Electronic Health Records Donation – Final Rules Issued by Centers for Medicare & Medicaid Services and Office of Inspector General

By and
January 2, 2014

Just before the current rule was due to expire, the Centers for Medicare & Medicaid Services (CMS) on December 27, 2013 released final regulations on donation of electronic health record software. The existing rule, which was set to expire on December 31, 2013, allowed hospitals and other providers of Stark Law “designated health services” to make donations of electronic health records software that meets certain requirements, to physicians and physician groups. A parallel rule was released by the Office of Inspector General (OIG) addressing the Anti-Kickback issues presented by donation arrangements.

Since 2006, there has been an exception to the Stark Law protecting certain arrangements involving interoperable electronic health records software or information technology and training services (the “Donation Exception”). The Donation Exception provides an exception from the physician self referral laws for certain arrangements involving interoperable electronic health records software or information technology and training services. Absent such an exception, the value of qualifying technology donated by a hospital or other provider of “designated health services” would create a compensation arrangement that would trigger a violation of the Stark Law.

The Donation Exception final rule adopts most of the changes that were proposed in draft rules released in April 2013. For example, the rule extends the expiration date of the EHR donation exception from December 31, 2013 to December 31, 2021. The final rule also removes the previous requirement that qualifying software contain electronic prescribing capacity. In response to commenters on the April 2013 proposed regulations, clinical laboratory companies are now excluded from the ability to offer EHR donations under the Donation Exception. Lastly, the final rule also clarifies some issues regarding restrictions on the use, compatibility, and/or interoperability of donated items.
The following summarizes the primary changes that were made in the final regulations:

Extension of the Stark Law Exception
The Stark Law exception was scheduled to expire on December 31, 2013. As a result of the built in expiration date, most donation agreements were set to expire at the end of 2013. The exception has now been extended through December 31, 2021; a change that was expected based on the previous draft released April 2013.

Clarification of Interoperability and Certification Requirements
In order to qualify for the Donation Exception, the applicable software must be certified as being “interoperable.” The previous exception left some ambiguity regarding the relationship between the cycle upon which the software receives certification and the date the software is provided to the physician. The final regulations clarify that the appropriate inquiry is whether the software is as interoperable as feasible given the prevailing state of technology at the time items or services are provided to the physician recipient. This change was expected based on the previously released proposed regulations and changes in certification cycles that took place since the rules were first adopted in 2006.

Exclusion of Clinical Laboratories
The original Donation Exception promulgated in 2006 permitted any designated health service provider to offer an electronic health records donation program. This included hospitals, durable medical equipment providers, clinical laboratories, and providers of all other goods and services categorized as “designated health services” under the Stark Law. The final regulations exclude clinical laboratory companies as approved providers of electronic health record donations beginning March 27, 2014.

Through the years, the OIG has expressed concerns about the potential for abuse of the exception by certain types of providers and suppliers, such as laboratories and other ancillary service providers to abuse the Donation Exception and comparable Anti-Kickback Statute provisions. CMS’ proposed rule revision in April of 2013 sought input from the provider community regarding possible exclusion of certain types of providers from being able to take advantage of the Stark Law s Donation Exception.

CMS received responses that indicated potential for fraud relating to donations of electronic health records items and services by laboratory companies. Some of these comments strongly urged the elimination of protection for donations made by clinical laboratories. Based on these comments, CMS concluded that donations of electronic health records items and services by laboratory companies present a high risk of fraud and abuse. To that end, the final regulations exclude laboratory companies from the types of entities that may donate electronic health records items and services under the Donation Exception.

CMS did not exclude durable medical equipment providers or any other providers of the Stark Law “designated health services” from being able to offer qualifying electronic health information donations under the Donation Exception. CMS based its decision not to exclude other types of providers on the failure of industry comments to provide specific examples of abusive practices involving donation programs offered by these providers. CMS stressed that it is the behavior of laboratory companies and physician recipients of donations from laboratory companies that caused CMS to exclude clinical laboratory companies as possible donors.

CMS does not preclude the possibility that it might consider excluding other provider types in the future based on specific examples of abuse. Rather, CMS indicates that it would be premature to exclude potential donors when CMS has not heard of specific concerns about categories of donors or types of donation arrangements other than clinical laboratory providers.

Electronic Prescribing Capabilities
The original electronic health records Donation Exception required donated software to include an electronic prescribing capability, either through an electronic prescribing component or the ability to interface with the physician’s existing electronic prescribing system. The requirement in the original rules was symbolic of the government’s view that electronic prescribing was of critical importance.

The electronic prescribing requirement for donated information systems has been removed from the newly issued regulations. Deleting the electronic prescribing requirement is reflective of the fact that other incentives have solidified electronic prescribing as a standard part of information systems. As such, CMS’ view is that the requirement is no longer a necessary condition for receiving the benefit of the electronic health record donation exception.

Data Lock-In Arrangements
CMS addressed concerns regarding potential data lock-in arrangements. One possible “data lock-in” arrangement addressed by CMS involves donors charging fees to providers to permit them to interface with the donated software. As a practical matter, this type of arrangement defeats the “interoperability” requirements under the donation rules.

Additionally, data-lock situations can occur when external software has difficulty accessing data in the donated system or there is difficulty populating external software with data from the donated system. The limited accessibility of the data makes it harder for the physician recipient to access and use it for clinical purposes and makes it more likely that a physician will only use the donor’s service to assure data accessibility.

CMS failed to create any specific additional requirements to address potential data-lock situations. CMS points out that any arrangement that creating limited or restricted interoperability due to action taken by the donor would fail to satisfy the donation rules. Apparently, CMS felt that existing regulatory requirements adequately prohibit possible data-lock situations.

Based on the revised rule, donors are now permitted to extend donation agreements through the end of 2021. Clinical laboratory companies have until March 27, 2014 to discontinue their donation arrangements. This gives physicians who have existing donation relationships with clinical laboratory companies a limited window to secure an alternative donation arrangement. While this summarizes the main changes, anyone involved in donation programs should review the regulatory comments to gain a better understanding of donation program aspects causing regulatory concerns.
If you have questions regarding this article, please contact one of the authors, John Fisher, Mary Ellen Schill, or Mark Munson.

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