, including breach response, troubleshooting and general “help desk” services;

  • Business continuity and data recovery services;

  • “Cybersecurity as a service” models that rely on a third-party service provider to manage, monitor, or operate cybersecurity of a recipient;

  • Services associated with performing a cybersecurity risk assessment or analysis, vulnerability analysis, or penetration test; or

  • Services associated with sharing information about known cyber threats, and assisting recipients responding to threats or attacks on their systems.

The intent of these rules is to allow the donation of these cybersecurity technology and services in order to encourage its proliferation throughout the health care community, and especially with providers who may not be able to afford to undertake such efforts on their own. Therefore, these rules are expressly intended to be less restrictive than the previous EHR exception and safe harbor. The proposed restrictions are as follows2:

  • The donation must be necessary to implement, maintain, or reestablish cybersecurity;

  • The donor cannot condition the donations on the making of referrals by the recipient, and the making of referrals by the recipient cannot be conditioned on receiving a donation; and

  • The donation arrangement must be documented in writing.

AKS has an additional requirement that the donor must not shift the costs of any technology or services to a Federal health care program. Currently, there are no “deeming provisions” within these proposed rules for the purpose of meeting the necessity requirement, but HHS is considering, and is seeking comment on, whether to add deeming provisions which essentially designate certain arrangements as acceptable. Some in the industry appreciate the safety of knowing what is expressly considered acceptable and others find this approach more restrictive out of fears that the list comes to be considered exhaustive.

HHS is also considering adding a restriction regarding what types of entities are eligible for the donation. Previously for other rules, HHS has distinguished between entities with direct and primary patient care relationships, such as hospitals and physician practices, and suppliers of ancillary services, such as laboratories and device manufacturers.

Additionally, HHS is soliciting comment on whether to allow the donation of cybersecurity hardware to entities for which a risk assessment identifies a risk to the donor’s cybersecurity. Under this potential rule, the recipient must also have a risk assessment stating that the hardware would reasonably address a threat.

1 AKS Safe Harbor 42 CFR §1001.952(y); Stark Exception §411.357(bb)
2 AKS Safe Harbor 42 CFR §1001.952(jj); Stark Exception §411.357(w)(4)

©2020 von Briesen & Roper, s.c

More on cybersecurity software donation regulation on the National Law Review Communications, Media & Internet law page.

Pharmaceutical Company Agrees To $54 Million To Settle False Claims Kickback Allegations

Teva Pharmaceuticals has agreed to pay $54 Million to settle false claims kickback allegations brought by two whistleblowers, Charles Arnstein and Hossam Senousy. In their 2013 complaint, the whistleblowers asserted that Teva Pharmaceuticals (“Teva”) violated the False Claims Act when the company knowingly induced physicians to prescribe two of the company’s drugs in exchange for “speaker fees.”

Physicians hosted Teva’s speaker events, which were attended by the speakers, their families, Teva employees, and various repeat attendees. In her memorandum decision and order denying Teva’s motion for summary judgment, Chief Judge Colleen McMahon pointed to the suspect audience in attendance as well as the event locations, and the amount of alcohol served as further evidence of the questionable nature of the events.

Physician speakers earned speaker fees for their event appearances. These same physicians subsequently prescribed the drugs Copaxone and Azilect, both manufactured by Teva. The physicians in question also encouraged other doctors to prescribe the medications that treated multiple sclerosis and Parkinson’s disease, respectively. Pharmacies across the United States filled the prescriptions and submitted reimbursement claims to government-funded healthcare programs. Reimbursement funds to the pharmacies are taxpayers’ dollars.

The whistleblowers allege that the reimbursement payments from the various Federal health care programs were a result of fraud, namely the questionable “speaker fees” paid to the physicians in exchange for their prescribing Copaxone and Azilect. Furthermore, the Anti-Kickback Statute of the False Claims Act makes it illegal to knowingly pay or offer to pay kickbacks, bribes, or rebates to encourage someone to recommend the purchase of a pharmaceutical covered by a Federal health care program.

