205. Medical Staff Relationships-Solving the Regulatory Issues for Old and New Physician Relationships

Transcription

1 205. Medical Staff Relationships-Solving the Regulatory Issues for Old and New Physician Relationships Patricia T. Meador, Esq. Kennedy Covington Research Triangle Park, NC The University of Arizona College of Medicine Phoenix, AZ I. Introduction A. Overview of Topic [*] A regulatory focus on remuneration between a health care entity most commonly a hospital - and physician members of its medical staff, seems a fairly straightforward topic. Yet, the combination of historically interdependent businesses (i.e., delivery of care in a facility setting intertwined with the practice of many independent physicians) with the strict regulatory structure of Stark II in a changing technology environment, causes unplanned and often ill-fitting complexity. This complexity is heightened by enforcement bias that can on occasion be quick to presume culpability, as well as by operational pressures on providers to integrate, coordinate, educate and reduce medical error. What follows is a detailed summary of both the current and historical state of the law under Stark II and the Anti-Kickback Statute as it relates to financial relationships between health care entities and their medical staffs. The primary focus of this outline is on arrangements that arise simply by virtue of medical staff membership, as contrasted to relationships involving professional service contracts or employment. By the term medical staff benefits, we intend to include traditional facility linked benefits such as preferential (and free) parking, staff lounges, cafeteria meals, as well as the more service linked benefits such as transcription, medical record access and maintenance and educational services. Also included is a discussion of how evolving federal law addresses medical staff benefits such as malpractice subsidiaries, professional courtesy, medical staff leadership stipends, travel and lodging for retreats and education sessions and gifts to medical staff leaders. Also considered is how developing law (and agency guidance) may treat newer initiatives such as concierge services and electronic health record technology. The lack of AKS commentary, advisory opinions and fraud alerts on medical staff benefits arrangements in the past ten years suggests that government enforcement agencies have seen little abuse in this area. However, the promulgation of the Phase II Stark rules changed the rules of the road. Health care entities with medical staffs and physicians need to consider now whether many commonly existing arrangements constitute remuneration, and if so, whether they fit within an exception. Unfortunately, many arrangements don't fit

2 squarely in an exception and guidance in this area in the form of CMS advisory opinions continues to be sparse. In considering the topic, there are several threshold questions that require judgment and, to date, lack clarity under interpretive guidance and case law. The first is a question as fundamental as when is an item or service that is provided by a health care entity to members of its medical staff a benefit (or remuneration) for which a Stark II exception or AKS safe harbor might be appropriate or required. Certain items or services freely provided by health care entities (e.g., a treatment room or medical supplies) enable a physician to treat patients and bill a professional fee, but are not regarded as remuneration to a physician. The line between what a hospital offers as part of the business product to its patients (but which has ancillary benefit to physicians) and what is Stark II remuneration is not a clear one. Consider the following examples: Physician access to medical records reading and storage room built by health care entity is historically provided free of charge, yet there has been considerable discussion about which Stark II exception might be required for electronic access to and maintenance of health records via software technology and services built by health care entity; Physician access to medical library resources, including journals, historically paid for by hospital seemed uncontroversial and not subject to serious fraud concern, whereas electronic access to online medical library resources raises potential regulatory concern; and Subsidy of cafeteria vendor to keep cost of meals lower for patients, visitors, employees and staff versus subsidy of concierge service available to the same group of persons. Medical staff members have traditionally received on-site meals, parking, transcription services, access to hospital rooms and patient facilities. CMS has indicated that some of these are not remuneration, but the analysis is not altogether clear, and a legitimate argument can be made that none of these should be considered remuneration when the primary purpose is to further patient care and services by the hospital. New forms of medical staff arrangements include concierge services that a hospital may provide for all employees, patients, families and medical staff members, or child care services that may be offered on the same basis (and may or may not be on the campus). If properly structured, it is hard to see the risk to these arrangements, but none of the existing exceptions are tailored to account for these arrangements and there is some room for disagreement among lawyers over the proper analysis of this issue. In many situations, these new arrangements are provided by an intermediate entity and the hospital provides a payment of some sort to that vendor (or offers free space), which in turn makes the services available to the physicians and others at a lower cost. It is legitimate to consider whether this is any different than a hospital leasing space for a gift shop for $1 a year to make sure

3 its services are available to its staff and patients. Or providing cafeteria food at a subsidy? If this is remuneration, it raises some interesting issues about the applicability of the indirect compensation provisions. Finally, some hospitals are providing new benefits for physicians who contract or provide professional services, such as block booking OR times or other forms of preferred scheduling. If these are part of a service agreement, and negotiated at arms length, it seems reasonable to qualify them as part of a fair market value exception without going to the expense of a third party value analysis, but again published guidance on this point is limited. Another important consideration in reviewing medical staff benefits under current law is the effect created from the very fact that we now have many more regulatory exceptions in Stark II focused on historically common relationships. On the one hand, the addition of exceptions to protect Christmas gifts, golf outings, cafeteria meals and charitable donations to tax-exempt hospital foundations, are helpful protections for these activities. On the other hand, the presence of such specific exceptions could cause courts to look more skeptically upon services or items traditionally made available by health care entities to medical staff members as part of hospital operations. To the extent such historical services or items don't fit precisely within promulgated exceptions or commentary and are later judged to be remuneration, the economic consequences (in the form of refunds or penalties) can be harsh. Since the line between remuneration and health care entity operations is not a clear one, this issue remains in the absence of clear guidance in the form of advisory opinions or other CMS publications. B. The Stark Law 1. General Prohibition. The federal Physician Self-Referral Law ( 42 U.S.C. 1395nn, commonly known as the Stark Law ) generally prohibits physicians from making referrals of Medicare patients to an entity for designated health services ( DHS ) if the physician (or physician's immediate family member) has a financial relationship with that entity. Additionally, the entity that receives the prohibited referral may not seek payment from Medicare for the services that were furnished as a result of the referral. Note that unlike the Anti-Kickback Statute discussed below, the presence of an intent element is not required for a violation of the Stark Law to occur. 2. Exceptions. The Stark Law contains several exceptions that describe permissible financial relationships between referring physicians and entities. If a financial relationship triggers the Stark Law prohibition and does not fit under one of the enumerated exceptions, any referrals would be prohibited and neither the entity nor the physician can bill Medicare for the services provided. Note that several of the exceptions are relevant to the relationship between a health care entity and physicians on its medical staff, as more fully discussed below. 3. Penalties. The Stark Law contains strict civil penalties for violating offenders including: a. Denial of payment for the impermissible provision of DHS;

