[Federal Register Volume 71, Number 152 (Tuesday, August 8, 2006)]
[Rules and Regulations]
[Pages 45140-45171]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-6667]
[[Page 45139]]
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Part III
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Part 411
Medicare Program; Physicians' Referrals to Health Care Entities With
Which They Have Financial Relationships; Exceptions for Certain
Electronic Prescribing and Electronic Health Records Arrangements;
Final Rule
Federal Register / Vol. 71 , No. 152 / Tuesday, August 8, 2006 /
Rules and Regulations
[[Page 45140]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 411
[CMS-1303-F]
RIN 0938-AN69
Medicare Program; Physicians Referrals to Health Care Entities
With Which They Have Financial Relationships; Exceptions for Certain
Electronic Prescribing and Electronic Health Records Arrangements
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.
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SUMMARY: As required by section 101 of the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (MMA), this final rule
creates an exception to the physician self-referral prohibition in
section 1877 of the Social Security Act (the Act) for certain
arrangements in which a physician receives compensation in the form of
items or services (not including cash or cash equivalents)
(``nonmonetary remuneration'') that is necessary and used solely to
receive and transmit electronic prescription information. In addition,
using our separate legal authority under section 1877(b)(4) of the Act,
this rule creates a separate regulatory exception for certain
arrangements involving the provision of nonmonetary remuneration in the
form of electronic health records software or information technology
and training services necessary and used predominantly to create,
maintain, transmit, or receive electronic health records. These
exceptions are consistent with the President's goal of achieving
widespread adoption of interoperable electronic health records to
improve the quality and efficiency of health care while maintaining the
levels of security and privacy that consumers expect.
DATES: Effective date: These regulations are effective on October 10,
2006.
FOR FURTHER INFORMATION CONTACT: Lisa Ohrin, (410) 786-4565, or Linda
Howard, (410) 786-5255.
SUPPLEMENTARY INFORMATION:
I. Background
This final rule establishes exceptions to the physician self-
referral law for certain arrangements involving the donation of
electronic prescribing and electronic health records technology and
training services. Set forth below is a brief background discussion
addressing:
The physician self-referral law and its exceptions;
A summary of the relevant provisions of the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA),
(Pub. L. 108-173);
The Secretary's authority to implement exceptions under
section 1877(b)(4) of the Social Security Act (the Act); and
The November 9, 2005 Open Door Forum on electronic
prescribing and electronic health records.
A. The Physician Self-Referral Law and Exceptions
Section 1877 of the Act, also known as the physician self-referral
law: (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
an exception applies; and (2) prohibits the entity from submitting
claims to Medicare or billing the beneficiary or third party payor for
those referred services, unless an exception applies. 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.
B. Section 101 of the MMA
Section 101 of the MMA added a new section 1860D to the Act
establishing a prescription drug benefit in the Medicare program. As
part of the new statutory provision, in section 1860D-4(e)(4) of the
Act, the Congress directed the Secretary to adopt standards for
electronic prescribing in connection with the new prescription drug
benefit with the objective of improving patient safety, quality of
care, and efficiency in the delivery of care. (See H.R. Conf. Rep. No.
108-391, at 455, 456 (2003)). Section 1860D-4(e)(6) of the Act directs
the Secretary, in consultation with the Attorney General, to create an
exception to the physician self-referral prohibition that would protect
certain arrangements involving the provision of compensation in the
form of nonmonetary remuneration (consisting of items and services in
the form of hardware, software, or information technology and training
services) that is necessary and used solely to receive and transmit
electronic prescription information in accordance with electronic
prescribing standards published by the Secretary under section 1860D-
4(e)(4) of the Act. Specifically, this new exception sets forth
conditions under which the provision of such remuneration by hospitals,
group practices, and prescription drug plan (PDP) sponsors and Medicare
Advantage (MA) organizations (collectively, for purposes of this
preamble discussion, donors) to prescribing physicians (collectively,
for purposes of this preamble discussion, physician recipients) would
be protected. As we noted in the preamble to the October 11, 2005
proposed rule, depending on the circumstances, provisions in the
existing physician self-referral regulations may also provide
protection for the donation of these items and services to physicians.
In addition to mandating the new exception to the physician self-
referral prohibition, section 1860D-4(e)(6) of the Act directs the
Secretary to create a corresponding safe harbor under the anti-kickback
statute (section 1128B(b) of the Act, 42 U.S.C. 1320a-7b(b)). The
Health and Human Services Office of Inspector General (OIG), the agency
that enforces the anti-kickback statute, is promulgating that safe
harbor through a separate rulemaking. We have attempted to ensure as
much consistency as possible between our final electronic prescribing
exception and the corresponding final safe harbor, given the
differences in the respective underlying statutes. One significant
difference in the statutory schemes is that complying with a safe
harbor under the anti-kickback statute is voluntary, whereas fitting in
an exception under section 1877 of the Act is mandatory. In other
words, arrangements that do not comply with a safe harbor may not
necessarily violate the anti-kickback statute. Rather, such
arrangements are subject to the customary case-by-case review under the
statute. If an arrangement fails to meet all requirements of a
physician self-referral exception, however, it violates section 1877 of
the Act. Another difference is that section 1877 of the Act applies
only to referrals from physicians, while the anti-kickback statute
applies more broadly.
C. Section 1877(b)(4) Authority
Section 1877(b)(4) of the Act authorizes the Secretary to create
regulatory exceptions for financial relationships that he determines do
not pose a risk of program or patient abuse. Using this authority, this
final rule also sets forth terms and conditions for a separate
exception to the physician self-referral prohibition for certain
arrangements involving the donation of electronic health records
software or information technology and training
[[Page 45141]]
services. Information technology, and electronic health records in
particular, supports treatment choices for consumers and enables better
and more efficient care, while maintaining the levels of security and
privacy that consumers expect. We seek to encourage the adoption of
such technology through this final rulemaking. We believe that
electronic health records systems that are secure and interoperable may
mitigate many of our concerns regarding the potential anticompetitive
effects of stand-alone electronic health records systems.
D. Open Door Forum
We held an Open Door Forum early in the comment period for the
proposed rule, on November 9, 2005, to discuss the benefits and risks
of donating electronic prescribing and electronic health records
technology. The OIG also participated in this Open Door Forum. This
Open Door Forum was in addition to, and not in lieu of, the public
comment process. During this Open Door Forum, panelists representing
the health care industry (for example, the American Hospital
Association and the American College of Physicians), the health
information technology industry, and members of the public contributed
to the discussion. Panelists described the types of technology they
believe are necessary to have a useful, workable, interoperable
electronic health records system, including software, training,
connectivity, upgrades, and a help desk function. The following topics
were also included in the discussion:
The cost of the technology to the donor versus the value
to the physician and a cap on the value of the technology;
Safeguards necessary to protect against program or patient
abuse, including permissible donors and recipients and donation
selection criteria;
Staged implementation;
Standards for the certification of the technology;
Physician certification of technical and functional
equivalence; and
The limitations of electronic prescribing functionality
alone as opposed to electronic prescribing functionality integrated
into electronic health records software.
II. Provisions of the October 11, 2005 Proposed Rule
On October 11, 2005, we published a proposed rule to issue three
exceptions under the physician self-referral statute (70 FR 59182). The
first proposed exception addressed arrangements involving electronic
prescribing technology as required by section 101 of the MMA. Many
industry and government stakeholders had expressed concerns that the
MMA provision was not sufficiently useful or practical, and would not
adequately advance the goal of achieving improved health care quality
and efficiency through widespread adoption of interoperable electronic
health records systems. Accordingly, we proposed two additional
exceptions to address donations of certain electronic health records
software and directly related training services, using our authority at
section 1877(b)(4) of the Act. One proposed exception would have
protected certain arrangements involving nonmonetary remuneration in
the form of interoperable electronic health records software certified
in accordance with criteria adopted by the Secretary (and directly
related training services). The second proposed exception would have
protected certain arrangements involving donations of electronic health
records technology made before the adoption of certification criteria.
The proposed rule for safe harbors under the anti-kickback statute,
issued the same day, contained comparable proposals.
In response to our proposed rule, we received 74 timely filed
comment letters. The majority of the comments came from hospitals and
health systems, trade associations, and vendors. We also received
comments from information technology organizations, health plans, and
providers.
The OIG received 71 timely filed comment letters. The majority of
the comments came from the same types of entities from which CMS
received its comments. However, the OIG also received comments from
pharmaceutical manufacturers and pharmacies.
Overall, the commenters welcomed the establishment of exceptions
and safe harbors for electronic prescribing and electronic health
records technology arrangements. However, we received many specific
comments about various aspects of the proposed rule.
After considering these public comments, we are finalizing two
exceptions:
An exception that protects certain arrangements involving
electronic prescribing technology (new Sec. 411.357(v)); and
An exception that protects certain arrangements involving
interoperable electronic health records software or information
technology and training services (new Sec. 411.357(w)).
These final exceptions create separate and independent grounds for
protection under the physician self-referral law. For the convenience
of the public, we are providing Chart 1 that lays out schematically the
overall structure and approach of the final exceptions, details of
which we are providing in sections III and IV of this preamble. Readers
are cautioned that the final exceptions contain additional conditions
and information not summarized in Chart 1.
CHART 1.
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MMA-mandated
electronic Electronic health
prescribing records exception
exception Sec. Sec. 411.357(w)
411.357(v)
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Authority for Exception..... Section 101 of the Section 1877(b)(4)
MMA. of the Social
Security Act.
Covered Technology.......... Items and services Software necessary
that are necessary and used
and used solely to predominantly to
transmit and create, maintain,
receive electronic transmit, or
prescription receive electronic
information. health records.
Software packages
may include
functions related
to patient
administration, for
example, scheduling
functions, billing,
and clinical
support.
Includes hardware, Software must
software, internet include electronic
connectivity, and prescribing
training and capability.
support services.
[[Page 45142]]
Information
technology and
training services,
which would
include, for
example, internet
connectivity and
help desk support
services.
Standards with Which Donated Applicable standards Electronic
Technology Must Comply. for electronic prescribing
prescribing under capability must
Part D (currently, comply with the
the first set of applicable
these standards is standards for
codified at Sec. electronic
423.160). prescribing under
Part D (currently,
the first set of
these standards is
codified at Sec.
423.160).
Electronic health
records software
must be
interoperable.
Software may be
deemed
interoperable under
certain
circumstances.
Donors and Recipients....... As required by Entities that
statute, protected furnish designated
donors and health services
recipients are (DHS) to any
hospitals to physician.
members of their
medical staffs;
group practices to
physician members;
PDP sponsors and MA
organizations to
prescribing
physicians.
Selection of Recipients..... Donors may not take Donors may use
into account selection criteria
directly or that are not
indirectly the directly related to
volume or value of the volume or value
referrals from the of referrals from
recipient or other the recipient or
business generated other business
between the parties. generated between
the parties.
Value of Protected No limit on the Physician recipients
Technology. value of donations must pay 15 percent
of electronic of the donor's cost
prescribing for the donated
technology. technology and
training services.
The donor may not
finance the
physician
recipient's payment
or loan funds to
the physician
recipient for use
by the physician
recipient to pay
for the items and
services.
Expiration of the Exception. None................ Exception sunsets on
December 31, 2013.
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General Comments and Responses to the Proposed Rule
Comment: Most commenters supported the promulgation of exceptions
for electronic prescribing and electronic health records arrangements.
Commenters observed that both the Congress and the Administration have
recognized the compelling need for rapid and widespread adoption of
electronic prescribing and electronic health records technology.
Several commenters suggested that fraud and abuse concerns should not
impede the adoption of health information technology. In this regard,
commenters suggested that the final rule should better balance the goal
of preventing fraud and abuse with the goal of creating incentives for
health information technology arrangements that reduce fraud and abuse,
increase quality and efficiency, and improve patient care. One
commenter asserted that investments in health information technology
and the desire to provide an incentive to participate in health
information technology systems do not raise typical fraud and abuse
concerns present with other financial arrangements. However, another
commenter noted that the proposed rule generally struck an appropriate
balance between the needs of physicians who may require assistance to
develop health information technology systems and the underlying
purpose of Federal fraud and abuse laws to promote the professional
independence of the physicians receiving the support.
Response: We disagree with the commenter that suggested that
financial arrangements involving incentives in the form of health
information technology do not pose the same fraud and abuse concerns as
other financial arrangements between parties in a potential referral
relationship. Indeed, our enforcement experience demonstrates that
improper remuneration for Medicare referrals may take many forms,
including free computers, facsimile machines, software, and other goods
and services. However, we recognize that certain arrangements for the
transfer of health information technology between parties with actual
or potential referral relationships may further the important national
policy of promoting widespread adoption of health information
technology to improve patient safety, quality of care, and efficiency
in the delivery of health care. We believe the final rule strikes the
appropriate balance between promoting the adoption of health
information technology and protecting against program or patient abuse.
Comment: Several commenters stated that the Congress and the
Administration need to offer meaningful financial incentives for
practitioners to accept the increased cost and workflow burdens
associated with the implementation of health information technology.
For example, the government could provide modest add-on payments to
physicians who employ health information technology as part of overall
quality improvement measures. Some commenters observed that the
proposed rule would remove a minor impediment to the adoption of health
information technology, but suggested that we must play a larger role
in providing capital for the technologies that assist physicians in
providing quality care and avoiding medical errors.
Response: These comments address matters outside the scope of this
rulemaking. However, we note that the Administration supports the
adoption of health information technology as a normal cost of doing
business. Specifically, the 2007 Budget states that ``[t]he
Administration supports the adoption of health information technology
(IT) as a normal cost of
[[Page 45143]]
doing business to ensure patients receive high quality care.''
Comment: Some commenters complained that the proposed exceptions
were too narrow and vague. These commenters urged that the final
exceptions should be easy to understand, interpret, and enforce so that
donors and physicians readily can distinguish permissible activities
from those that violate the statute. Some commenters believe that the
proposed rule was too complex and might have the unintended effect of
discouraging participation in health information technology
arrangements.
Response: As described in this preamble, we have adopted a number
of modifications and changes that address the commenters' concerns.
Although the final exception at Sec. 411.357(v) addresses only
electronic prescribing arrangements, the final exception at Sec.
411.357(w) protects a broad scope of arrangements involving electronic
health records technology. We have made a number of changes that
clarify and simplify the final rules. We have endeavored to create
bright line provisions to the extent possible. Moreover, we do not
believe that the Congress, in enacting section 1860D-4(e)(6) of the
Act, intended to suggest that a new exception is needed for all
arrangements involving the provision of electronic prescribing items
and services, nor do we believe that an exception is needed for all
electronic health records arrangements. Many arrangements can be
structured to fit in existing exceptions.
Comment: Some commenters observed that the description of the
nonmonetary remuneration that would be included in the exceptions as
proposed did not reflect the many existing combinations and varieties
of electronic prescribing, electronic health records, and similar
technology.
Response: As discussed in greater detail, we believe that the final
exceptions are sufficiently broad to accommodate the most essential
current and evolving electronic prescribing and electronic health
records technology. We began this rulemaking process by looking to the
guidance from the Congress in section 101 of the MMA with respect to
electronic prescribing technology. Using our regulatory authority, we
have added a separate exception for arrangements involving electronic
health records software or information technology and training
services. We believe that we have appropriately balanced the goal of
promoting widespread adoption of health information technology against
the significant fraud and abuse concerns that stem from the provision
of free or reduced cost goods or services to actual or potential
referral sources.
Comment: A commenter suggested that the final rule should include
provisions that allow us to evaluate and ensure that the regulatory
requirements, once enacted, have not negatively impacted key
stakeholders or business segments within the health care industry.
Response: Nothing in this rulemaking prevents us from reviewing the
impact of the regulations on stakeholders in the health care industry.
As with all regulatory exceptions, we may, in future rulemaking,
propose modifications or clarifications to the exception as
appropriate.
Comment: We solicited comments on whether and, if so, how to take
into account physician access to publicly available software at free or
reduced prices. One commenter urged that the availability of free
public software should not impact the design of the final exceptions.
In addition, the commenter stated that we should grant physicians and
hospitals substantial latitude in selecting interoperable technology
that best meets their needs.
Response: After further consideration, we concluded that it was not
necessary to take the availability of publicly available software into
account in developing the final exceptions. Hospitals, physicians, and
other donors will have great flexibility in selecting technology that
will qualify for protection under the exceptions. Nothing in this rule
limits the choice of health information technology, although certain
technology, such as non-interoperable electronic health records
software (as discussed in section IV), would not qualify for protection
because it would not meet all of the conditions of the exception.
Comment: Some commenters suggested that the exceptions under the
physician self-referral law should mirror the safe harbors under the
anti-kickback statute in all respects in order to promote the rapid and
widespread adoption of electronic prescribing and electronic health
records technology. A few commenters suggested that OIG not adopt anti-
kickback statute safe harbors or that any safe harbors should be
stricter than any corresponding exceptions to the physician self-
referral law.
Response: We believe consistency between these exceptions and the
corresponding safe harbors under the anti-kickback statute is
preferable. We have attempted to ensure as much consistency between the
two sets of regulations as possible given the underlying differences in
the two statutory schemes.
Comment: A few commenters requested that the Federal physician
self-referral exception preempt State laws that prohibit physician
self-referrals relating to health information technology. One commenter
wanted the physician self-referral exceptions, once finalized, to
preempt any State laws or regulations that conflict with the provisions
of the exceptions.
