HEALTH CARE ADVISORY

Transcription

1 HEALTH CARE ADVISORY October 11, 2005 PROPOSED RULES FOR E-PRESCRIBING AND ELECTRONIC HEALTH RECORDS SAFE HARBORS AND EXCEPTIONS On October 5, 2005, the Centers for Medicare and Medicaid Services ( CMS ) and the Office of the Inspector General ( OIG ) announced the eagerly-awaited proposed rules establishing exceptions to the Stark self-referral law and the anti-kickback statute for certain arrangements involving the provision of electronic prescribing ( e-prescribing ) technology. In addition, as part of these proposed rules, CMS and the OIG are soliciting comments on similar exceptions related to the provision of electronic health records ( EHR ) technology. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 ( MMA ) required the new safe harbor under the anti-kickback statute and the new exception to the Stark law for e-prescribing. Comments are due to the respective agencies by December 12, In addition, CMS notes at the outset that it plans to schedule an Open Door Forum early in the comment period to discuss the benefits and risks of donating electronic prescribing and electronic health records technology. The Open Door Forum will be in addition to, and not in lieu of, the public comment process. Specifically, the OIG and CMS are proposing the following: (1) an anti-kickback safe harbor for e-prescribing; (2) two anti-kickback safe harbors for electronic health records; (3) a Stark law exception for e-prescribing; and (4) two Stark law exceptions for electronic health records. Because CMS and the OIG are requesting extensive comments on all of these proposals, we have italicized the specific requests for comments within the discussion of each proposal. ANTI-KICKBACK STATUTE SAFE HARBORS FOR E-PRESCRIBING AND ELECTRONIC HEALTH RECORDS The proposed safe harbor to the anti-kickback statute would protect certain arrangements involving hospitals, group practices, prescription drug plan sponsors ( PDPs ), and Medicare Advantage ( MA ) organizations that provide to specified recipients certain nonmonetary remuneration in the form of hardware, software, or information technology and training services necessary, and used solely, to receive and transmit electronic prescription drug information. Section 1128(b) of the Social Security Act (the anti-kickback statute) provides criminal penalties for individuals or entities that knowingly and willfully offer, pay, solicit, or receive remuneration in order to induce or reward the referral of business reimbursable under 1

2 federal health care programs. Individuals or entities may also be subject to civil monetary penalties under 1128A(a)(7), program exclusion under 1128(b)(7), and liability under the False Claims Act. The types of remuneration covered specifically include kickbacks, bribes, and rebates, whether made directly or indirectly, overtly or covertly, in cash or in kind. In addition, prohibited conduct includes not only the payment of remuneration intended to induce or reward referrals of patients, but also the payment of remuneration intended to induce or reward the purchasing, leasing, or ordering of, or arranging for or recommending the purchasing, leasing, or ordering of, any good, facility, service, or item reimbursable by any federal health care program. To limit the broad reach of the statute, Congress specifically authorized the development of safe harbors to protect specified payment and business practices that, while potentially capable of inducing referrals, would not be considered offenses under the statute. Over the years, the OIG has developed a number of safe harbors to protect various practices, and the MMA mandated creation of one more, specific to e-prescribing. SAFE HARBOR FOR E-PRESCRIBING (PROPOSED 42 C.F.R (X)) In the Proposed Rule, the OIG states that it does not believe that Congress intended, in the MMA, to suggest that a new safe harbor is needed for all, or even most, arrangements involving the provision of e-prescribing items and services. The OIG notes that fair market value arrangements that are arm s length and do not take into account the volume or value of federal health care program referrals, or arrangements that do not have as one purpose the generation of business payable by a federal health care program, should not raise concerns under the statute. Clearly, however, this still leaves a broad range of agreements that will require safe harbor protection. The Proposed Rule would add a new section to the existing safe harbor regulations at 42 C.F.R The MMA authorized the creation of a safe harbor for the provision of items and services (hereafter items, collectively) that are necessary and used solely to receive and transmit electronic prescription drug information. Necessary The Proposed Rule defines what is considered necessary under the safe harbor: Items or services that might be necessary to conduct e-prescribing are hardware, software, broadband or wireless Internet connectivity, training, information technology support services, etc. However, the safe harbor would not protect arrangements in which a Donor provides items or services that are technically or functionally equivalent to items and services the Recipient currently possesses or has obtained (e.g., the Donor could provide a hand held device, even though the Recipient has a computer 2