The False Claims Act has been a vital tool in the fight against government programs fraud since its inception; however, the success of the act depends on private citizens like Charles Arnstein and Hossam Senousy who are willing and able to speak out against the wrong that they encounter and work closely with the help of an experienced False Claims Act attorney to get results for everyone. The settlement of this case is not only beneficial to the government from a monetary perspective, but it is also a win for the taxpayers – those who ultimately pay when companies like Teva Pharmaceuticals choose to defraud the government.

© 2020 by Tycko & Zavareei LLP

For more false claims act settlements, see the National Law Review Litigation & Trial Practice section.

Olympus to Pay $632.2 Million to Resolve Allegations of Kickbacks

Olympus Corporation of the Americas, the United States’ largest distributor of endoscopes and related medical equipment, recently agreed to pay $623.2 million to resolve criminal charges and civil claims, according to a United States Department of Justice (DOJ) press release on March 1, 2016. The settlement is a result of a qui tam action alleging violations of the Federal False Claims Act (FCA), Federal Anti-Kickback Statute (AKS), and analogous state statutes for paying kickbacks to physicians and hospitals to induce the purchase of Olympus medical and surgical equipment. Olympus was required to enter into a Corporate Integrity Agreement and a Deferred Prosecution Agreement that, among other things, includes an executive financial recoupment program that will cause company executives to forfeit certain compensation if they are associated with future misconduct.

The relator and government alleged that, because the Olympus equipment used for treatment was purchased as a result of a kickback, Olympus caused the physicians and hospitals to file false claims for treatment under Medicare, TRICARE, and Medicaid in violation of the FCA and state law. The kickbacks themselves were prohibited under the AKS. Both federal laws have separate penalties that were combined in this settlement, which is a reminder to the health care industry that liability under the FCA and AKS can reach staggering amounts.

What Providers Should Know

  • If an employee raises a compliance concern, investigate and appropriately address the concern. Do not retaliate. While the Olympus relator was a former Chief Compliance Officer with a long employment history at Olympus, individuals at all levels and experiences may have insight into company practices sufficient to identify areas of compliance vulnerability (thereby later arming themselves with information sufficient to file a qui tam action should the company choose to ignore individuals’ concerns or otherwise fail to correct non-compliance).

  • Prohibited remuneration under the AKS may take many forms. For instance, the remuneration that Olympus allegedly provided to physicians and hospitals included free use of medical equipment, unprotected discounts, payments disguised as grants for educational or research programs, payments to physicians in excess of fair market value for speaking engagements, vacations, meals, and entertainment.

  • If referring health care providers receive remuneration, the compensation arrangements should be carefully structured to meet applicable AKS safe harbors. Providing remuneration in the form of medical equipment discounts, leases or payments for speaking engagements may increase a company’s exposure under the AKS. Where such remuneration is provided, it is best to structure the arrangement with relevant AKS safe harbor protection.

  • An effective and robust compliance program is essential. In addition to allegations of kickbacks, the federal government also focused on Olympus’ alleged lack of appropriate training, knowledgeable compliance staff, and compliance programs to prevent and identify violations of the AKS and other federal health care laws.

Background and Alleged Misconduct – Kickbacks and More Kickbacks

The relator in the qui tam action was an 18-year employee of Olympus and was appointed to be Chief Compliance Officer of Olympus in 2009. Prior to 2009, Olympus had no compliance department. As the Chief Compliance Officer, the relator alleged that the he began to try to “eliminate the illegal and systemic practices” described below, but was met with inaction, retaliation, harassment, and severe resistance. In March 2010, Olympus relieved the relator of all his compliance duties and months later terminated his employment. The relator thereafter filed a qui tam action against Olympus.

The relator and government alleged that, from 2006 to 2011, Olympus induced physicians and hospitals to purchase Olympus endoscopes and other medical and surgical equipment by way of the following:

  • Providing free medical equipment and discounts to hospitals and physicians to induce them to purchase surgical consumables produced by Olympus.