Response: The MMA specifically dictated that the Part D electronic
prescribing standards would preempt any State law or regulation that--
(1) Is contrary to the adopted final Part D electronic prescribing
standards or that restricts the Secretary's ability to carry out Part D
of title XVIII; and (2) pertains to the electronic transmission of
medication history and of information on eligibility benefits, and
prescriptions with respect to covered Part D drugs under Part D. No
similar authority was provided with respect to the physician self-
referral exception for the donation of electronic prescribing
technology. Moreover, the legal authority for the electronic health
records exception in this rule is derived from section 1877(b)(4) of
the Act, which similarly does not provide authority to preempt State
physician self[pi]referral laws. Existing Federal physician self-
referral law permits States to regulate physician self-referrals
concurrently.
Comment: Some commenters inquired whether the electronic
information that is transmitted via electronic prescribing or
electronic health records systems would be considered remuneration for
purposes of the physician self[pi]referral law.
Response: Whether a particular item or service constitutes
remuneration for purposes of the physician self-referral law depends on
the particular facts and circumstances. Typically, information about a
particular patient's health status, medical condition, or treatment
exchanged between or among the patient's health care providers and
suppliers for the purpose of diagnosing or treating the patient would
not constitute remuneration to the recipient of the information. In
this regard, the electronic exchange of patient health care information
is comparable to the exchange of such information by mail, courier, or
phone conversation. Thus, when related to the care of individual
patients, information such as test results, diagnosis codes,
descriptions of symptoms, medical history, and prescription information
are part of the delivery of the health care services and would not have
independent value to the recipient. However, in other
[[Page 45144]]
situations, information may be a commodity with value that could be
conferred to induce or reward referrals. For example, data related to
research or marketing purposes, or information otherwise obtained
through a subscription or for a fee, could constitute remuneration for
purposes of the physician self-referral law.
III. Response to Comments and Final Rule Provisions Regarding
Electronic Prescribing Exception Required Under Section 101 of the MMA
(proposed Sec. 411.357(v))
A. Summary of the Proposed Provisions Related to Sec. 411.357(v)
On October 11, 2005, as mandated in the MMA, we proposed adding a
new paragraph (v) to the existing regulations at Sec. 411.357 for
certain electronic prescribing arrangements. We proposed the following:
That the exception would protect certain arrangements
involving the provision of nonmonetary remuneration (in the form of
hardware, software, or information technology and training services)
necessary and used solely to receive and transmit electronic
prescription information. We construed this language broadly to include
internet connectivity services (of all types, including broadband or
wireless), and upgrades of equipment and software that significantly
enhance functionality.
That the donated technology must be part of, or used to
access, a prescription drug program that meets applicable standards
under Medicare Part D.
That the technology must be donated by a hospital to
members of its medical staff, by a group practice to its members, or by
a PDP sponsor or MA organization to prescribing physicians, as long as
all of the exception conditions are satisfied.
That the physician could not make the receipt of donated
technology a condition of doing business with a donor.
That protected arrangements must be fully and completely
documented.
That the exception would not protect donations of
technology that replicate technology the physician already possessed.
To ensure compliance with this provision, we proposed requiring
physicians to certify that they did not already possess equivalent
technology. Moreover, we proposed that donors would not be protected if
they knew or should have known that the physicians already possessed
equivalent technology.
That neither a physician's eligibility for donated
technology, nor the amount or nature of the technology, could be
determined in any manner that takes into account the volume or value of
referrals or other business generated between the parties.
That the parties could not take any action to impede the
compatibility or interoperability of the technology.
That the donor could not restrict the ability of the
physician to use the technology for any patient, regardless of payor.
Limiting the value of donated technology that could be
protected by the exception.
A separate exception for multifunctional items and
services used for electronic prescribing (for example, multi-use hand-
held devices) because we recognized the limitations imposed by the
``used solely'' standard set forth in the MMA.
B. General Comments
Comment: Many commenters stated that the proposed electronic
prescribing exception was too narrow to be useful and should be merged
into an electronic health records exception, noting that physicians
would likely resist adopting stand-alone electronic prescribing
systems. One commenter observed that the proposed rule was generally in
accordance with the congressional intent underlying section 101 of the
MMA.
Response: We agree that the proposed exception was consistent with
congressional intent. As we are not free to ignore a congressional
mandate, we must promulgate the electronic prescribing exception
described in section 101 of the MMA. However, we are also promulgating
a separate exception for electronic health records arrangements that
incorporate an electronic prescribing component. This new exception
should address the commenters'' concerns.
C. Specific Comments
1. Protected Compensation in the Form of Items and Services
(Nonmonetary Remuneration)
The proposed rule clarified the items and services that would
qualify for the new exception (for purposes of this preamble,
``qualifying electronic prescribing technology'') that the Congress
authorized only for the provision of items and services that are
``necessary and used solely'' to transmit and receive electronic
prescription drug information.
a. Covered Technology
In our proposed exception, we proposed protecting hardware,
software, or information technology and training services that met the
various exception conditions. We interpreted the statutory language to
include the donation of broadband or wireless internet connectivity,
training, information technology support services, and other items and
services used in connection with the transmission or receipt of
electronic prescribing information.
Comment: Various commenters suggested that the scope of covered
technology should be expanded to include: billing, scheduling, and
other administrative functions; implementation and maintenance of the
system; upgrades; and licenses, rights of use, or intellectual
property. Commenters also urged that any exception cover educational
sessions and consulting assistance related to the electronic
prescribing technology. Commenters generally agreed that the provision
of equipment for personal, non-medical purposes should not be
protected. One commenter suggested that it would not be possible to
develop a comprehensive list of protected remuneration that would
sufficiently reflect all possible electronic prescribing items and
services. The commenter recommended that we periodically review the
scope of protected items and services, and expand it as needed.
Response: We agree that it would be difficult to provide a
comprehensive list of items and services covered by the exception.
Although a specific list would provide a ``bright line'' rule, in this
case, it would also impede the ability of the exception to accommodate
novel or rapidly evolving technologies in the marketplace. For these
reasons, we are not promulgating a specific list of protected items and
services.
Consistent with the MMA mandate, covered items and services under
Sec. 411.357(v) include ``hardware, software, and information
technology and training services'' that are necessary and used solely
for electronic prescribing and that meet the other conditions of the
exception. We believe that licenses, rights of use, intellectual
property, upgrades, and educational and support services (including,
for example, help desk and maintenance services) are items and services
that potentially can fit in the exception if all conditions of the
exception are met. Billing, scheduling, administrative, and other
general office software cannot. Operating software that is necessary
for the hardware to function can qualify for protection under the
exception because it is integral to the hardware and distinct from
other software applications that are not necessary to transmit and
receive electronic
[[Page 45145]]
prescribing information. Interfaces designed to link the donor's
existing electronic prescribing system to the physician's existing
electronic prescribing system can qualify for protection. The exception
does not protect the provision of technology for personal, nonmedical
purposes, nor does the exception protect the provision of office staff.
Comment: We solicited comments on whether the exception should
protect electronic prescribing technology that is used for the
transmission of prescription information for items and services that
are not drugs (for example, durable medical equipment (DME) or
laboratory tests). Several commenters suggested that the exception
should support the use of electronic prescribing technology for all the
functions currently accomplished through written prescriptions, in
order to encourage provider utilization of electronic prescribing
technology to increase safety, cost-effectiveness, and efficiency. The
commenters suggested including the use of electronic prescribing
technology used for prescribing medical supplies and durable medical
equipment, physical therapy, dialysis testing, laboratory tests, and
other nondrug prescriptions. A commenter from the clinical laboratory
industry supported a broad reach, but only if clinical laboratories
were included as permissible donors under the exception.
Response: We agree generally with the first set of commenters. We
have reviewed further the language in section 101 of the MMA. The
exception mandated by section 1860D-4(e)(6) of the Act requires that
the donated technology be capable of receiving and transmitting
``electronic prescription information'' in accordance with the
electronic prescribing standards promulgated for purposes of the MMA
electronic prescription drug programs described in section 1860D-
4(e)(1) through (3) of the Act. We believe that the specific term
electronic ``prescription information'' as commonly used and as used in
section 1860D-4(e)(6) of the Act retains a broad meaning, to include
information about prescriptions for any items that would normally be
conducted with a written prescription. In contrast, the information to
be transmitted under an electronic prescription drug program
established under section 1860D-4(e)(2) of the Act is clearly limited
to drug information for Part D eligible individuals. Moreover, we do
not believe that the statutory language is intended to be construed to
prohibit the use of the donated technology for the transmission and
receipt of orders or prescriptions for other items and services or to
require the use of separate systems depending on the payor or the item
or service to be prescribed or ordered. We believe this approach is
consistent with the broad applicability of the physician self-referral
law, the objectives of the electronic prescribing standards, and the
patient safety, quality, and efficiency goals underlying the mandated
exception. Accordingly, we are defining ``prescription information''
for purposes of the exception to mean information about prescriptions
for drugs or any other item or service normally accomplished through a
written prescription. With respect to the clinical laboratory
commenter, consistent with the MMA language, we are not including
clinical laboratories as permissible donors under the exception.
However, we have expanded the new exception for electronic health
records arrangements to include clinical laboratories.
b. ``Necessary and Used Solely''
In the proposed rule, we proposed protecting items and services
that are necessary and used solely to transmit and receive electronic
prescription information. We stated that the exception would not
protect arrangements in which donors provide items or services that are
technically or functionally equivalent to items that the receiving
physician already possessed or services that the physician had already
obtained. We proposed requiring the physician to certify that the items
and services provided were not technically or functionally equivalent
to those that the physician already possessed or had already obtained.
We also proposed that arrangements would not be protected if the donor
knowingly provided technology that duplicated the physician's existing
technology. We indicated that we would consider ``necessary,'' for
purposes of the exception, upgrades of equipment or software that
significantly enhance the functionality of the item or service.
Because the term ``necessary'' appeared in our proposed rule in the
discussions of all three proposed exceptions, many commenters chose to
address comments on the meaning of the term ``necessary'' in the
context of the proposed exceptions for electronic health records
arrangements. We intend to interpret the term ``necessary'' uniformly
for both new exceptions. Thus, there is a detailed discussion of our
interpretation of the term ``necessary'' in section IV.C of this
preamble, which addresses the new electronic health records exception.
We are addressing here only the comments received on the ``necessary
and used solely'' requirement that are specific to the proposed
electronic prescribing exception.
Comment: One commenter observed that the ``necessary and used
solely'' requirement ensures that items and services will be used to
encourage electronic prescribing activities. This commenter suggested
including an additional requirement that the items or services clearly
be intended to promote the interoperability of health information
technology and the improvement of quality in a clinical setting.
Response: We agree that it was the intent of the Congress to
encourage electronic prescribing activities, in part, through the
development of an exception for donations of certain items and services
necessary and used solely for electronic prescribing transactions.
However, the additional standards suggested by the commenter, while
reflecting laudable goals, are not sufficiently ``bright line'' for
purposes of this exception. We have included a requirement at Sec.
411.357(v)(3) intended to ensure that protected technology meets Part D
electronic prescribing standards applicable at the time of the
donation, including any standards relating to interoperability.
Comment: Some commenters expressed concern that we have taken an
unnecessarily narrow interpretation of the statutory language
``necessary and used solely to receive and transmit electronic
prescription information in accordance with the standards promulgated
under [section 101 of the MMA].'' One commenter explained its view that
the phrase ``necessary and used solely'' should be read such that the
word ``necessary'' modifies the phrase ``in accordance with the
standards issued under this subsection.'' In other words, in this
commenter's view, the protected hardware, software, and services must
be ``necessary'' to perform electronic prescribing transactions
``solely'' in accordance with CMS-established data interchange
standards. The commenter explained that this interpretation would be
consistent with the purpose of the exception and the practical
realities of computers and electronic transactions.
Response: We appreciate the comment; however, we do not believe
that the commenter's proposed interpretation is the best or most
logical reading of the statutory language. We believe the better and
less strained reading is that the Congress intended for all donated
technology to be necessary for the receipt and transmission of
[[Page 45146]]
electronic prescription information and to be used solely for that
purpose. Limiting the exception to necessary items and services helps
ensure that the exception does not become a means of conveying valuable
items and services that do not further the underlying policy goals and
that might, in reality, constitute disguised payments for referrals. As
we noted in the preamble to the proposed rule, we believe that the
Congress included the ``used solely'' requirement to safeguard against
abusive arrangements in which the donated technology might constitute a
payment for referrals because it might have additional value
attributable to uses other than electronic prescribing. For example, a
computer that a physician can use to conduct office or personal
business might have value to the physician apart from its electronic
prescribing purpose. Accordingly, consistent with section 101 of the
MMA, the final exception requires that the protected items and services
be necessary and used solely to receive and transmit electronic
prescribing information.
We note that software that bundles general office management,
billing, scheduling, electronic health records, or other functions with
the electronic prescribing features does not meet the ``used solely''
requirement and is not protected by the final electronic prescribing
exception. In some cases, the provision of such bundled software may be
eligible for protection under the new exception for electronic health
records arrangements at Sec. 411.357(w).
Comment: One commenter suggested that the definition of
``necessary'' include all components required for a physician to be
enabled to prescribe electronically whether or not other functionality
is available or incorporated into the electronic prescribing
technology.
Response: We believe that the commenter is referring to technology
that is beyond the scope of the MMA-mandated exception. We have elected
not to finalize a multifunctional electronic prescribing exception. The
final exception for arrangements involving the donation of electronic
health records technology may address the commenter's concerns.
Comment: Many commenters requested that we eliminate the proposed
requirement that physicians provide written certification that the
donated technology is not technically or functionally equivalent to the
technology that the physician already possesses. Several commenters
expressed concern about the potential difficulty of making this
determination, the potential lack of expertise on the part of some
physicians, and the potential increased cost that could arise by having
an outside expert provide a determination of technical or functional
equivalence.
Response: For the reasons noted in section IV of this preamble with
respect to the electronic health records exception, we are not adopting
the proposed requirement that physicians provide written certification
that the donated technology is not technically or functionally
equivalent to technology the physician already possesses. Although we
have eliminated the certification requirement, we retained the
requirement for written documentation regarding the specifics of the
arrangement in the final exception at Sec. 411.357(v)(7).
We do not believe that items and services are ``necessary'' if the
physician already possesses equivalent items and services. The
provision of duplicative items and services poses a heightened risk of
abuse, since such arrangements would confer independent value on the
physician (that is, the value of the existing items and services that
may be put to other uses) unrelated to the need for electronic
prescribing technology. Thus, if a donor knows that the physician
already possesses equivalent items or services, or acts in deliberate
ignorance or reckless disregard of that fact, the exception will not
protect the donation. Therefore, prudent donors may want to make any
reasonable inquiries to potential physician recipients and document the
communications. We do not believe this requirement necessitates the
hiring of technical experts by either the donor or the physician
recipient.
Comment: One commenter supported our interpretation of the term
``necessary'' as permitting upgrades of equipment or software that
significantly enhance the functionality of an item or service. Another
commenter suggested that we should not require that the upgrades
``significantly'' enhance the functionality of the item or service.
Rather, the commenter believes that we should allow the marketplace to
determine whether an upgrade constitutes a beneficial improvement.
Response: Although we continue to believe that the term
``necessary'' does not preclude upgrades of equipment or software that
significantly enhance the functionality of the item or service, we
agree with the commenter that distinguishing ``significant''
enhancements from other beneficial improvements introduces unnecessary
complexity. Under the final exception, any upgrade that is necessary
and used solely to transmit and receive electronic prescribing
information is protected (as long as all other conditions of the
exception are satisfied).
Comment: Many commenters noted that it would be impractical to
require physicians to acquire or use software and hardware solely for
electronic prescribing. Several commenters noted that, in most cases,
single-use technology is of limited value to a physician, and could
result in inefficiencies. Another commenter expressed concern that the
``used solely'' standard would preclude the use of robust electronic
clinical support tools, such as tools to identify drug-to-drug
interactions or to conduct drug-to-lab or prescription data analysis.
This commenter urged that any exceptions from the physician self-
referral prohibition for health information technology arrangements
promote access to all information needed by physicians to evaluate
alternative drug therapies, identify potential drug-to-drug
interactions, and to improve safety, quality, and efficiency of patient
care.
Response: The ``used solely'' condition derives directly from the
MMA language. We believe that many of the arrangements of interest to
the commenters are addressed best by the electronic health records
exception, which is not restricted to technology used solely for
electronic prescribing. The MMA-mandated electronic prescribing
exception reasonably is interpreted to encompass electronic tools that
provide information necessary to formulate, transmit and receive a
medically appropriate prescription for a patient. These tools would
include electronic clinical support tools identifying alternative drug
therapies, drug-to-drug interactions, or a payor's formulary
information.
The nature of the ``prescription data analysis'' tools referenced
by the commenter is not clear. We believe the appropriate inquiry would
be whether the tool is used to formulate, transmit and receive a
medically appropriate prescription for a patient. To the extent the
data analysis tool (or any other electronic item or service) is used to
transmit and receive data unrelated to formulating a medically
appropriate prescription for a patient (for example, data collected for
marketing purposes), the tool would not be necessary for electronic
prescribing and would not be protected under the exception.
c. Standards
The MMA required that donated electronic prescribing technology
must comply with the standards for electronic prescribing under
Medicare Part D at the
[[Page 45147]]
time the items and services are donated. In the November 7, 2005
Federal Register (70 FR 67568), we finalized the first set of these
standards (the ``foundation standards''). We proposed in Sec.
