Health October Proposed Health Information Technology Protections Under New Antikickback Statute Safe Harbors and New Stark Exceptions

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1 Health October 2005 Proposed Health Information Technology Protections Under New Antikickback Statute Safe Harbors and New Stark Exceptions On Tuesday, October 11, the Department of Health and Human Services (HHS) announced four new regulatory proposals to enable hospitals, physician group practices and certain payors to provide health information technology related to electronic prescribing and electronic health records to certain referral sources without triggering liability under the Federal Antikickback Statute or the Medicare physician self referral prohibition (the Stark law). As described in more detail below, these proposals would establish separate protections for donors and recipients for each of four types of donations: (1) technology and services used solely to transmit and receive electronic prescription drug information; (2) hardware and connectivity services that are substantially used to transmit and receive electronic prescription drug information; (3) software and related training services used solely to transmit, receive, and maintain electronic health records; and (4) certified electronic health records software and related training services. HHS is actively soliciting comment on issues at the core of these proposals and its Federal Register notices emphasize that the exact contours of the protection available are not yet settled. Industry and other interested parties have an opportunity to help shape the development of the new protections on a number of fronts. Proposed Protections Stem from Medicare Modernization Act The current proposals had their genesis in the Medicare Modernization Act (MMA), which directs the Secretary of HHS to create narrow protections for donations of technology and services related to electronic prescribing. Specifically, MMA requires that the technology and related services be necessary and used solely to receive and transmit electronic prescription information in accordance with the Copyright 2005 Hogan & Hartson L.L.P. All rights reserved.

2 Secretary s electronic prescribing standards. 1 The MMA protections would only apply to transfers of technology between three specific donor-recipient pairs: (1) a hospital may donate to members of its medical staff; (2) a group practice may donate to prescribing health care professionals that are members or employees of its practice; and (3) a Medicare Prescription Drug Plan sponsor or Medicare Advantage organization may donate to its network pharmacies and pharmacists and to prescribing health care professionals. 2 Four Proposed New Protections for Donation of Health Information Technology In keeping the President s initiative to promote the widespread adoption of interoperable health information technology, the Centers for Medicare and Medicaid Services (CMS) and the Office of the Inspector General of HHS (OIG) used the mandate of MMA to propose four new Stark exceptions and safe harbor provisions. 3 Both CMS and OIG propose regulatory language to implement the specific protections described in MMA for sole-use electronic prescribing technology. The agencies suggest in their published discussion that they would like to establish a separate protection for providing certain multi-use electronic prescribing technology. Although only CMS has proposed specific regulatory language regarding the broader subject of electronic health records, both CMS and OIG outline additional proposals to protect donors and recipients of electronic health record software and related services, with separate proposals for before and after HHS s adopts product certification criteria. Each agency expresses a strong interest in adding a limit on the value of all health information technology and services a single donor may provide to a recipient, although this concept is not included in the proposed regulatory language. Electronic Prescription Technology Electronic Prescription Information: Sole Use The first and most developed protection tracks the language in the MMA and would allow donors to provide hardware, software, broadband or wireless Internet connectivity, training, and information technology support services necessary and solely used to receive and transmit electronic prescription drug information. The agencies commentaries state that the term necessary would preclude a donor from providing items or services that are technically or functionally equivalent to items or services the recipient currently possesses or has obtained. However, an item could be necessary if it offers a material advantage over an item currently owned by the recipient and or is an upgrade of equipment or software that significantly enhances the functionality of the recipient s technology or services. In order to receive the technology or services, the recipient must certify that the benefit is not technically or functionally equivalent to anything the recipient already possesses or has obtained. Such certification would protect a donor so long as the donor did not have actual knowledge or act with reckless disregard or deliberate ignorance of the fact that the technology or service did not meet the necessary standard; however, the recipient would be protected only if the certification were true. In order to meet the requirement of being solely used to transmit or receive electronic prescribing information, the CMS and OIG commentaries state that the technology or service may not have independent value apart from its electronic prescribing purpose or offer a separate personal or business benefit to the recipient. Specifically, electronic prescribing technology or services may not be bundled with general office management, billing, or 1 P.L , codified at SSA 1860D-4(e)(6). 2 P.L , codified at SSA 1860D-4(e)(6). 3 CMS and the OIG affirm in their comments that the Stark exemption and safe harbor proposals are intended to function in parallel and provide consistent protections. Health 2