4 b. Refund of amounts collected in violation of the Stark Law; c. Civil monetary penalties of up to $15,000 for each violation and $100,000 for each circumvention arrangement or scheme. 4. Regulatory History. The Stark Law's regulatory history has developed in stages. The stages include: a. Stark I Final Regulations, 60 Fed. Reg (1995) (the Stark I Final Regulations ) b. Stark II Proposed Rule, 63 Fed. Reg (1998) (the Proposed Rule ) c. Phase I of the Stark II Final Rule, 66 Fed. Reg. 856 (January 4, 2001 (the Phase I Regulations ) d. Phase II of the Stark II Final Rule, 69 Fed. Reg (March 26, 2004) (the Phase II Regulations ) C. Anti-Kickback Statute II. Stark Law 1. General Prohibition. The federal anti-kickback statute ( 42 U.S.C. 1320a-7b, the Anti-Kickback Statute ) prohibits individuals and entities from knowingly and willfully offering, paying, soliciting or receiving remuneration (including any bribe, kickback or rebate) in return for a referral reimbursable under a federal or state healthcare program. The Anti-Kickback Statute also prohibits remuneration meant to induce the purchasing, leasing, ordering or arranging of any good, facility or service payable under a federal or state healthcare program. 2. Safe Harbor Protection. The Anti-Kickback Statute allows the Secretary of the Department of Health and Human Services ( DHHS ) to promulgate through regulations certain permissible payment practices. The Office of Inspector General ( OIG ) set forth certain safe harbored payment practices that are not subject to the general anti-kickback prohibition. In order to obtain protection under a safe harbor, the payment arrangement must meet all of the elements of the applicable safe harbor provision. However, arrangements that do not qualify for safe harbor protection are not per se illegal, and must be evaluated on a case by case basis. 3. Penalties. The Anti-Kickback Statute contains strict criminal and civil penalties for those convicted of a violation, including: a. Fines up to $25,000 and imprisonment up to five years; b. Exclusion from federal healthcare programs; c. Civil monetary penalties of up to $50,000 per violation and recovery of damages up to three times the amount of prohibited remuneration. A. Since the Stark Law was enacted in 1992, CMS has grappled with relationship of a hospital to its non-employed physician medical staff, in terms of gratuities, perks, gifts and other items or services of value that have been made available historically without charge. B. The original language found in the Stark statute includes: 1. An exception for personal service arrangements that meet seven

5 conditions [ 42 U.S.C. 1395nn(e)(3)]. 2. An exception for remuneration unrelated to the provision of designated health services [ 42 U.S.C. 1395nn(e)(4)]. 3. An exception for payments by a physician a. To a laboratory in exchange for the provision of clinical laboratory services; or b. To an entity as compensation for items or services, if they are furnished at a price that is consistent with fair market value [ 42 U.S.C. 1395nn(e)(8)]. C. The original statutory language does not include explicit exceptions for: Professional Courtesy; Non-monetary Compensation up to $300; Incidental Medical Staff Benefits; Fair Market Value; Community Wide Health Information Systems; Indirect Compensation Arrangements; Charitable Donations; or Compliance Training. However, the original statute provides that the Secretary of DHHS has the authority to promulgate an exception in the case of any financial relationship which the Secretary determines does not pose a risk of program or patient abuse. III. Remuneration Unrelated to a DHS [ 42 U.S.C. 1395nn(e)(4) & 42 CFR (g) ] A. Original Stark Statute: contains an exception for remuneration that is provided by a hospital to a physician if the remuneration does not relate to the provision of designated health services. B. Current State of Law: In (g), CMS currently interprets this statutory exception to mean that such remuneration may not relate, directly or indirectly, to the furnishing of any designated health service, and it must not take into account the volume or value of the physician's referrals. Remuneration relates to designated health services if: Remuneration is an item, service or cost that could be allocated in whole or in part to Medicare or Medicaid under cost reporting principles; Remuneration is furnished directly or indirectly, explicitly or implicitly, in a selective, targeted, preferential or conditioned manner to medical staff or other persons in a position to make or influence referrals; or Remuneration otherwise takes into account the volume or value of referrals or other business generated by the referring physician. C. Notable Commentary/History: 1. In light of statutory history, CMS interprets the exception narrowly and makes the exception available only if remuneration is wholly unrelated to the provision of DHS. Phase II Commentary stated that originally, the exception applied to anything that was unrelated to clinical lab services, but since the Stark prohibition has expanded, the exception should be drawn more narrowly. See 69 Fed. Reg. at

6 CMS uses the rental of residential property as an example of wholly unrelated remuneration. The Proposed Rule noted that administrative tasks and utilization review were to be considered unrelated but in the Phase II Regulations, CMS withdrew that interpretation. Id. 3. This exception is only available to physicians (and not their immediate family members). Additionally, the exception is only applicable in terms of remuneration from the hospital itself. See 69 Fed. Reg. at D. Practical Application: Narrowed to the point of being of very limited use in planning or structuring arrangements; may be of greater value in litigation process; Could be allocated language leaves open a question in situations where provider might chose not to allocate expenses even though allocation was permissible; The Commentary to the Phase II Rule states that the exception applies only when the hospital provides the remuneration directly to the physician. This leaves the question of whether the exception can ever apply to a situation where a hospital provides a subsidy to a vendor that makes a service unrelated to DHS available to a physician. IV. Non-Monetary Compensation Up To $300 Per Year [ 42 CFR (k) ] A. Original Stark Statute: did not contain a de minimis exception or its progeny, the exception for non-monetary compensation up to a certain named amount. B. Current State of Law: In the Phase II Regulations, CMS provides that certain non-monetary compensation given by an entity in the form of items or services that does not exceed $300 per year is subject to exception from the Stark prohibition if the following conditions are satisfied: 1. The compensation is not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician; 2. The compensation is not solicited by the physician or physician's practice (including staff members and employees); 3. The compensation arrangement does not violate the Anti-Kickback Statute or any federal or state law or regulation governing billing or claims submission. *The $300 limit will be adjusted each year to the nearest whole dollar by the increase in the CPI-U for inflation. C. Notable Commentary/History: 1. This exception dates back to the Proposed Rule, and was originally referred to as the De Minimis Exception. The Proposed Rule's version of the exception provided that compensation from an entity in the forms of items or services (and not cash or cash equivalents) that