411.357(v)(2) a requirement that the items and services be provided as
part of, or be used to access, an electronic prescription drug program
that complies with the applicable standards under Medicare Part D at
the time the items and services are donated.
We received no comments on this issue. The final exception requires
that the donated technology must comply with the applicable standards
under Medicare Part D at the time the items and services are donated.
2. Permissible Donors and Physician Recipients
We proposed protecting the same categories of donors and physician
recipients listed in section 101 of the MMA.
Comment: We received numerous comments requesting that we expand
the list of permissible donors and physician recipients.
Response: Because most commenters commented on this issue jointly
with the proposed electronic health records exception, we included a
detailed discussion of these comments in our discussion of the
electronic health records exception in section IV.D. of this preamble.
We are finalizing the exception consistent with the MMA-mandated
donors and physician recipients set forth by the Congress. We are not
persuaded that additional donors or physicians are necessary to achieve
the purpose of this exception for electronic prescribing. The
enumerated categories of donors and physicians reflect individuals and
entities centrally involved in the ordering, processing, filling, or
reimbursing of prescriptions. Accordingly, protected donors and
physicians under Sec. 411.357(v) are hospitals to members of their
medical staffs, group practices to their physician members, and PDP
sponsors and MA organizations to prescribing physicians. For the
convenience of the reader, we note the following:
Group practice is defined as specified in Sec. 411.352;
Members of a group practice is defined as all persons
covered by the definition of ``member of a group practice'' at Sec.
411.351;
PDP sponsor or MA organization is defined as specified in
Sec. 423.4 and Sec. 422.2, respectively.
3. Selection of Physician Recipients
We proposed additional conditions in proposed Sec. Sec.
411.357(v)(5) and (v)(6) related to how donors select recipients of the
electronic prescribing technology. These proposed conditions were
designed to minimize the risk that donors would select recipients for
the improper purpose of inducing or rewarding the generation of
Medicare business. Proposed Sec. 411.357(v)(5) would require that the
recipients (including their groups, employees, or staff) refrain from
making the donation of qualifying electronic prescribing technology a
condition of doing business with the donor. Proposed Sec.
411.357(v)(6) would preclude protection if the eligibility of a
physician to receive items and services from a donor, or the amount or
nature of the items or services received, is determined in any manner
that takes into account the volume or value of the physician's
referrals or other business generated between the parties. We observed
that this requirement would not preclude selecting a recipient based
upon the total number of prescriptions written by the recipient, but
would preclude selecting the recipient based upon the number or value
of prescriptions written by the recipient that are dispensed or paid by
the donor (as well as on any other criteria based on any other business
generated between the parties). (see October 11, 2005 proposed rule,
(70 FR at 59187)).
Comment: Commenters requested that we confirm that donors can
select physician recipients of electronic prescribing technology based
upon the total number of prescriptions written by the physician, but
cannot select them based upon the number or value of prescriptions
written by the physician recipient that are dispensed or paid by the
donor (or on any other criteria based on any other business generated
between the parties). A commenter supported excluding from the
protection of the exception donations that take into account directly
the volume or value of referrals or other business generated between
the parties. This commenter expressed concern that donors would employ
such selection criteria to disadvantage small practices and practices
in rural or underserved areas. To counter this potential disadvantage,
the commenter suggested that the final rule include incentives to
promote donations to small practices, especially in rural and
underserved areas. Other commenters suggested that donors, such as PDP
sponsors and MA organizations should be permitted to consider the
volume and value of prescriptions written by the physician recipient,
particularly for a donor's patient or plan population.
Response: To safeguard against the use of donated technology to
disguise referral payments, we are adopting our proposal that neither
the eligibility of a physician to receive items and services, nor the
amount or nature of the items or services received, may be determined
in a manner that takes into account, directly or indirectly, the volume
or value of the physician's referrals or other business generated
between the parties. Notwithstanding, in the instant case, we believe
that prohibiting the selection of recipients based on total number of
prescriptions written by the recipient would be inconsistent with the
MMA mandate and congressional intent to promote the use of electronic
prescribing. Accordingly, we confirm our interpretation, for purposes
of the exception at Sec. 411.357(v), that donors may select physician
recipients of electronic prescribing technology based upon the total
number of prescriptions written by the physician, but cannot select
them based upon the number or value of prescriptions written by the
physician that are dispensed or paid by the donor (or on any other
criteria based on any other business generated between the parties).
They also may not select physician recipients based on the overall
value of prescriptions written by the physician or on the volume or
value of prescriptions written by the physician that are reimbursable
by the Medicare program.
We are not persuaded that PDP sponsors or MA organizations should
be permitted to offer technology selectively based on the volume or
value of business generated for the plan by the recipient, especially
in the context of Part D, which includes some reimbursement based on
the plan's costs, rather than capitated payments.
The exception would not protect arrangements that seek to induce a
physician to change loyalties from other providers or plans to the
donor (for example, a hospital using an electronic prescribing
technology arrangement to induce a physician who is on the medical
staff of another hospital to join the donor hospital's medical staff),
because such arrangements take into account business generated for the
donor. We understand the commenter's concern about donors excluding
rural and underserved area physicians from their health information
technology arrangements. Some donors may favor large or urban practices
over small or rural ones. However, we can discern no ``incentives''
that could be included appropriately in an exception to address
[[Page 45148]]
this concern, nor has the commenter proposed any with respect to
assisting rural or solo practitioners. We note that our decision not to
limit the value of technology that can qualify under the exception may
assist rural and solo practices insofar as donors may want to provide
them with greater resources in recognition of their greater need for
assistance in adopting electronic prescribing technology.
Comment: Some commenters supported our proposal to exclude from the
protection of the exception donations that are a condition of doing
business with the donor.
Response: We are retaining the proposed requirement that recipients
(or any affiliated group, employee, or staff member) cannot make the
receipt of items or services a condition of doing business with the
donor. We have clarified that the condition applies with respect to all
individuals and entities affiliated with the recipient.
4. Value of Technology: Cap
In our proposed rule, we solicited public comments on various means
by which we might limit the value of protected technology under the
electronic prescribing exception. We indicated that we were considering
a limit on the value of protected technology as a further safeguard
against program or patient abuse. We received a large number of
comments on this topic, the majority of which opposed any limit on the
value of donated technology. Because these commenters typically
commented jointly on this issue for all three proposed exceptions (and
each commenter typically had the same concerns under all three proposed
exceptions), an extensive description of these comments is found in
section IV of this preamble. Having considered the comments, we are
persuaded not to limit the value of the donated technology under the
new exception for electronic prescribing arrangements at Sec.
411.357(v). We believe the final conditions of the exception, including
the ``necessary and used solely'' requirement and the conditions
related to how donors select physician recipients, should be sufficient
to guard against program and patient abuse. Although we are not
limiting the value of donated technology, it is not our expectation
that donors will necessarily want, or be in a position, to donate
unlimited amounts of electronic prescribing technology.
5. Additional Conditions on the Provision of Qualifying Electronic
Prescribing Technology
a. All Payors Requirement
In proposed Sec. 411.357(v)(4), we stated that we would require
that, where possible, physicians must be able to use the protected
technology for all patients without regard to payor status.
Comment: Commenters universally supported the requirement that,
where possible, physicians must be able to use the donated technology
for all patients regardless of payor source.
Response: We agree, and we have included this requirement in the
final exception.
b. Documentation
We proposed at Sec. 411.357(v)(7) a requirement that the
arrangement for the donation of electronic prescribing technology be in
writing, be signed by the parties, identify with specificity the items
or services being provided and their values, and include a
certification that the donated items and services are not technically
or functionally equivalent to items and services the physician
recipient already has. We stated that, to permit effective oversight of
protected arrangements, the writing must cover all qualifying
electronic prescribing technology provided by the donor to the
physician. For example, if a donor provides a piece of hardware under
one arrangement and subsequently provides a software program, the
agreement regarding the software would have to include a description of
the previously donated hardware (including its nature and value).
Comment: Some commenters supported the requirement that any
transfers of technology and services be memorialized in a written
agreement. One commenter objected to including a written agreement
requirement in the exception, arguing that the requirement would cause
an unnecessary delay and increase paperwork. Another commenter
suggested that the exception permit the arrangement between the donor
and physician recipient to be captured through a combination of
agreements between the recipient, donor, and service provider, rather
than one agreement. Commenters also urged us to remove the technical
and functional equivalence certification requirement from the
exception.
Response: We have adopted a documentation requirement in the
exception at Sec. 411.357(v)(7) with several modifications. With
respect to the condition requiring that the documentation cover all of
the electronic prescribing items and services provided by the donor to
the physician recipient, we have added language to the final exception
clarifying that the written documentation requirement can be satisfied
by incorporating by reference other agreements between the parties or
by the use of cross references to a master list of agreements between
the parties that is maintained and updated centrally, is available for
review by the Secretary upon request, and preserves the historical
record of agreements. We have eliminated the certification of technical
and functional non-equivalence. In addition, given our decision not to
limit the value of protected donations, we have eliminated the
requirement that the agreement specify the value of the donated
technology. However, in the interests of transparency and
accountability, we are requiring that the parties document the donor's
cost for the technology. We have retained the remaining documentation
requirements, as proposed, at Sec. 411.357(v)(7).
c. Commercial and Other Messaging
Comment: A commenter requested clear and specific rules prohibiting
inappropriate commercial messaging through electronic prescribing
technology, including electronic detailing messages from a manufacturer
promoting a particular brand or brand-name drug. This commenter
suggested that such messaging may inappropriately influence clinical
decision-making. The commenter gave the following as examples of
inappropriate messaging: (1) Messages disguised as ``clinical alerts''
based upon biased research not published in the public domain; and (2)
alerts purporting to save a patient money when, in reality, the out-of-
pocket expense for the drug to the patient is higher. Another commenter
suggested that we should prohibit commercial messaging and require that
donated technologies present information in a neutral and transparent
manner so as not to influence clinical decision making improperly.
Similarly, another commenter noted that pop-up messaging could
influence inappropriately prescribing patterns. The commenter provided
the example of making the procedure for prescribing certain formulary
drugs very easy and straightforward, while attempts to prescribe other
formulary drugs trigger multiple pop-up notices or require a series of
additional steps.
Response: We do not believe it would be feasible or appropriate to
regulate the content of commercial messaging or
[[Page 45149]]
formulary compliance activities through these exceptions to the
physician self-referral law. The regulation of speech is outside the
scope of this rulemaking. Nor, in any event, would a condition in these
exceptions related to the accuracy or objectivity of the content of
messages or formulary activities be sufficiently ``bright line'' to be
practical or readily enforceable. Nothing in this rulemaking should be
construed to authorize or approve any commercial messaging, formulary
compliance activity (or any other conduct) that is prohibited by any
Federal, State, or local law or regulation. Moreover, technology used
for marketing purposes would not meet the ``necessary and used solely''
standard required by the MMA for the electronic prescribing exception
because marketing information is not the type of clinical support that
is integral to prescribing accurate and appropriate items and services
for patients.
d. Other Conditions
Comment: Many commenters supported the prohibition against donors
or their agents taking any actions to disable or limit interoperability
or otherwise impose barriers to compatibility.
Response: We agree, and we are retaining this requirement in the
final exception.
Comment: Commenters generally agreed that the provision of
equipment for personal, nonmedical purposes should not be protected.
Response: The exception does not protect the provision of
technology for personal, nonmedical purposes.
6. Multifunctional Technology
We proposed using our regulatory authority under section 1877(b)(4)
of the Act to create an additional exception to protect the provision
by DHS entities to physician recipients of some limited hardware
(including necessary operating system software) and connectivity
services that are used for more than one function, as long as a
substantial use of the item or service would be to receive or transmit
electronic prescription information.
Comment: Most commenters supported a single exception that would
extend protection to technology beyond what is ``necessary and used
solely'' for electronic prescribing. Many commenters expressed the hope
that multifunctional technology ultimately would be captured in an
electronic health records technology exception.
Response: We have decided not to create a separate exception for
multifunctional technology. Instead, we are creating a new exception
for the protection of certain arrangements involving electronic health
records software, information technology and training services
(including connectivity services) that will serve more directly to
further the overall goal of widespread adoption of interoperable
electronic health records technology without some of the program or
patient abuse risks inherent in gifts of multifunctional hardware. Our
review of the totality of the public comments supports this approach,
as more fully described in the next section.
D. Summary of the Final Provisions Related to Sec. 411.357(v)
This final rule at Sec. 411.357(v) contains one exception for
items and services that are necessary and used solely to receive and
transmit electronic prescription information. The exception mirrors the
MMA language and protects donations of hardware, software, internet
connectivity, and training and support services, provided that the
technology meets the applicable standards under Medicare Part D at the
time the items and services are donated. (See November 7, 2005 final
rule (70 FR 67568) for the current, or ``foundation,'' standards.)
Further, donations may not take into account, directly or indirectly,
the volume or value of referrals from the physician or other business
generated between the parties. We have not placed a monetary limit on
the value of donations of electronic prescribing technology. We have
retained most of the key provisions from the proposed rule; however,
the final rule does not include a requirement for physician
certification of technical and functional non-equivalence. We emphasize
that: (1) The final rule protects technology necessary and used solely
to receive and transmit any prescription information, whether related
to drugs or to other items or services normally ordered by
prescription; and (2) donations may be in an unlimited amount.
We are not finalizing a separate exception for multifunctional
electronic prescribing technology.
IV. Response to Comments and Final Rule Provisions Regarding Electronic
Health Records Exception (Proposed Sec. 411.357(w))
A. Summary of the Proposed Provisions Related to Sec. 411.357(w)
Prior to publication of the proposed rule, many in the hospital
industry, among others, raised the issue of the need for protection
under an exception for arrangements involving technology other than
electronic prescribing. To encourage the adoption of electronic health
records technology consistent with the ultimate goal of achieving fully
interoperable electronic health records for all patients, we proposed
using our legal authority at section 1877(b)(4) of the Act to issue two
exceptions related to electronic health records software and training
services that are necessary and used to receive, transmit, and maintain
electronic health records of the donor's or physician's patients. We
did not propose protecting hardware in either exception, because we
believe electronic health records software and training services are
the components of electronic health records systems most likely to be
needed by physicians, and because donations of valuable,
multifunctional hardware (such as computers and servers) would
inherently pose a higher risk of constituting a disguised payment for
referrals. The first proposed exception would have applied to donations
made before the Secretary adopts product certification criteria,
including criteria for interoperability, functionality, and privacy and
security of electronic health records technology. (In the proposed rule
(70 FR 59197), we referred to this proposed exception as the ``pre-
interoperability'' exception.) We proposed the following:
That the electronic health records software must be
necessary and used solely for the transmission, receipt, and
maintenance of patients' electronic health records and prescription
drug information.
Defining ``necessary'' consistent with the definition of
the term in the proposed exception for electronic prescribing
arrangements.
That the software would have to include an electronic
prescribing component that meets the applicable standards under
Medicare Part D at the time the software is donated.
That the pre-interoperability exception would not protect
the provision of other types of technology (for example, billing,
scheduling, or general office management software) or any software or
staff used by the physician to conduct business or engage in activities
unrelated to the physician's medical practice. We also proposed that
the exception would not protect the provision of staff to the physician
or the physician's office.
Defining the term ``electronic health records'' and we
solicited comments on an appropriate definition.
Including documentation provisions comparable to those
proposed for the electronic prescribing exception.
Prohibiting protection for any arrangement in which the
donor (or any
[[Page 45150]]
person on the donor's behalf) disabled the interoperability of any
component of the software or otherwise imposed barriers to
compatibility.
Limiting the aggregate value of protected technology that
a donor could provide to a physician under the pre-interoperability
exception or in combination with the other proposed exceptions. We
noted that we were considering the same alternatives for setting a
value limit that were proposed for the electronic prescribing
exception. These could include: An aggregate dollar cap; a limitation
that would require cost sharing by the physician; or another
methodology, for example, a reduction in the amount of any cap over
time.
Including the same categories of donors and physician
recipients that we proposed for the electronic prescribing exception.
Including other requirements drawn from the proposed
electronic prescribing exception, for example, the restriction on
arrangements tied to the volume or value of referrals or other business
generated between the donor and recipient (proposed Sec.
411.357(x)(4)); a prohibition on conditioning business on the receipt
of technology (proposed Sec. 411.357(x)(3)); and an all payors
condition (proposed Sec. 411.357(x)(7)).
Sunsetting the pre-interoperability exception once product
certification criteria were finalized.
Recognizing that some enhanced flexibility in the conditions
applicable under an exception for electronic health records
arrangements might be appropriate once standards and product
certification criteria were developed for electronic health records
(including standards for interoperability) and adopted by the
Secretary, we proposed a second exception that we referred to as the
``post-interoperability'' exception. We noted that adoption of uniform
interoperability standards, as well as product certification criteria
to ensure that products meet those standards, would help prevent
technology from being used by unscrupulous parties to lock in streams
of referrals or other business. In summary, we proposed the following
for the post-interoperability exception:
That protected technology must be certified in accordance
with product certification criteria adopted by the Secretary, and must
include an electronic prescribing component that complies with
applicable electronic prescribing standards established by the
Secretary for the Part D program, to the extent that those standards
are not incorporated into the product certification criteria.
