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Newly Issued Final Rules under Stark and Anti-kickback Laws Permit Furnishing of Electronic Prescribing and Electronic Health Records Technology

August 04, 2006

On August 1, 2006, the Centers for Medicare and Medicaid Services (CMS) and the Office of the Inspector General (OIG) of the U.S. Department of Health and Human Services (HHS) announced final rules under the Stark and Anti-kickback laws for the furnishing of electronic prescribing and electronic health records (EHR) technology at nominal cost. The final rules are intended to improve patient safety, quality of care, and efficiency in the delivery of care by encouraging the use of electronic prescribing and EHR technology. Both rules will be effective 60 days after publication in the Federal Register, which is scheduled for Aug. 8, 2006.

Background
The Stark law prohibits physicians from making referrals to entities with whom they have financial relationships for the furnishing of designated health services payable under Medicare, unless an exception applies. The Stark law further prohibits the entity from submitting claims to Medicare as a result of the prohibited referral. The Anti-kickback law prohibits the giving, receiving, offering or soliciting of any remuneration, direct or indirect, to induce referrals for services or items reimbursed by Medicare, Medicaid or other federal health care programs.

In 2003, the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) established a prescription drug benefit in the Medicare program, Medicare Part D. As part of the new benefit, Congress mandated the creation of standards for electronic prescribing. Because the provision of technology items and services at little or no cost may create a financial relationship under Stark or constitute remuneration under Anti-kickback laws, the MMA also mandated an exception and safe harbor for arrangements involving the furnishing of electronic prescribing technology and services.

The Exceptions and Safe Harbors
The CMS rule creates two new exceptions under the Stark law, one for the furnishing of electronic prescribing technology and the other for the furnishing of EHR technology. The OIG rule establishes two similar safe harbors under the Antikickback law.

Electronic Prescribing -
The exception and safe harbor for electronic prescribing technology protects the furnishing of hardware, software or information technology and training services that are necessary and used solely to receive and transmit electronic prescription information. In addition, the items or services must be provided as part of, or used to access, an electronic prescription drug program that meets the applicable standards under Medicare Part D.

Under the Stark law, the exception protects the furnishing of electronic prescribing technology items or services by specific entities to referring physicians, such as by a hospital to a physician who is a member of the hospital’s medical staff. Consistent with the statutory differences between the Stark and Anti-kickback laws, the safe harbor protects the furnishing of electronic prescribing technology items or services to a broader range of health care providers, including hospitals, physician group practices, prescription drug plan sponsors and Medicare Advantage organizations.

Importantly, arrangements involving the furnishing of electronic prescribing technology items or services must be set forth in writing and signed by the parties.

Electronic Health Records (EHR) -
The exception and safe harbor for EHR technology protects the furnishing of EHR software or information technology and training services that are necessary and used predominantly to create, maintain, transmit or receive EHR.

Among other requirements, the EHR must contain an electronic prescribing capability that meets the applicable standards established under Medicare Part D. In addition, the exception and safe harbor contain a cost-sharing component – the recipient must pay 15% of the donor’s cost for the EHR technology items and services.

To qualify for the exception and safe harbor, the software must also be “interoperable” at the time it is provided. Under the final rules, the term “interoperable” is defined as being able 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 and meaning of the data are preserved and unaltered.” Alternatively, software will be deemed “interoperable” if a certifying body recognized by HHS has certified the software no more than 12 months prior to the date it is furnished. On Aug. 4, 2006, HHS announced that it has recognized the Certification Commission for Healthcare Information Technology (CCHIT) as a certifying body. To qualify for certification by CCHIT, and be deemed “interoperable” for purposes of the exceptions and safe harbors, the software must meet specific standards in four areas: functionality, interoperability, security and reliability. The standards for each area are available at http://www.hhs.gov/healthit/documents/AEHRRecognizedCertCriteria.pdf.

Like the exception and safe harbor for electronic prescribing technology, arrangements involving the furnishing of EHR technology must be set forth in writing and signed by the parties.

Consistent with President Bush’s goal of adopting EHR technology by 2014, the exception and safe harbor protecting the furnishing of EHR technology will sunset on December 31, 2013.

Conclusion
While the new exceptions and safe harbors create new opportunities for furnishing certain technology items or services to physicians and other health care providers, such opportunities are not without limitation. For example, the exception for electronic prescribing technology under the Stark law does not permit hospitals to furnish technology items or services to entire physician groups, unless each member of the group is on the medical staff of the hospital. In addition, the exception and safe harbor for EHR technology do not protect the furnishing of hardware. Finally, the exceptions and safe harbors prohibit the furnishing of technology items or services based on the “volume or value of referrals,” thereby limiting a health care provider’s ability to furnish items and services based on certain business considerations, such as a minimum number of shared patients.

For these reasons, arrangements involving the furnishing of technology items or services should be carefully structured to comply with the new rules. If you would like assistance in developing an arrangement or setting forth an arrangement in writing, please contact Choua L. Vang (920-831-6351 or, cvang@gklaw.com) or any member of the Godfrey & Kahn Health Care Team.

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