3 scheduling technology or services unless the recipient pays fair market value for these additional capabilities. As described in relation to the second electronic prescribing proposal below, CMS and OIG have concerns about the impact of the sole use requirement. The regulatory language of these CMS and OIG proposals also tracks the MMA language with respect to the three specific types of donor-recipient pairs to be protected. In their commentary, CMS and OIG provide additional guidance with regard to hospital and group practice donations. In explaining the protection for hospital donations, CMS and OIG note that this protection would not extend to arrangements with recipients who do not routinely furnish services at the donor hospital, or arrangements used to induce recipients to join the staff of the donor hospital. The regulators caution that the protection for group practice donations would not apply arrangements with a recipient is an independent contractor rather than an owner or employee of the group practice. 4 Consistent with the current safe harbor and Stark regulations, these proposed regulations would require that each protected donation be documented and that the documentation include certain prescribed elements. The arrangement between the donor and recipient must be in writing, signed by the parties, identify with specificity the technology and/or services being provided, the value of the donation, and include the recipient s certification that the necessary standard has been met. CMS and OIG note that to the extent that additional items or services are provided subsequent to the initial arrangement, documentation of the new arrangement must include a description of any technology and related services that the donor previously provided to the recipient. Throughout the commentary, the regulators emphasize that their core policy goal, and the key to avoiding the risk of fraud and abuse in connection with transfers of health information technology, is interoperability among and between health care providers and suppliers. The proposed regulatory language includes several provisions to address these concerns. As required by MMA, the donated technology must comply with any electronic prescribing standards adopted by the Secretary of HHS. The proposed regulations would prohibit donors and their agents from taking any actions to limit or restrict unnecessarily the use or compatibility of the items or services with other electronic prescription information items or services or electronic health information systems. Similarly, to the extent that a technology is not payor-specific, the donor would not be allowed to restrict or otherwise limit the recipient s right or ability to use the item or service for any patient. A donor would not be permitted use the volume or value of business received from the recipient as the basis for determining whether a recipient is eligible for a donation or the nature and amount of technology donated. 5 The final requirement of this protection would prohibit a recipient from making the donation of electronic prescribing technology a condition of doing business with a donor. Electronic Prescription: Substantial Use of Hardware and Connectivity Services Both CMS and OIG express concern that the sole use requirement incorporated in the first proposal may limit the utility of the protection offered in connection with providing hardware or connectivity services, as many individuals prefer to use a single multi-functional device or service. Therefore, both CMS and OIG are considering a second electronic prescribing proposal to protect the provision of hardware 6 and connectivity services that are used for more than one function provided that a substantial use of the item or service is to receive or transmit electronic prescription information. The agencies indicate that this protection would not extend to hardware or services that are only occasionally used for electronic 4 For purposes of the safe harbor proposed by the OIG, the definition of group practice member is expanded beyond the definition in existing regulations under the Stark law, 42 CFR , to include the full range of prescribing health care professionals, rather than just physicians. 5 Both CMS and OIG note that this prohibition would not preclude the donor from using selection criteria based on the total number of prescriptions written by a recipient. In contrast, their commentaries emphasize that donations may not be used to induce the recipient to transfer business from other providers or plans to the donor. 6 Agency comments state that necessary operating system software would be considered integral to the hardware and distinct from other software applications that are not necessary for the hardware to operate. Health 3