  • Paying sales reps stipends of $2,300 that were meant to be used to entertain physicians.

  • Paying physicians tens of thousands and as much as $100,000 per year for consulting services, often without written agreements.

  • Providing physicians and hospitals with millions of dollars worth of free medical equipment, categorized as “permanent loans,” “leases,” “promotions,” “demo units,” “samples,” and “trade-ins.”  In one case, the relator and the government alleged that Olympus provided a physician with approximately $400,000 in endoscopes and other equipment to use without charge in the physician’s private practice, allegedly resulting in one hospital’s decision to purchase millions of dollars of Olympus products.

  • Leasing products to physicians on a debt forgiveness program under which Olympus wrote off debt if the physician entered into a new lease for new products.

  • Paying physicians honorariums for speaking engagements, often without speaker agreements.

  • Paying out grants of hundreds of thousands of dollars from a grant committee made up entirely of sales reps, marketing people, and customer relation personnel.

  • Paying for physicians’ golf trips and vacations, including week-long trips to Japan with sightseeing excursions and lavish entertainment included.

Relator alleged that, because of the aforementioned conduct, Olympus facilitated more than $600 million in sales, earning more than $230 million in gross profits.

Agreements to the Olympus Settlement

The Olympus settlement contains three written agreements: a Civil Settlement Agreement, a Deferred Prosecution Agreement (DPA), and a Corporate Integrity Agreement (CIA). Collectively, these agreements reiterate the monetary and non-monetary consequences to settling allegations of kickbacks and also provide invaluable insight into the government’s view of an effective compliance program.

  • Civil Settlement Agreement. To settle civil claims, Olympus agreed to pay the federal government and affected state governments $306 million total plus interest, with $263.16 million going to the federal government and the remaining $42.84 million to be divided among the states. The realtor was awarded $43.4 million from the federal government’s share. Olympus also agreed to enter into a CIA with the government for five years as part of the civil settlement agreement.

  • Deferred Prosecution Agreement. The DPA indicates that the federal government will file on, or shortly after, the effective date of the DPA a criminal complaint charging Olympus with conspiracy to commit violations of the AKS. Under the DPA, Olympus agreed to pay the federal government $306 million plus interest in exchange for a three-year deferral of criminal prosecution, provided Olympus takes specific remedial actions. Such remedial actions include: (i) the development and implementation of an effective corporate compliance program; (ii) retention of an independent monitor to evaluate and monitor compliance with the DPA and review Olympus’ procedures and practices related to tracking loaned equipment, selecting and paying consultants, considering and awarding grants, and training and education programs; (iii) performance of specific duties by Olympus’ Chief Compliance Officer; and, (iv) enhancement and maintenance of existing training and education programs for all sales, marketing, legal, and compliance employees and senior executives. The DPA also includes an executive financial recoupment program that will cause company executives to forfeit certain compensation if they are associated with future misconduct. If Olympus fulfills its obligations, the government will not thereafter pursue a criminal conviction and will seek dismissal of the criminal complaint the federal government filed in connection with the alleged conduct.

  • Corporate Integrity Agreement. Olympus entered into a five year CIA with the government to review and approve its compliance program, in exchange for the government’s promise not to seek exclusion of Olympus from Medicare, Medicaid, or TRICARE. The CIA sets forth many general obligations for Olympus to meet, including: (i) compliance responsibilities of specific Olympus employees and the board of directors; (ii) development and implementation of a health care compliance code of conduct and policies and procedures regarding the operation of Olympus’ compliance program; (iii) training and education programs; (iv) risk assessment and mitigation; and, (v) establishment of a mechanism, e.g., compliance hotline, to enable individuals to disclose any identified issues or questions with compliance

The CIA further directs Olympus to meet the following specific requirements related to the alleged misconduct:

  1. Consulting arrangements. Olympus must require all consultants who are health care professionals to enter written agreements describing the scope of work to be performed, the fees to be paid, and compliance obligations for the consultant. Olympus will pay consultants according to a centrally managed, pre-set rate structure that is determined based on a fair-market value analysis.

