[Federal Register Volume 78, Number 249 (Friday, December 27, 2013)]
[Rules and Regulations]
[Pages 78751-78769]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-30923]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 411

[CMS-1454-F]
RIN 0938-AR70


Medicare Program; Physicians' Referrals to Health Care Entities 
With Which They Have Financial Relationships: Exception for Certain 
Electronic Health Records Arrangements

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule revises the exception to the physician self-
referral law that permits certain arrangements involving the donation 
of electronic health records items and services. Specifically, this 
final rule extends the expiration date of the exception to December 31, 
2021, excludes laboratory companies from the types of entities that may 
donate electronic health records items and services, updates the 
provision under which electronic health records software is deemed 
interoperable, removes the electronic prescribing capability 
requirement, and clarifies the requirement prohibiting any action that 
limits or restricts the use, compatibility, or interoperability of 
donated items or services.

DATES: With the exception of the amendment to Sec.  411.357(w)(13), 
this regulation is effective on March 27, 2014. The amendment to Sec.  
411.357(w)(13) is effective on December 31, 2013.

FOR FURTHER INFORMATION CONTACT: Lisa Ohrin, (410) 786-8852.

SUPPLEMENTARY INFORMATION: 

I. Executive Summary

A. Purpose of the Regulatory Action

    Section 1877 of the Social Security Act (the Act), codified at 42 
U.S.C. 1395nn, also known as the physician self-referral statute: (1) 
prohibits a physician from making referrals for certain designated 
health services (DHS) payable by Medicare to an entity with which he or 
she (or an immediate family member) has a financial relationship 
(ownership interest or compensation arrangement), unless the 
requirements of an exception are satisfied; and (2) prohibits the 
entity from submitting claims to Medicare for those referred services, 
unless the requirements of an

[[Page 78752]]

exception are satisfied. The statute establishes a number of exceptions 
and grants the Secretary the authority to create additional regulatory 
exceptions for financial relationships that do not pose a risk of 
program or patient abuse. Since the original enactment of the statute 
in 1989, we have published a series of final rules interpreting the 
statute and promulgating numerous exceptions.
    In accordance with our statutory authority, we published an 
exception to the physician self-referral law to protect certain 
arrangements involving the provision of interoperable electronic health 
records software or information technology and training services. The 
final rule for this exception was published on August 8, 2006 (71 FR 
45140) (hereinafter referred to as the August 2006 final rule) and is 
scheduled to expire on December 31, 2013 (see 42 CFR 411.357(w)(13)). 
In the April 10, 2013 Federal Register (78 FR 21308), we published a 
proposed rule that would update certain aspects of the electronic 
health records exception and extend the expiration date of the 
exception. The purpose of this final rule is to address the public 
comments received on the proposed rule and to finalize certain aspects 
of the proposed rule.

B. Summary of the Final Rule

    This final rule amends the current exception in several ways. 
First, this final rule extends the expiration date of the exception to 
December 31, 2021. Second, it excludes laboratory companies from the 
types of entities that may donate electronic health records items and 
services. Third, this rule updates the provision under which electronic 
health records software is deemed interoperable. Fourth, this rule 
clarifies the requirement at Sec.  411.357(w)(3) prohibiting any action 
that limits or restricts the use, compatibility, or interoperability of 
donated items or services. Finally, it removes from the exception the 
requirement related to electronic prescribing capability.

C. Costs and Benefits

    This final rule modifies an existing exception to the physician 
self-referral law. The exception permits certain entities to provide to 
physicians certain software and information technology and training and 
services necessary and used predominantly to create, maintain, 
transmit, or receive electronic health records. The modifications to 
the exception do not impose new requirements on any party. This is not 
a major rule, as defined at 5 U.S.C. 804(2). It is also not 
economically significant, because it will not have a significant effect 
on program expenditures and there are no additional substantive costs 
to implement the resulting provisions. We expect the exception, as 
modified by this final rule, to continue to facilitate the adoption of 
electronic health records technology.

II. Background

A. Physician Self-Referral Statute and Exceptions

    Section 1877 of the Act, codified at 42 U.S.C. 1395nn, also known 
as the physician self-referral statute: (1) prohibits a physician from 
making referrals for certain DHS payable by Medicare to an entity with 
which he or she (or an immediate family member) has a financial 
relationship (ownership interest or compensation arrangement), unless 
the requirements of an exception are satisfied; and (2) prohibits the 
entity from submitting claims to Medicare for those referred services, 
unless the requirements of an exception are satisfied. The statute at 
42 U.S.C. 1395nn(b)(4) establishes a number of exceptions and grants 
the Secretary the authority to create additional regulatory exceptions 
for financial relationships that do not pose a risk of program or 
patient abuse. Since the original enactment of the statute in 1989, we 
have published a series of final rules interpreting the statute and 
promulgating numerous exceptions.

B. The Electronic Health Records Items and Services Exception

    On August 8, 2006 (71 FR 45140), we published a final rule that, 
among other things, finalized at Sec.  411.357(w) an exception to the 
physician self-referral law for protecting certain arrangements 
involving interoperable electronic health records software or 
information technology and training services (the ``electronic health 
records exception''). Also in the August 8, 2006 Federal Register (71 
FR 45110), the Department of Health and Human Services' (HHS) Office of 
Inspector General (OIG) published similar final regulations at Sec.  
1001.952 that, among other things, adopted a safe harbor under the 
Federal anti-kickback statute (section 1128B(b) of the Act, codified at 
42 U.S.C. 1320a-7b(b)) for certain arrangements involving interoperable 
electronic health records software or information technology and 
training services. As set forth at Sec.  411.357(w)(13) and Sec.  
1001.952(y)(13), the physician self-referral law electronic health 
records exception and the Federal anti-kickback electronic health 
records safe harbor, respectively, are scheduled to expire on December 
31, 2013.
    On April 10, 2013 (78 FR 21308), we published a proposed rule that 
would set forth certain proposed changes to the electronic health 
records exception. First, we proposed to update the provision under 
which electronic health records software is deemed interoperable. 
Second, we proposed to remove from the exception the requirement 
related to electronic prescribing capability. Third, we proposed to 
extend the expiration date of the exception. In addition to these 
proposals, we solicited public comment on other possible amendments to 
the exception, including our proposal to limit the types of entities 
that may donate electronic health records items and services under the 
exception and to add or modify conditions to limit the risk of data and 
referral lock-in. Elsewhere in the same issue of the Federal Register 
(78 FR 21314), OIG proposed almost identical changes to the Federal 
anti-kickback statute safe harbor. Within the limitations imposed by 
the differences in the respective underlying statutes, we attempted to 
ensure as much consistency as possible between our proposed 
modifications to the exception at Sec.  411.357(w) and OIG's proposed 
modifications to the safe harbor. We noted in the proposed rule that, 
due to the close nexus between our proposed rule and the OIG's proposed 
rule, we might consider comments submitted in response to OIG's 
proposal in finalizing this rule.
    This final rule adopts some of the proposed changes to the 
electronic health records exception to the physician self-referral law. 
First, this final rule extends the expiration date of the exception to 
December 31, 2021. Second, it excludes laboratory companies from the 
types of entities that may donate electronic health records items and 
services under the exception. Third, this rule updates the provision 
under which electronic health records software is deemed interoperable. 
Fourth, this rule clarifies the requirement at Sec.  411.357(w)(3) 
prohibiting any action that limits or restricts the use, compatibility, 
or interoperability of donated items or services. Finally, it removes 
from the exception the requirement related to electronic prescribing 
capability.
    Elsewhere in this issue of the Federal Register, the OIG is 
finalizing almost identical changes to the electronic health records 
safe harbor \1\ under the Federal anti-kickback statute. We attempted 
to ensure as much

[[Page 78753]]

consistency as possible between our changes to the physician self-
referral law exception and OIG's safe harbor changes. We have 
considered and responded to the timely comments we received as well as 
those received by OIG. Similarly, OIG considered comments submitted in 
response to our proposed rule in crafting its final rule. For purposes 
of this final rule, we treat comments that were made with respect to 
the Federal anti-kickback statute as if they had been made with respect 
to the physician self-referral law, except where they relate to 
differences in the underlying statutes.
---------------------------------------------------------------------------

    \1\ 42 CFR 1001.952(y).
---------------------------------------------------------------------------

III. Provisions of the Proposed Regulations and Analysis of and 
Responses to Public Comments

    We received approximately 110 timely items of correspondence for 
the proposed rule. We summarize and respond to comments later in this 
section of the final rule. For ease of reference, we divided the 
comments and responses into the following categories: the deeming 
provision; the electronic prescribing provision; the ``sunset'' 
provision; and additional proposals and considerations.

A. The Deeming Provision

    Our current electronic health records exception requires at Sec.  
411.357(w)(2) that the donated software must be ``interoperable'' (as 
defined at Sec.  411.351) at the time it is provided to the physician. 
This provision further provides that software is deemed to be 
interoperable if a certifying body recognized by the Secretary has 
certified the software no more than 12 months prior to the date it is 
provided to the physician. We proposed two modifications to Sec.  
411.357(w)(2), which is known as the ``deeming provision.'' Both 
modifications to the deeming provision were proposed to reflect recent 
developments in the Office of the National Coordinator for Health 
Information Technology's (ONC) certification program.
    The first proposed modification would reflect ONC's responsibility 
for authorizing certifying bodies. The second would modify the 
timeframe during which donated software must be certified. Currently, 
to comply with the deeming provision, the exception requires donated 
software to be certified no more than 12 months prior to the date of 
donation.
    After the issuance of the August 2006 final rule, ONC developed a 
regulatory process for adopting certification criteria and standards 
which is anticipated to result in a cyclical rulemaking process. (For 
more information, see ONC's September 4, 2012 final rule entitled 
``Health Information Technology: Standards, Implementation 
Specifications, and Certification Criteria for Electronic Health Record 
Technology, 2014 Edition; Revisions to the Permanent Certification 
Program for Health Information Technology'' (77 FR 54163).) Our 
proposal would have modified the deeming provision to track ONC's 
anticipated regulatory cycle. As a result, software would be eligible 
for deeming if, on the date it is provided to the physician, it has 
been certified to any edition of the electronic health record 
certification criteria that is identified in the then-applicable 
definition of Certified EHR Technology in 45 CFR part 170. By way of 
example, for 2013, the applicable definition of Certified EHR 
Technology includes both the 2011 and the 2014 editions of the 
electronic health record certification criteria. Therefore, in 2013, 
software certified to meet either the 2011 edition or the 2014 edition 
would have satisfied the requirement of the exception as we proposed to 
modify it. Additionally, we solicited comments on whether removing the 
current 12-month certification requirement would impact donations and 
whether we should retain the 12-month certification period as an 
additional means of determining eligibility under the deeming 
provision.
    After consideration of the public comments received, we are 
finalizing the proposed revisions to Sec.  411.357(w)(2) with one 
clarification to our proposed regulatory text to ensure that the 
deeming provision closely tracks ONC's certification program. We are 
revising Sec.  411.357(w)(2) to state that software is deemed to be 
interoperable if, on the date that it is provided to the physician, it 
has been certified by a certifying body authorized by the National 
Coordinator for Health Information Technology to an edition of the 
electronic health record certification criteria identified in the then-
applicable 45 CFR part 170. As we stated in the August 2006 final rule 
(71 FR 45156), we understand ``that the ability of software to be 
interoperable is evolving as technology develops. In assessing whether 
software is interoperable, we believe the appropriate inquiry is 
whether the software is as interoperable as feasible given the 
prevailing state of technology at the time the items or services are 
provided to the physician recipient.'' We believe that our final rule 
with respect to this requirement is consistent with that understanding 
and our objective of ensuring that software is certified to the current 
required standard of interoperability when it is donated.
    Comment: All of the commenters that addressed this issue in their 
comments supported the proposed modification that would amend the 
exception to recognize ONC as the agency responsible for authorizing 
certifying bodies on behalf of the Secretary, with one commenter 
requesting that we clarify that software need not be certified to ONC's 
standards to be eligible for donation.
    Response: We appreciate the commenters' support for this 
modification. With respect to the request for clarification, the 
commenter is correct that Sec.  411.357(w)(2) does not require software 
to be certified to ONC's standards in order to be eligible for 
donation. As we discussed in the August 2006 final rule (71 FR 45156), 
the deeming provision offers one way for parties to be certain that the 
interoperability requirement of Sec.  411.357(w)(2) is met at the time 
of donation. Even if donated software is not deemed to be 
interoperable, the arrangement would satisfy the interoperability 
requirement of the exception if the software meets the definition of 
``interoperable'' at Sec.  411.351.
    Comment: One commenter expressed concerns about linking the 
interoperability requirement of the exception to ONC's certification 
criteria and standards because they do not, in the commenter's 
assessment, reflect contemporary views of interoperability. The 
commenter suggested that we instead implement a broad definition of 
interoperability adopted by the International Organization for 
Standardization or, alternatively, that we adopt interoperability 
functional definitions developed by the American National Standards 
Institute.
    Response: Although we are mindful that other non-governmental 
organizations may be developing their own standards to encourage the 
adoption of interoperable electronic health records technology, ONC's 
certification criteria and standards are the core policies the 
Department is utilizing to accelerate and advance interoperability and 
health information exchange. On March 7, 2013, ONC and CMS jointly 
published a Request for Information (78 FR 14793) to solicit public 
feedback on a set of possible policies ``that would encourage providers 
to routinely exchange health information through interoperable systems 
in support of care coordination across health care settings.'' The 
process by which ONC considers the implementation of new certification