3 that could provide the same services, but the Donor could not provide a second hand held device to the Recipient if he/she already has one). This would not preclude the donation of upgrades. Since Donors will not necessarily know which items and services the Recipient already has, the proposed regulations include a requirement that the Recipient certify that the donated items are not technically or functionally equivalent to items the Recipient already has. The certification would have to be updated prior to the provision of any necessary upgrades or items not reflected in the original certifications. In addition, the Donor must not have actual knowledge of, and not act in reckless disregard or deliberate ignorance of, the fact that the Recipient already possesses items that are technically or functionally equivalent to those donated by the Donor. *The OIG is soliciting comments about other ways to address the certification process. The OIG is also soliciting comments about how to address the issue of Recipients potentially divesting themselves of equivalent technology that they already possess to shift costs to Donors. Used Solely The Proposed Rule defines what is considered used solely under the safe harbor: This requirement was intended to safeguard against abusive arrangements in which the remunerative technology might constitute a payment for referrals because it might have additional value attributable to uses other than e-prescribing. The OIG is specifically concerned that Donors might provide software for free or reduced cost that bundles valuable general office management, billing, scheduling, or other software with the e-prescribing features. Such donations would not meet the used solely requirement, and could potentially raise concerns if one purpose of their provision is to induce or reward federal health care program referrals. However, the OIG notes that the Recipient could purchase for fair market value additional technology not protected by the proposed safe harbor. The OIG recognizes that hardware and connectivity services are broad and can be put to many different uses; therefore, the Proposed Rule considers creating an additional safe harbor to protect the provision by Donors to Recipients of some limited hardware and connectivity services that are used for more than one function, so long as a substantial use of the item is to receive or transmit electronic prescription information. Operating software would be considered integral to the hardware and distinct from other software applications. However, such a separate safe harbor would not include items that are only occasionally used for 3

4 e-prescribing. *The OIG is soliciting comment about the standards for the additional safe harbor for multi-functional hardware (including necessary operating system software) or connectivity services, especially suggested methodologies for quantifying or ensuring that a substantial use of hardware and connectivity services is for the receipt or transmission of e-prescribing information. The OIG is also seeking comment on the nature and amount of any cap that could be imposed on the value of donated multi-functional hardware or connectivity services. Donors and Recipients Protected The MMA describes who may be protected under the new safe harbor as either Donors or Recipients: (1) hospitals with respect to members of their medical staffs; (2) group practices with respect to prescribing health care professionals who are members of the group practice; and (3) PDP sponsors and MA organizations with respect to participating pharmacists and pharmacies, and prescribing health care professionals. Hospitals/medical staff: This would not extend to physicians who do not routinely furnish services at the hospital, or remuneration that is used to induce physicians who already use other hospitals to join the medical staff of a different hospital. *The OIG is soliciting comments on whether the safe harbor should apply to items provided to other individuals or entities (e.g., other health care prescribing professionals who treat patients at the hospital). Group practices/members: The Proposed Rule would define group practice and members of a group practice in accordance with the Stark regulations. Thus, a group practice is a single legal entity with unified business operations and may not be an informal affiliation of physicians. However, the members of the group would be broader than under the Stark law definition (to comply with the MMA), and would include prescribing health care professionals (e.g., nurse practitioners) who are owners or employees of the group and who are authorized to prescribe under applicable state law. *Since the Stark law definition excludes independent contractors, the OIG is soliciting comment regarding whether and how a group practice may appropriately furnish technology to physicians or other professionals who contract to provide services to the group s patients. PDP sponsors/ma organizations/pharmacists/pharmacies/prescribing health care professionals: PDP sponsor and MA organization would be defined according to the Medicare Part D regulations, pharmacies and pharmacists would be defined according to applicable state law, and prescribing health care professional would be a physician or other health care professional licensed to prescribe drugs in the state in which the drugs are dispensed. *The OIG is soliciting comments on whether other Donors or Recipients should be included within the safe harbor. 4