That the same conditions proposed for the pre-
interoperability exception would apply, with the following exceptions:
(1) We proposed including some additional software applications as long
as electronic health records and electronic prescribing remain core
functions; (2) we proposed including additional categories of donors
and physician recipients; (3) we proposed including specific selection
criteria to identify acceptable methods for selecting physician
recipients; and (4) we proposed a potentially larger limit on the value
of protected technology.
We also proposed and solicited public comment on the scope and
conditions for the electronic health records exceptions.
As noted previously in this preamble and in the proposed rule, our
decision to propose these exceptions did not reflect a view that all
electronic health records arrangements would require protection under
an exception to the physician self-referral law. Moreover, in many
cases, such arrangements may qualify for such protection under existing
exceptions or may not implicate the physician self-referral law.
B. General Comments
Comment: Most commenters expressed concern with the pre- and post-
interoperability bifurcated approach to the exceptions, asserting that
a bifurcated approach was not necessary, too confusing, and/or contrary
to the goal of achieving widespread adoption of health information
technology. These commenters urged us to abandon the bifurcated
approach and to publish one final exception for remuneration in the
form of electronic health records technology. Commenters urged us and
the OIG to adopt similar approaches to a post-interoperability
exception under the physician self-referral law and a post-
interoperability safe harbor under the anti-kickback statute.
Response: We have finalized one exception for arrangements
involving the donation of electronic health records software or
information technology and training services at Sec. 411.357(w).
Comment: Some commenters suggested that we incorporate the general
concept of interoperability into the pre-interoperability exception,
even if we do not require product certification. Many commenters stated
that encouraging electronic health records arrangements before
interoperability standards are available would be undesirable public
policy. Some commenters believe that a product certification process
that would include interoperability standards is already underway and
within the timeframe for this rulemaking. Others expressed that we
should either not wait until certification standards are adopted before
finalizing the post-interoperability exception, or not finalize either
of the exceptions until the certification standards are adopted. One
commenter expressed that, since timetables for the rulemaking and for
the certification standards are not known, we should consider
promulgating the regulation from the pre-interoperability perspective
and address the post-interoperability era in the future.
Response: We agree with the commenters that a bifurcated approach
is not necessary. We are not promulgating separate exceptions for pre-
and post-interoperability as we had proposed in the October 11, 2005
proposed rule. The industry has made considerable progress in
developing certification criteria for electronic health records
products within a very short time. In fact, one certification
organization has already completed an initial set of certification
criteria for ambulatory electronic health records. In some cases, there
may be products for which no certification criteria are available. To
address this situation, and to ensure interoperability to the extent
possible, the final exception requires that donated software be
interoperable at the time of the donation (regardless of whether the
product is actually certified), and bars a donor or any entity on its
behalf from taking any actions to disable or limit interoperability.
This latter condition also protects against donors that improperly may
attempt to create closed or limited electronic health records systems
by offering technology that functionally or practically locks in
business for the donor.
Comment: Many commenters supported the proposed prohibition against
donors or their agents taking any actions to disable or limit
interoperability or otherwise impose barriers to compatibility of the
donated technology with other technology, including technology owned or
operated by competing providers and suppliers.
Response: We have included this requirement in the final exception.
We believe this condition helps ensure that remunerative arrangements
involving health information technology will further the policy goal of
fully interoperable health information systems and will not be misused
to steer Medicare referrals to the donor.
Comment: Some commenters suggested that early adopters of
electronic health records technology
[[Page 45151]]
should be offered incentives or rewards because, otherwise, physicians
might delay investing their own funds in electronic health records
systems while waiting for a donor to offer them free technology. The
commenters continued that this delay would have a detrimental effect on
the adoption of electronic health records technology.
Response: It is unclear what types of incentives or rewards the
commenters are requesting. We note that the exception does not provide
incentives or rewards, nor would it be appropriate for an exception to
do so; rather, the exception protects the donation of certain
electronic health records technology when all conditions of the
exception are satisfied. The exception would not protect any cash
reimbursement paid to physician recipients for costs they incurred in
adopting technology.
Comment: One commenter requested that we and the OIG coordinate
with the Internal Revenue Service (``IRS'') to provide guidance through
an IRS revenue ruling publication to alleviate concerns related to tax
exemption.
Response: The commenter should contact the IRS directly with its
concerns.
C. Specific Comments
1. Protected Compensation in the Form of Items or Services (Nonmonetary
Remuneration)
a. Covered Technology
We proposed protecting the donation of electronic health records
software and directly related training services that are necessary to
receive, transmit, and maintain electronic health records of the
entity's or physician's patients, provided that the software includes
an electronic prescribing component. Importantly, we stated our
intention to protect donations of systems that improve patient care
rather than of systems comprised solely or primarily of technology that
is incidental to the core functions of electronic prescribing and
electronic health records.
Comment: Some commenters asked whether our proposal to protect
certain technology necessary and used to ``receive, transmit, and
maintain'' electronic health records would include technology used to
develop, implement, operate, facilitate, produce, and supplement
electronic health records.
Response: We intended that the final rule would encompass the types
of uses described by the commenters. To make this intent clear, we have
clarified the final rule to provide that the protected technology must
be necessary and used predominantly to ``create, maintain, transmit, or
receive'' electronic health records.
Comment: Most commenters believe that the proposed scope of
protected remuneration was too narrow. A few commenters suggested that
we limit the scope of the protected technology.
Commenters variously suggested that the exception should also
protect remuneration in the form of hardware, operating software,
connectivity items, support services, secure messaging, storage
devices, clinical decision support technology, services related to
training and ongoing maintenance, rights, licenses, and intellectual
property, as well as interfaces and translation software to allow
physician offices to exchange data with hospital systems, all of which
the commenters considered necessary for a fully-functioning electronic
health records system.
Some commenters encouraged us to exclude from protection hardware
and broadband wireless internet connectivity and to tailor the
protection of this exception narrowly to cover software, training, and
information technology support services. One commenter opined that
ongoing support, such as help desk support, could pose a risk of abuse,
because the physician would become dependent on the donor for the help
desk support, and might feel obligated to refer to the donor to ensure
continuation of that support. This commenter suggested that we protect
initial, start-up support services, but not long-term, ongoing system
support. A few commenters suggested that the scope of support services,
training, and other items and services should be a defined contribution
not to exceed 365 person-days.
Response: We have carefully considered the comments in light of our
intention to promote the adoption of electronic health records without
risk of program or patient abuse. The final rule protects electronic
health records software or information technology and training services
necessary and used predominantly to create, maintain, transmit, or
receive electronic health records.
To ensure that the exception is only available for software,
information technology and training services that are closely related
to electronic health records, the exception provides that electronic
health records functions must predominate. The core functionality of
the technology must be the creation, maintenance, transmission, or
receipt of individual patients' electronic health records. In addition,
the donated software must have 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. Although electronic health records
purposes must predominate, protected software packages may also include
other software and functionality directly related to the care and
treatment of individual patients (for example, patient administration,
scheduling functions, billing, clinical support software, etc.). This
condition recognizes that it is common for electronic health records
software to be integrated with other features.
We interpret ``software, information technology and training
services necessary and used predominantly'' to include, by way of
example, the following:
Interface and translation software;
Rights, licenses, and intellectual property related to
electronic health records software;
Connectivity services, including broadband and wireless
internet services;
Clinical support and information services related to
patient care (but not separate research or marketing support services);
Maintenance services;
Secure messaging (for example, permitting physicians to
communicate with patients through electronic messaging); and
Training and support services (such as access to help desk
services).
We interpret the scope of covered electronic health records
technology to exclude--
Hardware (and operating software that makes the hardware
function);
Storage devices;
Software with core functionality other than electronic
health records (for example, human resources or payroll software); and
Items or services used by a physician primarily to conduct
personal business or business unrelated to the physician's practice.
Further, training and support services do not include the provision
of staff to physicians or their offices. For example, the exception
would not protect the provision of staff to transfer paper records to
the electronic format. We believe that most physicians already possess
the hardware necessary to operate electronic health records systems.
Moreover, hardware represents a much lower cost to the physician when
compared to electronic health records software. Requiring investment by
a physician recipient in the hardware
[[Page 45152]]
portion of the electronic health records system safeguards further
against program abuse.
Finally, consistent with our discussion in the proposed rule and
our goal of widespread adoption of electronic health records, we are
not protecting systems comprised solely or primarily of technology that
is incidental to electronic prescribing and electronic health records.
As previously discussed, we intend that this exception protect
electronic health records technology arrangements in which the
electronic health records component predominates.
Although we share the concerns of those commenters that ongoing
remuneration, such as maintenance and help desk support, creates long-
term remunerative ties between donors and recipients, we believe that
requiring donated electronic health records to be interoperable
protects against the ``tying'' of referral sources (physicians) to
donor entities seeking referrals. Further, the cost sharing requirement
and sunset provision in the final electronic health records exception
should also address this concern.
Comment: With respect to internet connectivity services, some
commenters suggested that donations for connectivity should be limited
to any necessary devices for connectivity and technical support for
selecting and installing the appropriate connectivity services, but
should not include connectivity fees, which should be an ongoing
expense of the physician. Other commenters suggested that covered
technology should include ``T1'' lines or other enhanced broadband
connectivity (including connectivity needed to transfer medical images
and EKGs (especially in rural areas)), routers to speed download times,
secure connections and messaging, and ongoing maintenance and support
and interfaces.
Response: The final exception protects the donation of all forms of
connectivity services. We believe the choice of appropriate
connectivity services is an individual determination best made by the
donors and physician recipients given their specific circumstances. We
note that the cost sharing requirement of Sec. 411.357(w)(4) will
apply to these services, including connectivity fees. The exception
does not protect routers or modems necessary to access or enhance
connectivity because hardware is not protected remuneration under the
exception. As noted in the preceding response, concerns about ongoing
donations of connectivity services are also addressed by the sunset
provision.
Comment: Several commenters urged us to protect arrangements
involving the donation of billing software and other software for
administrative functions, such as registration and patient scheduling,
because much of the ``return on investment'' (that is, value) for
physicians who incorporate an electronic health records system into
their practices is the integration of clinical and administrative
systems. Commenters noted that the scope of the exception should
account for the fact that the products on the market increasingly
integrate administrative functions with the clinical electronic health
records functions. One commenter suggested that the exception should at
least prohibit the donation of technology that is unrelated to the
actual electronic health records software, such as technology related
to office administration. The commenter requested that the exception
protect integrated bundles of applications that include an electronic
health records component, provided the physician pays for the
technology that is unrelated to the electronic health records software.
Another commenter suggested that the exception should not protect
clearly separable administrative software (for example, billing,
coding, and practice management software), but protect those elements
of an electronic health records system that incidentally facilitate
administrative functions, such as software that links to diagnosis
codes for billing purposes. The commenter suggested that these
functions that dually support patient care and practice administration
are valuable to the physician and a driving force behind adoption of
electronic health records systems.
Response: As previously noted, the final exception protects the
donation of electronic health records software packages that include
core functionality of electronic prescribing and the creation and
maintenance of individual patients' electronic health records.
Protected software packages may also include other software and
functionality directly related to the care and treatment of individual
patients (for example, patient administration, scheduling functions,
billing, clinical support software, etc.).
Comment: A commenter asked for further clarification on whether the
exception would cover the donation of an electronic health records
system operating within an ``Application Service Provider'' model.
Response: Subject to the cost sharing requirement and other
conditions of the final exception, we would consider the donation of an
electronic health records system operating within an ``Application
Service Provider'' model (a business model that provides computer-based
services over a network) as covered technology.
Comment: A few commenters requested that the final rule require
donors to provide data migration services to a physician if the
physician chooses to abandon the donated electronic health records
system and purchase his or her own electronic health records system.
Response: We believe it is not appropriate to require donors to
provide data migration or any other specific service to physicians who
choose to switch electronic health records systems. Donors may provide
services if they wish, as long as the arrangement otherwise complies
with the exception. We note that, to the extent the data migration
services involve the provision of staff to the physician's office in
order to transfer the data, the services would not be protected.
Comment: A commenter recommended that the exception specifically
protect the provision of patient portal software that enables patients
to maintain on-line personal medical records, including scheduling
functions.
Response: Nothing in this final exception precludes protection for
patient portal software if it meets all conditions of the exception.
Comment: Some commenters urged us to remove the proposed
requirement that an electronic health records system include an
electronic prescribing component because such a requirement may stifle
investment in electronic health records technology in situations where
electronic prescribing is not considered a significant need. These
commenters suggested that patients would benefit most if we permit
donors to first adopt electronic health records technology and then add
electronic prescribing. Other commenters supported making an electronic
prescribing component a mandatory part of the donated electronic health
records system.
Response: Nothing in this exception prevents donors from adopting
any particular form of technology. However, to qualify for the
protection of this exception for arrangements in which the donor
provides electronic health records technology to potential referral
sources, we are requiring that the donated electronic health records
system include electronic prescribing capacity, either in an electronic
prescribing component or the ability to interface with the physician's
existing electronic prescribing system that meets the
[[Page 45153]]
applicable standards under Medicare Part D at the time the items and
services are donated. We are including 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 MMA. It is our understanding that most
electronic health records systems routinely include an electronic
prescribing component.
Comment: One commenter urged that the availability of public
software, such as VISTA, is not relevant to the requirements of an
exception. The commenter explained that hospitals and physicians must
be allowed flexibility to determine which software best meets their
needs, as long as it also meets the final interoperability standards.
Response: We agree that hospitals and physicians should have
flexibility to determine which software best meets their needs. We are
not adopting any express requirements related to public software.
Nothing in this final rule limits physician choice with respect to
health information technology. Protection is only available under this
exception for technology that meets the conditions of the exception,
including interoperability. We expect that physicians would
appropriately evaluate any offer of health information technology to
ensure that it best meets their needs before accepting the donation.
b. Definition of Electronic Health Records
Comment: We requested comments on how to define ``electronic health
record.'' One commenter suggested that we should define electronic
health record as electronically originated and/or maintained clinical
health information, that may incorporate data derived from multiple
sources and that replaces the paper record as the primary source of
patient information. Another commenter suggested that we protect any
interoperable component or module of an electronic health record.
Another commenter suggested that ``electronic health record'' be
defined for purposes of this exception to accomplish two objectives:
(1) To promote a connected system of electronic health care information
available to all doctors and patients whenever and wherever possible;
and (2) to promote the collection of quality and outcome measures to
facilitate pay-for-performance payment methodologies. This commenter
referred to the Medicare Payment Advisory Commission (``MedPAC'')
description of electronic health record clinical information technology
and suggested that we define ``electronic health record'' to include
applications that permit the following functions:
Tracking patients' care over time;
Allowing physicians to order medications, laboratory work,
and other tests electronically and access test results;
Providing alerts and reminders for physicians; and
Producing and transmitting prescriptions electronically.
(See MedPAC ``Report to the Congress: Medicare Payment Policy'' at 206
(2005) (available at http://www.medpac.gov/publications/congressional_reports/Mar05_EntireReport.pdf.) A commenter requested that we define
``electronic health record'' broadly enough to include applications
that capture clinical trial data. Another commenter did not think it
was in the best interest of the industry for us to propose such a
definition at this time.
Response: For the purpose of this regulation, we are adopting a
broad definition of ``electronic health record'' to read as follows:
``A repository of consumer health status information in computer
processable form used for clinical diagnosis and treatment for a broad
array of clinical conditions.'' We are adopting a broad definition
consistent with our goal of encouraging widespread adoption of
electronic health records technology.
Comment: A commenter stated that the term ``electronic health
record,'' as used in the proposed rule, is inconsistent with the same
terminology when used within the information technology industry, and
is therefore confusing. The commenter suggested that we may have meant
to use the term ``electronic medical record.'' According to the
commenter, an ``electronic health record'' is commonly used to describe
the broad concept of the total health care data that exists regarding
an individual within an electronic universe (including, for example,
the patient's personal health record, medication history stored by an
insurance plan, electronic imaging results stored at a hospital, etc.).
An ``electronic medical record'' typically refers to patient-centric,
electronically maintained information about an individual's health
status and care that focuses on tasks and events related to patient
care, is optimized for use by a physician, and relates to care within a
single clinical delivery system.
Response: We recognize that there are several ways in which
information technology terms are used, including the terminology
``electronic health record'' and ``electronic medical record.'' For
purposes of this exception, we have opted to use the term ``electronic
health record,'' and we have included a definition of ``electronic
health record'' in this final rule.
Comment: We solicited comments on whether we should require that,
in order to qualify for protection under this exception, electronic
health records software include a computerized physician order entry
(``CPOE'') component. Many commenters stated that, without either
agreed upon standards or product criteria, a CPOE component should not
be required. These commenters noted that CPOE and electronic
prescribing functionalities can be quite similar and may be redundant.
These commenters were concerned that mandating implementation of CPOE
technology along with electronic health records software could deter
development of either system. Another commenter noted that most of the
off-the-shelf generic CPOE programs have proven ineffective to date.
Some commenters supported permitting CPOE as part of the electronic
health records software, as long as it is not a particular type of
CPOE.
Response: We are not persuaded to require that electronic health
records technology include a CPOE component in order to qualify for
protection under this exception. We note that nothing in this exception
mandates the implementation of any particular technology or functions.
Comment: Most commenters opposed our proposal to require that
electronic health records software be compatible with Public Health
Information Network (``PHIN'') preparedness standards or BioSense
standards in order to qualify for the protection of this exception.