[[Page 78754]]

criteria and standards is a public, transparent effort that allows the 
Department's electronic health records technology experts to consider 
appropriately the comments submitted in light of the goal ``to 
accelerate the existing progress and enhance a market environment that 
will accelerate [health information exchange] across providers. . . .'' 
(78 FR 14795).
    We believe that it is reasonable and appropriate to link the 
deeming provision to ONC's certification criteria and standards because 
of ONC's expertise and its public process for considering and 
implementing its criteria and standards. ONC is the agency within the 
Department with expertise in determining the relevant criteria and 
standards to ensure that software is as interoperable as feasible given 
the prevailing state of technology. ONC expects to revise and expand 
such criteria and standards incrementally over time to support greater 
interoperability of electronic health records technology. (See the 
September 4, 2012 final rule (77 FR 54269).) Additionally, we believe 
that utilizing ONC's certification criteria and standards, which are 
implemented through a public process, affords the best opportunity for 
interested parties to comment on, understand, and ultimately implement 
those criteria and standards. Therefore, we are not adopting the 
commenter's suggestion.
    Comment: One commenter stated that many electronic health records 
systems lack the capabilities to function within a patient-centered 
medical home. The commenter suggested that we finalize policies that 
further strengthen the use of core electronic health records features.
    Response: We are not adopting the commenter's suggestion. As 
discussed, ONC is the agency within the Department with expertise in 
determining the relevant criteria and standards for electronic health 
records technology, including those related to the use of core 
features. The public process through which ONC's certification criteria 
and standards are implemented affords the best opportunity for 
interested parties to comment on, understand, and ultimately implement 
those criteria and standards.
    Comment: Of the commenters that addressed the deeming provision, 
most supported our proposal to modify the timeframe within which 
donated software must have been certified to track more closely the 
current ONC certification program. Commenters asserted that aligning 
the exception's certification timeframe with ONC's certification 
program will provide donors and physician recipients more certainty 
about the deemed status of donated software because the software must 
be certified to meet only one set of standards on the same 
certification cycle to comply with both ONC's certification criteria 
and the deeming provision of the exception. One commenter supported the 
modification, but suggested that the 12-month certification timeframe 
also be retained or, alternatively, that we allow software to be deemed 
to be interoperable if it has been certified to any edition of ONC's 
electronic health record certification criteria.
    Response: We agree that aligning the exception's certification 
timeframe with ONC's certification program provides more certainty to 
donors and physician recipients. We believe that the modification we 
are making to the requirement at Sec.  411.357(w)(2) will support the 
dual goals of the deeming provision: (1) to ensure that donated 
software is as interoperable as feasible given the prevailing state of 
technology at the time it is provided to the physician recipient; and 
(2) to provide donors and physician recipients a means to have 
certainty that donated software satisfies the interoperability 
requirement of the exception.
    We are not persuaded to adopt the commenter's suggestion to retain 
the 12-month certification timeframe, as this would not ensure that 
software is certified to the current required standard of 
interoperability. In the course of evaluating the commenter's 
suggestion, however, we realized that our proposed regulatory text may 
be too narrow to satisfy the dual goals of the deeming provision. Under 
our proposed regulatory text, software would be deemed interoperable if 
it was certified to an edition \2\ of certification criteria referenced 
in the then-applicable definition of ``Certified EHR Technology'' at 45 
CFR 170.102. That definition applies only to the Medicare and Medicaid 
Electronic Health Record Incentive Programs (the EHR Incentive 
Programs). See generally, 42 CFR part 495. However, ONC also has the 
authority to adopt into its regulations in 45 CFR part 170 
certification criteria for health information technology, including 
electronic health records, that may not be referenced in the definition 
of ``Certified EHR Technology'' because they are not related to the EHR 
Incentive Programs. If we finalize the proposed regulatory text, 
software certified to criteria in editions not included in the 
definition ``Certified EHR Technology'' would not be eligible for 
deeming under the exception. Further, we have recently learned that ONC 
intends to retire outdated editions of certification criteria by 
removing them from the regulatory text in 45 CFR part 170. Accordingly, 
software certified to an edition identified in the regulations in 
effect on the date of the donation would be certified to a then-
applicable edition, regardless of whether the particular edition was 
also referenced in the then-applicable definition of Certified EHR 
Technology. Thus, we are finalizing revisions to Sec.  411.357(w)(2) to 
track more closely ONC's certification program in the deeming 
provision. We are finalizing a modification to our regulatory text to 
provide that software is deemed to be interoperable if, on the date it 
is provided to the physician recipient, it has been certified by a 
certifying body authorized by the National Coordinator for Health 
Information Technology to an edition of the electronic health record 
certification criteria identified in the then-applicable version of 45 
CFR part 170. We believe that this is consistent with our intent, as 
articulated in the proposed rule, to modify the deeming provision by 
removing the 12-month timeframe and substituting a provision that more 
closely tracks ONC's certification program. Further, we believe that 
the regulatory text, as modified, will support the goals of the deeming 
provision described previously.
---------------------------------------------------------------------------

    \2\ ONC has recently begun characterizing sets of adopted 
certification criteria as ``editions.''
---------------------------------------------------------------------------

    Comment: One commenter suggested that, for deeming purposes, we 
should require that software be certified to the latest edition of 
electronic health record certification criteria rather than any edition 
then applicable. This commenter also suggested that the electronic 
directory of service (e-DOS) standard should be a certification 
requirement for donated software, and asserted that both 
recommendations would help ensure electronic health records software is 
interoperable.
    Response: We decline to adopt the commenter's suggested 
requirements for the exception at Sec.  411.357(w). We believe that 
requiring donated software to be certified to editions that are adopted 
and not yet retired by ONC through its certification program ensures 
that the software is certified to interoperability standards updated 
regularly by the agency of the Department with the relevant expertise. 
Further, adding requirements to the ONC certification criteria and 
standards is outside the scope of this rulemaking. Therefore, we are 
not implementing the commenter's suggestions.

[[Page 78755]]

B. The Electronic Prescribing Provision

    At Sec.  411.357(w)(11), our current electronic health records 
exception specifies that the donated software must ``contain [] 
electronic prescribing capability, either through an electronic 
prescribing component or the ability to interface with the physician's 
existing electronic prescribing system that meets the applicable 
standards under Medicare Part D at the time the items and services are 
provided.'' In the preamble to the August 2006 final rule (71 FR 
45153), we stated that we included ``this requirement, in part, because 
of the critical importance of electronic prescribing in producing the 
overall benefits of health information technology, as evidenced by 
section 101 of the [Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA), Pub. L. 108-173].'' We also noted that 
it was ``our understanding that most electronic health records systems 
already include an electronic prescribing component'' (71 FR 45153).
    We continue to believe in the critical importance of electronic 
prescribing. However, in light of developments since the August 2006 
final rule, we proposed to delete from the exception the requirement at 
Sec.  411.357(w)(11). Based on our review of the public comments and 
for the reasons stated in the proposed rule, we are finalizing our 
proposal to eliminate the requirement that electronic health records 
software contain electronic prescribing capability in order to qualify 
for protection under the exception at Sec.  411.357(w).
    Comment: Two commenters disagreed that it is no longer necessary to 
require the inclusion of electronic prescribing capability in donated 
electronic health records software. One of the commenters stated that 
it was encouraged by the growth in the number of physicians using 
electronic prescribing between 2008 and 2012, but believed that the 
requirement should remain for patient safety reasons because electronic 
prescribing is critical to lowering the incidences of preventable 
medication errors.
    Response: Like the commenters, and as we stated in the proposed 
rule (78 FR 21311), we believe in the importance of electronic 
prescribing. However, we are persuaded that other existing policy 
drivers, many of which did not exist in August 2006 when the exception 
was promulgated, sufficiently support the adoption of electronic 
prescribing capabilities. We do not want to undermine important public 
policy goals by requiring redundant and sometimes expensive software 
capabilities that may not contribute to the interoperability of a given 
system. As we discussed in the proposed rule, electronic prescribing 
technology will remain eligible for donation under the electronic 
health records exception or under the electronic prescribing exception 
at Sec.  411.357(v). We do not believe that removing this requirement 
would increase the risk of fraud or abuse posed by donations made 
pursuant to the exception.
    Comment: Many commenters supported our proposal to eliminate the 
requirement that donated software must include electronic prescribing 
capability at the time it is provided to the physician recipient, 
agreeing that developments since the promulgation of the exception make 
it unnecessary to retain this requirement. One of the commenters 
asserted that the goal of the requirement for the inclusion of 
electronic prescribing technology in donated electronic health records 
software--that is, increasing the use of electronic prescribing--had 
been achieved through the electronic prescribing incentive program 
authorized by the Medicare Improvements for Patients and Providers Act 
of 2008.
    Response: We appreciate the commenters' support and, for the 
reasons explained in more detail previously in this final rule, we are 
eliminating the requirement at Sec.  411.357(w)(11) that donated 
electronic health records software must contain electronic prescribing 
capability, either through an electronic prescribing component or the 
ability to interface with the physician's existing electronic 
prescribing system that meets the applicable standards under Medicare 
Part D at the time the items and services are provided.

C. The ``Sunset'' Provision

    Protected donations under the current electronic health records 
exception must be made on or prior to December 31, 2013. In adopting 
this requirement of the electronic health records exception, we 
acknowledged in the August 2006 final rule (71 FR 45162), ``that the 
need for donations of electronic health records technology should 
diminish substantially over time as the use of such technology becomes 
a standard and expected part of medical practice.''
    As we discussed in the proposed rule, although the industry has 
made great progress in the adoption and meaningful use of electronic 
health records technology, the use of such technology has not yet been 
adopted nationwide. Continued use and further adoption of electronic 
health records technology remains an important goal of the Department. 
We continue to believe that, as progress on this goal is achieved, the 
need for an exception for donations of electronic health records items 
and services should continue to diminish over time. Accordingly, we 
proposed to extend the expiration date of the exception to December 31, 
2016, selecting this date for the reasons described in the proposed 
rule (78 FR 21311). We also specifically sought comment on whether we 
should, as an alternative, select a later expiration date and what that 
date should be. For example, we stated that we were considering an 
expiration date of December 31, 2021 (78 FR 21311). In response to 
comments, we are extending the expiration date of the exception to 
December 31, 2021.
    Comment: Numerous commenters urged us to make permanent the 
exception at Sec.  411.357(w). According to these commenters, a 
permanent exception could: (1) provide certainty with respect to the 
cost of electronic health records technology for physicians; (2) 
encourage adoption by physicians who are new entrants into medical 
practice or have postponed adoption based on financial concerns 
regarding the ongoing costs of maintaining and supporting an electronic 
health records system; (3) encourage adoption by providers and 
suppliers that are not eligible for incentive payments through the 
Medicare and Medicaid programs; and (4) preserve the gains already made 
in the adoption of interoperable electronic health records technology, 
especially where hospitals have invested in health information 
technology infrastructure through protected donations of such 
technology. According to some commenters, although the exception was 
implemented to encourage the adoption of health information technology, 
it is now a necessity for the creation of new health care delivery and 
payment models. Some commenters also stated their support for a 
permanent exception because the adoption of electronic health records 
technology has been slower than expected, and allowing the exception to 
expire in 2016 would adversely affect the rate of adoption. Some of 
these commenters requested that, if CMS is not inclined to make the 
exception permanent, we extend the availability of the exception 
through the latest date noted in the proposed rule--December 31, 2021.
    Response: We agree with the commenters that the continued 
availability of the exception at Sec.  411.357(w) plays a part in 
achieving