7 did not exceed $50 per gift or $300 per year would be allowed by the Statute if: The entity providing the compensation made it available to all similarly situated individuals, regardless of whether or not the individuals refer patients to the entity for services; and The compensation is not determined in any way that takes into account the volume or value of referrals to the entity. 2. Proposed Rule Commentary made it clear that remuneration under this exception must solely be in the form of non-cash items or services. Additionally, remuneration cannot include cash equivalents, such as stocks/bonds; gift certificates or airline frequent flyer miles. See 63 Fed. Reg. at In 2001, CMS (then HCFA ) made a distinction between the proposed and final rule. It changed the name from De Minimis Compensation Exception to Non-Monetary Compensation Up to $300 Exception to avoid any unintentional implication that the dollar amount in the exception is minimal or inconsequential in all circumstances. CMS concluded that $300 could potentially be a sufficient amount of remuneration to induce referrals, but it felt that the limit was adequate to protect against abuse. See 66 Fed. Reg. at Dollar Cap. The Phase I Regulations eliminated the $50 per gift limit, and instead the cap was set solely at $300 per year. Thus, the Phase I Regulations permitted larger one-time gifts. Additionally, in Phase II Commentary, CMS declined to raise the $300 cap to $600 because its believed that $600 was too high and would create risk of abuse. Id. 5. Solicitation By Physician. The Phase I Regulations added a provision that precluded protection for any item or service of value solicited by physicians in order to prevent physicians from making such items or services a condition of conducting business with the entity. Id. 6. Similarly Situated Standard. The Phase I Regulations eliminated the similarly situated standard, and instead enhanced the standard prohibiting compensation that takes in account the volume or value of referrals or other business generated between the parties. Id. 7. Remuneration to Physician Groups. Phase I Commentary clarified that the exception only protects remuneration to individual physicians. Valuable items, services or gifts to physician groups do not qualify for this exception. Non-cash gifts could be given to individual physician group member(s) if the terms meet the conditions of the exception. However, CMS cautioned that the exception would not apply to gifts such as holiday parties, office equipment or supplies that are not valued at more than $300 per physician, but are in effect a group gift. See 66 Fed. Reg. at 921. * In 2001, CMS recognized that $300 per physician in a large group could be a substantial sum of remuneration. *In the Phase II Commentary, CMS noted that it was retaining the restrictions in regard to a prohibition of gifts to physician groups based in order to preclude high value gifts to group practices that may control referrals to benefactors. See 69 Fed. Reg. at

8 D. Practical Application: Even if a compliance officer or legal counsel elects not to require strict tracking of remuneration that falls within the $ payment window, there is a strong likelihood that tracking exists within the accounting system. Such accounting data is essentially unanalyzed but tracked information and could create problems in the context of an agency review. While tracking, who decides whether something is remuneration ; who decides whether the remuneration fits into another exception and doesn't count toward the $ limit? Is there a need for detailed tracking in order to meet abbreviated timing on OIG disclosure request? (see, e.g., 42 CFR (c)) Determining offset value of hospital in-kind services; Consider as a policy matter simply reserving this exception for a few named annual events (medical staff party, annual golf event, holiday gifts, etc.) and requiring everything else to fit into another exception. V. Medical Staff Incidental Benefits [ 42 CFR (m) ] A. Original Stark Statute: Did not contain an exception for Medical Staff Incidental Benefits. B. Current State of Law: In the Phase II Regulations, CMS provides an exception in regard to certain compensation in the form of items or services (and not including cash or cash equivalents) from a hospital to a member of its medical staff when the item or service is used on the hospital's campus, if all of the following conditions are met: (1) The compensation is provided to all members of the medical staff practicing in the same specialty (but not necessarily accepted by every member to whom it is offered) without regard to the volume or value of referrals or other business generated between the parties; (2) Except with respect to identification of medical staff on a hospital website or in hospital advertising, the compensation is provided only during periods when medical staff members are making rounds or are engaged in other services or activities that benefit the hospital or its patients; (3) The compensation is provided by the hospital and used by the medical staff members only on the hospital's campus. Compensation including, but not limited to, internet access, pagers, or 2-way radios, used away from the campus only to access hospital medical records or information or to access patients or personnel who are on the hospital campus, as well as the identification of the medical staff on a hospital web site or in hospital advertising, will meet the on-campus requirement of this exception; (4) Compensation is reasonably related to the provision of, or designed to facilitate, directly or indirectly, the delivery of medical

9 services at the hospital; (5) The compensation is of low value (*less than $25) with respect to each occurrence of the benefit (ie: each meal given to physician during time he is serving patients must be of low value). The $25 limit will be adjusted each year to the nearest whole dollar by the CPI-U. (6) The compensation is not determined in any manner that takes into account the volume or value of referrals or business generated between the parties; (7) The compensation arrangement does not violate the Anti- Kickback Statute or any Federal or State law or regulation governing billing or claims submission; (8) Other facilities and healthcare clinics (including FQHCs) that have bona fide medical staffs may provide compensation under this exception on the same terms and conditions that are applied to hospitals. C. Notable Commentary/History: 1. The issue of incidental benefits first came up in the Proposed Rule Commentary. In the Responses to Questions about the Law section of the Proposed Rule Commentary, CMS fielded a question regarding whether a physician's referrals would be prohibited if an entity paid for certain incidental benefits, such as malpractice insurance; reduced or free parking; and meals. CMS responded by saying that whether or not the referral would be prohibited hinged on the nature of the financial relationship between the physician and the entity. It suggested that such incidental benefits should fit within the fair market value exception or the (previously named) de minimis exception, rather than such a situation falling under its own exception. See 63 Fed. Reg. at Parking Spaces. As part of the Proposed Rule Commentary, when specifically addressing the provision of parking spaces to medical staff members, CMS conceded that while the physician is doing rounds at the health care entity, free parking to the physicians provides a benefit to both the health care entity and its patients, rather than providing the physician a personal benefit. Therefore, rather than interpreting it as deserving of its own exception, CMS did not consider parking remuneration by the hospital to the physician but rather just part of the hospital's obligation to provide facilities and physical access to facilities to care for patients. However, CMS asserted that if the hospital provided parking to the physician during the time when the physician is not performing rounds, the free or reduced parking would constitute remuneration. See 63 Fed. Reg. at The Phase I Regulations added the new exception that allowed certain incidental benefits of low value to be provided by hospitals to medical staffs. 4. The Phase I Commentary recognized that many of the incidental benefits that hospitals provide members of their medical staff do not qualify for the Employment or Fair Market Value Exceptions because

10 there is neither an employment relationship or a written agreement. See 66 Fed. Reg. at In the Phase I Commentary, CMS asserted that it still believed that incidental benefits could be structured to reward referrals, but it also recognized that many incidental benefits are customary in the industry and designed to benefit a hospital and its patients. Regardless, CMS also stated that incidental benefits should be reviewed to ensure compliance with other laws, including the Anti-Kickback Statute. Id. 6. Phase I Commentary also cautioned that medical staff incidental benefits that did not meet the conditions set forth in the exception could constitute prohibited remuneration. Id. Malpractice Insurance. For example, malpractice insurance should not be considered an incidental benefit of low value. However, it may be provided as part of a physician's employment with the hospital or pursuant to a service agreement. Id. Transcription Services. Likewise, medical transcription services are not viewed in the Phase I Commentary as a incidental benefit of nominal value. However, in Phase II Commentary, CMS took up the issue of transcription services again to clarify that it does not believe that transcription of hospital medical records dictated by an attending physician is a benefit to the physician, and consequently, it does not constitute a compensation arrangement. On the other hand, transcription services that relate to private practice do constitute remuneration that would create a compensation arrangement and would need to fit under another exception. See 69 Fed. Reg. at On-Campus Requirement. In the Phase II Commentary, CMS provided clarification with regard to the on-campus requirement in the Incidental Medical Staff Benefits Exception. With the creation of the exception, CMS intended to limit the exception to those benefits that are customarily provided by hospitals to their medical staff (like parking and cafeteria meals). The exception was not intended to cover tangential, off-site benefits like dinners at restaurants and theater tickets. Such tangential benefits would need to be covered under the Non-Monetary Compensation up to $300 Exception or another exception. Likewise, off-site dinners with hospital board members or hospital administrators would need to fit under the Non-Monetary Compensation Up to $300 Exception or the Fair Market Value Exception. See 69 Fed. Reg. at Internet Access/Electronic Medical Records. In 2004, CMS also clearly stated that the exception is meant to cover internet access to facilitate electronic medical records. See 69 Fed. Reg. at a. In the Phase I Commentary, CMS stated that it intended to cover incidental benefits such as computer and internet access in order to facilitate the maintenance of up-to-date medical records and availability of medical information. See 66 Fed. Reg. at 921. b. In the Phase II Commentary, CMS asserted that a hospital's provision of a computer or other technology that is always used in connection