These commenters pointed out that there is currently no industry
consensus on preparedness standards, nor are there product
certification criteria established for these programs. These commenters
were concerned that clinicians and patients may be alarmed by the idea
of clinician systems being linked to government systems for
biosurveillance purposes.
Response: We are not including this requirement in the final
exception.
c. ``Necessary and Used Solely'' and Technical and Functional
Equivalence
1. Interpretation of ``Necessary''
We proposed interpreting ``necessary'' in the electronic health
records exception consistent with our interpretation of the term in
section
[[Page 45154]]
II.A.1 of the proposed rule in the exception for electronic
prescribing.
Comment: Some commenters asked whether our proposal to protect
certain technology necessary and used to ``receive, transmit, and
maintain'' electronic health records would include technology used to
develop, implement, operate, facilitate, produce, and supplement
electronic health records.
Response: We intend that the final rule will encompass the types of
uses described by the commenters. To make this intent clear, we have
clarified the final rule to provide that the protected technology must
be necessary and used predominantly to ``create, maintain, transmit, or
receive'' electronic health records.
Comment: One commenter requested that we clarify that the term
``necessary'' would not preclude the provision of outpatient-focused
(also referred to as ``ambulatory-focused'') electronic health records
software to physicians who may already have access through the internet
or otherwise to an inpatient-focused electronic health records systems.
Response: The final rule does not preclude the provision of
outpatient or ambulatory electronic health records software to
physicians who already have access to inpatient-focused systems.
2. Technical and Functional Equivalence
We proposed requiring the physician recipient of donated electronic
health records technology to certify that the items and services to be
provided are not technically or functionally equivalent to items or
services the physician already possesses or has obtained. The proposed
exception would have required that the certification be updated before
the provision of any necessary upgrades or items and services not
reflected in the original certification. We expressed our concern that
the certification process would be ineffective as a safeguard against
program or patient abuse if it were a mere formality or if physicians
simply executed a form certification provided by a donor. Therefore, we
proposed that the donor must not have actual knowledge of, and not act
in reckless disregard or deliberate ignorance of, the fact that the
physician possessed or had obtained items and services that were
technically or functionally equivalent to those donated by the donor
and that the exception would protect the physician only if the
certification were truthful.
Comment: Several commenters requested further clarification
regarding the meaning of ``technically or functionally equivalent'' and
the meaning of ``significantly enhance the functionality'' as we used
those terms in the proposed rule. Other commenters expressed concerns
about the requirement, asserting that it would deter physicians who are
not technology experts from adopting health information technology, and
might result in physicians hiring costly technology consultants to
evaluate their existing systems. A commenter expressed concern that the
exception not hinder the goals of widespread adoption of electronic
health records by, for example, excluding from protection technology
that would standardize the technology used by all physician recipients
or updated, user-friendly technology that would replace outdated,
outmoded, or unusable technology. For these reasons, several commenters
stated that technical and functional equivalence was not an appropriate
or workable standard for assessing whether donated items and services
are necessary and that, accordingly, the requirement should not be
adopted. Other commenters suggested modifications to the proposed rule.
One commenter suggested that hospitals should incorporate inquiries
regarding the technological items and services physicians possess into
the surveys physicians must complete to acquire and maintain physician
privileges. Another suggested that any costs associated with the
certification process should be included as part of the services
offered by the donor. A few commenters suggested that we should provide
financial assistance in evaluating the existing technology, while
another commenter proposed that we publish guidelines for technological
equivalence upon which all donors and physicians could rely. Some
commenters urged that the certification requirement incorporate a
``good faith'' standard for compliance, while other commenters
expressed concern that donors would not be in a position to evaluate
the technology already possessed by potential physician recipients and,
therefore, that protection under this exception for donors should not
hinge on the physician's certification. Another commenter requested
that we provide ``templates'' for the written certification to ensure a
simple and transparent certification process. One commenter expressed
concern that a requirement for ongoing certification to account for
upgrades or new software, hardware, or services would create an
unnecessary burden. Another commenter proposed that there should be one
certification required once interoperability standards for all health
information technology components are finalized.
Response: Having considered the public comments, we have concluded
that our proposal to require physicians to certify in writing that they
do not possess equivalent technology might become unnecessarily
burdensome. We are not requiring a written certification. The final
exception requires that protected donations be limited to electronic
health records software or information technology and training services
that are necessary and used predominantly to create, maintain,
transmit, or receive electronic health records. We do not believe
software and services are ``necessary'' if the physician recipient
already possesses the equivalent software or services. The provision of
equivalent items and services poses a risk of abuse, since such
arrangements potentially confer independent value on the 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. Thus, if a donor knows that the physician already possesses
the equivalent items or services, or acts in deliberate ignorance or
reckless disregard of that fact, the donor will not be protected by the
exception. Thus, prudent donors may want to make reasonable inquiries
to potential physician recipients and document the communications. We
do not believe this requirement necessitates the hiring of technical
experts by either the donor or physician recipient.
The final exception would not preclude upgrades of items or
services that enhance the functionality of the physician's existing
technology, including upgrades that make software more user-friendly or
current, nor would it preclude items and services that result in
standardization of systems among donors and physicians, provided that
the standardization enhances the functionality of the electronic health
records system (and any donated software is interoperable).
Comment: Many commenters requested further clarification of our
concern about the risk of physicians intentionally divesting themselves
of technically or functionally equivalent technology that they already
possess or have obtained in order to shift costs to the donor. (See
October 11, 2005 proposed rule, (70 FR 59188).) These commenters
expressed the opinion that physicians would not intentionally divest
themselves of health information technology given the low adoption rate
of health information technology and the time and resource commitment
[[Page 45155]]
necessary to implement and maintain a health information technology
system.
Response: Although we believe that there is a real potential for a
physician to divest intentionally himself or herself of health
information technology to shift the costs to a donor, we are not
including any specific conditions to address such divestiture. Rather,
we believe that the totality of the conditions in the final exception,
including, for example, the cost sharing requirement and the sunset
provision, should adequately address our concerns. We believe that
physicians, acting as prudent buyers, are less likely to divest
themselves of technology for which they would have to contribute to the
replacement cost.
d. Interoperability/Standards
The implementation of electronic health information technology is a
national priority that has the potential to improve our health care
system. Interoperable electronic health information technology would
allow patient information to be portable and to move with consumers
from one point of care to another. This would require an infrastructure
that can help clinicians gain access to critical health information
when treatment decisions are being made, while keeping that information
confidential and secure. We believe that the promise of a secure and
seamless information exchange that reduces medical errors, improves the
quality of patient care, and improves efficiency will be realized only
when we have a standardized system that is open, adaptable,
interoperable, and predictable.
As discussed in the proposed rule, we believe that interoperable
electronic health records technology, once implemented, has the
potential to increase health care quality and improve efficiency, which
are outcomes consistent with our goals in exploring Pay-for-Performance
options. We also believe it is important to promote these open,
interconnected, interoperable electronic health records systems that
help improve the quality of patient care and efficiency in the delivery
of health care to patients, without protecting arrangements that hinder
marketplace competition, serve as marketing platforms, or are
mechanisms to influence clinical decision-making inappropriately. We
proposed two types of conditions that would make compatibility and
interoperability of donated technology key features of protected
arrangements. These features would encourage the adoption of open,
interconnected, interoperable systems, and thereby reduce the risk of
fraud and abuse. First, we proposed that once interoperability and
other product criteria have been recognized, electronic health records
technology should be certified in accordance with standards adopted by
the Secretary. Second, we proposed that a donor (or entity acting on
behalf of the donor) not limit or restrict the use of the technology
with other electronic prescription or health records systems, or
otherwise impose barriers to compatibility.
Comment: Many commenters advocated a requirement that all donations
meet the Certification Commission for Healthcare Information Technology
(CCHIT) approved certification levels of functionality,
interoperability, and security. One commenter suggested that we measure
interoperability based on accepted, consensus-driven standards that are
already in place, such as the Electronic Health Record-Lab
Interoperability and Connectivity Standards or other interoperability
standards adopted by the Federal government as part of the Consolidated
Health Informatics initiative (see http://www.hhs.gov/healthit/chi.html). Some commenters expressed concern that clinicians who adopt
health information technology before the existence of final
certification standards would be unfairly penalized. These commenters
were also concerned about the chilling effect on some early adoption
arrangements where certification standards are not yet available. These
commenters requested that we consider ``grandfathering'' clinicians
whose existing health information technology systems are not compliant
with the certification standards by permitting them a one-time
opportunity to upgrade their systems to be compliant with CCHIT
certification criteria. As an alternative to requiring CCHIT
certification, a few commenters recommended that we condition the
ongoing use of the exception on the donated software being capable of
exchanging health care information in compliance with applicable
standards once adopted by the Secretary and on no action being taken
that would pose a barrier to the information exchange.
Response: Having considered the options, and consistent with
Department policy, we have concluded that software will qualify for the
protection of the exception if it is interoperable as defined in this
final rule. Software will be deemed to be interoperable if it is
certified by a certifying body recognized by the Secretary. Nothing in
the final rule precludes donors from providing physicians with upgrades
to software that meet the definition of ``interoperable'' or would make
the software comply with then-existing certification standards.
Comment: We indicated in the October 11, 2005 proposed rule (70 FR
59186) that we were considering defining the term ``interoperable'' for
purposes of the exception to mean ``the ability of different operating
and software systems, applications, and networks to communicate and
exchange data in an accurate, secure, effective, useful, and consistent
manner.'' One commenter agreed with this proposed definition. Another
commenter suggested that we adopt the definition developed by the
National Alliance for Health Information Technology (NAHIT): ``the
ability of different information technology systems and software
applications to communicate, to exchange data accurately, effectively,
and consistently, and to use the information that has been exchanged.''
One commenter suggested that the definition of interoperability be
flexible enough to adapt to evolving industry standards. A few
commenters suggested defining interoperability as ``the uniform and
efficient movement of electronic healthcare data from one system to
another, such that clinical or operational purpose and meaning of the
data is preserved and unaltered.'' One commenter opposed any definition
of interoperability that would require a donor to support electronic
transmissions from technology supplied by other vendors or to host
applications accessible by software supplied by other vendors.
Response: Having reviewed the public comments and upon further
consideration, we are defining ``interoperable'' to mean that, at the
time of the donation, the software is ``able to (1) communicate and
exchange data accurately, effectively, securely, and consistently with
different information technology systems, software applications, and
networks, in various settings, and (2) exchange data such that the
clinical or operational purpose and meaning of the data are preserved
and unaltered.''
Interoperability must apply in various settings, meaning that the
software must be interoperable with respect to systems, applications,
and networks that are both internal and external to the donor's or
physician recipient's systems, applications, and networks. In other
words, software will not be considered interoperable if it is capable
of communicating or exchanging data only within a limited health care
system or community.
We believe this definition reflects our intent to protect only
those
[[Page 45156]]
arrangements that will foster open, interconnected, interoperable
electronic health records systems that help improve the quality of
patient care and efficiency in the delivery of health care to patients,
without undue risk that donors might use arrangements to lock in
referrals from physician recipients.
We are mindful 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. Parties should have a reasonable basis for
determining that software is interoperable. We believe it would be
appropriate--and, indeed, advisable--for parties to consult any
standards and criteria related to interoperability recognized by the
Department. Compliance with these standards and criteria will provide
greater certainty to donors and recipients that products meet the
interoperability requirement, and may be relevant in an enforcement
action. We note further that parties wishing to avoid any uncertainty
can avail themselves of the ``deeming'' provision, which provides that
software that is certified by a body recognized by the Secretary will
be deemed to be interoperable for purposes of the exception. In order
to ensure interoperability, products must have an up-to-date
certification at the time of donation, and we are requiring that, to
meet the deeming provision, the software must have been certified
within 12 months prior to the date of the donation.
We are including the condition that the donor (or any person on the
donor's behalf) must not take any actions to limit or restrict the
ability of the items or services to be interoperable with other
electronic prescription information items or services or electronic
health information systems. We believe this condition clearly reflects
our intent that donors should not limit or restrict the use,
compatibility, or interoperability of donated technology. We note that
compliance with the condition in Sec. 411.357(w)(3) is a separate
requirement from compliance with Sec. 411.357(w)(2), which requires
that products must be interoperable and will be deemed interoperable if
a certifying body recognized by the Secretary has certified the
software within no more than 12 months prior to the date it is provided
to the physician. For example, if a donor takes actions that would
cause a certified product to fall out of compliance with the
interoperability standards that apply to the certified product, we
would consider that to be an action to limit or restrict the use or
compatibility of the items or services for purposes of Sec.
411.357(w)(3). We are not persuaded to protect arrangements where use,
compatibility, or interoperability is limited to the products of
specific vendors. To the contrary, we believe that inherent in the
concept of interoperability is the ability of technology to communicate
with products of other vendors.
Comment: Many commenters supported the proposed prohibition against
donors or their agents taking any actions to disable or limit
interoperability or otherwise impose barriers to compatibility of the
donated technology with other technology, including technology owned or
operated by competing providers and suppliers.
Response: We have revised Sec. 411.357(w)(3) to clarify this
requirement in the final exception. We believe this condition will help
ensure that donations of health information technology will further the
policy goal of fully interoperable health information systems and will
not be misused to steer business to the donor.
2. Permissible Donors and Physician Recipients
a. Donors
We proposed to limit the scope of protected donors under the
electronic health records exception to hospitals, group practices, PDP
sponsors, and MA organizations, consistent with the MMA-mandated donors
for the electronic prescribing exception. We indicated that we selected
these donors because they have a direct and primary patient care
relationship and a central role in the health care delivery
infrastructure that would justify protection under the exception for
the provision of electronic health records technology that would not be
appropriate for other types of providers and suppliers, including
providers and suppliers of ancillary services.
Comment: Most commenters stated that the proposed scope of
potential donors was too limited. Commenters variously suggested that
the protected donors include some or all of the following categories:
Nursing facilities;
Assisted living and residential care facilities;
Intermediate care facilities for persons with mental
retardation;
Mental health facilities;
Organizations providing population health management
services (such as disease and care management programs and services);
All components of an integrated delivery system (``IDS'')
(including network providers or other entities that operate, support,
or manage network providers);
Clinical laboratories;
Pharmaceutical manufacturers;
Durable medical equipment suppliers;
Radiation oncology centers;
Community health centers;
Physician-hospital organizations;
Health plans;
Regional Health Information Organizations (``RHIOs'');
Dialysis facilities; and
Other entities that, in the commenters' views, enhance the
overall health of a community.
One commenter representing dialysis facilities suggested that the
exception should protect donations of nonmonetary remuneration by all
providers that maintain medical staffs pursuant to medical staff bylaws
when the donations are made to members of the medical staff. Another
commenter suggested that a clinical data exchange (or community-wide
health information system) should be included as a protected donor,
because individual stakeholders in health information technology
projects are unlikely to develop, purchase, or donate items necessary
to implement and maintain a true community-wide clinical data exchange.
A few commenters stated that health plans and pharmacy benefits
managers (PBMs) should be protected donors because, according to the
commenters, these entities develop health information technology and
are engaged with physicians on a direct level to increase the
utilization of electronic prescribing and electronic health records
technology. These commenters urged that the risk to the Medicare
program and its beneficiaries is reduced because health plans and PBMs
have business incentives to limit utilization of prescriptions. A few
commenters suggested that we should permit any entity that has an
interest in donating health information technology to do so.
Response: Recognizing that extending the protection of the
exception to a wider group of donors may further facilitate the
dissemination of the technology and after carefully considering the
recommendations of the commenters, we have expanded the list of
protected donors. In an effort to create a bright line rule, protected
donors include all entities (as that term is defined at Sec. 411.351)
that furnish DHS. DHS entities may donate covered
[[Page 45157]]
technology to any physician. To the extent that a PDP sponsor or MA
organization is an entity that furnishes DHS, donations of electronic
health records software or information technology and services by the
PDP sponsor or MA organization would be permissible, provided that all
conditions of the exception are met. (When PDP sponsors and MA
organizations do not satisfy that definition, the physician self-
referral prohibition may not be implicated.) Moreover, PDP sponsors and
MA organizations potentially may avail themselves of other existing
exceptions.
In identifying the final list of protected donors, we considered
the important goal of encouraging the rapid adoption of interoperable
electronic health records by physicians and other providers. We believe
that, although some types of DHS entities may have a more direct and
central role in the provision of care to patients than other DHS
entities, the goal of widespread adoption of interoperable electronic
health records is sufficiently important to permit all types of DHS
entities to donate covered technology. Expanding the list of
permissible donors beyond those identified in the proposed rule will
expedite adoption of electronic health records. We also believe that
our concerns about the potential for increased utilization or
anticompetitive behavior that could arise from permitting an expanded
list of donors to donate electronic health records technology are
addressed through the additional conditions and limitations included in
the final rule. Specifically, we believe that the requirements that
donated software be interoperable and that physicians contribute 15
percent to the cost of the donated technology, and the limited duration
of the exception (it sunsets on December 31, 2013), if met, provide
adequate protection against program and patient abuse. We caution that
compliance with each condition of the exception is mandatory in order
for an arrangement to enjoy the protection of the exception. We are not
expanding the list of protected donors to include every type of health
care entity requested by the commenters as the physician self-referral
law does not apply to many of the suggested entities (for example,
pharmaceutical manufacturers and RHIOs). In addition, as discussed in
this preamble, protection under this exception may not be needed for
all arrangements involving the provision of electronic health records
items and services.