5 Additional Conditions of the Safe Harbor The MMA requires that qualifying e-prescribing technology be used to receive and transmit information in accordance with standards to be established by the Secretary for the Part D electronic prescription drug program. These standards were proposed in February, and a final rule is expected any time. *The OIG is requesting comments on whether the safe harbor should protect qualifying e-prescribing technology that is used for the transmission of prescription information regarding items that are not drugs (e.g., laboratory tests or supplies). The OIG believes that interoperability can be an important safeguard against fraud and abuse and mitigate the risk that a Donor s offer of free or discounted technology to a Recipient could be a means of maintaining or increasing referrals from the Recipient. For instance, interoperability would allow the Recipient to transmit prescriptions to any appropriate pharmacy. Although there are no regulatory standards at this time to ensure e-prescribing products are interoperable with other products, the OIG notes that interoperability may be required in the future under the Part D e-prescribing final rule. In addition, to limit Donors ability to tie up Recipients referrals, the Proposed Rule would prohibit Donors from taking any actions to disable or limit the interoperability of donated items. *The OIG is soliciting comment on its approach to interoperability, including the definition of interoperable. The OIG is also soliciting comment on a number of other proposed ideas related to the value of the technology: For instance, the OIG believes that it is appropriate to limit the aggregate value of the qualifying e-prescribing technology that a Donor could provide, and is considering whether to limit the aggregate fair market value of all items provided to a Recipient from a single Donor. The Proposed Rule states that a monetary limit is appropriate, but is soliciting comment on all aspects of the cap idea, including the amount, the methodology to be used to determine (e.g., fixed dollar amount, percentage of the value of the donated technology, etc.), how it would work with the donation of multi-functional hardware and connectivity services, whether it should be reduced over time, and whether it would disadvantage smaller entities. In addition, the OIG is soliciting comment on the retail and nonretail costs of obtaining e-prescribing technology and the degree to which potential Recipients may already possess such items. The Proposed Rule notes that the final safe harbor regulations may not protect all possible costs. The OIG is considering various potential caps that would be no higher than any cap that may ultimately be imposed in the corresponding exception to the Stark self-referral law. In addition, the OIG is considering measuring the monetary limit at fair market value to the Recipient (i.e., the retail value). 5

6 The OIG is soliciting comment on the idea of setting an initial cap, which would be lowered after a certain period of time sufficient to promote initial adoption of the technology. The OIG is soliciting comment on whether and how to take into account situations where Recipients already have access software because it is publicly available either free or discounted. The OIG is also proposing to impose several other conditions to qualify for the safe harbor: Recipients would not be permitted to make the donation of qualifying technology from Donors a condition of doing business with the Donor. Neither the eligibility of a Recipient to receive items from a protected Donor, nor the amount or nature of the items received, could be determined in a way that takes into account the volume or value of the Recipient s referrals nor other business generated between the parties. However, this would not preclude selection criteria based upon the total number of prescriptions written by a Recipient, but would preclude criteria based upon the number or value of prescriptions written by the Recipient that are dispensed or paid by the Donor. *The OIG is seeking comments on any other potential criteria for selecting medical staff Recipients of donated technology. The safe harbor would not protect arrangements that seek to induce a Recipient to change loyalties from other plans or providers to the Donor. The safe harbor would require the arrangement to be in writing, be signed by the parties, specifically identify the items being provided and their values, and include the certification described above. The writing would have to cover all qualifying technology provided by the Donor (cumulatively). Where possible, the technology donated to a Recipient would have to be usable for e-prescribing for all patients, regardless of payor status. SAFE HARBOR FOR ELECTRONIC HEALTH RECORDS In addition to the safe harbor for e-prescribing, the OIG is also taking the initiative to propose a safe harbor to promote open, interconnected, interoperable electronic health records ( EHR ) systems that help improve the quality of patient care and efficiency. The goal of the safe harbor is to foster EHR technology while also ensuring that arrangements do not simply serve as marketing platforms or mechanisms to influence inappropriately clinical decision making or tie physicians to particular providers or suppliers. The Proposed Rule notes that in many respects, the provision of EHR technology to physicians and others poses greater risk of fraud and abuse than the 6

