Eliminating Legal Barriers to Technology Cost Sharing

By Sandra Greenblatt, Esq.

Health care providers, including physicians, are essential participants in the government’s effort to accelerate the adoption of electronic prescribing (eRX) and electronic health records (EHR) technology needed to modernize and streamline the health care system. However, the cost of purchasing and implementing this new technology is an immense barrier for many physicians and small providers. Existing fraud and abuse laws previously prevented third party contributions and cost-sharing. Recognizing this, the Department of Health and Human Services issued final regulations in August 2006 creating new Stark Law exceptions and new Safe Harbor regulations under the Medicare/Medicaid Anti-Kickback Statute that now permit larger stakeholders to subsidize the cost of adopting eRX and EHR technology.

These new federal regulations permit only the donation of non-monetary financial support to providers and, while similar, are not identical. The Stark exceptions apply only to physicians, while the Safe Harbors apply to a broader range of health care providers. In general, the new eRX Stark exception AND the Safe Harbor for eRX require satisfaction of multiple conditions, including that (i) items and services donated (ISD) must only consist of necessary hardware, software, or IT and training services that are used solely to receive and transmit eRX information in a drug program that meets Medicare Part D standards; (ii) ISD must be provided only by a hospital to physician members of its medical staff; by a group practice to a member (owner or employee) of the group; or by a prescription drug plan sponsor or Medicare Advantage organization to network pharmacists/pharmacies and to prescribing professionals; (iii) an ISD donor cannot restrict use or compatibility of ISD with other EHR/eRX systems, or for any patient, regardless of payor; (iv) receipt of ISD a not a condition of doing business with donor; (v) recipient’s eligibility, amount or nature of ISD is not based on the volume or value of referrals to donor; (vi) no donor must have actual knowledge, or act with deliberate ignorance or reckless disregard that the eRX recipient possesses equivalent ISD; and (viii) the parties must sign a written agreement covering all ISD that reveals the donor’s cost of ISD.

The EHR Stark Exception AND Safe Harbor are more complex, do not allow donation of hardware, require recipients to pay at least 15% of the donor’s cost of ISD and require the parties to meet the following conditions: (i) ISD includes only necessary software or IT and training used predominantly to create, maintain, transmit, or receive EHR, cannot include staffing, nor be used for recipient’s personal or unrelated business; (ii) ISD must be provided to any physician or provider by an entity that provides and bills Medicare for covered services [including DHS]; (iii) software is interoperable and includes eRX capability meeting Medicare Part D standards; (iv) donor cannot restrict ISD use, compatibility, interoperability with other EHR/eRX systems, or use for patients regardless of payor; (v) recipient’s ISD eligibility, amount or nature is not directly based on volume or value of referrals or business with donor [includes determination methods that are deemed not to be based on volume/value]; (vii) no donor actual knowledge, deliberate ignorance nor reckless disregard of recipient’s possession of equivalent ISD; (viii) requires a signed written agreement covering all ISD, revealing the donor’s cost of ISD and recipient’s contribution (minimum 15%); (ix) donor cannot shift ISD costs to any federal health care program; (x) the ISD arrangement must not violate other laws [Stark only]; and (xi) all conditions are met and transfers of ISD must be made before December 31, 2013.

These new regulations cover a broad scope of donors and recipients and require careful analysis by all parties with their health law attorneys to ensure compliance both before and during implementation of any specific eRX and/or EHR donation or cost-sharing plan. Although not simple, these new regulations go a long way, by removing some significant legal barriers, to assist the various stakeholders in the health care industry, including hospitals, pharmaceutical companies, third party payors and larger providers, to come together and share resources so that physician practices and other smaller health care providers, essential to the system, can afford the necessary technology to improve efficiency and reduce the current paperwork burden in the system. The result of these technology-driven improvements has been shown to lower the cost and to raise the quality of health care services, a worthy goal essential to the future success of our health care system, for us all.
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Sandra Greenblatt is a Board Certified Health Lawyer and President of the health law firm of Sandra Greenblatt, PA in Miami, FL. She has served on the Legal Work Group of the Governor’s Privacy and Security Project and is a Board member of the South Florida Health Information Initiative, which will help provide a foundation for Florida’s participation in the creation of a Nationwide Health Information Network. She can be reached at (305) 577-9995 or [email protected]. This article is an overview only of the topic and is not intended to, nor does it provide legal advice, which must be based on the specific facts and circumstances of each client.