Comment: A commenter requested that Federally qualified health
clinics (FQHCs), as defined in the Medicaid statute and Medicare
regulations, should be included as permissible donors.
Response: As entities furnishing DHS, FQHCs are protected donors
under the final rule.
Comment: A commenter requested that we expand the list of
permissible donors to include research and manufacturing entities and
suggested that blind trusts could be established utilizing funds from
several pharmaceutical companies to reduce the risk of program or
patient abuse. Another commenter requested that we include entities in
the research-based biopharmaceutical industry as permissible donors,
noting that the widespread adoption of health information technology
could reduce the need for proprietary systems used solely for purposes
of clinical trial programs. One commenter requested that health
information technology vendors be included as protected donors.
Response: We are not including research and manufacturing entities,
entities in the research-based biopharmaceutical industry, or health
information technology vendors as protected donors for purposes of this
final exception because they are not subject to the prohibitions of the
physician self-referral law as they are not entities furnishing DHS.
With respect to the establishment of blind trusts, such arrangements
would be outside the scope of this rulemaking.
Comment: One commenter strongly urged us to expand the list of
protected donors to give physicians the opportunity to choose between
different software offerings. Other commenters suggested that the
exception should require an open, transparent Request for Proposal
(``RFP'') process whereby the donating entity would be required to
offer technology from a minimum of three vendors for the physician to
select. These commenters expressed the view that a multivendor, open
RFP process would ensure competitive market pricing and would allow
physicians to participate in the selection process to ensure that
services meet the needs of their clinical practices, while also
protecting against the physician being locked in by the donating
entity. Another commenter requested that the final rule clearly state
that physicians should be free to choose their own electronic health
records systems or should be offered a choice by entities providing
subsidies or assistance for purchasing these systems.
Response: Physicians remain free to choose any electronic health
information technology that suits their needs. However, we are not
requiring donors to facilitate that choice for purposes of the
exception, although donors must offer interoperable products and must
not impede the interoperability of any technology they decide to offer.
We decline to require the type of RFP process requested by the
commenter, as it would be unnecessarily complex, burdensome and
impractical, and would increase significantly the transaction costs for
donating electronic health records technology. In addition, nothing in
this exception requires donors to donate any particular level, scope,
or combination of items and services.
Comment: Commenters from the laboratory industry strongly urged us
to include laboratories as protected donors. They argued that reducing
duplicative laboratory testing is a potential benefit to the
implementation of interoperable electronic health records. These
commenters stated that clinical laboratories should be included in the
exception to achieve a level playing field and the goal of widespread
adoption of technology.
Response: Because clinical laboratories are entities furnishing
DHS, we are including them as permissible donors under the final
exception.
Comment: A commenter suggested that the exception should protect
nonmonetary remuneration offered by partnerships or consortia of
otherwise permissible donors, so that parties could work together and
share the cost of expanding needed health information technology in the
community.
Response: We discern nothing in the final exception that
necessarily would preclude a partnership or consortium of otherwise
permissible donors from entering into a protected arrangement, provided
the conditions of the exception are satisfied.
b. Physician Recipients
Comment: Most commenters expressed the view that the categories of
protected physician recipients were too limited and urged us to be more
expansive. Commenters suggested that some or all of the following
should be included as permissible recipients:
Nonmedical staff physicians;
Physicians who are network providers;
Physicians who have contracted with an IDS;
Physicians and other licensed health care professionals
whose patients regularly receive inpatient and/or outpatient care at
the donor hospital or health system;
Hospitalists;
Intensivists;
[[Page 45158]]
Physician assistants;
Nurse practitioners;
Audiologists; and
Independent contractors of group practices.
Commenters noted that many nonphysician providers would benefit
greatly from protection under this exception, given the fact that
nonphysician providers generally have limited resources available to
fund office technology.
Response: We agree with the commenters who suggested expanding the
list of protected physician recipients of donated technology to further
the goal of, and achieve the benefits of, widespread adoption of
electronic health information technology. The final rule permits
donation of protected remuneration by an entity that furnishes DHS to
any physician. Because the physician self-referral law only applies to
donations to physicians, it is unnecessary for us to expand the
exception to protect donations to nonphysicians.
Comment: Many commenters suggested that the categories of
permissible recipients be expanded to include the following providers
and suppliers and their staffs:
Nursing facilities;
Assisted living and residential care facilities;
Intermediate care facilities for persons with mental
retardation;
Mental health facilities;
Clinical laboratories;
Durable medical equipment providers;
Pharmacies, including long term care pharmacies;
Community health centers;
Network providers or other entities that operate, support
or manage network providers;
Physician-hospital organizations;
Health plans;
RHIOs; and
Other entities designed to enhance the overall health of
the community.
Commenters also requested that FQHCs, as defined in the Medicaid
statute and Medicare regulations, should be included as permissible
recipients.
Response: We decline to adopt the commenters' suggestion for
permitting donations to these types of entities and their staffs. We
note that the physician self-referral law applies only when a physician
is a party to the financial (either compensation or ownership)
arrangement. Donations to the types of entities suggested by the
commenters for inclusion as permissible recipients under the final
exception would not implicate the physician self-referral law if made
by other nonphysician entities.
Comment: Many commenters requested that we permit donors to donate
technology to all members of a group practice, or to the group practice
as a whole, even if all members do not routinely provide services to
the donor. Some commenters suggested that we should permit group
practices to donate to other group practices. One commenter asked for
clarification as to whether the proposed exception would apply only to
the specific physician recipient of the donated technology or whether,
for example, all members of a group practice could use the technology
that was donated to the physician.
Response: The final rule contains no limitation on the physician's
membership on a donor hospital's medical staff. The final exception
does not protect donations from one group practice to another group
practice; however, group practices, because they are entities that
furnish DHS, may donate covered technology to any physician.
Comment: Some commenters stated that a hospital donor may not want
to donate the full value of an electronic health records system to
physicians outside of its medical staff. These commenters suggest
permitting outside physicians to have access to the information in the
hospital's electronic health records system by allowing the outside
physicians to use or sublicense the hospital's electronic health
records system at the cost to the hospital. These commenters also
suggested allowing outside physicians to take advantage of the pricing
obtained by the hospitals for electronic health records technology and
related services.
Response: We have expanded the final exception to include all
physicians as recipients when the donor is an entity that furnishes
DHS. Nothing in the exception requires hospitals or other donors to
offer physicians a full electronic health records system. We interpret
the commenters' suggestion that community physicians be permitted to
access electronic data at the hospital's cost to be a comment seeking
clarification that any aggregate dollar limit on donated technology be
calculated based on the donor's costs rather than retail value to the
recipient. In this regard, the final exception incorporates a cost
sharing requirement based on the donor's costs. It does not incorporate
an aggregate dollar limit.
3. Selection of Physician Recipients
In light of the enhanced protection against program or patient
abuse offered by interoperable electronic health records systems, this
final rule permits donors to use selective criteria for choosing
physician recipients, provided that neither the eligibility of a
physician, nor the amount or nature of the items or services donated,
is determined in a manner that directly takes into account the volume
or value of referrals or other business generated between the parties.
We have enumerated several selection criteria which, if met, are deemed
not to be directly related to the volume or value of referrals or other
business generated between the parties (for example, a determination
based on the total number of hours that the physician practices
medicine or a determination based on the size of the physician's
medical practice). Selection criteria that are based on the total
number of prescriptions written by a physician are not prohibited.
However, the final rule prohibits criteria based upon the number or
value of prescriptions written by the physician that are dispensed or
paid by the donor, as well as any criteria directly based on any other
business generated between the parties. The final exception does not
protect arrangements for which selection criteria are designed to
induce a physician to change loyalties from other providers or plans to
the donor.
We expect that this approach will ensure that donated technology
can be targeted at physicians who use it the most in order to promote a
public policy favoring adoption of electronic health records, while
discouraging especially problematic direct correlations with Medicare
referrals. This approach is a deliberate departure from other
exceptions under the physician self-referral law based on the unique
public policy considerations surrounding electronic health records and
the Department's goal of encouraging widespread adoption of
interoperable electronic health records. We caution, however, that
outside of the context of electronic health records as specifically
addressed in this final rule, and except as permitted in Sec.
411.352(i) (special rules for productivity bonuses and profit shares
distributed to group practice physicians), both direct and indirect
correlations between the provision of free or deeply discounted goods
or services and the volume or value of referrals or other business
generated between the parties are prohibited.
Comment: Several commenters commended us for our efforts to prevent
program or patient abuse by prohibiting efforts to increase referrals
or other changes in practice patterns. Some commenters noted that we
should not allow donors to choose physicians selectively based upon the
volume of their prescribing, size of practice, or
[[Page 45159]]
whether they would be likely to adopt the technology, and stated that
donors should give technology to all physicians.
One commenter suggested eliminating the criteria permitting donors
to select physicians based on any reasonable and verifiable manner that
is not directly related to the volume or value of referrals or other
business generated between the parties. The commenter stated that this
criteria is too open-ended and subjective and could become a major
loophole. Other commenters supported the use of such criteria and
expressed the view that the use of selection criteria to select
physician recipients will improve quality of care and ensure successful
adoption of health information technology by physicians. These
commenters offered suggestions on the standards for selection criteria.
Some commenters suggested that we consider broad criteria for the
selection of physicians, and that donors should be permitted to make
this decision based upon their own financial model.
A commenter recommended that selection criteria related to the
volume or value of referrals should be permitted, as long as the
criteria are linked to achieving greater improvement in quality of
patient care or greater success in adoption of health information
technology. The commenter provided the following examples:
Participation in hospital quality improvement activities;
Participation in medical staff meetings and activities;
Specialty;
Department (if health information technology is rolled out
by department);
Readiness to use health information technology;
Consistent use of hospital-based information technology
systems;
Acting as a ``physician champion'' of hospital-based
information technology systems;
Willingness to serve as a trainer for other physicians;
Size of medical practice; or
Willingness to contribute some resources to the health
information technology project.
Another commenter requested that any list of criteria included in
the rule be inclusive, rather than exclusive, and that we provide
further guidance on how to interpret the criteria.
Response: Some of the commenters' suggestions are too subjective,
impractical, or not sufficiently bright-line to be ``deeming''
provisions for purposes of this rulemaking. Accordingly, those
suggestions are not appropriate here. Although we believe it is
important to provide some guidance with respect to selection criteria,
we do not believe it is possible to enumerate a comprehensive list.
Therefore, we are providing several bright-line criteria in the final
rule, along with a general provision that permits other reasonable and
verifiable selection criteria that do not relate directly to the volume
or value of referrals. We are finalizing the criteria enumerated in the
proposed rule, in addition to a criterion related to the provision of
uncompensated care, specifically--
The determination is based on the total number of
prescriptions written by the physician (but not the volume or value of
prescriptions dispensed by the donor);
The determination is based on the size of the physician's
medical practice (for example, total patients, total patient
encounters, or total relative value units);
The determination is based on the total number of hours
that the physician practices medicine;
The determination is based on the physician's overall use
of automated technology in his or her medical practice (without
specific reference to the use of technology in connection with
referrals made to the donor);
The determination is based on whether the physician is a
member of the donor's medical staff, if the donor has a formal medical
staff;
The determination is based on the level of uncompensated
care provided by the physician; or
The determination is made in any reasonable and verifiable
manner that does not directly take into account the volume or value of
referrals or other business generated between the parties.
Comment: Some commenters inquired whether the exception would
permit a donor to offer a staggered rollout of electronic health
records technology so that the technology could be provided on a
selective basis, either by specialty, hospital department, or
otherwise. These commenters suggested that the exception should not
enumerate specific examples of instances when a staggered offering is
deemed ``not directly related to'' referrals or other business, but
rather should allow donors to offer health information technology as
appropriate for each hospital's individual financial situation.
Response: The final rule prohibits the selection of recipients
using any method that takes into account directly the volume or value
of referrals from the recipient or other business generated between the
parties. The final rule provides some examples of acceptable criteria
and permits any other determination that is reasonable and verifiable.
Given the potential variation in arrangements, it is not entirely clear
to us how the commenters would implement their ``staggered rollout.''
Such arrangements should be evaluated for compliance with the exception
on a case-by-case basis. We note that nothing in the exception requires
that technology be provided to all potential recipients
contemporaneously.
Comment: One commenter recommended that we reaffirm that physicians
who receive donated technology remain free to choose what health
information may or may not be shared with the hospital or entity
providing the technology, consistent with current law and the wishes of
patients and physicians.
Response: Nothing in this final rule regulates the sharing of
health information. In addition, nothing in this final rule permits
donors to influence the medical decision making of physicians or
requires physicians to act in a manner that would violate any legal or
ethical obligation to patients.
Comment: A commenter requested that we prohibit donors from
selecting physicians in a manner that punishes or rewards past
prescribing practices or influences their future prescribing practices.
Another commenter recommended that we expressly permit any incidental
increase to the volume of referrals resulting from increased quality
and patient care.
Response: Any selection criteria directly related to past, present,
or future volume of prescriptions dispensed or paid by the donor or
billed to the Medicare program, or directly related to any other
business generated between the parties, are strictly prohibited. Any
selection criteria that punish or reward past prescribing practices or
seeks to influence future prescribing practices would give rise to an
inference that the selection criteria are tied directly to the volume
or value of referrals. We are not adopting the commenter's suggestion
that we expressly permit increases in the volume of referrals
attributable to increased quality in patient care. Whether an increase
in the volume of referrals between a donor and physician recipient is
attributable to increased quality in patient care, rather than an
impermissible incentive, requires an evaluation of the particular facts
and circumstances.
Comment: A commenter requested that PDP sponsors and MA
organizations be permitted to determine eligibility, or the amount or
nature of the items and services, in a manner that takes into account
the volume and value of prescriptions written by the
[[Page 45160]]
physician that are paid by the PDP sponsor or MA organization. This
commenter believes that PDP sponsors and MA organizations have the
financial incentive to control drug utilization costs to compete
effectively in the Medicare Part D marketplace.
Response: We are not persuaded by this commenter. Neither
eligibility, nor the amount or nature of the items or services, may be
determined by taking into account the volume or value of prescriptions
written by the physician and paid by the PDP sponsor or MA
organization. Nothing in the exception precludes PDP sponsors and MA
organizations from offering protected items and services to physicians
with whom they have network agreements.
Comment: One commenter requested that we protect donations when
provided to a physician who provides a certain level of uncompensated
care or a combination of uncompensated care and services to a certain
number of Medicaid patients.
Response: The provision of uncompensated care would be an
acceptable selection criterion and we have included it in the list of
selection criteria deemed not to be directly related to the volume or
value of referrals or other business generated between the donor and
physician recipient. For example, a hospital can elect to provide
technology only to rural and solo practitioners who provide high levels
of uncompensated care when selecting among eligible physicians. The
total number of Medicaid patients served by the practice could also be
acceptable as long as there is no direct correlation with the number of
Medicaid patients referred to the donor (or the value of the services
provided). We do not believe it would be appropriate for us to
establish a threshold level of uncompensated care necessary to qualify
for protection under this exception. Donors should have flexibility to
respond to the particular needs of their communities by selecting
recipients based on levels of uncompensated care that reflect those
needs.
4. Value of Technology: Cap
We proposed, as a further safeguard against program or patient
abuse, to limit the aggregate value of the qualifying electronic
prescribing technology that a donor could provide to a physician. We
solicited public comment on the applicable amount and methodology for
limiting the aggregate value of donated technology.
We also indicated that we were considering setting an initial cap,
for both the electronic prescribing and electronic health records
exceptions, which could be lowered after a certain period of time
sufficient to promote the initial adoption of the technology. This
approach would have the effect of encouraging investments in the
desired technology while also ensuring that (as often occurs with
technology), as costs decrease and technology becomes more widely
adopted, the exception cannot be abused to disguise payments for
referrals.
Comment: We solicited public comments that address the retail and
nonretail costs (that is, the costs of purchasing from manufacturers,
distributors, or other nonretail sources). Only a few commenters
provided concrete information on the cost of health information
technology, while most commenters simply noted that the cost was high,
financial incentives were imperative, and adoption was not equally
affordable by all sectors of the health care industry.
Response: We appreciate commenters providing this information, and
we have considered this information in finalizing the exception. Again,
we note that the Administration supports the adoption of health
information technology as a normal cost of doing business to ensure
patients receive high quality care.
Comment: Most commenters shared the opinion that there should not
be a cap on the value of donated technology, stating that there is not
a consistent or appropriate way to determine fair market value or
establish a monetary cap that would accommodate all situations and
account for the rapid advancement in technology. Some commenters
believe that the attempt to ascertain the value of donations for the
purpose of fraud protection could become a barrier to adoption of
electronic health records, unnecessarily discourage potential donors
from providing technology, or result in a reduction on the ``return on
investment'' for electronic prescribing and electronic health records
technology. Other commenters expressed concern that a low cap might
discourage the implementation of electronic health records technology,
while a high cap may serve to pressure hospitals to provide the maximum
allowable amount. However, a few commenters shared our concern that
allowing donors to provide items or services without limiting the value
of such support could provide a potential for program or patient abuse.
One commenter asserted that the value of donations will be self-
limiting, because donors are unlikely to spend more than is necessary,
thereby eliminating the need for a cap. Another commenter argued that a
cap is not necessary as long as the donation is made without limiting
or restricting the use of the electronic prescribing or electronic
health records technology to services provided by the donating entity,
and as long as the donation does not take into account the volume or
value of referrals or other business generated between the parties.