7 provision of e-prescribing technology, because the former is more valuable in terms of cost, avoided overhead, and administrative expense. However, the potential return in quality care and efficiency are also much greater. Thus, the OIG is proposing to establish two separate EHR safe harbors one for the time before the Secretary has adopted product certification criteria, including criteria for interoperability, functionality, and privacy and security of EHR technology (the pre-interoperability safe harbor), and one for after these standards have been established (the post-interoperability safe harbor). Since Congress provided no direction for this effort, the OIG is not actually proposing safe harbor language at this time. Instead, the agency is soliciting extensive public comment on a broad outline for these safe harbors. We discuss below the outline for the pre-interoperability safe harbor, and then follow with the details of how the postinteroperability safe harbor would be different. Covered Technology The pre-interoperability safe harbor would protect EHR software that is essential to and used solely for the transmission, receipt, and maintenance of patients EHR and electronic prescription drug information, and directly-related training services, provided that the software includes an e-prescribing component that complies with the federal standards established by the Secretary. As noted above, final e-prescribing standards are expected soon. *The OIG is soliciting comment on whether the exception should permit the e-prescribing component of EHR software to be used for the transmission of prescription information regarding items that are not drugs (e.g., supplies or laboratory tests). The agency is also asking for comments on whether the safe harbor should require the EHR software to include a computerized provider order entry ( CPOE ) component. The safe harbor would not protect the provision of other types of technology (e.g., hardware, connectivity services, billing, scheduling or other administrative software) or software that might be used by a Recipient to conduct personal business or business unrelated to the Recipient s medical practice. Donors would be able to provide training services related to the software, but they would not be permitted to provide staff to the Recipient. *The OIG is soliciting comments on special circumstances that may warrant exceptions to this rule. *The OIG is specifically requesting comment on how to define electronic health records, including the types of software that should be protected, the retail and nonretail cost of such software, the manner in which the software is currently marketed, methods for defining the scope of protected software, and safeguards that might be imposed to ensure that donations cannot be used to camouflage unlawful payments or tying arrangements. 7

8 The pre-interoperability safe harbor would require that the software and training services be necessary, as defined in the proposed e-prescribing safe harbor, and the OIG is also considering similar certification requirements. *Similarly, the OIG is requesting comments on how to address the possibility that Recipients may intentionally divest themselves of software and training services they currently have to shift costs to Donors. Interoperability Neither Donors nor recipients would be permitted to disable or limit the interoperability of any component of the software, or impose any other barriers to compatibility. The OIG is also considering requiring that protected software comply with relevant Public Health Information Network Preparedness standards (e.g., BioSense). *The OIG is soliciting comment on these and other appropriate qualifications. Since EHRs lack the program and beneficiary protections that exist under Medicare Part D, the OIG is considering including requirements similar to those under Part D, such as quality assurance measures. *The OIG is soliciting comment on the most appropriate way to do this. Value of the Protected Technology The proposed safe harbor would limit the aggregate value of the protected software and training services that a Donor could provide. The limit under the pre-interoperability safe harbor would be directly related to the limit adopted for the e-prescribing safe harbor (discussed above). *The OIG is requesting similar comments in this context. Specifically, the OIG is considering: An aggregate dollar cap; A cap that would be set at a percentage of the value of the technology to the Recipient; or A cap set at the lower of a fixed dollar amount or a percentage of the value of the technology to the Recipient. *In particular, the OIG is soliciting comment on how a cap under the EHR safe harbor would relate to a cap under the e-prescribing safe harbor, and how the value of technology provided under both would be aggregated. The OIG is concerned that Donors will abuse the exceptions by relying on both to maximize the value of technology provided as a means of disguising payments for referrals. Thus, the OIG is considering an overall cap on value, as well as documentation requirements incorporating all technology provided under the two exceptions. For instance, the value of donated technology for e-prescribing would count towards 8