11 with hospital services and hospital patients would be considered for the hospital's benefit and thus would not constitute prohibited remuneration to a physician. See 69 Fed. Reg. at c. In 2004, CMS changed performing other duties to engaged in other services or activities to clarify that dedicated electronic and internet items and services can meet the requirement found in (m)(2). 9. The Phase II Commentary notes that as part of the Phase II Regulations, CMS changed the word offered to provided in (m)(1) and (m)(2) to be more consistent with other paragraphs in exception, while also making it clear that the (m)(1) requirements would be satisfied if the incidental benefits are offered to all members of the medical staff of the same specialty, even if some members don't accept them. See 69 Fed. Reg. at Listing of Medical Staff on Hospital Website/Advertising. Phase II Commentary states that a simple listing of medical staff members on a hospital website is an incidental benefit that would fall under the exception. However, advertising or the promotion of a physician's private practice on a hospital website is not covered by the exception. Such a situation would need to fit under the Non-Monetary Compensation up to $300 exception or the physician would need to pay the hospital a fair market value rate for the advertising. See 69 Fed. Reg. at Continuing Medical Education Expenses. In Phase II Commentary, CMS responds to a question relating to hospital's payment of a physician's continuing medical education expenses by cautioning that such costs could constitute remuneration to physician depending on the content of the program and physician's obligation to acquire CME credits. See 69 Fed. Reg. at D. Practical Application: Measuring the occurrence of the benefit (frequency, unit cost?) The discussion in the commentary distinguishing between the fact that a hospital can list a physician on a website but cannot promote a private practice illustrates the close lines within which these rules work; $25.00 very restrictive as an actual de minimis amount; What is related to (e.g. is picking up dry cleaning before close of business while physician remains in-house for unexpected OB delivery sufficiently related?) How is the benefit of physician proximity measured, if at all? VI. Professional Courtesy [ 42 CFR (s) ] A. Original Stark Statute: did not contain an exception for the provision of professional courtesy. B. Current State of Law: professional courtesy is defined in 42 CFR as the provision of free or discounted health care items or services to a physician or his or her immediate family members or

12 office staff. The exception covers professional courtesy offered by an entity to a physician or a physician's immediate family member or office staff if all of the following conditions are met: (1) The professional courtesy is offered to all physicians on the entity's bona fide medical staff or in the entity's local community or service area without regard to the volume or value of referrals or other business generated by the parties; (2) The health care items and services provided are of a type routinely provided by the entity; (3) The entity's professional courtesy policy is set out in writing and approved in advance by the entity's governing body; (4) The professional courtesy is not offered to a physician (or immediate family member) who is a federal health care program beneficiary, unless there has been a good faith showing of financial need; (5) If the professional courtesy involves any whole or partial reduction of any coinsurance obligation, the insurer is informed in writing of the reduction; and (6) The arrangement does not violate the anti-kickback statute, or any federal or state law or regulation governing billing or claims submission. C. Notable Commentary/History: 1. In 2001, CMS responded in the Phase I Commentary that it could not generalize about the application of the Stark prohibition to professional courtesy arrangements. It mentioned that it would consider such arrangements in the Phase II Regulations. 66 Fed. Reg. at Non-Physician Employees. The Professional Courtesy Exception was introduced in the Phase II Regulations. In the Phase II Commentary, CMS asserted that while professional courtesy discounts may be covered by the employee exception, nothing in the new Professional Courtesy Exception precludes a health care entity from extending the courtesy to non-physician employees, as well. See 69 Fed. Reg. at In the Phase II Commentary, CMS also states that nothing concerning the new exception should be construed to encourage or require courtesy arrangements and it cautioned that some arrangements may violate the Anti-Kickback Statute or civil monetary penalties law against giving inducements to Medicare or Medicaid beneficiaries. Id. D. Practical Application: AKS safe harbor is narrower than the Stark II exception on this issue, raising issues under the sixth requirement. Physician employees need not fit into this exception, if part of institutional employee benefit package includes discounted health services; in any event, the benefit raises possible income tax issue for physicians. Practical issue concerning how often one informs the insurers: annually or upon submission of each claim?

13 Limitations regarding need to exclude Medicare beneficiaries raises practical tracking difficulties and introduces potential for mistakes in a broad benefit program, especially as physicians age into Medicare secondary coverage. VII. Compliance Training [ 42 CFR (o) ] A. Original Stark Statute: did not contain an exception specifically addressing the provision of compliance training. B. Current State of Law: The Phase II Regulations contain an exception for compliance training provided by an entity to a physician (or to the physician's immediate family member or member of his or her office staff) who practices in the entity's local community or service area, so long as the training is held in that community or service area. For purposes of the exception, compliance training is defined as training regarding the basic elements of a compliance program (for example, establishing policies and procedures, training of staff, internal monitoring, reporting); specific training regarding the requirements of Federal and State health care programs (for example, billing, coding reasonable and necessary services documentation, unlawful referral arrangements); or training regarding other Federal, State, or local laws, regulations, or rules governing the Conduct of the part for whom the training is provided (but not including continuing medical education). C. Notable Commentary/History: 1. The Compliance Training Exception was first introduced in the Phase I Regulations. 2. In 2004, CMS made changes to the Phase I Regulations. a. Addition of the inclusion of the training of a physician's office staff (in addition to a physician or the physician's immediate family members). b. Inclusion of compliance training given by any entity (including training by entities other than a health care entity). c. Inclusion of compliance training that addresses the requirements of federal, state or local law. 3. Continuing Medical Education. The Phase II Commentary makes clear that the provision of continuing medical education is not to be included as compliance training. Compliance training should primarily refer to training that is intended to promote legal compliance. See 69 Fed. Reg. at However, CME may be covered by the Non- Monetary Compensation Up to $300 Exception. D. Practical Application: Off-site training (blunt axe on Caribbean trip issue?) Question of who is benefited; what if off-site training for all system physician department heads scheduled to be held in cold Midwestern city is more cost effective for the hospital system? Given increasing pressure to reduce medical errors and improve quality, why is there a continuing concern over CME that