  2. Grants and Charitable Contributions. Olympus must establish a grants management system that will be the exclusive mechanism through which requestors may request or be awarded grants.

  3. Management of Field Assets. Olympus must establish a system to manage medical and surgical equipment and products provided to health care professionals on a temporary basis.

  4. Review of Travel Expenses. Olympus must establish processes for the review and approval of travel and related expenses for health care professionals.

Article By Jennifer L. Evans, Dayna C. LaPlante, Ryan M. McAteer & Stephen M. Angelette
Polsinelli PC
© Polsinelli PC, Polsinelli LLP in California

New Jersey Pharmaceutical Company Agrees to Pay $39 Million to Settle Alleged Anti-Kickback Violations

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On January 9, 2015, the Department of Justice (DOJ) announced that pharmaceutical company Daiichi Sankyo, headquartered in New Jersey, agreed to pay the Government $39 million to settle claims that it violated the Anti-Kickback Statue and the False Claims Act (FCA) by allegedly incentivizing physicians to prescribe Daiichi drugs by providing kickbacks to those doctors.  The drugs prescribed as a result of those alleged kickbacks were billed under the Medicare or Medicaid Program, and thus paid for, at least in part, by the government.  This lawsuit was filed by former Daiichi sales representative Kathy Fragoules under the qui tam whistleblower provision of the FCA.  Fragoules will receive an award of $6.1 million, which represents approximately 15 percent of the settlement amount, for exposing Daiicho Sankyo’s alleged illegal practices.

The qui tam lawsuit, originally filed on behalf of the government by Fragoules, claims that for a period of six years, from January 1, 2005 to March 31, 2011, Daiichi Sankyo allegedly devised a scheme to promote several of its drug products by offering monetary kickbacks to physicians that prescribed Daiichi drugs to their patients.  The Physician Self-Referral Statue and the Anti-Kickback Statue prohibit anyone from knowingly and willfully offering, paying, soliciting, or receiving remuneration in order to induce business reimbursed under the Medicare or Medicaid programs.  However, according to the government, Daiichi allegedly orchestrated kickback compensation to physicians in the form of speaker fees by allegedly funneling payment to health care providers through the Daiichi’s Physician Organization and Discussion programs known as PODs.  In doing so, the government claims that Daiichi knowingly and willfully violated the FCA.

Physician drug ordering and prescribing decisions continue to be influenced by the drug industry.  Last year, the DOJ reported billions in settlements in connection with the pharmaceutical industry arising out of violations of the Physician Self-Referral Statue and the Anti-Kickback Statue.  The government also paid out millions in awards to individuals and whistleblowers that exposed these alleged illegal practices through the filing of qui tam lawsuits under the FCA.  A whistleblower who files a case against a company that has committed fraud against the government, may receive compensation of up to 30 percent of the amount ultimately recovered by the government.

ARTICLE BY

Jonathan Tycko
OF
Tycko & Zavareei LLP

Office of Inspector General Issues Special Fraud Alert Concerning Laboratory Payments to Referring Physicians

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On June 26th, the OIG issued a Special Fraud Alert concerning laboratory payments to referring physicians.  The OIG identified 2 different types of payment arrangements that may be viewed as problematic under the Anti-Kickback law: blood specimen collection, processing and packaging arrangements and registry payments.

The OIG described specimen processing arrangements as payments from laboratories to physicians for certain specified duties, which may include blood specimen collection and centrifuging, maintaining the specimens at a particular temperature, and packaging the specimens so that they are not damaged in transport. The OIG indicated that payments are typically made to referring physicians on a per-specimen or per-patient-encounter basis, and often are associated with expensive or specialized tests.  The concern raised by the OIG is that since Medicare (and other third party payors) allow nominal payments in certain circumstances for specimen collection and for processing and packaging specimens for transport to a laboratory, payment by the laboratory to the physician amounts to unlawful remuneration because the physician is effectively being paid twice for the same work.  The OIG also raised concerns that such payments may be made in amounts which exceed fair market value, although the OIG cautioned that such payments may be suspect if one purpose of the arrangement is to induce or reward referrals of Federal health care program business “regardless of whether the payment is fair market value for services rendered.”