9 the cap for donating EHR technology. The proposed safe harbor would also prohibit Donors from shifting the financial cost of providing this technology to Federal health care programs or beneficiaries. *Finally, the OIG is requesting comments on whether to take into account Recipient access to any software that is publicly available either free or at a reduced price, and if so, how to do so. Donors and Recipients The pre-interoperability safe harbor would protect the same categories of Donors and Recipients as the e-prescribing safe harbor, and would define them similarly. The OIG proposes that Donors be limited to hospitals, group practices, PDP sponsors, and MA organizations because they have a direct and primary patient care relationship, and therefore play a central role in the health care delivery infrastructure, that justifies protection for furnishing EHR technology that would not be appropriate for other types of providers and suppliers. In addition, according to the Proposed Rule, these categories of Donors are potentially in a better position to promote widespread use of EHR technology that has the greatest degree of openness and interoperability. The OIG specifically states that it does not believe that providers and suppliers of ancillary services, such as laboratories, have a comparable stake in advancing the goal of interoperable electronic health records. *The OIG is requesting comments on whether other categories of Donors or Recipients should be included and why, as well as whether different or alternative conditions should apply to certain Donors. Other Conditions The OIG is proposing to incorporate several of the same other conditions discussed above regarding e-prescribing, including the requirement that: neither the eligibility of a Recipient to receive items nor the amount and nature of the items received could be determined in a way that takes into account the volume or value of the referrals or other business generated between the parties; the Recipient may not make the donation of technology a condition of doing business; the agreement be in writing, signed, specify the items, and include a certification; and the technology be useful for all patients. Sunset Provision The OIG is considering whether to sunset the pre-interoperability safe harbor once the post-interoperability safe harbor becomes effective. *The OIG is interested in com- 9

10 ments discussing whether the pre-interoperability safe harbor could have the unintended effect of impeding the adoption of interoperable EHRs by promoting closed or isolated systems that effectively tie physicians to particular providers or suppliers. Post-interoperability Safe Harbor Differences Once product certification criteria are adopted for interoperable EHR technology, the OIG intends to finalize a post-interoperability safe harbor to help prevent technology from being used to lock in streams of referrals or other business. In general, the postinteroperability safe harbor would mirror the pre-interoperability safe harbor (including the requests for comments), with the following differences: The OIG is considering whether the safe harbor should protect additional software applications if e-prescribing and EHR are the core functions of the protected software. *The OIG is asking for comment on what types of software should be protected and methods for ensuring that e-prescribing and EHR are the core functions of any donated technology. The OIG is considering whether to protect other categories of Donors or Recipients, and whether different conditions should apply to any category of Donors or Recipients. *The OIG is specifically interested in comments on the types of individuals or entities that should be protected, the degree of need for protection, and the safeguards that should be imposed. To promote the Secretary s public policy goal of encouraging the adoption of e- prescribing and EHR, the OIG is considering a limited departure from the approach of other safe harbors regarding correlations between volume or value of business and free goods and services. Unlike the other safe harbors, the Proposed Rule makes a distinction between indirect and direct correlations with referrals, saying that the former may be permitted under some circumstances. Specifically, the OIG is evaluating the possibility of permitting Donors to use selective criteria for choosing Recipients, so long as the eligibility and the amount or nature of items is determined in a way that does not directly take into account the volume or value of referrals or other business generated between the parties. The OIG may identify several selection criteria that would be deemed not to be directly related to the volume or value of referrals or other business generated (e.g., a determination based on the total number of hours that the Recipient practices medicine or the size of the Recipient s medical practice). For instance, selection criteria based on the total number of prescriptions written by a Recipient would not be prohibited, but criteria based upon the number of prescriptions written by the Recipient that are dispensed or paid by the Donor would be prohibited. The safe harbor would not protect arrangements designed to encourage a Recipient to change loyalties from other entities to the Donor. *The OIG is requesting comments on the criteria for selecting Recipients, including whether or not there may be unintended consequences that would inhibit the adoption of interoper- 10