14 clearly benefits hospital patients? VIII. Fair Market Value Exception [ 42 CFR (l) ] A. Original Stark Statute: did not contain a specific exception which addressed a compensation arrangement that complied with fair market value rate requirements. B. Current State of Law: The Phase II Regulations contain a Fair Market Value Exception which provides an exception for compensation arrangements between an entity and a physician (or the physician's immediate family member) or any group of physicians for the provision of items or services by the physician if the arrangement is set forth in an agreement that meets the following conditions: (1) The agreement is in writing, signed by all of the parties and covers only identifiable items or services; (2) The agreement specifies the timeframe for the arrangement, which can be for any period of time and contain a termination clause, provided the parties enter into only one arrangement for the same items or services during the course of a year. An arrangement made for less than 1 year may be renewed any number of times if the terms of the arrangement and the compensation for the same items or services do not change. (3) The agreement specifies the compensation to be provided. It must be set in advance, be consistent with fair market value and not be determined in a manner that takes into account the volume or value of referrals or other business generated by the referring physician; (4) The agreement involves a transaction that is commercially reasonable and furthers the legitimate business purpose of the parties; (5) The agreement does not violate the Anti-Kickback Statute or any federal or state law or regulation governing billing or claims submission; (6) The services to be performed under the arrangement do not involve the counseling or promotion of a business arrangement or other activity that violates a State or Federal law. C. Notable Commentary/History: 1. The 1998 Proposed Rule introduced the Fair Market Value Compensation Arrangement Exception because the other exceptions in place at that time, due to their specificity, did not encompass certain other fair, commercially reasonable compensation arrangements. The Proposed Rule Commentary indicates that CMS believed such arrangements should be included as an exception. See 63 Fed. Reg. at The Phase I Commentary clarified that the Fair Market Value Exception includes arrangements between the entity and either a physician or a physician group (even if the group does not meet the definition of group practice). See 66 Fed. Reg. at The Phase I Commentary pointed out that in determining whether an arrangement is commercially reasonable, any reasonable method of

15 valuation is acceptable, based on the specific business of the involved parties. CMS suggested that. the parties use thorough documentation to support its method of valuation. See 66 Fed. Reg. at When discussing the Recruitment Exception in the Phase II Commentary, CMS states that it does not believe that recruitment incentives fit under the Fair Market Value Exception because the recruited physician's relocation is not properly viewed as a benefit to the hospital, except as a potential referral source of DHS. Thus, CMS indicates that in order to fit under the Fair Market Value Exception, the service must benefit the health care entity. See 69 Fed. Reg. at A health care entity's provision of a physician's malpractice insurance is to be considered a compensation relationship within the prohibitive meaning of the statute. a. But see Advisory Opinion which approves a fact pattern involving malpractice assistance in which the OIG does not discuss the Stark II implications. D. Practical Application: Is it possible to qualify malpractice support under this exception? (e.g., with hospital benefit being availability and access to physicians) What is the practical limit of the 2004 preamble commentary to the Phase II Regulations regarding unavailability of this exception for recruitment because there is no direct benefit to the hospital? When are obligations of the medical staff membership or medical staff leadership of value to the hospital under this exception? Why is one year term required in this and other exceptions but not required when remuneration is indirect? IX. Community-Wide Health Information Systems [ 42 CFR (u) ] A. Original Stark Statute: did not contain a specific exception which addressed community-wide health information systems. B. Current State of Law: The Phase II Regulations contain a new exception for community-wide health information systems. The new exception in 42 CFR (u) encompasses items or services of information technology provided by an entity to a physician that allow access to, and sharing of, electronic health records and any complementary drug information systems, general health information, medical alerts, and related information for patients served by community providers and practitioners, in order to enhance the community's overall health, provided that: (1) The items or services are available as necessary to enable the physician to participate in a community-wide health information system, are principally used by the physician as part of the communitywide health information system, and are not provided to the physician in any manner that takes into account the volume or value of referrals or other business generated by the physician;

16 (2) The community wide health information systems are available to all providers, practitioners, and residents of the community who desire to participate; (3) The arrangement does not violate the anti-kickback statute,... or any Federal or State law or regulation governing billing or claims submission. C. Notable Commentary/History: 1. In General. The exception for community-wide health information systems was introduced in the Phase II Regulations. In the Phase II Commentary, CMS announced that it was creating a new exception to address the provision of information technology items and services provided by a DHS entity to a physician in order to participate in community-wide health information systems which are designed to improve the health of the community. Such items and services include hardware and software. Certain conditions must be met for the exception to apply. See 69 Fed. Reg. at The system must be available to all providers, practitioners and residents of the community who want to participate in the system. Additionally, the system must be capable of allowing providers and practitioners shared access to electronic health care records. The system may also provide shared access to complementary drug information systems, general health information, medical alerts and related information to patients in the community. Id. 3. The items and services provided to physician under this exception must principally be used by the physician as part of the community-wide health information system. The DHS entity may only provide items and services that are necessary to enable the physician's participation in the community-wide system. CMS gave the following illustrations: a. If a physician already owned a computer, it would only be necessary for the DHS entity to provide software or training in connection with the health information system. b. If a physician already had access to the Internet, it would not be necessary for the DHS entity to provide the physician with Internet access. Id. 4. The items and services must not be provided in any manner that takes into account the volume or value of referrals or other business generated by the physician who is receiving the items and services. The DHS entity must not engage in the selective provision of items and services to referral sources. Id. 5. The provision of community-wide health information systems under the exception must not violate the Anti-Kickback Statute and all claims and billing must comply with applicable Federal and State laws and regulations. Id. D. Practical Application: What about the creation of one web-based product with open access to all patients, providers and community residents that contains lots of specific portals through which only certain people with specific authorization can pass?