4 prescribing. Although no regulatory language was provided on this proposal, CMS and OIG suggest that, with the exception of the sole use requirement, the limitations and conditions for providing multi-use hardware and services would be at least as stringent as those required by the first electronic prescribing proposals. Electronic Health Records Both CMS and OIG express an interest in expanding protection beyond the donation of electronic prescribing technologies described in MMA to also protect the donation of electronic health records software and directly related training services. Although only CMS published draft regulatory language in this area, both CMS and OIG describe an incremental approach to protecting the donation of electronic health records technology, which differentiates between before and after the Secretary of HHS adopts product certification criteria. These electronic health records proposals would require that the donated technology have electronic prescribing capability that complies with the Secretary s standards. The proposals also would adopt the same donor-recipient pairs, the necessity standard, and the same documentation requirements as the electronic prescribing proposals. The same prohibitions on recipients making donations a condition of doing business and on donors limiting or restricting the use of technology to certain systems or certain patients established for electronic prescribing donations would also apply here. Beyond these areas, the electronic health records proposals incorporate a number of noteworthy differences. Precertification Electronic Health Records: Sole Use Software For pre-certification protection, the software and training services donations would be protected only if they are used solely to receive, transmit, and maintain electronic health records. Donors would be expressly precluded from including any billing, scheduling, or other similar office management or administration software or services or providing physician office staffing. As with the electronic prescribing proposals, the precertification electronic health records proposals would prohibit the donor from determining the eligibility of a recipient or the amount or nature of the donation in a manner that takes into account the volume or value of referrals or other business generated between the parties. In addition to these conditions, which are included in the draft CMS regulatory language, both CMS and OIG are considering whether to require that the donated electronic health records software include a computerized provider order entry component or comply with relevant Public Health Information Network preparedness standards. CMS and OIG are considering mechanisms to sunset the precertification electronic health records protections, once the protections for certified electronic health records take effect. Certified Electronic Health Records: Multi-use Software CMS and OIG anticipate that the Secretary of HHS will adopt certification criteria for electronic health records, including criteria for interoperability, functionality, and privacy and security. Based on the assumption that interoperability and certification will reduce the risk of fraud and abuse, CMS and OIG propose protections for the donation of electronic health records software with far greater flexibility in two key areas after these certification criteria have been adopted. First, donors would be allowed to provide additional software applications such as billing, scheduling, or other similar office management or administration software in connection with the donation of certified electronic health records software. Although not addressed in the current proposed regulatory language, CMS and OIG are considering methods to ensure that electronic health records and electronic prescribing would be the core uses for donated technology under this post-certification proposal. Second, although donors would still be prohibited from making determinations of eligibility and donation type in a manner directly related to the volume and value of recipient s business and referrals, CMS and OIG are considering identifying certain determination criteria that would be deemed not to be directly related. The CMS proposal under the Stark law would allow greater flexibility than OIG. The CMS proposed language would allow donors determinations to be based on the recipient s overall use of automated technology or whether the physician is a member of the donor-hospital s medical staff, neither of which is mentioned in the OIG discussion. Moreover, OIG is considering an enumerated list of selection criteria that would be deemed not directly related and thus permissible, whereas the CMS regulatory language somewhat circularly Health 4

5 would deem a determination not to be directly related so long as the determination is made using any reasonable and verifiable manner that is not directly related to the volume or value of referrals or other business generated between the parties. Significant Opportunity to Shape the Scope of these Protections The CMS and OIG commentary on each of the four proposals clearly demonstrate that the parameters of the health information technology protections are still being developed. Indeed, CMS and OIG request comments on nearly every aspect of the proposals described above. The absence of specific regulatory language from OIG on the electronic health records proposals and from either agency on the proposal for multi-use electronic prescribing hardware and connectivity services further emphasizes that the contours of the protections are still open for discussion. The following areas under consideration deserve specific mention. Monetary Cap on Donations As mentioned above, the CMS and OIG final regulatory language for each of the health information technology protections is likely to include a monetary limit on the value of the technology that donors may provide to each recipient. In framing the discussion of this issue, CMS predicts that each recipient would receive no more than $3,000 worth of technology and services; CMS and OIG caution that donors should not be expected to assume the full cost of recipients adopting new technologies. Despite the agencies stated assumptions, all aspects of a monetary cap and its application appear open for discussion. CMS and OIG are soliciting comments on the estimated acquisition and implementation costs of each of the permissible technologies and services as well as what specific dollar amount(s) would be adequate both to allow for the donation of substantive technologies and services and to protect against abuse. Multiple options for the cap calculation methodology are also under consideration, including a fixed dollar amount and/or a percentage of the value of donated technology. The commentaries suggest that CMS and OIG are considering an aggregate cap for donated technologies across all of the protections. Other considerations include whether the cap should be greater for technologies that meet interoperability standards and whether the amount of the cap should be phased down once widespread adoption of health information technology has been achieved. Scope of Protected Parties and Communications Each of the proposals would allow donations between the three specific donor-recipient pairs set forth in MMA. The commentaries describe the types of recipients who may receive donations from hospitals and group practices under the proposals; it is less clear what limitations, if any, would apply to the types of prescribing healthcare professionals who would be permitted to receive protected donations for Prescription Drug Plan sponsors and Medicare Advantage organizations. CMS and OIG solicit comment on whether other types of donors or recipients should be included, as well as comments on the degree of protection needed by any additional parties and what different or additional safeguards, if any, should be imposed in connection with any additional donor type. Notably, potential addition of donor-types is perhaps the only category of solicitation in which the published commentary cautions against further expansion of the protections. CMS and OIG assert that the direct and primary patient care relationships of the MMA-proposed donor types and their central role in the health care delivery infrastructure justify protections for this limited set of parties. Moreover, the agencies suggest that providers and suppliers of ancillary services, such as laboratories, may not have the same degree of interest in advancing interoperability of health information technologies as the donor types identified in the proposal. Use of the Proposed Protections CMS and OIG seek comments on the expected use of the proposed protections. Among the various components of this inquiry are: the number and value of donations each donor expects to provide under these protections; the type and number of recipients each donor expects to assist; and the likelihood that recipients may enter into arrangements with multiple donors. Notably, CMS suggests that, on average, physicians would receive items and services from only one entity even though the draft regulatory language would not preclude different donors from providing non-overlapping technologies. While Health 5