11 able technology or lead to abusive arrangements, and if so, whether more or less restrictive conditions are appropriate. The OIG is considering a cap on the value of donated interoperable software that may be larger than the cap under the pre-interoperability safe harbor. Community-Wide Health Information Systems In addition to the pre- and post-interoperability safe harbors, the OIG is assessing whether there is a need for a safe harbor for the provision of information technology items by certain entities to physicians to enable physicians to participate in a community-wide health information system designed to enhance the overall health of the community. The Stark Law currently has an exception for these types of arrangements, and the OIG has received numerous requests to create a comparable safe harbor under the anti-kickback statute. *Thus, the OIG is requesting comments on the need for, and any conditions that should apply to, such a safe harbor. STARK LAW EXCEPTIONS FOR E-PRESCRIBING AND ELECTRONIC HEALTH RECORDS Section 1877 of the Social Security Act (the Act ), also known as the physician selfreferral law or the Stark law: (1) prohibits a physician from making referrals for certain designated health services ( DHS ) payable by Medicare to an entity with which he or she (or an immediate family member) has a financial relationship (ownership interest or compensation arrangement), unless an exception applies; and (2) prohibits the entity from submitting claims to Medicare for those referred services, unless an exception applies. The statute establishes a number of exceptions and grants the Secretary the authority to create additional regulatory exceptions for financial relationships that do not pose a risk of program or patient abuse. Unlike the anti-kickback statute, where the safe harbors are voluntary and a non-safe-harbored arrangement does not necessarily violate the law, the Stark law exceptions are mandatory that is, in order for the physician to make referrals and the referral-receiving DHS entity to submit claims, the financial arrangement must satisfy an exception to the Stark law. The Proposed Rule would add three new exceptions to the Stark law: (1) proposed (v), as mandated under MMA, for certain arrangements involving the donation of electronic prescribing technology; (2) proposed (w), as authorized under section 1877(b)(4) of the Act, for the pre-interoperability donation of EHR technology; and (3) proposed (x), as authorized under section 1877(b)(4) of the Act, for post-interoperability donation of EHR technology. CMS notes that, depending on the circumstances, these new exceptions may not be necessary, as existing Stark law exceptions, for in-office ancillary services, employment, and certain prepaid health plans, may provide sufficient protection for the donation of electronic prescribing items to physicians. 11

12 STARK LAW EXCEPTION FOR E-PRESCRIBING (PROPOSED 42 C.F.R (V)) The proposed e-prescribing exception to the Stark law would protect certain arrangements involving hospitals, group practices, PDPs, and MA organizations that provide to specified recipients certain nonmonetary remuneration in the form of hardware, software, or information technology and training services necessary, and used solely, to receive and transmit electronic prescription drug information. This proposed exception is substantially the same as the proposed anti-kickback statute safe harbor discussed above. Necessary and Used Solely The Proposed Rule explains that Congress authorized the creation of an exception only for the provision of items that are necessary and used solely to transmit and receive electronic prescription drug information. The proposed rule clarifies the items that would qualify for the new exception as qualifying electronic prescribing technology. CMS s discussion of the terms necessary and used solely in its Proposed Rule mirrors that of the OIG Proposed Rule. *In addition, CMS is seeking public comments regarding the same issues on which the OIG seeks comment. Donors and Recipients Protected Similar to the anti-kickback statute safe harbor, the MMA provides that the Stark law exception must apply to the following donors and recipients: (1) hospitals with respect to members of their medical staffs; (2) group practices with respect to prescribing health care professionals who are members of the group practice; and (3) PDP sponsors and MA organizations with respect to participating pharmacists and pharmacies, and prescribing health care professionals. CMS s discussion of these provisions differs somewhat from the OIG s discussion of the proposed safe harbor. For example, CMS states that, consistent with the provisions of the Stark law, it will limit the new exception to recipients who are physicians. CMS explains that the Stark law is not implicated when remuneration is provided to non-physician prescribing health care professionals or to pharmacists and pharmacies that are not otherwise affiliated with a referring physician. Hospitals/medical staff: Protection would extend only to physicians who routinely furnish services at the hospital, and would not extend to remuneration that is used to induce physicians who already practice at other hospitals to join the medical staff of a different hospital. *CMS is soliciting comments on this issue. Group practices/members: The Proposed Rule would define group practice and member of a group practice consistent with existing CMS Stark law regulations. CMS notes that the inclusion of group practices and members in 12