17 How should community be defined? The requirement of including all providers, practitioners and residents presents practical and economic issues. Can an entity roll out an electronic system in stages? X. Indirect Compensation Arrangements [ 42 CFR (p) ] A. Original Stark Statute: did not provide an exception for indirect compensation arrangements B. Current State of Law: The Phase II Regulations provide for an exception addressing indirect compensation arrangements, as defined in (c)(2), so long as the following conditions are met: (1) Compensation received by the physician or physician's immediate family member is fair market value for the services and items provided and such compensation is not determined in any manner that takes into account the volume or value of referrals or other business generated between the referring physician and the health care entity furnishing DHS. (2) The indirect compensation arrangement is set forth in writing, signed by the parties, and specifies the services covered by the arrangement, except in the case of a bona fide employment relationship, in which case the arrangement need not be set forth in writing, but must be for identifiable services and be commercially reasonable, even if no referrals are made to the employer. (3) The compensation arrangement does not violate the Anti- Kickback Statute or any Federal or State law or regulation governing billing or claims submission. C. Notable Commentary/History: 1. To determine whether or not an indirect compensation arrangement exists, please refer to 42 CFR (c)(2) for a detailed definition. 2. The Indirect Compensation Arrangement Exception was first introduced in the Phase I Regulations. In the Phase II Commentary, CMS expounded on the requirements of the indirect compensation arrangement. See 69 Fed. Reg at D. Practical Application: What is the permitted use of indirect compensation for arrangements that involve funds transfers (gifts or grants) and other such remuneration? Is this exception limited to an arrangement where the health care entity is receiving services of value? Is service to be narrowly or broadly defined? Continuing issue that under the statutory language, a direct exception would break the chain (arguably eliminating the Stark financial relationship), an interpretation rejected by CMS in Phase II commentary but not yet tested by case law. Does a flat fee payment ever create an indirect compensation arrangement? XI. Payments by a Physician [42 U.S.C. 1395nn(e)(8) & 42 CFR

18 (i) ] A. Original Stark Statute: did contain an exception for payments by physicians for certain items and services if such items and services were furnished at fair market value (or if payments were directed to a laboratory in exchange for provision of clinical lab services). B. Current State of Law: 42 CFR (i) provides an exception for payments made by a physician or physician's immediate family member: (1) To a laboratory for the provision of clinical laboratory services; or (2) To an entity as compensation for any other items or services that are furnished at fair market value, and that are not specifically excepted under another provision in through (including but not limited to the Fair Market Value Exception in (l)). The term services means services of any kind (not just those defined as services for purposes of the Medicare program in ). C. Notable Commentary/History: 1. The Stark I Final Regulations incorporated the applicable statutory exception into 42 CFR (i). 2. In 1998, the Proposed Rule proposed that each exception should remain mutually exclusive. Thus, arrangements covered by another exception could not be excepted under (i). However, in the Phase II Commentary, CMS conceded that parties can use the Fair Market Value Exception, where applicable. See 69 Fed. Reg. at Additionally, in the Phase II Regulations, CMS extended the exception to cover payments made by members of a physician's immediate family. Id. D. Practical Application: If a hospital contracts with a vendor, such as concierge services, to provide services to all employees and medical staff and provides start-up funding to the vendor, is the physician paying fair market value for the services if the rate reflects comparable services from other sources, but does not take into account the start-up subsidy? What if the subsidy is not greater than what the hospital would have offered to the extent the service were limited to use by its employees? XII. Charitable Donations [ 42 CFR (j) ] A. Original Stark Statute: did not include an exception for charitable donations by a physician. B. Current State of Law: (j) of the Phase II Regulations permits charitable donations by a physician, as it excepts bona fide charitable donations made by a physician (or immediate family member) to an entity if all of the following conditions are met: (1) The charitable donation is made to an tax-exempt

19 organization (or to a supporting organization); (2) The charitable donation is neither solicited, nor made, in any manner that takes into account the volume or value of referrals or other business generated between the physician and the entity; (3) The charitable donation arrangement does not violate the Anti-Kickback Statute or any Federal or State law or regulation governing billing or claims submission. C. Notable Commentary/History: 1. In the Phase II Commentary, CMS responded to a commenter who had expressed concern regarding charitable donations by physicians to DHS entities when buying a ticket to a charity ball or participating in a fundraising campaign. CMS agreed that such charitable donations from a physician to a DHS entity involved remuneration as defined under the statute, and thus created a compensation relationship and the need for a regulatory exception. See 69 Fed. Reg. at The Phase II Commentary stated that broad-based solicitations that are not specifically targeted at physicians will qualify under the new exception. However, parties engaged in more selective or targeted fundraising, need to ensure that the activities are not conducted in a way that takes into account the volume or value of referrals or the generation of business between the parties. Id. D. Practical Application: The presence of this exception illustrates the often unexpected scope of the Stark II statutory reach. XIII. Medical Staff Issues and the Anti-Kickback Statute A. Prohibited Remuneration In General. Medical Staff members and health care entities are prohibited from receiving or providing any remuneration (including any bribe, kickback or rebate) that is intended to induce referrals of patients for items or services that may be reimbursed under a federal or state healthcare program. B. Gifts and Gratuities. 1. In General. A health care entity is prohibited from offering gifts and gratuities to members of its medical staff in order to induce their referrals. 2. Computers and Fax Machines. A 1997 OIG fraud document responded to a question involving the provision of free fax machines, computers and fax lines. While the supplier entity referred to in the document was not a health care entity, the OIG's observations found in the document are applicable to the relationship between a health care entity and its medical staff members. The OIG reiterated language from the 1991 safe harbor regulations, as it distinguishes between using a computer as part of a particular services that is being provided (for example, printing out laboratory results) and giving away a free personal computer. The OIG states that in determining whether a free or loaner computer or fax machine constitutes illegal remuneration, the substance not the form of the transaction controls and any

20 reasonably foreseeable misuse of the equipment implicates the entity providing the equipments as well as the user. C. Professional Courtesy. 1. Waiver of Coinsurance and Deductible Safe Harbor. The OIG promulgated a safe-harbor [ 42 CFR (k)] addressing the waiver of beneficiary coinsurance and deductible amounts by stating that such amounts do not constitute prohibited remuneration so long as the amounts fall under one of the following two categories: a. If coinsurance or deductible amounts are owed to a hospital for inpatient hospital services for which Medicare pays under the prospective payment system, the hospital complies with the following conditions. i. The hospital may not later claim the waived or reduced amount as bad debt for Medicare payment purposes, or otherwise shift the financial burden onto Medicare, a state healthcare program, other payers or individuals; ii. The hospital must offer to reduce or waive the coinsurance or deductible amounts without regard to the reason for admission, the length of stay of the beneficiary, or the diagnostic related group for which the claim for Medicare reimbursement is filed; iii. The hospital's offer to reduce or waive the amounts must not be made as part of a price reduction agreement between a hospital and a thirdparty payer, unless the agreement is part of a contract for the furnishing of items or services to a beneficiary of a Medicare supplemental policy issued under the terms of section 1882(t)(1) of the Act. b. If the coinsurance or deductible amounts are owed by an individual who qualifies for subsidized services under certain Acts, the facility may reduce or waive the coinsurance or deductible amounts for items or services for which payment may be made in whole or in part under part B of Medicare or a State health care program. 2. In order to fit under the Stark Professional Courtesy Exception under 42 CFR (s), the arrangement cannot violate the anti-kickback statute, or any federal or state law or regulation governing billing or claims submission. Thus, if a hospital waives coinsurance or deductibles of inpatient services paid under PPS, as part of a professional courtesy arrangement, it must comply with the requirements of the applicable Anti-Kickback safe harbor or otherwise ensure that the arrangement does not violate the Anti-Kickback Statute. 3. The OIG Supplemental Compliance Program Guidance ( CPG ) for Hospitals, issued in 2005, also addressed Professional Courtesy relationships. Through the Guidance, the OIG acknowledged that the term professional courtesy is used in a variety of ways in the industry to describe a range of arrangements involving free and discounted services to physicians and their families and staff. The CPG states that while many professional courtesy arrangements are unlikely to pose a risk of fraud and abuse, some hospital-sponsored arrangements may implicate the Anti-Kickback Statute. a. The OIG states that whether or not the specific arrangement violates