[[Page 78756]]

the Department's goal of promoting electronic health records technology 
adoption. However, we do not believe that making the exception 
permanent is required or appropriate at this time. The permanent 
availability of the exception could serve as a disincentive to adopting 
interoperable electronic health records technology in the near-term. 
Moreover, as described in the proposed rule (78 FR 21312) and elsewhere 
in this final rule, we are concerned about inappropriate donations of 
electronic health records items and services that lock in data and 
referrals between a donor and physician recipient, among other risks. A 
permanent exception might exacerbate these risks over the longer term 
without significantly improving adoption rates. However, in light of 
other modifications we are making in this final rule to mitigate such 
ongoing risks, including removing laboratory companies as protected 
donors of electronic health records items and services, we are 
persuaded to permit use of the exception for more than the additional 
3-year period that we proposed.
    The adoption of interoperable electronic health records technology 
still remains a challenge for some providers and suppliers despite 
progress in its implementation and meaningful use since the August 2006 
promulgation of the exception at Sec.  411.357(w). (See ONC's Report to 
Congress on Health IT Adoption (June 2013) at http://www.healthit.gov/sites/default/files/rtc_adoption_of_healthit_and_relatedefforts.pdf and the U.S. Department of Health and Human Services 
Assistant Secretary for Planning and Evaluation's EHR Payment 
Incentives for Providers Ineligible for Payment Incentives and Other 
Funding Study (June 2013) at http://aspe.hhs.gov/daltcp/reports/2013/ehrpi.shtml.) Although we believe that the protection afforded by the 
exception encourages the adoption of such technology, its permanence is 
not essential to the achievement of widespread adoption. It is only one 
of a number of ways that physicians are incented to adopt electronic 
health records technology, including the incentives offered by the EHR 
Incentive Programs and the movement in the health care industry toward 
the electronic exchange of patient health information as a means to 
improve patient care quality and outcomes.
    Balancing our desire to encourage further adoption of interoperable 
electronic health records technology against our concerns about 
potential disincentives to adoption and the misuse of the exception to 
lock in referral streams, we are establishing a December 31, 2021 
expiration date for the exception. We believe that this expiration date 
will support earlier adoption of electronic health records technology, 
provide a timeframe that aligns with the financial incentives for 
electronic health records adoption currently offered by the Federal 
government, and safeguard against foreseeable future fraud risks, while 
still providing adequate time for donors and physician recipients to 
maximize the financial incentives currently offered by the Federal 
government.
    Comment: Two commenters agreed that the availability of the 
exception at Sec.  411.357(w) should be extended, but not beyond 
December 31, 2016. One of these commenters asserted that a relatively 
short extension of the sunset date for the exception would allow a 
wider range of people to obtain access to health information technology 
services while not diminishing the incentive for providers to acquire, 
implement and standardize the necessary electronic health records 
systems. Another commenter supported our proposal to extend the 
availability of the exception through December 31, 2016, and encouraged 
us to consider an additional extension as that date approaches. One 
commenter suggested that we extend the availability of the exception 
for at least 6 years, although a shorter or longer time period could be 
established after review of adoption rates across the range of 
providers that may or may not be eligible for meaningful use incentives 
under the EHR Incentive Programs. Other commenters supported our 
alternative proposal to extend the availability of the exception 
through December 31, 2021, which corresponds to the statutory end of 
the Medicaid incentive program. These commenters noted that more 
remains to be done to promote electronic health records technology 
adoption, and suggested that maintaining the exception through this 
date will help maximize the incentives for eligible physicians to adopt 
electronic health records technology and thereby increase use of 
electronic health records. Two other commenters suggested tying the 
expiration of the exception to the corresponding date for assessing 
``penalties'' under the Medicare EHR Incentive Program in order to 
align appropriately Federal regulation of electronic health records 
technology adoption and use.
    Response: We share the commenter's concerns regarding diminishing 
incentives for providers to acquire, implement and standardize the 
necessary electronic health records systems. However, after 
consideration of all of the comments on this issue, we believe that an 
extension of the exception would advance the Department's goals 
regarding the adoption of interoperable electronic health records 
technology and improvements in patient care, while providing an 
incentive for providers to adopt electronic health records technology 
in the near-term. Therefore, we are extending the availability of the 
exception at Sec.  411.357(w) through December 31, 2021, which 
corresponds to the end of incentive payments under the Medicaid EHR 
Incentive Program.
    We note that the two commenters that suggested tying the expiration 
of the exception to the corresponding date for assessing penalties 
under the Medicare EHR Incentive Program appear to misunderstand the 
duration of the downward payment adjustments under this program, which 
will continue until an eligible participant adopts and meaningfully 
uses appropriate electronic health records technology. (For additional 
information, see the July 28, 2010 (75 FR 44448) final rule entitled 
``Medicare and Medicaid Programs; Electronic Health Record Incentive 
Program.'') The practical effect of the commenters' suggestion would be 
to extend permanently the exception at Sec.  411.357(w). For the 
reasons stated elsewhere in this final rule, we do not believe that 
making the exception permanent is required or appropriate at this time, 
and we are not adopting the commenters' suggestion.
    Comment: A few commenters expressed general support for extending 
the availability of the exception, but did not specify whether the 
extension should be for 3 years, 8 years, or some other length of time. 
Commenters noted that failure to extend the availability of the 
exception would negatively impact the adoption of electronic health 
records technology, as well as its continued use.
    Response: As described previously, we are finalizing our 
alternative proposal to extend the exception through December 31, 2021.
    Comment: A number of commenters urged us to let the exception at 
Sec.  411.357(w) expire on December 31, 2013. Some of the commenters 
asserted that the exception permits the exact behavior the law was 
intended to stop, namely, referrals tied to financial relationships 
between physicians and entities furnishing DHS, in this case, entities 
that donate electronic health records items and services. Other 
commenters asserted that the exception permits ``legalized extortion'' 
or provides ``legal sanction to trample the competition.'' Another 
commenter

[[Page 78757]]

asserted that the inclusion of ``non-market factors'' (that is, the 
influence of donors, rather than end users) in the decision to adopt 
electronic health records technology may result in lower quality 
products or services and/or higher costs, often with an adverse impact 
on technology adoption and innovation. Still others asserted that, 
given the financial incentives that the government itself has provided, 
it is no longer necessary to spur the adoption of electronic health 
records technology through the underwriting of the cost of electronic 
health records technology by outside entities.
    Response: Although we appreciate the commenters' concerns, we 
continue to believe that the exception serves to advance the adoption 
and use of interoperable electronic health records. However, we caution 
that a compensation arrangement involving the donation of electronic 
health records technology runs afoul of the physician self-referral law 
unless it satisfies each requirement of the exception at Sec.  
411.357(w). Arrangements that disguise the ``purchase'' or lock-in of 
referrals and donations that are solicited by the physician recipient 
in exchange for referrals would fail to satisfy the requirements of the 
exception. We disagree with the commenters that asserted that 
encouragement for the ``underwriting'' of electronic health records 
technology by organizations other than the government is no longer 
necessary, particularly in light of the developments in integrated 
patient care delivery and payment models.
    Comment: Numerous commenters suggested that the exception at Sec.  
411.357(w) should sunset as scheduled on December 31, 2013, but only 
with respect to laboratories and pathology practices, ``ancillary 
service providers,'' entities not listed in section 101 of the MMA 
(authorizing an exception for certain donations of electronic 
prescribing items and services), or entities that are not part of an 
accountable care organization or not integrated in a meaningful manner.
    Response: We consider these comments to be related to ``protected 
donors'' and address them in section III.D.1. of this final rule.

D. Additional Proposals and Considerations

1. Protected Donors
    As we discussed in the proposed rule, despite our goal of 
expediting the adoption of electronic health records technology, we 
have concerns about the potential for abuse of the exception by certain 
types of providers and suppliers (including suppliers of ancillary 
services that do not have a direct and primary patient care 
relationship and a central role in the health care delivery 
infrastructure). The OIG indicated that it has concerns related to the 
potential for laboratories and other ancillary service providers to 
abuse its safe harbor, as it has received comments suggesting that 
abusive donations are being made under the electronic health records 
safe harbor. In order to address these concerns, we proposed to limit 
the scope of protected donors under the electronic health records 
exception.
    In the proposed rule, we stated that we were considering revising 
the exception to cover only the MMA-mandated donors we originally 
proposed when the exception was first established: hospitals, group 
practices, prescription drug plan sponsors, and Medicare Advantage (MA) 
organizations. We stated that we were also considering whether other 
individuals or entities with front-line patient care responsibilities 
across health care settings, such as safety net providers, should be 
included, and, if so, which ones. Alternatively, we stated that we were 
considering retaining the current broad scope of protected donors, but 
excluding specific types of donors--suppliers of ancillary services 
associated with a high risk of fraud and abuse--because donations by 
such suppliers may be more likely to be motivated by a purpose of 
securing future business than by a purpose of better coordinating care 
for beneficiaries across health care settings. In particular, we 
discussed excluding laboratory companies from the scope of permissible 
donors, as their donations have been the subject of complaints. We also 
discussed excluding other high-risk categories of potential donors, 
such as durable medical equipment (DME) suppliers and independent home 
health agencies. We sought comment on the alternatives under 
consideration, including comments (with supporting reasons) regarding 
particular types of providers or suppliers that should or should not be 
permitted to utilize the exception given its goals.
    Many commenters raised concerns about donations of electronic 
health records items and services by laboratory companies and strongly 
urged us to adopt our proposal to eliminate protection for such 
donations, either by excluding laboratory companies from the scope of 
protected donors (if we extend the availability of the exception), or 
by letting the exception sunset altogether. (For more detailed 
discussion of comments concerning the sunset provision, see section 
III.C. of this final rule.) Other commenters raised similar concerns, 
but did not suggest a particular approach to address them.
    We carefully considered the comments that we received on this 
proposal and, based on the concerns articulated by commenters and the 
wide-ranging support from the entire spectrum of the laboratory 
industry (from small, pathologist-owned laboratory companies to a 
national laboratory trade association that represents the industry's 
largest laboratory companies), we are finalizing our proposal to 
exclude laboratory companies from the types of entities that may donate 
electronic health records items and services under the exception. We 
believe this decision is consistent with and furthers our continued 
goal of promoting the adoption of interoperable electronic health 
records technology that benefits patient care while reducing the 
likelihood that the exception will be misused by donors to secure 
referrals. We also believe that our decision will address situations 
identified by some of the commenters involving physician recipients 
conditioning referrals for laboratory services on the receipt of, or 
redirecting referrals for laboratory services following, donations from 
laboratory companies.
    Comment: Many commenters raised concerns that, notwithstanding a 
clear prohibition in the exception, laboratory companies are, 
explicitly or implicitly, conditioning donations of electronic health 
records items and services on the receipt of referrals from the 
physician recipients of those donations or establishing referral quotas 
and threatening to require the physician recipient to repay the cost of 
the donated items or services if the quotas are not reached. Some 
commenters suggested that such quid pro quo donations, and donations by 
laboratory companies generally, are having a negative effect on 
competition within the laboratory services industry (including 
increased prices for laboratory services) and impacting patient care, 
as referral decisions are being made based on whether a laboratory 
company donated electronic health records items or services, not 
whether that company offers the best quality services or turnaround 
time. A few commenters also raised concerns that laboratory companies 
are targeting potential physician recipients based on the volume or 
value of their anticipated referrals.
    Response: The current requirement at Sec.  411.357(w)(6) prohibits 
determining the eligibility of a physician recipient or the amount or 
nature of the items or