6 separate donors may not be expected as a practical matter, CMS and OIG may benefit from comment on the likelihood, and potential impact of separate donors coordinating their donations. Relationship Among Proposed Protections and Sunset Provisions It is unclear to what extent CMS and OIG envision the concurrent use of multiple protections. The commentaries suggest that a monetary cap may be imposed for all health technology donations. The commentaries do not contain any discussion of the relationship or limitations on the donation of technology that may meet the requirements under one proposal but would not meet the requirements under another. For example, in light of the proposed protections for electronic health records, it is unclear whether there are any circumstances under which the sole use requirement of the electronic prescribing protections would apply to software donations. The agencies indicate that the precertification requirements for electronic health records would sunset once the protections for certified electronic health records take effect. The agencies solicit suggestions for how to effectuate this transition. The agencies appear to be contemplating whether the protections should be modified or sunset once certain adoption milestones are achieved. It is unclear from the commentaries whether the adoption of electronic health records certification standards would be a milestone that could lead to closure of proposed electronic prescribing protections. CMS and OIG seek comments on whether the protections should be tied to adoption milestones and, if so, how such milestones would be defined. Technology Requirements and Unnecessary Limitations on Interoperability Critical terms, such as electronic health records are not defined. CMS and OIG solicit comment on the required functionalities of the donated technology, including whether the proposed electronic prescribing protections should be expanded to allow for the donation of technology to transmit prescription information that is not related to drugs, such as orders for supplies or laboratory tests and whether electronic health records software should be requirements to contain computerized physician order entry capabilities. The agencies commentaries do not present a rationale for the proposals establishing different requirements for whether the donated technology may take the form of hardware, software, or a connectivity service. The protections under each proposal are contingent of predictions of how and to what extent the recipient would use the functionality of the donated technology or service, yet there is no discussion of the consequences of unintended or unanticipated failures to meet those standards. The agencies discussions emphasize the benefits of interoperability from a policy perspective; however, CMS and OIG provide very little definition to this concept. The proposed regulatory language would prohibit action to unnecessary restrict on the use or compatibility of the donated technology with technologies, services or systems. The commentaries contain no discussion of the distinction between necessary and unnecessary restrictions in this core area of the protections. Industry Impact The proposals rely heavily on standards that have yet to be established by the Secretary of HHS to delineate permissible and impermissible donations. CMS and OIG solicit comments on benefits and risks associated with establishing protections for electronic health records prior to the development of certification standards. Conclusion The health information technology proposals announced by HHS provide insight into how CMS and OIG view the risks and benefits of donations in this area but the contours of the protection are not yet settled. The agencies are actively soliciting input on every aspect of these proposals. The comment period is open until December 12, We would be happy to assist you in developing comments on these proposals and help to shape the development of the new protections. Health 6

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