21 the Anti-Kickback Statute hinges on whether the recipients are selected in a manner which takes into account the recipient's ability to refer or induce other business for the hospital. Whether the physician has solicited the professional courtesy in exchange for referrals is also significant. b. The OIG points out that hospitals should also look at the method by which the courtesy is given. Insurance only billing has the potential to implicate the Anti-Kickback statute, the False Claims Act and the Civil Monetary Penalties provision prohibiting inducements to Medicare and Medicaid beneficiaries. D. Suspect Hospital Incentive Arrangements. 1. In a Special Fraud Alert, issued in 1992, the OIG warned against the following suspect hospital incentive arrangements, noting that certain financial incentive packages that incorporate any of the features listed below may be subject to prosecution under the Anti-Kickback Statute if one of the purposes of the incentive is to induce referrals. The list included several arrangements which could fall under the category of customary benefits given by hospitals to medical staff members including, but not limited to: a. Provision of free or significantly discounted billing, nursing or other staff services; b. Free training for a physician's office staff in such areas as management techniques, CPT coding and laboratory techniques; i. Note that, as discussed above, the Final Stark Regulations provide an exception for Compliance Training. c. Payment of the cost of physician's travel and expenses for conferences; d. Payment for a physician's CME courses; and e. Payment for services which require few, if any, substantive duties by physician, or payment for services in excess of fair market value. 2. If engaging in any of the arrangements listed above, the hospital will want to go through a detailed Anti-Kickback analysis to ensure compliance with the statute. E. Medical Staff Credentialing. In its Supplemental CPG for Hospitals, the OIG cautioned hospitals that certain medical staff credentialing practices could potentially implicate the Anti-Kickback Statute. 1. As an example, the OIG stated that conditioning medical staff membership on a particular amount of referrals or a certain number of procedures performed (beyond what is necessary to ensure clinical proficiency) could potentially implicate the Anti-Kickback Statute. 2. Credentialing procedures that categorically refuse membership privileges to physicians with significant conflicts of interest would not appear to implicate the Anti-Kickback Statute. 3. In order to determine whether a particular credentialing policy would violate the Anti-Kickback Statute depends on the facts and circumstances of that particular situation. F. Medical Malpractice Insurance Subsidies. The topic of medical

22 malpractice insurance subsidies paid by hospital for members of the medical staff has recently been addressed by the OIG in an advisory opinion and in its Supplemental CPG for Hospitals. 1. Advisory Opinion No In Advisory Opinion 04-19, the OIG addressed the issue of a malpractice insurance subsidy arrangement between a hospital and two physicians on its medical staff, in which the hospital agreed to subsidize certain limited insurance coverage support for the physicians. The OIG noted that it recognized that physicians in some geographic areas are experiencing severe increases in malpractice premiums, insurer withdrawals, and sudden coverage termination. In determining that the particular subsidy arrangement was permissible, the OIG relied on several factors, including: a. The subsidy arrangement provided by the hospital was temporary and necessary to prevent a gap of local medical services in the specialty provided by the physicians; b. The subsidy arrangement was set up to avoid a significant financial windfall for the physicians; c. Because the physicians were required to perform additional services at the hospital as consideration for the subsidy, the risk of undue benefit to the physician was further reduced; and d. The subsidized insurance covered medical services at sites other than the subsidizing hospital, which further reduced the risk that the financial support was connected to referrals. 2. The OIG Supplemental CPG. In the most recent CPG for Hospitals, the OIG noted that, historically, it had been concerned with the notion of a hospital providing malpractice insurance subsidies for members of its medical staff, because of the risk under the Anti-Kickback Statute that the payments may be used to induce referrals. The OIG pointed out that it had established a safe harbor for medical malpractice insurance subsidies given to obstetrical providers in health professional shortage areas. While acknowledging the current disruption in the malpractice insurance markets in certain areas, the OIG advised hospitals to review such subsidy arrangement carefully to insure that they would not pose a risk under the Anti-Kickback statute. Additionally, the OIG advised hospitals to seek an advisory opinion if the malpractice insurance program does not fit under a safe harbor and to be mindful that such arrangements implicate the Stark Law. The OIG listed several relevant factors, including, but not limited to: a. Whether the hospital is providing the subsidy to the physician on an interim basis for a reasonable and fixed period in an area experiencing severe access of affordability issues; b. Whether the hospital is offering the subsidy to its current active medical staff (or physicians new to the area or in practice less than a year, i.e. those with no or few established patients); c. Whether the hospital is providing the subsidy in a manner that is unrelated to the volume or value of referrals or other business generated by those subsidized physicians or their practices; d. Whether the subsidized physicians are paying as much as they

23 currently pay for malpractice coverage (financial windfalls to subsidized physicians are to be avoided); e. Whether the subsidized physicians are required to perform certain services (or relinquish certain rights) which have a value that is equal to the fair market value of the subsidy provided by the hospital; and f. Whether the availability of the malpractice insurance is unrelated to the location of the services provided by the physician, including but not limited to, the provision of services at other hospitals. XIV. The Provision of Electronic Health Records ( EHR ) to Medical Staff Members A. General Benefits of EHR Systems 1. EHR can replace paper medical records, protocols and claim forms by substituting in its place an electronic source of patient information that will ultimately lead to improved patient care. EHR facilitate patient care through electronic patient registration, scheduling, and claims submission systems. EHR also provides a significant function by tracking patient information as well as outcomes for programs that reward healthcare quality and efficiency. EHR can significantly improve patient access to information and the timeliness and quality of clinical decision making. 2. The benefits of using an EHR system can only be realized once healthcare entities have integrated into the system and physicians have ready access to the system. B. View that Provision of EHR to Physicians Should Not Be Considered Remuneration 1. Arguably, when a health care entity provides members of its medical staff with access to EHR to support patient care practices, it should not be considered remuneration as set forth under the Stark Law. This viewpoint hinges on the significance of the benefit to the patient and to the health care entity in improving the quality of patient care. This conclusion is based upon the benefit to the patient and to the entity in establishing strong patient care practices. 2. The understanding that the provision of electronic support is not remuneration should not depend on whether the computer and related systems only allow communication between the physician and the entity providing the support. Rather, this understanding should be extended to electronic support systems that allow other uses of the system related to electronic-based patient care practices where the system does not include obstacles to compatibility with other systems. For example, a health care entity could provide a physician with a computer and software that allowed the physician access to shared patient information and clinical support, but also allowed the physician to use the same computer for software linking to other health care entities or payors. 3. Arguably, the provision of hardware, software and certain training by a health care entity to a physician is not remuneration when the information is available in a new electronic format (such as a transfer