Response: We agree with the commenters that determining the value
of donated technology poses certain difficulties and we are not
including a cap on the amount of protected donations in the final
exception. While gifts of valuable items and services to existing or
potential referral sources typically pose a high risk of program or
patient abuse, we believe that the combination of conditions in the
final exception should adequately safeguard against abusive electronic
health records arrangements.
Comment: Most commenters, while opposing the imposition of a cap,
offered other suggestions for limiting the value of protected
nonmonetary remuneration. Several commenters suggested a limit on the
value of protected nonmonetary remuneration in the form of a percentage
contribution from the physician, that is, cost sharing by the
recipient. These commenters suggested requiring either a set percentage
contribution by the physician or a scaled percentage contribution by
the physician that would be lowered once a predetermined threshold
amount was reached. Some commenters also suggested that we consider a
cost sharing method that would be based on set amounts that would be
donated, with the physician recipient paying any remaining costs. The
amounts could be revised over time to account for the fluctuating
expense of technology and other changes that may arise. One commenter
noted that studies have shown that individuals value services more when
they share a portion of the cost. This commenter suggested that we
should require, at a minimum, that physicians contribute towards the
purchase of wireless Internet access.
Response: We agree that cost sharing is an appropriate method to
address some of the risks inherent in unlimited donations of
technology. Accordingly, the exception establishes a contribution
percentage that the physician must incur. Specifically, the final rule
offers protection under this exception only if the physician pays 15
percent of the donor's cost of the technology. With respect to
calculation of the costs, particularly for internally-developed
(``homegrown'') software (that is, software that is not purchased from
an
[[Page 45161]]
outside vendor) and internally-developed add-on modules and components
(that is, software purchased from an outside vendor and internally
customized to ensure operational functionality), parties should use a
reasonable and verifiable method for allocating costs and are strongly
encouraged to maintain contemporaneous and accurate documentation.
Methods of cost allocation will be scrutinized to ensure that they do
not inappropriately shift costs in a manner that provides an excess
benefit to the physician recipient or results in the physician
effectively paying less than 15 percent of the donor's true cost of the
technology.
We believe the 15 percent cost sharing requirement is high enough
to encourage prudent and robust electronic health records arrangements
without imposing a prohibitive financial burden on physicians.
Requiring financial participation by a physician should result in
selection of technology appropriate for the physician's practice and
increase the likelihood that the physician will actually use the
technology. Moreover, this approach requires physicians to contribute
towards the benefits they may experience from the adoption of
interoperable electronic health records (for example, a decrease in
practice expenses). We note that, depending on the circumstances, a
differential in the amount of cost sharing imposed by a donor on
different recipients could give rise to an inference that an
arrangement is directly related to the volume or value of referrals or
other business generated between the parties, thus, rendering the
arrangement ineligible for the protection of the exception. In this
regard, the basis for the differential should be closely scrutinized.
We also note that all donated software and health information
technology and training services are subject to the cost sharing
requirements. It is our understanding that many updates and upgrades
are included in the initial purchase price of the technology and would
not trigger additional cost sharing responsibility on the part of the
physician at the time of the update or upgrade. Any updates, upgrades,
or modifications to the donated electronic health records system that
were not covered under the initial purchase agreement for the donated
technology are subject to separate cost sharing obligations by the
physician (to the extent that the donor incurs additional costs). To
ensure that physician recipients incur the requisite 15 percent of the
costs, a donor (and any party related to the donor) is prohibited from
providing financing or making loans to the physician to fund the
physician's payment for the technology.
Comment: One commenter stated that we should study the issue of a
cap since health information technology capabilities and costs are
rapidly evolving.
Response: As noted in the earlier responses, we are not
implementing in the final rule a cap on the value of donations of
electronic health records technology.
Comment: A few commenters suggested that the final rule should
allow donors to reimburse physicians for previously implemented
electronic health records systems in an amount equal to the lesser of
the fair market value of the donated technology or the cap on the value
of donations, should a cap be adopted. These commenters also requested
that the donor give assurance to physicians that any technology
previously purchased that is equivalent to donated technology and meets
the applicable interoperability standards would be integrated into the
donor's system.
Response: We are not adopting these suggestions. The commenters'
suggestions go beyond the scope of the exception and appear to be a
request for the exception to provide retroactive protection for
previously purchased technology. The exception protects donations of
technology that meet all of the conditions of the exception. The
exception does not protect reimbursement for previously incurred
expenses, as this would pose a substantial risk of program and patient
abuse.
5. Additional Conditions
The proposed rule also listed additional conditions including a
restriction on conditioning business on the receipt of electronic
health records technology, a requirement that the donor not have actual
knowledge or act in reckless disregard or deliberate ignorance of the
fact that the physician possesses or has obtained duplicative items or
services, an all-payors requirement, and a requirement that the
arrangement not violate the anti-kickback statute or any Federal or
State law or regulation governing billing or claims submission.
Comment: One commenter suggested omitting any requirement that the
written agreement documenting the arrangement specify the covered items
and services and their values. Another commenter requested
clarification as to whether all parties to a three-tier technology
arrangement (that is, the donor-distributor of the technology, the
vendor of the technology, and the physician recipient of the
technology) would be required to sign the written agreement required by
the exception.
Response: In light of the cost sharing condition of the final
exception, we are requiring documentation of the cost to the donor of
the donated technology, and the physician's contribution to that cost.
Moreover, we are requiring that the cost sharing contribution be made
and documented before the items and services can qualify for protection
under the exception. The documentation must be specific as to the items
and services donated, the actual cost to the donor, and the amount and
confirmation of the physician's cost sharing obligation. The
documentation must cover all of the electronic health records items and
services to be provided by the donor (or any party related to the
donor) to the physician. With respect to this requirement, we have
added language to the final exception clarifying that the written
documentation requirement can be satisfied by incorporating by
reference the agreements between the parties or by the use of cross
references to a master list of agreements between the parties that is
maintained and updated centrally and is available for review by the
Secretary upon request and preserves the historical record of
agreements. Nothing in the exception requires that agreements between
donors and physicians also be signed by third party vendors; however,
such documentation may be a prudent business practice.
Comment: A few commenters suggested that we not sunset the pre-
interoperability exception once the post-interoperability exception is
finalized, as we had proposed.
Response: We are not finalizing a separate pre-interoperability
exception.
Comment: One commenter suggested that the entire electronic health
records exception sunset no later than five years from the date of
publication of the final rulemaking, with the possibility for the
sunset to be delayed upon an administrative finding by the Secretary
that there is a still a need for the exception. The commenter observed
that, in the future, electronic health records technology will be a
standard and necessary part of a medical practice, and there will no
longer be a need for third parties to donate it to physicians to spur
adoption of the technology. Moreover, the commenter observed that
incompatibility across a network of providers will cease to be an issue
once interoperability of technology becomes the norm. For these
reasons, the commenter concluded that the rationale for establishing an
exception to the
[[Page 45162]]
physician self-referral law will decrease over time.
Response: We agree with this commenter that the need for an
exception 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. Over time, physicians
and others who receive donated technology from third parties may begin
to realize the economic benefits from increased efficiencies and
quality of care, at which point they should be expected to shoulder the
costs associated with producing any benefits. As we indicated earlier
in this rulemaking, we are promulgating a physician self-referral
exception for the donation of valuable technology to promote its use in
the interests of quality of care, patient safety, and health care
efficiency, notwithstanding the risk of fraud and abuse normally
associated with gifts of valuable goods and services to referral
sources. Our goal is to promote the beneficial uses of technology
without undue risk of program or patient abuse. As the technology
becomes widely used and an accepted part of medical practice, the
balance of competing goals underlying the exception changes.
A sunset provision would also address some of our concerns about
gifts of unlimited amounts of valuable technology. As noted previously
in this final rule, we have concluded that we cannot develop an
appropriate cap on the amount of protected technology. A sunset
provision, in effect, would cap the amount of protected technology that
could be donated by third parties in a different way, thereby
safeguarding against program and patient abuse in the long term.
We solicited comments on our overall approach to crafting a set of
conditions for the exception and how we might ensure that the
conditions, taken as a whole, provide sufficient protection against
program and patient abuse. Given the difficulties inherent in limiting
the value of donated technology and our relaxing of the ordinary
principle that remuneration cannot be linked in any manner to the
volume or value of referrals, we believe that the sunset provision
suggested by the commenter will provide appropriate additional
protection.
For all of these reasons, we are adopting the suggestion of the
commenter, with modifications. We are sunsetting the exception on
December 31, 2013. This date is consistent with the President's goal of
adoption of electronic health records technology by 2014. (See
President George W. Bush's Health Information Technology Plan announced
April 26, 2004; http://www.whitehouse.gov/infocus/technology/economic_policy200404/chap3.html.) Under Sec. 411.357(w)(13), all
donations of items and services must occur, and all conditions of the
exception must have been satisfied, on or before December 31, 2013.
Nothing in the exception would preclude the Secretary from extending
the time period pursuant to notice and comment rulemaking; we do not
believe it would be appropriate to have a condition in a regulation
that is contingent on an administrative determination.
We note that we are not similarly sunsetting the electronic
prescribing exception at Sec. 411.357(v), as that exception is
mandated by statute, and we do not have authority to limit its
duration.
Comment: Many commenters supported the prohibition against donors
or their agents taking any actions to disable or limit interoperability
or otherwise impose barriers to compatibility.
Response: We agree and we are retaining this requirement in the
final exception.
D. Summary of the Final Provisions Related to Sec. 411.357(w)
Consistent with the majority of public comments, we have finalized
one exception for arrangements involving electronic health records that
effectively combines the pre- and post-interoperability proposals.
Separate exceptions are no longer necessary, in part, because criteria
for product certification are available. Therefore, we have finalized
one exception for arrangements involving electronic health records
software or information technology and training services necessary and
used predominantly to create, maintain, transmit, or receive electronic
health records.
The final conditions for the exception, in combination, should
promote the important national policy goal of open, interconnected,
interoperable electronic health records systems that improve the
quality of patient care and efficiency in the delivery of health care
to patients, without protecting arrangements that pose a risk of
program or patient abuse.
In summary, the final exception includes the following conditions:
The exception protects arrangements involving 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 (provided all conditions
of the exception are satisfied). We have not included hardware. We have
clarified that the exception covers ``information technology
services,'' including, for example, connectivity and maintenance
services. We interpret ``training services'' to include help desk and
other similar support. We have eliminated the language that required
the training services to be ``directly related'' because that language
was superfluous in light of the language requiring the training
services to be ``necessary and used predominantly'' for electronic
health records purposes.
We have not adopted the proposal that the protected
technology be used solely for electronic health records purposes.
Instead, we have included a condition making clear that electronic
health records purposes must predominate. Thus, depending on the
circumstances, software that relates to patient administration,
scheduling functions, billing, clinical support, etc., can be donated.
We have also expressly prohibited the provision of any technology used
primarily to conduct personal business or business unrelated to the
physician's medical practice, as well as the provision of staff to the
physician or the physician's office.
To qualify for protection, at the time of donation, the software
must be interoperable as defined at Sec. 411.351. Software will be
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. Software must contain
electronic prescribing capability (either in an electronic prescribing
component or the ability to interface with the physician's existing
electronic prescribing system) which complies with the applicable
standards under Medicare Part D (the first set of which were
promulgated at Sec. 423.160 (see the E-Prescribing and the
Prescription Drug Program final rule (70 FR 67568, November 7, 2005))
at the time the items and services are donated. Moreover, the donor (or
any agent of the donor) must not take any steps to disable the
interoperability of any technology or otherwise impose barriers to the
compatibility of the donated technology with other technology.
The final exception protects broader categories of donors
and physician recipients than we proposed. All entities that furnish
DHS may make protected donations to any physician.
This final rule clarifies that donors may select
physicians for receipt of electronic health records technology using
means that do not directly take into account the volume or value of
[[Page 45163]]
referrals from the physician or other business generated between the
parties. The final rule sets forth specific criteria that will be
deemed to meet this condition.
The final rule does not limit the aggregate value of
technology that may qualify for protection under this exception. It
does contain a requirement that the physician pay 15 percent of the
donor's costs. The donor (or any party related to the donor) may not
fund any portion of this contribution.
The final exception adopts the proposed documentation
requirements and includes a requirement that the donor's costs be
documented in the written agreement between the parties, and permits
documentation through incorporation of other agreements between the
parties. The final exception does not require that physicians certify
that they do not already possess equivalent technology. However, the
final exception does preclude protection if the donor knows that the
physician already has equivalent technology or acts in deliberate
ignorance or reckless disregard of that fact.
The final exception adopts the proposed conditions related
to use of the technology for any patient without regard to payor status
and not conditioning business on donations.
The final exception sunsets on December 31, 2013.
V. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to evaluate fairly whether OMB should approve an information
collection, section 3506(c)(2)(A) of the Paperwork Reduction Act of
1995 (PRA) requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
Section 411.357 Exceptions to the referral prohibition related to
compensation arrangements
We solicited public comments on the information collection
requirements listed under Sec. 411.357(v) and Sec. 411.357(w).
Section 411.357(v) sets forth the exception for certain arrangements
involving the donation of electronic prescribing items and services.
Section 411.357(w) sets forth an exception for certain arrangements
involving the donation of interoperable electronic health records
software or information technology and training services. Specifically,
Sec. 411.357(v) addresses the donation of nonmonetary remuneration
(consisting of items and services in the form of hardware, software, or
information technology and training services) necessary and used solely
to receive and transmit electronic prescription information. Section
411.357(w) addresses the donation of nonmonetary remuneration
(consisting of items or services in the form of software or information
technology and training services) necessary and used predominantly to
create, maintain, transmit, or receive electronic health records. For
the purposes of this explanation of burden, the items and services
discussed in Sec. 411.357(v) and Sec. 411.357(w) will be collectively
referred to as ``electronic health information technology.''
Both Sec. 411.357(v) and Sec. 411.357(w) contain conditions for
their respective exceptions. The conditions for both sections require
that arrangements for the items and services provided must be set forth
in a written agreement that is signed by the involved parties,
specifies the items or services being provided and the cost of those
items or services (and, in the case of the electronic health records
exception, the amount of the physician's contribution), and covers all
of the electronic health information technology to be provided by the
donor.
The aforementioned requirements associated with these exceptions
are limited to donations made to physicians by entities furnishing DHS
(for purposes of this Section V and Section VI, ``DHS Entities''). We
do not know how many DHS Entities will use the exceptions that apply to
electronic health information technology. However, we expect that few
group practices will use either exception for donations to their
members because existing exceptions will likely apply to permit a group
practice to provide its physician members with electronic health
information technology. In addition, because the donation of electronic
health information technology is voluntary, we believe that some DHS
Entities will not avail themselves of this exception and will therefore
not experience any paperwork burden.
We expect that every DHS Entity that chooses to provide electronic
health information technology to physicians will likely use a model
agreement that lists or describes the items and services to be donated.
We expect that State or national organizations representing attorneys,
physicians, group practices, and DHS Entities will create model
agreements for their constituents. We also expect that attorneys for
large DHS Entities (for example, academic medical centers or other
entities that include hospitals and possibly skilled nursing facilities
or home health agencies) will create one model agreement for use by all
of their clients that are donors. In addition, we expect a DHS Entity
that donates electronic health information technology to create a
single model agreement for use for memorializing donations of
electronic prescribing and electronic health records technology,
because we believe that virtually no donor entity will need or want an
agreement that is limited just to the provision of electronic
prescribing technology.
The burden associated with these requirements is the time and
effort needed to gather the necessary information for the agreement, to
draft the agreement, and to review and sign the written document. For
donor entities (or their attorneys), we estimate that it will take 1.5
hours to create a model agreement and another 15 minutes to tailor the
model agreement for each physician and sign the personalized agreement.
Further, we estimate that, on average, each physician will spend 15
minutes reading and signing an agreement, including time spent
listening to an explanation from the group practice manager or other
physician representative. We recognize that a physician (and a donating
entity) will have to understand the differences between the items and
services that the donor is offering and the items and services that the
physician already possesses or has obtained.
We expect that no more than 150 State or national organizations or
attorneys for large hospital systems (or other DHS Entities) will draft
agreements for the hospitals and other DHS Entities. Because we
estimate it will take 1.5 hours to prepare a model agreement, and 150
different organizations will prepare these agreements, it could take a
maximum of 225 hours to prepare all model agreements.
[[Page 45164]]
As of April 2006, 609,562 physicians provided Part B physician
services to Medicare beneficiaries. To calculate the maximum number of
hours required to complete the agreements, we assume that 60,956
physicians (10 percent of the total number of physicians providing Part
B physician services to Medicare beneficiaries) will begin the process
of developing or using electronic prescribing and/or electronic health
records each year. We believe that one-fifth (or 20 percent) of those
physicians will accept donations of and sign agreements for electronic
health information technology each year. We assume that each of these
12,191 physicians (60,956 x 0.20) will accept two donations of
electronic health information technology, and each donation will
require that an agreement be signed by the donor DHS Entity and the
physician. Each agreement will require 15 minutes (0.25 hours) of the
physician's time. Therefore, the physicians might spend 6,096 hours
annually in interacting with two donors (2 agreements (that is, 1 per
donation) x 0.25 hours for each agreement x 12,191 physicians).