The OIG identified the following characteristics specimen processing arrangements that may be suspect:

  • Payment exceeds fair market value for services actually rendered by the party receiving the payment.
  • The payment is for services for which payment is also made by a third party, such as Medicare.
  • Payment is made directly to the ordering physician rather than to the ordering physician’s group practice, which may bear the cost of collecting and processing the specimen.
  • Payment is made on a per-specimen basis for more than one specimen collected during a single patient encounter or on a per-test, per-patient, or other basis that takes into account the volume or value of referrals.
  • Payment is offered on the condition that the physician order either a specified volume or type of tests or test panel, especially if the panel includes duplicative tests (e.g., two or more tests performed using different methodologies that are intended to provide the same clinical information), or tests that otherwise are not reasonable and necessary or reimbursable.
  • Payment is made to the physician or the physician’s group practice, despite the fact that the specimen processing is actually being performed by a phlebotomist placed in the physician’s office by the laboratory or a third party.

The OIG also noted that payment arrangements can be problematic even if they are structured to carve out work performed on specimens from non-Federal health care program beneficiaries.

The OIG also raised concerns about payments for registry maintenance and observational outcomes databases.  Under these arrangements, which often involve patients presenting with specific disease profiles, laboratories pay a physician for certain specified duties, including submitting patient data to be incorporated into the registry, answering patient questions about the registry, and reviewing registry reports. While the OIG found that such payments may be appropriate in certain limited circumstances, such payments may induce physicians to order medically unnecessary or duplicative tests, including duplicative tests performed for the purpose of obtaining comparative data, and to order those tests from laboratories that offer registry arrangements in lieu of other, potentially clinically superior, laboratories.

The OIG identified the following as being characteristics of potentially suspect registry arrangements:

  • The laboratory requires, encourages, or recommends that physicians who enter into registry arrangements to perform the tests with a stated frequency (e.g., four times per year) to be eligible to receive, or to not receive a reduction in, compensation.
  • The laboratory collects comparative data for the registry from, and bills for, multiple tests that may be duplicative (e.g., two or more tests performed using different methodologies that are intended to provide the same clinical information) or that otherwise are not reasonable and necessary.
  • Compensation paid to physicians pursuant to registry arrangements is on a per patient or other basis that takes into account the value or volume of referrals.
  • Compensation paid to physicians pursuant to registry arrangements is not fair market value for the physicians’ efforts in collecting and reporting patient data.
  • Compensation paid to physicians pursuant to registry arrangements is not supported by documentation, submitted by the physicians in a timely manner, memorializing the physicians’ efforts.
  • The laboratory offers registry arrangements only for tests (or disease states associated with tests) for which it has obtained patents or that it exclusively performs.
  • When a test is performed by multiple laboratories, the laboratory collects data only from the tests it performs.
  • The tests associated with the registry arrangement are presented on the offering laboratory’s requisition in a manner that makes it more difficult for the ordering physician to make an independent medical necessity decision with regard to each test for which the laboratory will bill (e.g., disease-related panels).

The OIG found that concerns also arise when a physician is selected to collect data for a registry on the basis of their prior or anticipated referrals, rather than their specialty, sub-specialty or other relevant attribute.  The OIG also noted that “Even legitimate actions taken to substantiate such claims, including, for example, retaining an independent Institutional Review Board to develop study protocols and participation guidelines, will not protect a registry arrangement if one purpose of the arrangement is to induce or reward referrals.”