24 of information electronically rather than by fax) and the hardware, software and training are used primarily for EHR purposes. Examples include: a. Read Only Access. The EHR system allows the physician to access a shared patient's electronic health record and to read a shared patient's information, such as medical history, test results, and laboratory and diagnostic information. b. Read/Write Access. The EHR system allows the physician to read health information about a shared patient and to make entries to the record, such as ordering or documenting additional tests or findings. c. Medical Library. The record system allows the physician to access an electronic medical library of electronic subscriptions where the electronic library in whole or in part replaces a medical library that the entity otherwise maintains on its campus. d. EHR Training for Record System Use. The health care entity provides orientation and training to the physician on the use and operation of its EHR system, even when the training qualifies for continuing medical education. e. Administrative Interfaces. The EHR system includes interfaces that would permit patient information to link to other electronic systems that the physician uses, such as the physician's patient registration, scheduling and billing systems. C. Practical Application of Relevant Stark Exceptions to EHR Systems Assuming that the provision of EHR Access and support constitutes remuneration, the arrangements may qualify under several Stark exceptions, such as the Fair Market Value Exception, Payments by a Physician Exception, Medical Staff Incidental Benefits Exception, Non-Monetary Compensation Up To $300 Exception, Community- Wide Health Information System Exception, and in some cases the exception for Indirect Compensation Arrangements. From a practical perspective, however, the fit between the exception and EHR may be less than precise. For example, if the healthcare entity seeks to qualify the arrangement under a Stark Law exception, such as the Exception for Payments by a Physician or the Fair Market Value Exception, the entity will have to determine, in relevant part, that the compensation by the physician to the entity for that portion of the support system is consistent with fair market value. See 42 U.S.C. 1395nn(e)(8), 42 C.F.R (i); 42 C.F.R (l). Traditional notions of fair market value based on commercial value and arm's length negotiations do not readily fit this situation and are difficult to apply. See 42 U.S.C. 1395nn(h); 42 C.F.R guidance on the meaning of services under the Fair Market Value Exception. The nature of this exception's timing and documentation requirements makes it well suited to health information system pilot programs and similar initiatives that will not fall neatly into one year increments. The exception, however, is based in part upon the provision of items or

25 services by the physician... or group. In order for this exception to apply to electronic health record arrangements, the concept of services may need to vary from traditional notions of clinical or administrative services provided to a healthcare entity. Ideally, the scope of services could embrace the physician's time and commitment to learn and use an electronic health record system and to comply with the system's procedures. This physician service provides arguably tangible benefit to a health care entity seeking to implement an electronic record system to further its mission of improving patient care and providing services in a safe and efficient manner. Such an application of the rule, however, is not discussed by existing regulatory guidance and there is neither case law nor advisory opinions that provide further clarity. The Community-Wide Health Information System Exception applies to items or services of information technology an entity provides to a physician that allow access to and sharing of electronic healthcare records and related information for patients served by the community providers. The exception does not include a definition of community. Even in a small rural area, the definition of the entire community of providers and practitioners may be difficult to identify. The definition of community in an urban setting might include so many providers and physicians that the ability to reach a consensus on a single electronic health record system is futile. The requirement that the system be available to all providers, practitioner and residents of the community who wish to participate is an equally problematic. In large communities, the cost of linking all willing participants may be prohibitive. Small communities with limited resources may face the same initial economic roadblock. In either case, there is little purpose to establish information sharing systems with physicians or providers that do not share patients. Many of the exceptions under the Stark Law were drawn to address traditional benefits provided by hospitals to their medical staffs and affiliated physicians, such as on campus meals, parking and de minimis items of value. Healthcare systems and their counsel face difficulty as they attempt to fit electronic record system initiatives into requirements that were not designed to readily accommodate the realities of this new technology. For example, the Medical Staff Incidental Benefits Exception applies only to members of an health care entity's medical staff and does not extend to non-medical staff physicians who have a bona fide need to access the health record of a shared patient. The additional requirement that the benefit be of low value (less than $25 per use) makes this exception virtually unavailable for any meaningful electronic record system support. The on campus use requirement, even with the clarifying provision that devices may be used off site to access information about on-campus patients, is too narrow to include the use of systems to access information after a patient is discharged or who is treated at multiple locations. Similarly, the Non-Monetary Compensation up to $300 Exception, has limited application to the provision of EHR arrangements because of the need to use it for other traditional benefits and because of the requirement that the value of the benefits not exceed $300 per year. This limit

26 Exhibit One would rarely, if ever, cover the cost of providing hardware, software or support services for an EHR system. Sample Medical Staff Member Agreement This Agreement between ( Physician ) and ( Hospital ) confirms the understanding between the parties about Physician's service asa member of Hospital's medical staff ( Medical Staff ) and participation in certainhospital activities for the purpose of furthering Hospital's mission of providing medicalcare and services to its patients and the community it serves. 1. In consideration of Physician's attendance at and active participation in activities and meetings that are intended to enhance Hospital's ability to provide quality care to its patients and medical services to the community, are primarily for the benefit of Hospital, its patients and the community, and further Hospital's compliance with applicable laws and regulations ( Hospital Activities ), Hospital will provide Physician with meals, approved travel expenses or the value of reasonable expenses incurred as part of Physician's active participation in Hospital Activities and approved in advance by Hospital, or provide reimbursement for such reasonable and approved expenses. Hospital shall also arrange for Physician to receive continuing medical education ( CME ) credit for Hospital Activities, as applicable. The parties acknowledge that the provision of such meals, travel expenses, the value of reasonable and approved expenses and CME credit, as applicable, reflects the fair market value of Physician's active participation in Hospital Activities as a Medical Staff member. Neither party is entitled to benefits for such Hospital Activities other than those provided in this Agreement. 2. The term of the Agreement shall be two years, beginning ( Effective Date ). Physician shall be a Medical Staff member throughout the term ofthe Agreement, and this Agreement shall automatically terminate if Physician ceases tobe a Medical Staff member. 3. Physician is an independent contractor with respect to Hospital; nothing in this Agreement is intended to or will be construed to create an employment or joint venture relationship. Physician is responsible for all applicable state and federal tax and withholding requirements. 4. This Agreement, together with the Medical Staff bylaws and related rules and regulations, constitutes the entire agreement between the parties with respect to the subject matter of this Agreement and supersedes all previous agreements or understandings. PHYSICIAN Date: HOSPITAL

27 Date: Footnotes [*] We wish to acknowledge and express our appreciation to Carolyn Merritt, a health care attorney at Kennedy Covington, for her substantial contributions to this outline.