[[Page 78758]]

services to be donated in a manner that directly takes into account the 
volume or value of referrals or other business generated between the 
parties. Accordingly, the quid pro quo arrangements and targeted 
donations described by the commenters would not satisfy this 
requirement of the exception. Such arrangements are not consistent with 
the purpose of the exception and can result in the precise types of 
harm the physician self-referral law is designed to prevent, such as 
financial self-interest that may affect a physician's medical decision 
making. We urge those with information about such arrangements to 
contact the OIG's fraud hotline at 1-800-HHS-TIPS or visit https://forms.oig.hhs.gov/hotlineoperations/ to learn of other ways to report 
fraud.
    We appreciate the commenters' support for our proposal to remove 
donations by laboratory companies from the protection of the exception. 
We believe that our decision to exclude laboratory companies from the 
scope of protected donors is the best way to encourage and facilitate 
the adoption of interoperable electronic health records technology 
without risk of program or patient abuse.
    Comment: Several commenters raised concerns about laboratory 
company arrangements with electronic health records technology vendors. 
The commenters described agreements involving laboratory companies and 
vendors that result in the vendors charging other laboratory companies 
high fees to interface with the donated technology or prohibiting other 
laboratory companies from purchasing the technology for donation to 
their own clients. One of the commenters also raised a concern that 
volume discount arrangements between laboratory companies and vendors 
of electronic health records technology are resulting in donations of 
electronic health records items and services that may not best suit the 
needs of the physician recipient. The commenter asserted that donor 
laboratory companies are pushing a particular vendor's specific 
electronic health records system onto physician recipients because of 
the donor's close relationship with the vendor.
    Response: Excluding potential competitors of the donor from 
interfacing with donated items or services, as described by the 
commenters, can result in data and referral lock-in. We discuss the 
issue of lock-in elsewhere in this final rule in more detail. We 
believe that our determination to exclude laboratory companies from the 
scope of protected donors will help address the data and referral lock-
in risks posed by arrangements such as those described by the 
commenters. We also believe that the changes to Sec.  411.357(w)(1) 
that we are finalizing regarding the types of entities that may donate 
electronic health records items and services will help address the 
commenter's concern about the negative impact of relationships between 
laboratory companies and vendors on the selection of electronic health 
records technology by physicians. We stated in the August 2006 final 
rule that, although physician recipients remain free to choose any 
electronic health records technology that suits their needs, we do not 
require donors to facilitate that choice for purposes of the exception. 
However, as we also stated in the August 2006 final rule (71 FR 45157), 
our regulations require donors to offer interoperable products and 
donors must not impede the interoperability of any electronic health 
records software they decide to offer. Any agreement between a donor 
and a vendor that precludes or limits the ability of competitors to 
interface with the donated electronic health records software would 
raise significant questions regarding whether the donation meets the 
requirement at Sec.  411.357(w)(3).
    Comment: Many commenters noted that several states--including 
Missouri, New Jersey, New York, Pennsylvania, Tennessee, Washington, 
and West Virginia--have prohibited or restricted donations of 
electronic health records technology by laboratory companies to address 
fraud and abuse concerns. Some of the commenters urged us to effectuate 
a similar prohibition or restriction by removing laboratory companies 
as potential donors under the exception. One of these commenters 
asserted that laboratory companies licensed in states that strictly 
prohibit them from donating to referring physicians all or part of the 
costs of electronic health records technology are put at a considerable 
disadvantage in the marketplace because of ``the need for [electronic 
health records technology] subsidies to compete for business.''
    Response: We believe that our determination to exclude laboratory 
companies from the types of entities that may donate electronic health 
records items and services under the exception will address the fraud 
and abuse concerns referenced by the commenters. With respect to the 
commenter's concern about being disadvantaged, we note that our 
decision to prohibit laboratory companies from utilizing the exception 
applies equally to all laboratory companies, regardless of their 
location.
    Comment: Several commenters, including a national laboratory trade 
association that represents the industry's largest laboratory 
companies, took exception to what they perceived as an allegation that 
laboratory companies are solely responsible for problematic donations 
of electronic health records items and services. Some of these 
commenters asserted that electronic health records technology vendors 
are encouraging physicians to seek or demand donations from laboratory 
companies, and that physicians are threatening to withhold referrals or 
send laboratory business elsewhere if donations are not made. According 
to one commenter, because physicians are not paying for a significant 
portion of the cost of these items and services, electronic health 
records technology vendors are able to charge high prices and the size 
of donations (in dollars) has increased exponentially in recent years. 
The commenter also suggested that vendors may be manipulating pricing 
to maximize the amount a laboratory company pays for donated items and 
services while minimizing or eliminating any physician responsibility. 
Another commenter raised a related concern that electronic health 
records technology vendors have increased the costs of their products 
because they know that laboratories are paying for them. Generally, 
commenters raising concerns about the conduct of electronic health 
records technology vendors and physicians recommended that we remove 
laboratory companies from the universe of permissible donors under the 
exception.
    One commenter asserted that physicians are no longer choosing 
electronic health records technology based on which system is most 
appropriate, but rather based on which will produce the largest 
donation of items and services. Another commenter asserted that many 
physicians will change laboratory companies and seek a new donation 
once an existing donor laboratory company ceases to subsidize the 
physicians' electronic health records technology costs. This commenter 
stated that such conversions to different electronic health records 
technology are not only inefficient, but undermine the spirit of the 
regulatory requirement that physicians do not possess the same or 
equivalent items or services as those being donated.
    Response: Our proposed modification related to the universe of 
donors potentially covered under the exception; thus, the focus of our 
discussion in the proposed rule was on donor conduct. Some of the 
comments we describe in

[[Page 78759]]

this final rule also raise concerns about the conduct of physician 
recipients. In response, we are clarifying that we do not believe that 
problematic donations involving laboratory companies are solely the 
result of questionable conduct by laboratory companies. We believe that 
our decision to exclude laboratory companies from the universe of 
protected donors is the best way to reduce the risk of misuse of the 
exception at this time and addresses the concerns identified by the 
commenters.
    We note that Sec.  411.357(w)(5) prohibits the physician recipient 
and the physician recipient's practice from making the receipt, amount 
or nature of the donated items or services a condition of doing 
business with the donor. This provision recognizes the program 
integrity risk posed by a potential physician recipient who demands a 
donation in exchange for referrals. This type of quid pro quo 
arrangement is no less troubling than quid pro quo arrangements that 
originate with the donor and would not satisfy the requirements of the 
exception. Whether a quid pro quo donation is for an initial 
installation of a donated item or service or a conversion to a 
different donated item or service would not change our analysis. 
Additionally, we caution those engaging in conversion arrangements to 
be mindful of the limitations in the exception at Sec.  411.357(w)(8) 
concerning the donation of equivalent items or services.
    Comment: Several commenters suggested that laboratory companies 
should be prohibited from donating electronic health records items and 
services to physicians or that physicians should pay for their own 
electronic health records technology. Other commenters asserted that 
laboratory companies do not share an essential interest in their 
referring clients having electronic health records technology. Still 
other commenters stated simply that laboratory companies represent a 
high risk of fraud and abuse.
    Response: Based on the complaints previously received by OIG, which 
are described in more detail in the proposed rule, and the information 
provided by the commenters regarding some of the arrangements between 
laboratory companies and physician recipients of donated electronic 
health records items and services, we agree that donations of 
electronic health records items and services by laboratory companies 
present a high risk of fraud and abuse. Exceptions promulgated using 
our authority under section 1877(b)(4) of the Act may provide 
protection from the physician self-referral law's prohibitions only for 
those financial relationships that pose no risk of program or patient 
abuse. We do not believe that continuing to permit laboratory companies 
to make protected donations under the exception at Sec.  411.357(w) 
would meet this standard. Therefore, we are modifying the requirements 
of the exception to eliminate laboratory companies from the types of 
entities that may provide donations under the exception. We do not 
agree with the commenters that laboratory companies necessarily do not 
have an essential interest in their referring clients having electronic 
health records technology. It is the behavior of laboratory companies 
and physician recipients of donations from laboratory companies of 
which we are aware that drives our determination to finalize our 
proposal to eliminate laboratory companies from the types of entities 
that may provide donations under the exception.
    Comment: A few commenters noted that, rather than electronic health 
records, laboratory companies typically use a laboratory information 
system (LIS), anatomic pathologist information system, and/or blood 
banking system to store and share patients' laboratory results, and 
that these systems should not be confused with an electronic health 
record that includes a patient's full medical record comprised of 
information from many medical specialties, including pathology. One of 
these commenters asserted that laboratories already bear the cost of 
establishing LIS interfaces that they provide to physicians in order to 
exchange laboratory services data electronically, and that clinical and 
anatomic laboratories could continue to do so legally even if they were 
no longer protected donors under the exception. One commenter lamented 
the costs associated with interfaces, other commenters requested that 
CMS clarify its position on the donation of interfaces by laboratory 
companies, and one commenter asserted that interfaces were not 
analogous to facsimile machines, which we have stated in the past may 
be provided to physicians under certain circumstances.
    Response: We appreciate the general information provided by the 
commenters regarding the various types of technology that laboratory 
companies generally use or do not use. The more relevant technology in 
the laboratory setting is the interface that exchanges data 
electronically between the laboratory and its referral sources. These 
comments provide us an opportunity to discuss more fully our position 
on the donation of interfaces by laboratory companies.
    Our decision to exclude laboratory companies from the universe of 
protected donors under the exception does not affect our interpretation 
of the physician self-referral law as it relates to whether the 
provision of an item or service qualifies as ``remuneration'' that 
establishes a compensation arrangement that implicates the law's 
referral and billing prohibitions. In section 1877(h)(1)(A) of the Act, 
``compensation arrangement'' is defined as ``any arrangement involving 
any remuneration'' between a physician (or an immediate family member 
of such physician) and an entity furnishing DHS. Section 1877(h)(1)(B) 
of the Act defines ``remuneration'' to include ``any remuneration, 
directly or indirectly, in cash or in kind.'' However, under section 
1877(h)(1)(C) of the Act, ``remuneration'' does not include ``the 
provision of items, devices, or supplies that are used solely to: (i) 
collect, transport, process, or store specimens for the entity 
providing the item, device, or supply; or (ii) order or communicate the 
results of tests or procedures for such entity.'' Therefore, the 
provision of such items, devices or supplies does not result in a 
compensation arrangement that implicates the physician self-referral 
law's referral and billing prohibitions. We discussed this further in 
CMS Advisory Opinion 2008-01, which can be found at http://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/Downloads/CMS-AO-2008-01.pdf. Accordingly, the provision of certain interfaces, such as those 
described by the commenters, need not satisfy the requirements of Sec.  
411.357(w).
    We disagree with the commenter that asserted that interfaces are 
not sufficiently analogous to facsimile machines. We believe that a 
limited-use interface (as described previously) is the contemporary 
analog to the limited-use computer or facsimile described in the 
example from the 1998 proposed rule preamble (63 FR 1693 and 1694 
(January 9, 1998)). Moreover, the mode of technology is not restricted 
by the language of section 1877(h)(1)(c) of the Act nor is its cost, 
which is, in any event, outside the scope of this rulemaking.
    Comment: Several commenters inquired whether our proposal to 
prohibit use of the exception for donations of electronic health 
records items and services by laboratory companies would apply to 
suppliers of both anatomic and clinical pathology services, and 
suggested that our proposal should apply to both. Commenters also 
inquired about the application of this proposal to hospitals

