G2 Compliance Perspectives: Donations of Electronic Health Records Technology: Is It Still Safe to Take Advantage of the Federal Safe Harbor?

The safe harbor issued by the Department of Health and Human Services Office of Inspector General under the Medicare and Medicaid anti-kickback law and the exception issued by the Centers for Medicare and Medicaid Services under the Stark physician self-referral law that permit certain donations of electronic health record (EHR) software or information technology and training services will terminate on Dec. 31, 2013. Generally, under the EHR safe harbor and exception, pathology providers, laboratories, and other permitted donors can subsidize the cost of compliant EHR technology for referring physicians at up to 85 percent of the cost of such technology, provided that all of the criteria of the safe harbor and the exception are met. As the federal safe harbor and exception for EHR donations do not pre-empt or displace state anti-kickback law and regulations, all providers must comply with both federal and state statutes and regulations. Therefore, it is particularly important to review the formal guidance that has been issued in New York, New Jersey, Pennsylvania, Tennessee, Missouri, Washington, and West Virginia regarding EHR donations. State Law Analysis Tennessee On March 4, 2013, the Tennessee attorney general issued an opinion severely restricting many if not most EHR donations in Tennessee. Specifically, the Tennessee attorney general relied on Tenn. Code Ann. 68-29-129(7), which is part of the Tennessee Medical Laboratory Act, and prohibits any person from soliciting the referral of specimens to such person’s (or to any other) medical laboratory or from contracting to perform medical laboratory examination of specimens “in a manner that offers or implies an offer of rebates to a person or persons submitting specimens, other fee-splitting inducements, participation in any fee-splitting arrangements, or other unearned remuneration.” The Tennessee attorney general opined that this “anti-kickback” provision prohibits any explicit or implicit financial incentive to solicit a contract to perform medical laboratory examinations of specimens. Thus, even the implication of an offer by a medical laboratory of a rebate, fee-splitting inducement, fee-splitting arrangement, or “other unearned remuneration” to a person submitting specimens is prohibited. Accordingly, the Tennessee attorney general ruled that a licensed medical laboratory is prohibited from making any monetary donation to a physician to cover the cost of software designed to manage the physician’s EHRs when the physician’s office that receives the donation either continues an existing referral arrangement with the donating laboratory or subsequently initiates an arrangement for referral of specimens to the donating laboratory for analysis. Washington On Nov. 20, 2012, the Washington attorney general issued a similar opinion restricting many if not most EHR donations in Washington. Specifically, the Washington attorney general ruled that a donation by a laboratory to a referring physician of 85 percent of the software cost of the physician’s EHR, when the physician either has a continued referral arrangement with the laboratory or subsequently initiates a referral relationship with the laboratory, violates Section 19.68.010 of the Washington Anti-Rebate Statute (RCW 19.68.010). This state law generally makes it unlawful to request, receive, or allow, directly or indirectly, a rebate, refund, commission, unearned discount, or profit by means of a credit or other valuable consideration in connection with the referral of patients. West Virginia On July 9, 2012, the West Virginia Board of Medicine issued a similar opinion. Specifically, the West Virginia Board of Medicine stated that if a physician receives a monetary donation to cover 85 percent of the cost of the physician’s EHR when the recipient physician either continues a referral arrangement with the laboratory, or subsequently initiates an arrangement for the referral of specimens to the donating laboratory for analysis, these actions would be in violation of West Virginia Code 30-3-14(c)(6). This West Virginia law defines the grounds for professional discipline of physicians and podiatrists, and these grounds include requesting, receiving, or paying directly or indirectly a payment, rebate, refund, commission, credit, or other form of profit or valuable consideration for the referral of patients to any person or entity in connection with providing medical or other health care services or clinical laboratory services, supplies of any kind, drugs, medication or any other medical goods, services, or devices used in connection with medical or other health care services. Pennsylvania On Aug. 18, 2011, the Pennsylvania Department of Health issued an opinion regarding the application of Section 5.71 of the Pennsylvania Administrative Code to the donation of EHR software costs by a laboratory to a physician who refers specimens to that laboratory. Section 5.71 states that “No employee or representative of a laboratory, either personally or through an agent, may solicit referral of specimens to his or any other laboratory in a manner which offers or implies an offer of rebates to persons submitting specimens or other feesplitting inducements. . . . No person involved in the submission of specimens may receive payment or other inducement by the laboratory or its representative.” The department determined that this state law could be violated if the donation in question is made by the laboratory to the physician in order for the laboratory to obtain more business from the physician in question. If the donation is made without this expectation, real or implied, then the prohibition contained in Section 5.71 does not apply. If, however, the donation is made with the explicit or implicit expectation or understanding of increased referrals, the donation could be a violation of Section 5.71. The department warned that if the Bureau of Laboratories discovers an increase in specimen referrals between the physician recipient and the donating laboratory and it appears that the increase is a result of the donation made by the clinical laboratory, then Section 5.71 would be implicated and the department would take appropriate action. Missouri On June 14, 2011, the Missouri attorney general issued an opinion finding that a laboratory’s donation of 85 percent of the costs of a physician’s EHR software costs, when afterward the physician either initiates or increases the referral of certain work to that laboratory, constitutes a kickback in violation of Missouri Revised Statutes Section 191.905. This state statute states in relevant part:

• 2. No person shall knowingly solicit or receive any remuneration, including any kickback, bribe, or rebate, directly or indirectly, overtly or covertly, in cash or in kind in return for:

• (1) Referring another person to a health care provider for the furnishing or arranging for the furnishing of any health care; or

• (2) Purchasing, leasing, ordering or arranging for or recommending purchasing, leasing or ordering any health care.

3. No person shall knowingly offer or pay any remuneration, including any kickback, bribe, or rebate, directly or indirectly, overtly or covertly, in cash or in kind, to any person to induce such person to refer another person to a health care provider for the furnishing or arranging for the furnishing of any health care.

New Jersey On July 19, 2010, the New Jersey Department of Health and Senior Services issued a new regulation, N.J.A.C. 8:44-2.14(a)(5), which states, “A clinical laboratory that operates a collection station in a physician’s office, also known as in-office phlebotomy, shall be limited to collecting specimens from patients of the medical practice in which the collection station is located, and shall comply with the following provisions: Except as necessary for the reporting of test results, the laboratory shall not provide office supplies, equipment, waste disposal services, test kits for the physician’s own use, electronic medical records systems or other goods or services to the physician.” On March 16, 2011, the director of the Clinical Laboratory Improvement Service issued guidance stating that the rule does not prohibit all EHR donations but only those under certain circumstances. The operation of an on-site histologic processing facility at a physician’s offices does not preclude the laboratory from donating an EHR system when the laboratory does not operate a collection station in the physician office and the donation complies with the federal safe harbor. A laboratory with no referral arrangement with a physician can donate an EHR system, assuming the donation is also in compliance with the federal safe harbor. However, if such donation is determined to be contingent upon the referral of specimens as evidenced by a significant shift in prior referral patterns, the laboratory may be determined to be in violation of N.J.S.A. 45:9-42.42. If a laboratory donates an EHR system to a physician office with which the laboratory has a referral arrangement and the physician’s laboratory referral pattern shifts significantly in favor of the donating laboratory, the department would consider the donation an incentive to the physician to refer specimens in violation of N.J.S.A. 45:9-42.42 unless the shift can be demonstrated to be beyond the control of the physician. New York On Sept. 27, 2010, the New York Department of Health issued a mandate prohibiting the donation of EHR systems to physician referral sources. In an open letter to laboratory owners and operators, the department provided guidance regarding the parameters under which laboratories are permitted to provide software and hardware to physicians in order to facilitate test ordering and the transfer and storage of laboratory-generated data. Specifically, laboratories are permitted to:

1. Interface their laboratory information system to the client’s existing EHR to enable seamless laboratory test ordering and laboratory test reporting, and facilitate other laboratory-related functions (see item 2 below), and may assume, as a cost of doing business, the cost of such a limited interface;
2. Provide to a practitioner computer hardware, software, and information technology training and supplies that are restricted to laboratory-related functions that enable the practitioner to (i) order tests from the laboratory, including access to a directory of services (i.e., specimen type, collection container, and test information); (ii) receive, access, print, and store test results received from the laboratory, including storing cumulative results for individual patients; (iii) transmit data necessary for the laboratory to prepare requisitions and generate bills, invoices, or claims for reimbursement; and (iv) transfer laboratory data received from the laboratory to any computer system maintained by the practitioner;
3. Provide computer hardware and software as noted above that also contains functionality that permits a practitioner to make referrals to other laboratories and/or provides access to other laboratories’ Internet portals; and
4. Provide to a regional health information organization (RHIO) or health information exchange (HIE) computer equipment and supplies, information technology, and software in accordance with the requirements in bullet 2 above. Laboratories may not contribute to the RHIO’s or HIE’s acquisition costs for EHR components, including software interfaces, or a practitioner’s costs of participation unless in accordance with the requirements in bullet 2 above.

Anti-Kickback Safe Harbor and Stark Exception For those laboratories that wish to consider a donation before the expiration of the anti-kickback safe harbor and Stark exception for EHR donations, here are some important considerations to keep in mind: What can be donated? The donation must consist of interoperable EHR software and the directly related technical and training services that are necessary and used predominantly to receive, transmit, and maintain electronic health records of the medical practice’s or physician’s patients. Hardware, such as computers and routers, are not allowable donations. An EHR system is broadly defined as “a repository of consumer health status information in computer processable form used for clinical diagnosis and treatment for a broad array of clinical conditions.” Any donation of EHR software must be capable of electronic prescribing, either through an e-prescribing component or module or through the ability to integrate with a physician’s existing e-prescribing system. Interoperability is specifically defined as “the ability [of the EHR software] to communicate and exchange data accurately, effectively, securely and consistently with different information technology systems, software applications, and networks, in various settings, and exchange data such that the clinical or operational purpose of the data are preserved and unaltered.” Software may be deemed interoperable if a certifying body recognized by the secretary of the Department of Health and Human Services has certified the software no more than 12 months prior to the date it is provided to the physician, such as the Certification Commission for Health Information Technology (www.cchit.org). Further, the donated systems may not include software that is used primarily for personal or business unrelated to the physician’s medical practice, e.g., scheduling, billing, or claims software packages that do not have EHR components. Staffing of physicians’ offices cannot be included in the donation. A donation is not permitted if the prospective recipient already possesses equivalent technology, which means that a physician who already has an EHR system cannot later ask a laboratory to make a donation toward the system. What are the criteria that may be used to select recipients? Donors of EHRs may not take into account, directly or indirectly, the volume or value of physician referrals or other business generated between the parties when determining which physicians are eligible to receive donated items and services, or the nature of those items and services. Donations cannot be conditioned upon the commencement or continuation of referrals from the recipient. There are a number of criteria that are deemed to meet these requirements:

• The total number of prescriptions written by the physician (but not the total number of laboratory or pathology services ordered by the physician);
• The size of the physician’s medical practice, e.g., total number of patients, encounters, or relative value units;
• The physician’s overall use of automated information technology in his or her medical practice;
• The total number of hours the physician practices medicine or surgery;
• Whether the physician is a member of the donor’s medical staff; and
• The level of uncompensated care provided by the physician.

What arrangements or agreements need to be made between donor and recipient? The arrangement must be set forth in a written agreement that specifies in detail the items and services that are being donated and the donor’s costs, and that covers all of the items and services that are to be provided by the donor. Before the physician receives the donated items, the physician must pay 15 percent of the cost of the EHR costs that are eligible for donation. The donor is prohibited from financing the physician’s portion of the costs. Conclusion If a donation is made that does not comply fully with the applicable Stark exception and anti-kickback safe harbor, as well as any applicable state laws, both the recipient and the donor, including individuals who are involved in the donation negotiations, could be subject to civil and criminal penalties under these fraud and abuse laws. These penalties can include civil monetary fines, exclusion from the Medicare and Medicaid programs, and up to five years in prison. The physicians could also be at risk of discipline by their state medical boards. As a result, compliance is critical. Jenny McGovern, Esq., can be reached at 312-642-6151, jmcgovern@mcdonaldhopkins.com. Jane Pine Wood can be reached at 508-385-5227,jwood@mcdonaldhopkins.com. 

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