13 the exception does not mean that the provision of the items by a group to its members necessarily requires a new exception, because the in-office ancillary services exception or the employment exception would apply in most circumstances, where needed. CMS states that it believes Congress included these relationships simply to encourage group practices to adopt electronic prescribing technology. *CMS is soliciting comments regarding whether and how a group practice may appropriately furnish qualifying electronic prescribing technology to a physician in the group practice (i.e., an independent contractor physician), as defined at PDP sponsors/ma organizations/pharmacists/pharmacies/prescribing health care professionals: CMS notes that, in certain circumstances, donations of qualifying electronic prescribing technology may qualify for protection under the existing Stark law exception at (c) for services furnished by an organization to enrollees of certain prepaid health plans. *CMS is soliciting comments on whether it should protect qualifying electronic prescribing technology provided to physicians by other DHS entities. CMS states that most other DHS services do not appear to involve substantial utilization of prescription drugs, but it is interested in comments addressing the types of DHS entities that should be included, the degree of need for the protection, and the safeguards that should be imposed to protect against program or patient abuse. Additional Conditions of the Exception CMS s discussion in this section of the Proposed Rule, regarding compatibility and interoperability, the value of protected technology, and other exception conditions, largely matches the OIG s discussion. Specifically, however, with regard to the costs associated with e-prescribing, CMS notes that it has received varying estimates of the costs of implementing electronic prescribing through the comment process for its E-Prescribing and the Prescription Drug Program proposed rule published on February 4, 2005, in the Federal Register (70 FR 6256) and that it has explored the available literature on the costs of implementing electronic prescribing. In the Regulatory Impact Statement section of the Proposed Rule, CMS discusses at length the potential costs and benefits associated with the implementation of e-prescribing. *In this regulatory impact discussion, CMS solicits comments on a variety of factors related to the cost and benefit of e-prescribing and the proposed Stark law exception, including: (1) whether the existing Stark Law exceptions provide sufficient protection to accommodate non-abusive arrangements and foster the adoption of health information technology; (2) information on the costs that would likely be incurred by entities choosing to furnish qualifying health information technology to physicians; (3) comments on the independent and synergistic effects of certain variables, such as technological progress and other market forces; (4) comments concerning CMS s estimated costs to hospitals for donating these items and 13

14 the expected savings from reductions in medical transcription, redundant diagnostic testing, adverse drug events, and readmissions to hospitals; (5) estimates as to the likely rates of the adoption and subsidization of health information technology; and (6) comments on whether information exists that would allow quantitative estimates of the effect of the proposed exceptions, taken alone, in the larger panorama of all health information technology investment decisions, market evolution, standards adoption, and use of existing physician self-referral exceptions. STARK LAW EXCEPTIONS FOR ELECTRONIC HEALTH RECORDS (PROPOSED 42 C.F.R (W) AND (X)) Similar to the OIG, CMS explains in this Proposed Rule that it is proposing two additional exceptions to protect nonabusive arrangements involving the provision of software and directly related training services that are necessary and used to receive, transmit, and maintain the electronic health records of the Donor s or physician s patients. The first exception would provide limited protection to donations made before the Secretary s adoption of product certification criteria, including criteria for the interoperability, functionality, and privacy and security of EHR technology (the pre-interoperability EHR exception ). The second exception would provide broader protection to donations made after product certification criteria are adopted by the Secretary (the post-interoperability EHR exception ). While CMS s discussion of the rationale for, and potential risk of, protecting the donation of EHR technology mirrors the OIG discussion, CMS has taken a step further than the OIG by setting forth proposed language for both of these exceptions. *CMS is soliciting public comment on whether hardware, connectivity and related items and services should also be protected under either or both these exceptions, and, if so, under what conditions. THE PRE-INTEROPERABILITY EHR EXCEPTION AT PROPOSED (W) Covered Technology CMS s discussion of the technology that would be covered by this proposed exception and its solicitation of comments parallels the discussion in the OIG s Proposed Rule. *In addition, CMS is soliciting public comment on whether and, if so, how to protect the provision of other kinds of electronic health information technology. Interoperability, Value of the Protected Technology, and Donors and Recipients CMS s Proposed Rule addresses the same principles and concerns associated with interoperability, the value of the protected technology, and Donors and Recipients as set forth in the OIG Proposed Rule. *In addition, CMS is soliciting comment on the degree to which physicians may already possess items or services that could be used for electronic health records. 14