[[Page 78760]]

that operate laboratory companies for non-hospital affiliated 
customers. Raising concerns about an uneven playing field, some of 
these commenters urged us to exclude such hospitals from the universe 
of protected donors if we determined to exclude laboratory companies. 
One commenter suggested that we effectuate this limitation by 
restricting protected hospital donations to those made to the 
hospital's employed physicians and the hospital's wholly-owned 
physician practices.
    Response: Our proposal applied to ``laboratory companies'' and did 
not distinguish between those that provide anatomic pathology services 
and those that provide clinical pathology services. We intend that 
references to ``laboratory company'' or ``laboratory companies'' 
include entities that furnish both types of DHS.
    With respect to the commenters' suggestion to limit or prohibit 
hospital donations of electronic health records items and services, we 
appreciate the concerns articulated by the commenters, but are not 
adopting their suggestion at this time. We continue to believe that 
hospitals have a substantial and central stake in patients' electronic 
health records. Further, the types and prevalence of the concerns that 
have been brought to the OIG's attention and discussed elsewhere in 
this final rule about donations by laboratory companies have not 
arisen, to our knowledge, in the hospital-donation context.
    We are also clarifying that, if a hospital furnishes clinical 
laboratory services through a laboratory that is a department of the 
hospital for Medicare purposes (including cost reporting), and the 
hospital bills for the services through the hospital's provider number, 
then the hospital would not be a ``laboratory company'' and would 
continue to qualify as a protected donor under the modified exception. 
However, if a hospital-affiliated or hospital-owned company with its 
own supplier number furnishes clinical laboratory services that are 
billed using a billing number assigned to the company and not to the 
hospital, the company would be a ``laboratory company'' and would no 
longer qualify as a protected donor. The ability of the affiliated 
hospital to avail itself of the exception would be unaffected. We 
remind readers that it is the substance, not the form, of an 
arrangement that governs under the physician self-referral law.
    Comment: One commenter requested that, if we finalize our proposal 
to exclude laboratory companies from the universe of protected donors, 
we specifically clarify that ``[laboratory companies] are prohibited 
from providing [ ] software to physicians unless they comply with 
another one of the existing exceptions.'' The commenter went on to cite 
examples of software leases and sales at fair market value that could 
potentially qualify for protection under an exception other than the 
one at Sec.  411.357(w).
    Response: We decline the commenter's invitation to make this 
clarification. Exceptions set forth specific requirements that, if 
satisfied, assure the parties involved that physician referrals to the 
entity for DHS are not prohibited and that the entity may bill Medicare 
for the services furnished pursuant to those physician referrals. As we 
have stated in prior rulemakings, an arrangement need not satisfy the 
requirements of a particular exception. Rather, the parties to an 
arrangement may avail themselves of any applicable exception to protect 
the physician's referrals to the DHS entity with which he or she (or an 
immediate family member) has a financial relationship.
    Comment: One commenter shared its concerns about a practice that it 
described as ``post-donation in-sourcing.'' The commenter stated that 
it is aware of situations in which laboratory companies are donating 
electronic health records technology to referring physicians only to 
have those physicians in-source their laboratory services shortly after 
the donation. The commenter suggested that the donations enable 
referring physicians to avoid bearing the full cost of electronic 
health records technology without continued referrals to the donating 
laboratory company.
    Response: We are not modifying the exception to address the 
commenter's concern. We remind stakeholders that the exception does not 
require the physician recipient to make referrals to the donor. To the 
contrary, Sec.  411.357(w)(5) prohibits the physician recipient and his 
or her practice from making the receipt, amount, or nature of the 
donated items or services a condition of doing business with the donor. 
Moreover, Sec.  411.357(w)(6) prohibits determining the eligibility of 
a physician recipient or the amount or nature of the items or services 
to be donated in a manner that directly takes into account the volume 
or value of referrals or other business generated between the parties. 
Whether protection is afforded under the exception to the types of 
arrangements described by the commenter will depend on whether all of 
the requirements of the exception are satisfied.
    Comment: Two commenters raised issues regarding the type of 
remuneration permissible under the exception at Sec.  411.357(w). One 
commenter characterized the exception as allowing laboratory companies 
to donate funds to physician recipients to help them implement 
electronic health records technology. Another commenter noted that some 
donations from laboratory companies have included hardware.
    Response: We remind stakeholders that the exception at Sec.  
411.357(w) applies only to the donation of nonmonetary remuneration (in 
the form of software or information technology and training services) 
necessary and used predominantly to create, maintain, transmit, or 
receive electronic health records. As stated in the preamble to the 
August 2006 final rule (71 FR 45161), reimbursement for previously 
incurred expenses is not protected, as it poses a substantial risk of 
program and patient abuse. We also remind stakeholders that the 
exception does not protect the donation of hardware.
    Comment: Although the majority of commenters supported excluding 
laboratory companies from the types of entities that may donate 
electronic health records items and services under the exception, some 
commenters made other recommendations related to protected donors. A 
number of commenters recommended that we maintain our current scope of 
protected donors; that is, allow any entity (as defined at Sec.  
411.351) to provide electronic health records items and services to a 
physician. Some of these commenters stated that limiting the scope of 
protected donors could have an impact on specialists, who, according to 
the commenters, still have relatively low rates of electronic health 
records adoption. Along the same lines, one commenter stated that 
limiting the categories of donors that may seek protection under the 
exception will negatively impact physician recipients by preventing 
certain entities from helping to move the entire healthcare system 
toward more interoperable electronic health record systems. Others 
cautioned that restricting the universe of permissible donors will 
stymie innovation and restrict learning from the technology. Finally, 
some commenters contended that laboratory companies and other ancillary 
service providers have a legitimate clinical interest in donating 
electronic health records technology and that many physician practices 
depend on it.
    Some commenters, while acknowledging our concerns regarding abusive 
donation practices, suggested

[[Page 78761]]

alternative means to address the concerns we articulated in the 
proposed rule. These commenters variously recommended that we 
strengthen interoperation requirements, provide physician education 
materials, or adopt enforcement policies to prevent abuses rather than 
limiting the universe of potential donors of electronic health records 
items and services.
    Response: We agree with many of the reasons articulated by the 
commenters supporting a fully expansive universe of protected donors 
under the exception. We recognize that limiting the universe of 
potential donors could constrain the ability of many physicians to 
adopt electronic health records technology. However, we are persuaded 
by the commenters that cited examples or patterns of program abuse by 
laboratory companies and are amending the exception to limit 
permissible donors under Sec.  411.357(w) by excluding laboratory 
companies. Other than with respect to laboratory companies, the 
universe of protected donors will remain the same. We will continue to 
monitor and may, prior to the end of 2021, reconsider in a future 
rulemaking the risk of program or patient abuse relating to the use of 
the exception by other donors or categories of donors.
    We appreciate the suggestions from commenters regarding alternative 
means of addressing abusive donation practices. However, our authority 
under section 1877(b)(4) of the Act permits us to establish exceptions 
to the physician self-referral law only where protected financial 
relationships would pose no risk of program or patient abuse. We do not 
believe that adopting the commenters' alternative suggestions for 
addressing our concerns would meet this standard.
    Comment: We received a number of comments requesting that we retain 
certain categories of providers and suppliers within the universe of 
permissible donors of electronic health records items and services 
under the exception at Sec.  411.357(w). For example, commenters that 
provide dialysis services specifically requested that they remain 
protected donors. One of the dialysis-provider commenters noted that 
excluding this specialty would have a chilling effect on the 
development and availability of the specialized electronic health 
records systems used by nephrologists. A few commenters requested that 
we continue to include hospitals and health systems as protected donors 
in order for them to retain the ability to assist physicians in 
adopting electronic health records technology. Other commenters 
requested that we explicitly retain home health agencies as permissible 
donors. In support of retaining home health agencies, one commenter 
stated that the depth, breadth, and frequency of communications between 
home health agencies and other direct care providers makes the use of 
interoperable electronic health records technology essential to 
improving clinical outcomes and financial efficiencies. We also 
received comments in support of retaining safety net providers and 
pharmacies as protected donors.
    Response: We agree generally with the thrust of these comments. We 
recognize the value of permitting entities that participate directly in 
the provision of health care to patients and that have a need to 
coordinate with care providers to donate electronic health records 
items and services to facilitate those interactions. We take no action 
in this final rule to prohibit entities other than laboratory companies 
from utilizing the exception.
    Comment: Some commenters agreed with the option we presented in the 
proposed rule to retain the ability of any DHS entity to donate 
electronic health records items and services, except suppliers of 
ancillary services associated with a high risk of fraud and abuse. A 
few of these commenters suggested that a targeted approach would 
minimize the risk of unintended consequences. One of these commenters 
asserted that we should exclude the particular individuals or entities 
that have been the subject of complaints. Another of these commenters 
specifically recommended that we target categories of suppliers with a 
history or pattern of abusive behavior.
    Other commenters variously recommended excluding laboratories, DME 
suppliers, home health agencies, or safety net providers from the types 
of entities that may donate electronic health records items and 
services under the exception. One commenter asserted that entities like 
laboratory companies and DME suppliers do not have an overarching and 
essential interest in having physicians use electronic health records, 
nor do they coordinate the patient's care. In contrast, one commenter 
objected to singling out a provider or supplier type to exclude from 
the scope of protected donors. This commenter stated that such an 
action unjustly: (1) penalizes a whole category of providers or 
suppliers when most, in the commenter's assessment, are law-abiding; 
and (2) supports other providers or suppliers that may have similar 
motivations.
    Response: We respond elsewhere in this final rule to the commenters 
who expressly recommended removing only laboratory companies from the 
universe of permissible donors. With respect to the other commenters, 
we note that, in the proposed rule (78 FR 21312), we specifically 
requested comments, ``with supporting reasons,'' regarding whether 
particular provider or supplier types should be prohibited from 
utilizing the exception at Sec.  411.357(w). Some commenters suggested 
that we prohibit other types of entities from donating electronic 
health records items and services under the exception, but the comments 
did not provide specific examples of abusive practices with respect to 
donations of electronic health records items and services by such 
donors, nor did the comments indicate problems with other types of 
entities comparable to those that are arising in the context of 
laboratory companies. Finally, we do not agree with the commenters that 
laboratory companies, DME suppliers, home health agencies, safety net 
providers, or, for that matter, any other ``ancillary'' service 
providers necessarily do not have an overarching and essential interest 
in having physicians use electronic health records, or that they do not 
coordinate the patient's care. It is the behavior of laboratory 
companies and physician recipients of donations from laboratory 
companies of which we are aware that drives our determination to 
finalize our proposal to exclude laboratory companies from the types of 
entities that may provide donations under the exception. We have not 
heard the same concerns about other categories of donors or types of 
donation arrangements and, therefore, believe it is premature to 
exclude potential donors (other than laboratory companies). We also 
decline to identify particular individuals or organizations in the 
regulation.
    Comment: A few commenters recommended restricting the entities that 
may donate electronic health records items and services under the 
exception to those types listed in the MMA. These commenters also 
suggested imposing additional restrictions on donations from this 
limited universe of donors. For example, one commenter recommended 
limiting the application of the exception to hospitals and providers 
operating in an integrated setting and to MA plans and providers under 
contract with them. Another commenter suggested limiting the 
application of the exception to a similar integration model, and to 
hospitals that donate electronic health records items and services to 
their employed physicians and the physician groups that they own. In 
contrast, one

[[Page 78762]]