The laboratory market is a very competitive one.  The issuance of the referenced Special Fraud Alert, as well as recent large scale investigations and criminal indictments involving laboratory and physician relationships (including the Biodiagnostic Laboratory Services LLC investigation here in New Jersey: https://tinyurl.com/cf5djfw) demonstrates that the OIG has turned an increased focus on relationships between laboratories and physicians.

Article By:

Beth Christian
Of:
Giordano, Halleran & Ciesla, P.C.

Center Medicare and Medicaid Services (CMS), Office of Inspector General (OIG) Extend Electronic Health Records (EHR) Stark Law Exception, Anti-Kickback Safe Harbor Through 2021

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On December 27, 2013, the Centers for Medicare and Medicaid Services (CMS) and the Office of Inspector General (OIG) of the Department of Health and Human Services (HHS) will publish final rules that extend through December 31, 2021 the existing Stark Law Exception (42 CFR 411.357(w)) and Anti-Kickback Statute Safe Harbor (42 CFR 1001.952(y)) applicable to the donation of electronic health records (EHR) items and services.   December 31, 2021 is the last year of the Medicaid Meaningful Use incentive payments.

In the Final Rule, CMS and OIG also:

  • Update the provisions under which EHR software is deemed interoperable;
  • Remove the requirement relating to e-prescribing from the Exception and Safe Harbor
  • Limit the scope of protected donors to exclude laboratory companies; and
  • Clarify the condition that prohibits a donor from limiting or restricting the use, compatibility or interoperability of donated EMR items and services.

Interoperability

The final rules require the donated EHR technology to be “interoperable” as of the date it is donated.  Such technology will be deemed to be interoperable if it has been certified by a certification body authorized by the Office of the National Coordinator for Health Information Technology (ONC) to an edition of the EHR certification criteria identified in the then-applicable 45 CFR part 170 (i.e., the HITECH Act’s definition of “Certified EHR”).  This will require donated software to be “as interoperable as feasible given the prevailing state of technology at the time they are provided to the recipient.”  For example, in 2013, the HITECH Act’s definition of “Certified EHR” permits certification pursuant to either the 2011 or 2014 editions of the EHR certification requirements; in 2014, the HITECH Act requires certification pursuant to the 2014 edition only.

E-prescribing

CMS and OIG have concluded that there are sufficient alternative policies driving the adoption of electronic prescribing such that it need not be included in the Exception and Safe Harbor.  Thus, under the final rules, an EHR is no longer required to have electronic prescribing capability in order to be subsidized.

Permissible Donors

In the proposed rules, CMS and OIG identified concerns of potentially abusive practices stemming from the donation of EHR software that seemed to provide for the interoperable exchange of information, but instead led to data and referral “lock-in” between the donor and the referral source.  OIG and CMS specifically referred to EHR items and services donated by ancillary service providers and suppliers, i.e., those do not have a direct primary patient care relationship, as subject to this concern. In the proposed rules, CMS and OIG sought comments on whether to limit the list of permissible donors of EHR items and services to hospitals, group practices, Prescription Drug Plan sponsors and Medicare Advantage organizations – or others with front-line patient care responsibilities.  In light of the comments received, in the final rules, CMS and OIG specifically exclude laboratories from the list of permissible donors.  Otherwise, the universe of protected donors remains the same.

Restrictions

In the proposed rules, CMS and OIG also requested comments on “new and modified conditions” that would prevent EHR donations from becoming a method for locking-in referrals (generally, to the donor), and instead encourage the free exchange of data.  CMS and OIG do not adopt any such additional conditions in the final rules, but clarify that neither a donor “nor any person on the donor’s behalf may take any action to limit or restrict the use, compatibility or interoperability of the donated items or services with other electronic prescribing or other EHR systems, including but not limited to health information technology applications, products or services.”  This expanded language is meant to clarify that neither donors nor recipients may limit interoperability and that donated EHRs must be interoperable both with other EHRs and with health information exchanges and other forms of technology.

To view the CMS final rule, click here. To view the OIG final rule, click here.

Article by:

Jennifer R. Breuer

Of:

Drinker Biddle & Reath LLP