15 Other Conditions, Sunset Provision CMS s discussion of other applicable conditions and a proposed sunset provision for the pre-interoperability Stark law exception is almost identical to the section of OIG s Proposed Rule discussing the possibility of a pre-interoperability anti-kickback statute safe harbor. The CMS Proposed Rule differs in that its proposed exception would require that the EHR donation arrangement not violate the anti-kickback statute. THE POST-INTEROPERABILITY EHR EXCEPTION AT PROPOSED (X) CMS states that it believes that only open, interconnected, interoperable electronic health records systems will allow for the free flow of information necessary to realize the full potential benefits of this technology. CMS anticipates that a process to identify product certification criteria, including uniform industry standards for interoperability, functionality, and privacy and security, may be completed in the next year. A certified product will meet all of the criteria adopted by the Secretary, through the process recognized by the Secretary. Once the Secretary adopts product certification criteria, the post-interoperability EHR exception will be finalized and will protect only the donation of certified electronic health records technology. *CMS is soliciting comments on how the processes under development, to identify product certification criteria, might impact the scope of a final exception for electronic health records. Many of CMS s proposed requirements for the post-interoperability EHR exception are identical to the proposed requirements for the pre-interoperability EHR exception. In addition, CMS s discussion of the expansions suggested for the post-interoperability EHR exception, as compared to the pre-interoperability EHR exception, parallels the discussion in the OIG s Proposed Rule. The following points are distinct in the postinteroperability EHR exception. Covered Technology For the post-interoperability EHR exception, CMS proposes to expand the scope of covered software, potentially including other kinds of software, provided that the core functions of the donated software are electronic prescribing and electronic health records. CMS states that it wants to ensure that integrated packages that could positively impact patient care are not excluded from the post-interoperability exception. CMS intends to protect systems that improve patient care rather than systems comprised solely or primarily of technology that is incidental to the core functions of electronic prescribing and electronic health records. *CMS is soliciting public comments on what types of software should be protected under the post-interoperability exception and methods for ensuring that electronic prescribing and electronic health records are the core functions of the donated technology. 15

16 Standards and Interoperability To obtain protection under the post-interoperability EHR exception, CMS would require that the donated electronic health records software be certified in accordance with the product certification criteria adopted by the Secretary. CONCLUSION These proposals set out only a basic framework for what the final safe harbors and exceptions will look like under the anti-kickback statute and the Stark law, respectively, and the agencies are soliciting comments on all aspects of their design and implementation. Thus, interested stakeholders have a prime opportunity to contribute to the discussion and shape the ultimate outcome of these new regulations. We hope you find this information useful. Please let us know if you have any questions. 16

17 This Health Care Advisory is published by Alston & Bird to provide a summary of significant developments to our clients and friends. It is intended to be informational and does not constitute legal advice regarding any specific situation. This material may also be considered advertising under the applicable court rules. This advisory may be reprinted without the express permission of Alston & Bird so long as it is reprinted in its entirety including the Alston & Bird name and logo. If you have any questions or would like additional information please contact your Alston & Bird attorney or one of the following: Jennifer E. Bell jbell@alston.com Peter M. Kazon pkazon@alston.com Timothy P. Trysla timothy.trysla@alston.com Jennifer L. Butler jbutler@alston.com Colin T. Roskey croskey@alston.com Peggy A. Whitmore peggy.whitmore@alston.com Erin L. Darling edarling@alston.com Thomas A. Scully tscully@alston.com Tiffani V. Williams tvwilliams@alston.com David E. Hebert dhebert@alston.com M. Lynn Sykes lsykes@alston.com ATLANTA One Atlantic Center 1201 West Peachtree Street Atlanta, GA CHARLOTTE Bank of America Plaza 101 South Tryon Street Suite 4000 Charlotte, NC If you would like to receive future Health Care Advisories electronically, please forward your contact information including address to healthcare.advisory@alston.com. Be sure to put subscribe in the subject line. NEW YORK 90 Park Avenue New York, NY RESEARCH TRIANGLE 3201 Beechleaf Court Suite 600 Raleigh, NC WASHINGTON, D.C. 601 Pennsylvania Avenue, N.W. North Building, 10th Floor Washington, D.C Alston & Bird LLP 2005