commenter suggested that limiting the protected donor types to the 
original MMA list would be too restrictive. The commenter believed that 
some provider types not listed in the MMA should have the opportunity 
to make donations (for example, ambulatory surgical centers that now 
perform many procedures previously only performed in hospitals).
    Response: We agree that providers and suppliers operating in an 
integrated environment need interoperable electronic health records. 
However, we do not believe that the need for this technology is limited 
to those individuals and entities in an integrated care setting. 
Patients may receive care from providers and suppliers that are not in 
the same integrated system, and the patient's medical records need to 
be shared with those providers and suppliers that also care for the 
patient. The Department's goal continues to be fostering broad adoption 
of interoperable electronic health records technology. In furtherance 
of that goal, we seek to limit the applicability of the exception vis-
[agrave]-vis permissible donors only to the extent necessary to prevent 
program and patient abuse. At this time, we believe that excluding 
laboratory companies from the types of entities that may utilize the 
electronic health records exception, rather than limiting the universe 
of permissible donors to the MMA list of donors (or some other subset 
of permissible donors) strikes the right balance between furthering the 
Department's goal and preventing program and patient abuse.
2. Data Lock-In and Exchange
    We solicited comments on what new requirements could be added to, 
or how we could modify existing requirements of, the exception at Sec.  
411.357(w) in order to achieve our goals of: (1) preventing misuse of 
the exception that results in data and referral lock-in; and (2) 
encouraging the free exchange of data (in accordance with protections 
for privacy). Additionally, we requested comments on whether such 
requirements, if any, should be in addition to, or in lieu of, our 
proposal to limit the entities whose donations of electronic health 
records items and services may qualify for protection under the 
exceptions. Finally, we solicited comments on possible modifications to 
Sec.  411.357(w)(3), which requires that, in order to qualify for the 
protection of the exception, ``[t]he donor (or any person on the 
donor's behalf) does not take any action to limit or restrict the use, 
compatibility, or interoperability of the items or services with other 
electronic prescribing or electronic health records systems.'' We 
solicited these comments to explore whether this requirement could be 
modified to reduce the possibility of data and referral lock-in.
    Comment: Many commenters asserted that the current requirements of 
the exception provide adequate safeguards to prevent donations of 
electronic health records items and services that result in data or 
referral lock-in between the donor and physician recipient. These 
commenters expressed general support for the investigation of 
arrangements that may not satisfy the requirements of the exception. 
Several of these commenters were also concerned that adding or 
modifying requirements may increase the burden of compliance and, 
therefore, lead to fewer entities willing to make appropriate donations 
of electronic health records items and services.
    Response: In general, we agree with these commenters. We are not 
persuaded to adopt significant new requirements or modifications to the 
exception to address the issue of data or referral lock-in. In 
addition, we do not wish to take any action that inadvertently 
discourages donors and physician recipients from entering into 
appropriate donation arrangements. However, we are making limited 
clarifications to Sec.  411.357(w)(3) to reflect our intended meaning 
of this requirement and our interpretation of existing requirements for 
interoperability as it pertains to potential data or referral lock-in. 
We also remain committed to assisting our law enforcement partners in 
the investigation of potentially abusive arrangements that purport to 
satisfy the requirements of the exception but, in fact, do not.
    Comment: Several commenters expressed concerns about donations of 
electronic health records items and services that lead to data lock-in. 
As described elsewhere in this final rule, some commenters suggested 
that, although some donated electronic health records software has the 
ability to be interoperable, vendors may charge providers who do not 
use the same donated software high fees to interface with it. The 
commenters contended that these business practices result in electronic 
health records software that is not practically interoperable because 
non-donor providers cannot afford to connect to the donated electronic 
health records items and services. Other commenters expressed general 
concerns that donated electronic health records items or services are 
capable of interoperation, but that physician recipients implicitly 
agree to send referrals using the technology only to the donor. These 
commenters did not provide specific recommendations to modify the data 
lock-in requirements of the exception, but generally supported our 
efforts to prevent data lock-in.
    Two commenters representing laboratory companies expressed specific 
concerns about a feature of donated software that may lead to data 
lock-in. These commenters explained that some software is designed to 
limit the accessibility of data that is received from an electronic 
health records system that is different than the donated software. Most 
often, data sent from the non-donated electronic health records system 
cannot populate automatically in a patient's electronic health record 
or other limits are placed on the portability of data sent from the 
non-donated electronic health records system. According to these 
commenters, the limited accessibility of the data makes it harder for 
the physician recipient to access and use it for clinical purposes. As 
a result, a physician recipient is more likely to utilize only the 
donor's services to make sure that necessary data is easily accessible. 
These commenters asserted that there are no technical solutions to 
reducing the possibility of data lock-in; rather, the only solution is 
to remove laboratory companies from the types of entities whose 
donations may be protected under Sec.  411.357(w).
    Several other commenters generally endorsed our efforts to prevent 
data and referral lock-in. These commenters evidenced strong support 
for the free exchange of health information across different provider 
types to better coordinate care for patients. However, apart from 
supporting our efforts to ensure that electronic health records systems 
are interoperable, the commenters made no specific recommendations 
regarding modifications to the exception.
    Response: We share the commenters' concerns about the 
interoperability of donated electronic health records software. 
Arrangements involving the donation of electronic health records 
software that has limited or restricted interoperability due to action 
taken by the donor or by any person on the donor's behalf (which could 
include the physician recipient acting on the donor's behalf) would 
fail to satisfy the requirement at Sec.  411.357(w)(3) and would be 
inconsistent with an important purpose of the exception, which is to 
promote the use of technology that is able to communicate with products 
from other vendors. For example, arrangements in which the donor takes 
an action to limit the use,

[[Page 78763]]

communication, or interoperability of the electronic health records 
items or services by entering into an agreement with the physician 
recipient to preclude or inhibit any competitor from interfacing with 
the donated items or services would not satisfy the requirement of 
Sec.  411.357(w)(3). Other donation arrangements described by the 
commenters in which electronic health records technology vendors charge 
high interface fees to non-recipient providers or competitors may also 
fail to satisfy the requirements of Sec.  411.357(w)(3). We believe 
that any action taken by a donor (or any person on behalf of the donor, 
including the electronic health records technology vendor or the 
physician recipient) to limit the use of the donated electronic health 
records items or services by charging fees to prevent non-recipient 
providers and the donor's competitors from interfacing with the donated 
items or services would pose legitimate concerns that parties were 
improperly locking in data and referrals, and that the arrangement in 
question would not satisfy the requirements of the exception. However, 
whether a donation actually satisfies the requirements of the exception 
depends on the specific facts of the donation arrangement.
    Comment: One commenter expressed concern regarding data lock-in and 
supported ensuring that donations of electronic health records items 
and services are transparent and free of any attempts to steer future 
business. Although it denied knowledge of any specific abuse of the 
exception, the commenter requested that we allow individuals or 
entities to remedy noncompliance with the physician self-referral law 
due to a donation that may not be protected by the exception. The 
commenter suggested that the remedy for violation of the physician 
self-referral law due to an arrangement's failure to satisfy the 
requirements of the exception at Sec.  411.357(w) should be to make 
physician recipients pay the fair market value of any costs for ongoing 
support of the donated electronic health records items or services. The 
commenter suggested allowing 3 years for the physician recipient to 
either pay full value for the donated electronic health records items 
and services or transition to a new system.
    Response: We appreciate the commenter's concern and recommendation; 
however, we decline to make the suggested modification. Implementing 
the commenter's suggestions would be outside the scope of our statutory 
authority under section 1877(b)(4) of the Act to promulgate exceptions 
to the physician self-referral law that pose no risk of program or 
patient abuse.
    Comment: A few commenters urged us to amend the exception to 
require the physician recipient or the donor to participate in health 
information exchange with an electronic health records system that is 
different from the one donated. One commenter specifically suggested 
that the physician recipient should have to demonstrate exchange with 
at least one other electronic health records system within a certain 
timeframe after receipt of the donation. Another commenter suggested 
that the donor should have to--upon request--enable the physician 
recipient of the donation to engage in bi-directional exchange of data 
with competitors not using the same electronic health records system.
    Response: We appreciate the commenters' recommendations; however, 
we are not modifying the exception to require the parties to an 
arrangement for the donation of electronic health records items and 
services to demonstrate interoperation. We question whether adequate 
demonstration of interoperation could occur only after the donation has 
been made, which would create uncertainty about whether the donation 
satisfies the requirements of the exception. This uncertainty would 
undermine the Department's broad goal for the exception--that is, to 
support widespread adoption of interoperable electronic health records 
technology. However, it is our intent and expectation that 
interoperation of donated items and services will, in fact, occur, and 
we believe the requirements of the exception, in their entirety, 
promote such interoperation. Moreover, routine interoperation with 
systems other than those of the donor may be evidence that neither the 
donor nor any person on the donor's behalf has taken any action to 
limit or restrict the use, compatibility, or interoperability of the 
items or services with other electronic prescribing or electronic 
health records systems, as required under Sec.  411.357(w)(3).
    Further, we note that the Department is considering a number of 
policies to accelerate and advance interoperability and health 
information exchange. As part of this process, ONC and CMS issued a 
notice requesting input from the public on possible policies and 
programmatic changes to accelerate electronic health information 
exchange among individuals and entities that furnish health care items 
and services, as well as new ideas that would be both effective and 
feasible to implement (78 FR 14793). We believe that the process 
through which ONC and CMS will jointly act is better-suited than this 
exception to consider and respond to evolving functionality related to 
the interoperability of electronic health records technology. The paper 
that addresses the public comments we received and outlines the 
Department's strategy for accelerating health information exchange is 
available at: http://www.healthit.gov/policy-researchers-implementers/accelerating-health-information-exchange-hie.
    Comment: In response to our solicitation of comments, some 
commenters provided suggestions as to how we could broaden the current 
requirements related to data lock-in. Two commenters suggested amending 
Sec.  411.357(w)(3), which prohibits the donor (or any person on the 
donor's behalf) from taking any action to limit or restrict the use, 
compatibility, or interoperability of the items or services with other 
``electronic prescribing or electronic health records systems.'' 
Specifically, the commenters suggested that we replace the reference to 
``electronic prescribing or electronic health records systems'' with 
``health information technology platforms or other health care 
providers.'' The commenters asserted that this proposed change reflects 
the development of health information technology that may not be 
classified as an electronic health records system, but supports the 
free exchange of health information. These two commenters also 
suggested that we modify Sec.  411.357(w)(3) to state that neither the 
donor nor the physician recipient may take any action to limit the 
interoperability of donated electronic health records items or services 
and that we require that the modified condition be included as part of 
the written agreement required under Sec.  411.357(w)(7).
    Another commenter suggested amending Sec.  411.357(w)(3) by 
providing a non-exhaustive list of actions that would cause a donation 
not to satisfy this requirement and by establishing a process for 
entities to provide the Department with information about potential 
abuses of the exception. A representative of several health plans 
suggested modifying the exception to ensure that, in the context of 
health information exchange, the interoperability requirement of the 
exception requires that all key stakeholders, including health 
insurance plans, have access to the health information exchange. The 
commenter suggested that we modify the interoperability condition at 42 
CFR 411.357(w)(2) to prohibit restrictions on the communication and 
exchange of

[[Page 78764]]

data with any covered entity as defined at 45 CFR 160.103.
    Response: The language in the existing regulatory text prohibits 
donors (or persons on the donor's behalf) from taking any action to 
limit or restrict the use, compatibility, or interoperability of 
donated items or services with other ``electronic prescribing or 
electronic health records systems.'' The term ``electronic prescribing 
or electronic health records systems'' was intended to be broad in 
order to account for developments in the health information technology 
industry. Based on the commenters' suggestions it appears, however, 
that stakeholders may have read this term more narrowly. This narrow 
reading is inconsistent with our intended meaning. We have always 
believed and continue to believe that an action taken by a donor (or on 
behalf of the donor) that limits the use, compatibility, or 
interoperability of donated items or services with any other health 
information technology may impede the free exchange of data and limit 
the ability of providers and suppliers to coordinate care, which is 
inconsistent with the goals of the exception. Therefore, we are 
clarifying 42 CFR 411.357(w)(3) by adding, by way of example and 
without limitation, a non-exhaustive list of some of the forms of 
technologies that we believe are included within the meaning of the 
existing regulatory language. We are not adopting the commenters' 
suggested edit, as we do not believe that it is necessary in light of 
our clarification. We also decline to modify 42 CFR 411.357(w)(2) to 
prohibit restrictions on the communication and exchange of data with 
any covered entity as defined at 45 CFR 160.103. We believe that 
existing 42 CFR 411.357(w)(3), which we have clarified in this final 
rule as including health information technology applications, products, 
or services, promotes interoperability with a variety of providers and 
suppliers, as well as other health care entities that may play a role 
in the coordination of care, including health plans that operate health 
information technology applications, products, or services.
    We are also not adopting the commenters' suggestion to modify the 
exception to state that neither the donor nor the physician recipient 
may take any action to limit the interoperability of donated electronic 
health records items or services. The requirement at Sec.  
411.357(w)(3) prohibits the donor (or any person on behalf of the 
donor) from taking any action that limits or restricts the use, 
compatibility, or interoperability of the donated electronic health 
records items or services. To the extent that a physician recipient 
takes an action on the donor's behalf to limit the use, compatibility, 
or interoperability of donated items or services, that donation would 
fail to qualify for protection under the exception. Because we see no 
obvious reason, other than at the behest of the donor or as a condition 
of the donation, why a physician recipient would take action to limit 
the use, compatibility, or interoperability of donated items or 
services, we believe that any action of this type by a physician 
recipient would be suspect. We are not making the suggested 
modification because we believe the concern articulated by the 
commenters is already addressed by the existing regulatory language and 
the policies we are adopting in this final rule. Accordingly, we are 
not making any corresponding revisions to require that the recommended 
provision be incorporated into the written agreement required under 
Sec.  411.357(w)(7).
    Finally, we are not revising the exception to provide in regulation 
text examples of actions that may cause a donation not to satisfy the 
requirements of Sec.  411.357(w)(3). Whether a donation satisfies the 
requirements of the exception requires a case-by-case analysis and 
depends on the specific facts of the donation.
    Comment: One commenter objected to the use of the exception to 
address the issue of data lock-in. The commenter contended that data 
lock-in may arise in response to legitimate concerns, such as the 
Health Insurance Portability and Accountability Act (HIPAA) privacy and 
security rules, liability issues, licensing requirements, and antitrust 
issues. Further, according to the commenter, data lock-in conditions 
may cause uncertainty for donors because parties may not be able to 
determine whether a donation satisfies the requirements of the 
exception until after donation.
    Response: Nothing in this final rule is intended to prohibit 
legitimate actions taken to ensure that electronic health records items 
and services appropriately protect data, including measures to ensure 
the privacy and security of health information data. We recognize that 
there may be appropriate security, privacy and other business reasons 
to protect data. This final rule addresses only actions that 
inappropriately lock in data, for example, locking in data to secure 
future referrals.
    Comment: One commenter expressed support for preventing electronic 
health records data lock-in and the free exchange of data. However, the 
commenter did not agree that additional requirements designed to 
promote these goals would be effective. Instead, the commenter 
suggested that we adopt payment models that continue to foster care 
coordination activities.
    Response: We appreciate the commenter's suggestion; however, 
changes to our payment models are outside the scope of the proposed 
rule. We note that, in our joint Request for Information, we and ONC 
solicited input on options for improving several different CMS payment 
models to support better the adoption of interoperable electronic 
health records technology (78 FR 14797). As noted earlier, the paper 
that addresses the public comments we received and outlines the 
Department's strategy for accelerating health information exchange is 
available at: http://www.healthit.gov/policy-researchers-implementers/accelerating-health-information-exchange-hie.
    Comment: Two commenters suggested data lock-in could be limited by 
requiring electronic health records software to be open or ``open 
source.'' Both commenters asserted that open source software would 
limit data lock-in due to the transparent nature of open source 
software. In addition, it would lead to greater interoperability of 
electronic health records systems. One commenter also suggested that we 
require mandatory advance disclosure of the operational and business 
policies and practices associated with the electronic health records 
technologies. One commenter suggested that we adopt the e-DOS standard 
as certification criteria for electronic health records.
    Response: Although we share the commenters' support for the free 
exchange of health information where appropriate protections for 
privacy and security exist, we are not adopting their recommendations 
because software certification criteria and standards are determined by 
ONC and are, therefore, outside the scope of this rulemaking.
3. Covered Technology
    In the proposed rule, we noted that we received questions 
concerning whether certain items or services fall within the scope of 
the technology potentially covered under the exception at Sec.  
411.357(w). There, we stated that the answer to such questions depends 
on the exact items or services being donated. We referenced our 
discussion in the August 2006 final rule regarding our interpretation 
of the term ``software, information technology and training services 
necessary and used predominantly.'' We stated that we believe that the 
current regulatory text, when read in light of the preamble discussion, 
is sufficiently clear concerning the scope of covered

[[Page 78765]]

technology. Nonetheless, because we received suggestions from 
stakeholders to modify Sec.  411.357(w) to reflect explicitly this 
interpretation, in the proposed rule (78 FR 21313), we sought comments 
from the public regarding this issue. After considering the public 
comments with respect to this issue, we determined not to make any 
changes to the regulation text to address the scope of covered 
technology.
    Comment: Several commenters stated that the regulatory text 
describing the scope of technology covered by the exception, when read 
in light of the August 2006 final rule preamble, is sufficiently clear. 
One of these commenters urged us not to revise the regulation in any 
way that might limit the scope of covered technology, limit the ability 
of donors and physician recipients in the design and selection of items 
and services, or create barriers to achieving interoperability. Other 
commenters agreed that the current definition of covered technology is 
appropriate, with two of these commenters suggesting that we revisit 
the definition in the future as health information technology evolves. 
Still other commenters asserted that the existing regulatory language 
can be interpreted to include ``services that enable the interoperable 
exchange of electronic health records data;'' thus, no revisions to the 
regulatory text are required. In contrast, one commenter suggested that 
we incorporate into the regulatory text the preamble language from the 
August 2006 final rule where we discussed examples of items and 
services that would qualify for coverage under the exception. Another 
commenter suggested that we revise the regulatory text to include as 
many examples of covered ``software, information technology and 
training services'' as possible while emphasizing that the list is not 
exhaustive.
    Response: We agree that maintaining flexibility is important, 
particularly as health information technology evolves. We endeavor to 
avoid revisions to the regulation text that could inadvertently narrow 
the exception, which is intended to promote the adoption of 
interoperable electronic health records technology. Moreover, our 
interpretation of what is covered by the exception has not changed. As 
we stated in the proposed rule (78 FR 21313), whether specific items or 
services fall within the scope of covered technology under the 
exception depends on the exact items or services that are being 
donated. If the ``services that enable the interoperable exchange of 
electronic health records data'' are of the type that do not meet the 
requirements for covered technology (for example, because they include 
hardware, storage devices, or have core functionality other than 
electronic health records), they would not be eligible for protection 
under the exception at Sec.  411.357(w).
    For these reasons, we are not revising the regulation text at Sec.  
411.357(w) to identify any specific types of items or services that may 
be donated if the other requirements of the exception are satisfied. We 
are also not modifying the examples identified in the preamble 
discussion in the August 2006 final rule (71 FR 45151). The exception 
continues to protect nonmonetary remuneration in the form of software, 
information technology and training services necessary and used 
predominantly to create, maintain, transmit, or receive electronic 
health records.
    Comment: A few commenters requested clarification regarding whether 
third-party fees related to the exchange of health information, such as 
health information exchange service charges for interconnectivity, are 
``covered technologies'' under the exception.
    Response: The exception protects only nonmonetary remuneration, in 
the form of software and information technology and training services, 
that is necessary and used predominantly to create, maintain, transmit, 
or receive electronic health records. Whether particular items or 
services, such as interconnectivity services, may be donated under the 
exception depends on the exact items or services being donated.
    Comment: One commenter suggested that, in addition to maintaining 
as much flexibility as possible, we broaden the scope of the technology 
covered by the exception to include software and services used for care 
coordination, quality measurement, improving population health, or 
improving the quality or efficiency of health care delivery among 
parties. The commenter noted that some of these items may be covered by 
the waivers issued in connection with the Medicare Shared Savings 
Program (MSSP); however, because those waivers extend only to parties 
participating in that program, protection for the donation of items or 
services that advance the Department's goal of encouraging the adoption 
of health information technology that supports public policy objectives 
is not available to other health care industry stakeholders. To advance 
these goals in a broader way, the commenter suggested that the 
exception be expanded to include items potentially covered by the MSSP 
pre-participation waiver, such as electronic health information 
exchanges that allow for electronic data exchange across multiple 
platforms, data reporting systems (including all-payer claims data 
reporting systems), and data analytics (including staff and systems, 
such as software tools, to perform analytic functions). Another 
commenter suggested that we broaden the scope of technology covered by 
the exception to include software separate from the certified 
electronic health records software as long as it is interoperable with 
the electronic health records software. The commenter gave as examples 
of such electronic health records-associated components ``patient 
portals that support patient engagement, direct and other standards-
compliant means for secure patient information exchange between 
providers, solutions to support transition care, and tools that may 
assist in inter- and intra-patient matching.'' A third commenter urged 
us to consider a broader array of covered technologies, provided that 
they support policy goals such as reducing hospital readmissions and 
coordinated care across settings outside of traditional office 
settings, including telemonitoring and telemedicine. Another commenter 
suggested that we expand the protection of the exception to cover ``any 
additional items or services that will be required or helpful in 
meeting Stage 2 or Stage 3 requirements for [the EHR Incentive 
Programs].''
    Response: As stated previously, whether specific items or services 
fall within the scope of covered technology under the exception at 
Sec.  411.357(w) depends on the exact items or services that are being 
donated. Some of the particular items and services that may be included 
within the broad categories identified by the commenters may be 
eligible for donation. For example, if a particular software product 
related to transitions of care was necessary and used predominantly to 
create, maintain, transmit, or receive electronic health records, then 
it would be eligible for donation, provided that the donation satisfied 
all of the other requirements of the exception. As noted previously in 
this final rule, software is not required to be certified to ONC 
certification criteria in order to be donated under the exception at 
Sec.  411.357(w). Thus, software that is separate from certified 
software may still be eligible for donation if it satisfies the 
definition of ``interoperable'' at Sec.  411.351.
    To the extent that the commenters suggested that we expand the 
scope of the exception to protect items and services that are not 
already eligible for donation, we note that revision of the exception 
to include such items or services would be outside the scope of

[[Page 78766]]

this rulemaking. In the proposed rule (78 FR 21313), with respect to 
the scope of technology potentially covered by the exception, we sought 
input from the public regarding the singular issue of ``whether the 
current regulatory text, when read in light of the preamble discussion, 
is sufficiently clear concerning the scope of covered technology.'' 
With regard to whether the scope of the technology covered under the 
exception should be broadened--as opposed to clarified--we are mindful 
of the important issues raised by the commenters and may consider them 
in the future. Further, we note that other exceptions to the physician 
self-referral law exist to protect financial relationships between 
physicians and entities furnishing DHS. Depending on the circumstances, 
some of the arrangements described by the commenters may satisfy the 
requirements of another exception or may not implicate the physician 
self-referral law.
    Comment: One commenter suggested that we define ``equivalent 
technology'' for purposes of the requirement in the exception that the 
donor of electronic health records items or services may not have 
actual knowledge of, or act in reckless disregard or deliberate 
ignorance of, the fact that the physician recipient possesses or has 
obtained items or services equivalent to those being donated. This 
commenter also suggested that we prohibit a physician from seeking or 
accepting a donation of electronic health records technology before a 
certain period of time has elapsed since the receipt of a previous 
donation. Another commenter urged us to eliminate maintenance and 
service agreements from the scope of potentially protected donations 
under the exception. In the alternative, the commenter suggested that 
we impose a restriction on the time period that donations of such 
services would be permitted. The commenter noted concerns that donors 
may use ongoing donations of maintenance and service agreements to lock 
in referrals from physician recipients. A commenter that urged us not 
to extend the availability of the exception suggested that we prohibit 
the donation of all technology except interfaces for reporting of 
laboratory results.
    Response: Although we appreciate the commenters' suggestions, we 
are not making the requested changes. We believe that the modifications 
to and clarifications of Sec.  411.357(w) adopted in this final rule 
and the clarifications offered in this preamble address the concerns 
raised by these commenters.
    Comment: One commenter asserted that the prohibition on donating 
equivalent items or services currently included in the exception locks 
physician practices into a vendor, even if they are dissatisfied with 
the technology, because the physician recipient must choose between 
paying the full amount for a new system and continuing to pay 15 
percent of the cost of the substandard system. The commenter asserted 
that the cost differential between these two options is too high and 
effectively locks physician practices into electronic health records 
technology vendors.
    Response: Although we appreciate the commenter's concern, we 
continue to believe that items and services are not ``necessary'' if 
the physician recipient already possesses equivalent items or services. 
As we stated in the August 2006 final rule (71 FR 45154), ``the 
provision of equivalent items and services poses a heightened risk of 
abuse, [because] such arrangements potentially confer independent value 
on the physician recipient (that is, the value of the existing items 
and services that might be put to other uses) unrelated to the need for 
electronic health records technology.'' Therefore, we are retaining the 
regulatory preclusion of protection for donation arrangements where the 
donor has actual knowledge of, or acts in reckless disregard or 
deliberate ignorance of, the fact that the physician recipient 
possesses or has obtained equivalent items or services. We expect that 
physicians would not select or continue to use a substandard system if 
it posed a threat to patient safety.
    Comment: One commenter referenced the proposed rule's statement 
that ``software or information technology and training services 
necessary and used predominantly for electronic health records 
purposes'' included ``information services related to patient care (but 
not separate research or marketing support services)'' (78 FR 21313). 
The commenter requested that we retract that statement and clarify that 
it is appropriate for health researchers to use data in electronic 
health records for research that is related to, for example, evidence-
based medicine, population management, or other research, provided that 
the use complies with applicable Federal, state, and institutional 
requirements.
    Response: We decline to retract our statement in the proposed rule. 
To promote adoption of electronic health records without risk of abuse, 
the scope of items and services permitted to be donated under the 
exception is limited to electronic health records items and services in 
the form of software and information technology and training services 
that are ``necessary and used predominantly to create, maintain, 
transmit, or receive electronic health records.'' Donations of software 
used for research that is separate from clinical support and 
information services related to patient care are not consistent with 
the primary goals of the exception.
    The exception at Sec.  411.357(w) addresses only the donation of 
electronic health records items and services, and not the use of data. 
Thus, the portion of the comment related to data use is outside the 
scope of this rulemaking. We note, however, that nothing in the 
exception prohibits the use of data in electronic health records 
systems for research purposes (assuming the parties comply with all 
other applicable laws, including HIPAA privacy protections).
    Comment: One commenter requested that CMS confirm that patient 
portals are within the scope of the technology potentially protected by 
the exception.
    Response: We are not certain what the commenter precisely means by 
``patient portals.'' Patient portals come in a variety of forms; the 
key to the analysis is whether the specific item or service donated is: 
(1) In the form of software, information technology and training 
services and; (2) necessary and used predominantly to create, maintain, 
transmit or receive electronic health records. As we stated in the 
August 2006 final rule in response to a commenter's recommendation that 
the exception specifically protect the provision of patient portal 
software that enables patients to maintain on-line personal medical 
records, including scheduling functions (71 FR 45152), nothing in the 
exception precludes protection for patient portal software if it 
satisfies all of the requirements of the exception.

E. Comments Outside the Scope of This Rulemaking

    In addition to the comments described and to which we responded 
previously, we received several comments from stakeholders, including 
suggestions on policy changes, that are outside the scope of this 
rulemaking. For example, one commenter raised concerns about a private 
insurer's proposed fee schedule for laboratory services. Another 
commenter expressed concern about ``outrageous bills'' the commenter 
received from a laboratory company. Although we appreciate the 
commenters taking the time to present these concerns, we do not address 
them here, as they are outside the scope of this rulemaking.

[[Page 78767]]

IV. Provisions of the Final Regulations

    For the most part, this final rule incorporates the proposed 
revisions stated in the proposed rule. Specifically, we are revising 
the exception to exclude laboratory companies from the types of 
entities that may donate electronic health records items and services 
under the exception, and are modifying the regulation text at Sec.  
411.357(w)(1) to effectuate this change. We are also amending Sec.  
411.357(w)(2) by deleting the phrase ``recognized by the Secretary'' 
and by replacing it with the phrase ``authorized by the National 
Coordinator for Health Information Technology'' and replacing the 12-
month timeframe for certification of electronic health records software 
with a requirement that the software be certified to an edition of the 
electronic health record certification criteria identified in the then-
applicable version of 45 CFR part 170 (ONC's certification program). We 
are clarifying the requirement at Sec.  411.357(w)(3) prohibiting any 
action that limits or restricts the use, compatibility, or 
interoperability of donated items or services. In addition, we are 
eliminating the requirement at Sec.  411.357(w)(11) that donated 
electronic health records software include electronic prescribing 
capability. Finally, we are modifying Sec.  411.357(w)(13) to extend 
the expiration of the exception from December 31, 2013 to December 31, 
2021.

V. Waiver of the Delay in the Effective Date

    Ordinarily, we provide a delay of at least 30 days in the effective 
date of a final rule after the date that the rule is issued. However, 
the 30-day delay in effective date can be waived if the rule grants or 
recognizes an exemption or relieves a restriction. We believe that it 
is appropriate to waive the 30-day delay in effective date for Sec.  
411.357(w)(13), which relieves a restriction on donations of electronic 
health records items and services. Specifically, this final rule amends 
Sec.  411.357(w)(13) to extend the expiration of the existing exception 
from December 31, 2013 to December 31, 2021. Without a waiver of the 
requirement for a delayed effective date, the entire exception will 
expire on December 31, 2013 and will not be available to protect any 
ongoing donation arrangements or new donations of electronic health 
records items and services made to physicians after December 31, 2013. 
By waiving the 30-day delay in effective date, the exception will not 
expire, thereby allowing parties to continue utilizing the exception to 
protect donations of electronic health records items and services. We 
stress, however, that donations of electronic health records items and 
services that occur between January 1, 2014 and the effective date of 
the remaining provisions of this final rule (March 27, 2014) will need 
to satisfy all of the requirements of the existing exception. The 
waiver of the 30-day delay in effective date simply serves to maintain 
the status quo until the rest of this final rule becomes effective.
    The 30-day delay in effective date can also be waived if the agency 
finds for good cause that the delay is impracticable, unnecessary, or 
contrary to the public interest, and the agency incorporates a 
statement of the findings and reasons in the rule issued. We find that 
it is unnecessary to provide a 30-day delay in effective date for Sec.  
411.357(w)(13) because an earlier effective date simply allows parties 
to continue making donations under the existing electronic health 
records items and services exception; it does not impose any new 
requirements or restrictions on potentially affected parties. Moreover, 
we find that a 30-day delayed effective date for Sec.  411.357(w)(13) 
is impracticable because it would cause the entire exception to expire, 
thereby nullifying this final rule.

VI. Collection of Information Requirements

    The provisions in this final rule will not impose any new or 
revised information collection, recordkeeping, or disclosure 
requirements. Consequently, this rule does not need additional Office 
of Management and Budget review under the authority of the Paperwork 
Reduction Act of 1995.

VII. Regulatory Impact Analysis

    We have examined the impact of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 1102(b) of the Act, section 202 of the 
Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), 
Executive Order 13132 on Federalism (August 4, 1999), and the 
Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). A 
regulatory impact analysis (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more in any 1 year). 
We believe that this final rule does not reach the economic threshold 
for being considered economically significant and, thus, is not 
considered a major rule. It is not economically significant because it 
will not have a significant effect on program expenditures, and there 
are no additional substantive costs to implement the resulting 
provisions. The rule modifies an existing exception to the physician 
self-referral law, and the modifications would not impose additional 
substantive costs on those seeking to utilize the exception. Further, 
the donation of electronic health records items or services and the use 
of the exception to protect such donations is entirely voluntary. In 
section III. of this final rule, we provide a detailed discussion and 
analysis of the alternatives considered in this final rule, including 
those considered for extending the expiration date of the electronic 
health records exception, limiting the types of entities that may 
donate electronic health records items and services, and tying the 
timeframe for deeming electronic health records software to ONC's 
certification program. Finally, we received no public comments specific 
to the RIA set forth in the proposed rule.
    This final rule extends the exception's expiration date to December 
31, 2021; excludes laboratory companies from the types of entities that 
may donate electronic health records items and services; updates the 
provision under which electronic health records software is deemed 
interoperable; clarifies the requirement at Sec.  411.357(w)(3) 
prohibiting any action that limits or restricts the use, compatibility, 
or interoperability of donated items or services; and removes the 
requirement related to electronic prescribing capability. Neither this 
final rule nor the regulations it amends requires any entity to donate 
electronic health records items and services to physicians, but we 
expect these changes to continue to facilitate the adoption of 
electronic health records technology by eliminating perceived barriers 
rather than creating the primary means by which physicians would adopt 
this technology.
    The summation of the economic impact analysis regarding the effects 
of electronic health records in the ambulatory setting that is 
presented in

[[Page 78768]]

the August 2006 final rule (71 FR 45164) still pertains to this final 
rule. However, since the August 2006 final rule, several developments 
have occurred to make us conclude that it is no longer necessary to 
retain a requirement related to electronic prescribing capability in 
the electronic health records exception. These developments include the 
passage of two laws encouraging adoption of electronic prescribing and 
electronic health records: (1) the Medicare Improvements for Patients 
and Providers Act of 2008 (MIPPA), Public Law 110-275; and (2) the 
Health Information Technology for Economic and Clinical Health (HITECH) 
Act, Title XIII of Division A and Title IV of Division B of the 
American Recovery and Reinvestment Act of 2009 (ARRA), Pub. L. 111-5. 
In addition, there has been an increase over the past few years in the 
rate of electronic health records-based electronic prescribing 
capabilities.\3\
---------------------------------------------------------------------------

    \3\ See, for example, State Variation in E-Prescribing Trends in 
the United States, available at http://www.healthit.gov/sites/default/files/us_e-prescribingtrends_onc_brief_4_nov2012.pdf.
---------------------------------------------------------------------------

    As discussed in more detail in the preamble to the proposed rule, 
section 132 of MIPPA authorized an electronic prescribing incentive 
program (starting in 2009) for certain types of eligible professionals. 
The HITECH Act authorized us to establish the EHR Incentive Programs 
for certain eligible professionals, eligible hospitals, and critical 
access hospitals. Also, the HITECH Act required that eligible 
professionals under the EHR Incentive Programs demonstrate meaningful 
use of certified electronic health records technology, including the 
use of electronic prescribing. Specifically, the final rule for Stage 2 
EHR Incentive Programs (September 4, 2012; 77 FR 53968) includes more 
demanding requirements for electronic prescribing and identifies 
electronic prescribing as a required core measure. As a result, 
beginning in calendar year 2015, an eligible professional risks a 
reduction in the Medicare Physician Fee Schedule payment amount that 
will otherwise apply for covered professional services if he or she is 
not a meaningful electronic health records technology user for a 
reporting period during that year. Our intent remains to allow 
physicians not to receive products or services they already own, but 
rather to receive electronic health records items and services that 
advance the adoption and use of electronic health records. Lastly, 
according to ONC, electronic prescribing by physicians using electronic 
health records technology has increased from 7 percent in December 2008 
to approximately 48 percent in June 2012.\4\ Furthermore, the rules 
recently published to implement Stage 2 of the EHR Incentive Programs 
(77 FR 54198 and 77 FR 53989), continue to encourage physicians' use of 
electronic prescribing technology. However, due to data limitations, we 
are unable to estimate accurately how much the electronic health 
records exception has contributed to the increase in electronic 
prescribing. Nevertheless, we believe that, as a result of recent 
developments, physician adoption of electronic prescribing and 
electronic health records technology will continue to increase despite 
removal of the electronic prescribing capability requirement in the 
electronic health records exception.
---------------------------------------------------------------------------

    \4\ See, for example, State Variation in E-Prescribing Trends in 
the United States, available at http://www.healthit.gov/sites/default/files/us_e-prescribingtrends_onc_brief_4_nov2012.pdf.
---------------------------------------------------------------------------

    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. Most hospitals and most other providers and 
suppliers are small entities, either by nonprofit status or by having 
revenues of less than $7.0 million to less than $35.5 million in any 1 
year. Individuals and States are not included in the definition of a 
small entity. This final rule does not result in an economic effect on 
small entities of 3 to 5 percent or more of their total revenues or 
costs. As a result, the Secretary has determined that this final rule 
will not have a significant economic impact on a substantial number of 
small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area for Medicare payment regulations and has fewer than 
100 beds. The Secretary has determined that this final rule would not 
have a significant economic impact on the operations of a substantial 
number of small rural hospitals (that is, an effect of more than 3 to 5 
percent of their total revenues or costs).
    Section 202 of the Unfunded Mandates Reform Act of 1995 requires 
that agencies assess anticipated costs and benefits before issuing any 
rule whose mandates require spending in any 1 year of $100 million in 
1995 dollars, updated annually for inflation. In 2013, that threshold 
is approximately $141 million. This final rule imposes no mandates and, 
as a result, will have no consequential effect on State, local, or 
tribal governments, or on the private sector, of $141 million or more.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it issues a final rule that imposes substantial 
direct requirement costs on State and local governments, preempts State 
law, or otherwise has Federalism implications. For the reasons stated 
earlier, this final rule will not have a substantial effect on State or 
local governments, nor does it preempt State law or have Federalism 
implications.
    In accordance with the provisions of Executive Order 12866, this 
rule was reviewed by the Office of Management and Budget.

List of Subjects for 42 CFR Part 411

    Kidney diseases, Medicare, Physician referral, Reporting and 
recordkeeping requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR part 411 as set forth below:

PART 411--EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE 
PAYMENT

0
1. The authority citation for part 411 continues to read as follows:

    Authority: Secs. 1102, 1860D-1 through 1860D-42, 1871, and 1877 
of the Social Security Act (42 U.S.C. 1302, 1395w-101 through 1395w-
152, 1395hh, and 1395nn).


0
2. Section 411.357 is amended as follows:
0
A. Revising paragraphs (w)(1) through (3).
0
B. Removing and reserving paragraph (w)(11).
0
C. In paragraph (w)(13), removing the date ``December 31, 2013'' and 
adding the date ``December 31, 2021'' in its place.
    The revision reads as follows:


Sec.  411.357  Exceptions to the referral prohibition related to 
compensation arrangements.

* * * * *
    (w) * * *
    (1) The items and services are provided to a physician by an entity 
(as defined at Sec.  411.351) that is not a laboratory company.

[[Page 78769]]

    (2) The software is interoperable (as defined in Sec.  411.351) at 
the time it is provided to the physician. For purposes of this 
paragraph, software is deemed to be interoperable if, on the date it is 
provided to the physician, it has been certified by a certifying body 
authorized by the National Coordinator for Health Information 
Technology to an edition of the electronic health record certification 
criteria identified in the then-applicable version of 45 CFR part 170.
    (3) The donor (or any person on the donor's behalf) does not take 
any action to limit or restrict the use, compatibility, or 
interoperability of the items or services with other electronic 
prescribing or electronic health records systems (including, but not 
limited to, health information technology applications, products, or 
services).
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: September 5, 2013.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: December 12, 2013.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2013-30923 Filed 12-23-13; 4:15 pm]
BILLING CODE 4120-01-P