As noted, we expect that a donor entity will spend 15 minutes
tailoring and signing each agreement into which it enters. We estimated
that 12,191 physicians will enter into 2 agreements each. Therefore,
each year, 24,382 agreements will be signed. Each agreement will
require 15 minutes (0.25 hours) of the donor entity's time, or 6,096
hours per year (24,382 x 0.25 hours).
We assume that donating entities will not interact with each
individual physician, but instead will spend time with individuals or
entities that represent physician recipients of donated technology. On
average, these representatives represent approximately 25 physicians
each. We estimate that a donor entity will spend approximately 2 hours
with each physician representative. We estimate that the average yearly
burden for donor entities for the interactions with physician
representatives may be 975 hours ([12,191 physicians/25 physicians per
representative] x 2 hours per interaction). This is in addition to the
time spent tailoring and signing physician-specific agreements
discussed above.
Assuming that the average cost for the donors and physician
recipients involved in this process is $75 per hour, the annual
paperwork burden for the first year should cost $1,004,400 ($75 x [225
hours preparing master agreements + 6,096 physician hours + 6,096 donor
hours + (975 donor hours spent with group practice or physician
representatives x 2 agreements per physician)]) with each additional
future year costing $987,525 ($75 x [6,096 physician hours + 6,096
donor hours + (975 donor hours spent with group practice or physician
representatives x 2 agreements per physician)]).
An additional requirement for both exceptions will be that of
maintaining the written agreements required to comply with Sec.
411.357(v) and Sec. 411.357(w), and, if necessary, making them
available to the Secretary upon request. We are requiring entities to
maintain information that they already maintain as part of their usual
and customary business practices. In addition, the information would
only be collected during the conduct of an administrative action,
investigation, or audit involving a Federal governmental agency
regarding specific individuals or entities.
We believe that the recordkeeping requirements in this section are
exempt from the PRA under both 5 CFR 1320.3(a)(2) and 5 CFR
1320.4(a)(2).
These requirements are not effective until they are approved by
OMB.
VI. Regulatory Impact Analysis
A. Overall Impact
We have examined the impact of this rule as required by Executive
Order 12866 (September 1993, Regulatory Planning and Review), the
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354),
section 1102(b) of the Social Security Act, the Unfunded Mandates
Reform Act of 1995, Pub. L. 104-4), the Congressional Review Act (5
U.S.C. 804(2)), and Executive Order 13132.
Executive Order 12866 (as amended by Executive Order 13258, which
merely reassigns responsibilities of duties) directs agencies to assess
all costs and benefits of available regulatory alternatives and, when
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 final rules with
economically significant effects (that is, a final rule that will have
an annual effect on the economy of $100 million or more in any one
year, or will adversely affect in a material way the economy, a sector
of the economy, productivity, competition, jobs, the environment,
public health or safety, or State, local, or tribal governments or
communities). Because we believe that the economic impact of this final
rule will not exceed $100 million annually, we have not prepared an
RIA. However, we have analyzed alternatives and assessed benefits and
costs in order to provide a basis for informed responses that have
helped us make final decisions.
This final rule creates two new exceptions to the physician self-
referral prohibition. The first exception permits certain entities to
provide to physicians hardware, software, or information technology and
training services necessary and used solely to receive and transmit
electronic prescription information, provided that certain conditions
are satisfied. The second exception permits DHS Entities to provide to
physicians software and information technology and training services
necessary and used predominantly to create, maintain, transmit, or
receive electronic health records, provided that certain conditions are
satisfied. (Electronic prescribing technology and electronic health
records technology are collectively referred to as ``electronic health
information technology'' for purposes of this Section VI.)
The exceptions should facilitate the adoption of electronic
prescribing and electronic health records technology by filling a gap
rather than creating the primary means by which physicians will adopt
these technologies. In other words, we do not believe that donor
entities will contribute toward all of the health information
technology used by physicians.
Recently, Modern Healthcare presented findings from its annual
survey (conducted in December 2005 through early January 2006) of 601
health care executives regarding whether respondents (about 80 percent
of which were hospitals or health care systems that include hospitals)
would be willing to contribute to physician office health information
technology if the physician self-referral provisions and the anti-
kickback statute did not prohibit such donations. The findings showed
that 70.2 percent of respondents would be willing to allocate money to
help a referring physician buy and use clinical information technology
(up from 59 percent last year). Table 1 shows the breakdown percentages
of respondents that would be willing to subsidize varying amounts of
the startup costs for computerizing physicians' practices.
[[Page 45165]]
Table 1
------------------------------------------------------------------------
Percentage of startup costs
Percentage of all respondents respondents would be willing to
subsidize
------------------------------------------------------------------------
29.80................................ no amount
32.36................................ 20 percent or less
8.77................................. 21-40 percent
15.16................................ 41-60 percent
4.28................................. 61-80 percent
9.69................................. 81-100 percent
------------------------------------------------------------------------
This survey indicates that, as of the beginning of calendar year
2006, over 60 percent of the CEOs surveyed did not see their
institutions providing more than 20 percent of the costs necessary to
initiate the computerization of physician offices for the purpose of
clinical information technology. (Conn, Joseph, ``Subsidies: Ready to
give, but * * *,'' Modern Healthcare, S5, February 13, 2006).
Interestingly, this same survey showed that 65.1 percent of the
executives indicated that moving toward an electronic health record was
one of their top 10 information technology priorities, whereas only
51.6 percent chose ``improve patient-care capabilities.'' (Conn,
Joseph, ``EHRs: Still in hot pursuit,'' Modern Healthcare, S1, February
13, 2006). However, 42.1 percent of the surveyed executives indicated
that they expected their organizations to spend approximately 1.6
percent to 3.0 percent of their total operating budget on information
systems. Nearly 21 percent of the executives predicted that their
organizations would spend less than 1.6 percent, and 37.3 percent
predicted that their organizations would spend more than 3.0 percent of
their total operating budget on information systems. (Conn, Joseph,
``Budgets: Opening the wallet,'' Modern Healthcare, S2, February 13,
2006).
We believe that health care entities are waiting for the completion
of a sizeable number of national standards before committing
substantially for electronic health records items and services, first
for themselves, and then for physicians and other entities in their
communities.
The final rule establishing the first set of standards for
electronic prescribing in the Part D program, which was published on
November 7, 2005 (70 FR 67568), discusses the expected cost for the
hardware, software, training and information technology needed by
prescribing practitioners, including physicians. In the preamble to
that rule, we presented a Regulatory Impact Analysis covering the
expected effects of electronic prescribing and the specific standards.
Our analysis showed the possibility of substantial and economically
significant positive health effects on consumers and net positive
economic effects on affected entities, such as physicians, pharmacies,
and health plans. Our analysis focused on the likelihood that DHS
Entities will find it in their interest to pay some or all of the costs
of qualifying health information technology to encourage physician
adoption of such technology.
This final rule removes a potential obstacle to the provision of
qualifying health information technology by certain entities. This
final rule applies to donations of qualifying health information
technology by DHS Entities, and we expect that many donor entities may
not need to use these exceptions, given the existing provisions at
Sec. 411.352 for group practices and the exception at Sec. 411.355(c)
for managed care services. (See 66 FR 856 and 69 FR 16054.) Of
particular importance, managed care services furnished by prepaid
health plans or their contractors may fall within a previously codified
exception (See Sec. 411.355(c)). We believe that prepaid plans have
substantial economic incentives (incentives that are larger than those
for most other entities) to encourage the adoption of health
information technology by contracting physicians.
Regardless of whether donations are allowed under existing
exceptions or those that are included in this final rule, we encouraged
commenters to provide information on the costs that likely will be
incurred by entities that choose to provide qualifying health
information technology to physicians, as well as other related costs
that likely will be incurred by both donors and physicians, such as
costs incurred for changes in office procedures.
Our analysis under Executive Order 12866 of the expenditures that
entities may choose to make under this final rule is restricted by the
potential effects of outside factors, such as technological progress
and other market forces, future certification standards, and companion
final anti-kickback statute safe harbors. Furthermore, both the costs
and potential savings of electronic prescribing, electronic health
records, and administrative software such as billing and scheduling
vary to the extent to which each element operates as a stand-alone
system or as part of an integrated system. We solicited comments to
help identify both the independent and synergistic effects of these
variables.
As discussed in the November 7, 2005 E-Prescribing final rule (70
FR 67584 through 67588), donors may experience net savings with
electronic prescribing in place, and patients will experience
significant positive health effects. We have not repeated that analysis
in this final rule.
There are numerous studies reporting that electronic health records
in the ambulatory setting can result in a substantial improvement in
clinical process. The effects of electronic health records include--
Reducing unnecessary or duplicative lab and radiology test
ordering by 9 to 14 percent (Bates, D., et al., ``A randomized trial of
a computer-based intervention to reduce utilization of redundant
laboratory tests,'' American Journal Medicine 106(2), 144-50 (1999));
(Tierney, W., et al., ``The effect on test ordering of informing
physicians of the charges for outpatient diagnostic tests,'' New
England Journal of Medicine 322(21): 1499-504 (1990)); (Tierney, W., et
al., ``Computerized display of past test results. Effect on outpatient
testing,'' Annals Internal Medicine 107(4): 569-74 (1987));
Lowering ancillary test charges by up to 8 percent
(Tierney, W., et al., ``Computer predictions of abnormal test results.
Effects on outpatient testing,'' JAMA 259: 1194-8 (1988));
Reducing hospital admissions due to adverse drug events
(ADEs), costing an average of $17,000 each, by 2 to 3 percent (Jha, A.,
et al., ``Identifying hospital admissions due to adverse drug events
using a computer-based monitor,'' Pharmacoepidemiology and Drug Safety
10(2), 113-19 (2001)); and
Reducing excess medication usage by 11 percent (Wang, S.,
et al., ``A cost-benefit analysis of electronic medical records in
primary care,'' American Journal of Medicine 114(5): 397-403 (2003));
(Teich, J., et al., ``Effects of computerized physician order entry on
prescribing practices,'' Archives of Internal Medicine 160(18): 2741-7
(2000)).
There is also evidence that electronic health records can reduce
administrative inefficiency and paper handling. (Khoury, A., ``Support
of quality and business goals by an ambulatory automated medical record
system in Kaiser Permanente of Ohio,'' Effective Clinical Practice
1(2): 73-82 (1998)).
These studies show a consistent pattern of reductions in clinical
utilization reported to arise from electronic health records use in
ambulatory settings. Although financial estimates were not performed in
these studies, these reductions in utilization could yield savings that
accrue to the Medicare program because of its high volume of payments
for ambulatory and inpatient care. Other studies have
[[Page 45166]]
estimated that electronic health records in the ambulatory setting will
save $78 billion to $112 billion annually, across all payors. This
estimate includes up to $34 billion in annual savings from ambulatory
computerized provider order entry (Johnston, D., et al., ``The Value of
Computerized Provider Order Entry in Ambulatory Settings,'' Center for
IT Leadership, Wellesley, MA (2003)) and up to $78 billion annually
from interoperability of electronic health records (Walker, J., et al.,
``The Value of Health Care Information Exchange and Interoperability,''
Health Affairs, http://www.healthaffairs.org (online exclusive)
(2005)). At the same time, the costs of electronic health records and
other health information technology are substantial.
The range of cost estimates for electronic health records alone is
wide. At one extreme, there are software systems under development that
may be offered to physician settings free or at the cost of perhaps
several thousand dollars, while others may cost $20,000 to $30,000.
Extrapolated to the universe of health plans, hospitals, and
physicians, total investment costs are likely to reach the billions of
dollars.
It is unclear how rapidly adoption is now occurring. A recent study
indicates ``practices are encountering greater-than-expected barriers
to adopting an [electronic health records] system, but the adoption
rate continues to rise.'' (Gans, D., et al., ``Medical Groups' Adoption
of Electronic Health Records and Information Systems,'' Health Affairs,
September/October 2005). This study dealt only with group practices,
and found greater difficulties in smaller groups. We can infer similar
implementation difficulties for individual physician practices. For
example, this study found the average initial cost of implementing an
electronic health records system to be $33,000 per physician, with
maintenance costs of $1,500 per physician per month, numbers which
``would translate into about a 10 percent reduction in take-home pay
each year for most primary care practices'' if amortized over 5 years.
(See Gans, D.).
HealthLeadersMedia interviewed individuals from 5 medical practices
to try to determine reasons (other than money) for the fact that, as of
2005, only 14 percent of physician groups used database-driven
electronic health records systems. One sole practitioner put $70,000
into hardware and software to duplicate the system she had used when in
a group practice. Although this physician reduced much of the external
paper flood, she has not saved money. She replaced transcription costs
with scanning expenses. This physician is pleased that she can document
more detail electronically than by hand, resulting in more appropriate
reimbursement. A small rural clinic hired a vendor after a year's
search, but then endured multiple delays and missed deadlines. After
firing its vendor, it hired another vendor with a similar lack of
results. Finally, it hired a vendor that the rural health clinic had
interviewed two years earlier after discovering that this vendor had
significantly upgraded its clinical documentation system, and the rural
health clinic is now satisfied. On the other hand, a physician practice
with over 500 physicians reported that, because it spent a lot of time
in design, workflow analysis, and early development before employing
any system, it is very satisfied with its physician-friendly system.
Another physician practice, with five physician members, successfully
adopted information technology with its third contractor resulting in
financial and clinical benefits, including running the practice much
more efficiently which resulted in treating more patients. Finally, a
group practice with 13 internists borrowed $600,000 for hardware and
software for an electronic health records system. Annual transcription
costs have decreased from $150,000 to $30,000 and records are easily
shared. (Baldwin, Gary, ``Paper Charts No More,'' http://www.healthleadersmedia.com (May 2006)).
Another recent study reviewed a broader range of providers and
argued that the economic incentives of most stakeholders do not support
health information technology investments. According to that article,
``The greater marvel is that any physician, at his or her personal
expense, would install a system that * * * saves money for every health
care stakeholder except the adopting physician.'' (Kleinke, J.D.,
``Dot-Gov: Market Failure and the Creation of a National Health
Information Technology System,'' Health Affairs, September/October
2005). This study is also more pessimistic than most about the business
case for managed care plans to make health information technology
investments, arguing that investments benefit not only the investing
firm but also its competitors. Many other studies, discussed in this
section, are more optimistic about economic returns to physicians.
However, the disparate results illustrate the uncertainty that prevents
us from making confident quantitative estimates of rates of adoption.
Even so, a recent survey by the Center for Studying Health System
Change indicated that between 2000-2001 and 2004-2005, the proportion
of physicians in their own practices reporting access to information
technology for treatment guidelines increased from 52.9 percent to 64.8
percent, and the number of electronically prescribing physicians
increased from 11.4 percent to 21.9 percent. In addition, the percent
of physicians in practices who reported that they had used information
technology to exchange clinical data increased from 40.6 percent to
50.1 percent during this time period. (Reed, Marie C. and Grossman, Joy
M., ``Growing Availability of Clinical Information Technology in
Physician Practices,'' Data Bulletin No. 31, Center for Studying Health
System Change, http://www.hschange.com (June 2006).
The major barriers to physician adoption of clinical information
technology include start-up and maintenance costs, and the significant
effort and costs of changing workflow to use information technology
effectively. (Bates, David W., ``Physicians and Ambulatory Electronic
Records,'' Health Affairs, (September/October 2005). However, in an
interview, Joy Grossman of the Center for Studying Health System
Change, cited above, indicated her belief that one reason for the delay
in physician adoption of information technology is that physicians want
to make sure that the type of technology and software they purchase
will not become obsolete and also will be compatible with tools used by
hospitals, other physicians, and health plans. (Agovino, Theresa,
``Doctor Access to Information Technology Up,'' the Associated Press,
reported by the Houston Chronicle at http://www.chron.com (June 6,
2006)).
We assume that health information technology costs and benefits
will be realized eventually. Even without government intervention,
there is a lively market today, and as consensus standards evolve, that
market will grow. The question as to the regulatory impact of this
final rule is: taking into account available policy instruments
(notably the development of interoperability standards), to what extent
does the use of these physician self-referral exceptions accelerate
adoption of electronic prescribing and electronic health records
technology?
We do not have good baseline information. There are numerous
estimates for the adoption rate of electronic prescribing by health
plans, hospitals, physicians, and (for prescribing of drugs only)
pharmacies.
[[Page 45167]]
However, these estimates are clouded by uncertainty. For example, some
studies count facsimile transmission of prescriptions as electronic
prescribing while others do not. The majority of physician offices now
use computers and have high-speed internet access, but less than one in
five uses electronic health records. (Goldsmith, J., et al., ``Federal
Health Information Policy: A Case of Arrested Development,'' Health
Affairs, July/August 2003 (citing 17 percent adoption)). The Gans study
found that about 12 percent of medical group practices have a fully
implemented electronic health records system, and another 13 percent
are in the process of implementation. For smaller group practices, both
of these percentages fall to 10 percent. (See Gans, D., supra.)
As discussed in this section, we estimate that 2 percent of
physicians and an unknown number of DHS Entities will be affected by
these exceptions each year. Put another way, only one in five
physicians adopting electronic health information technology will
utilize these exceptions annually.
As explained in the November 7, 2005 E-Prescribing final rule (70
FR 67585), we believe that between 5 and 18 percent of prescribers,
including physicians, are currently participating in some electronic
prescribing. In addition, we explained that we believe that the
proportion of prescribers using electronic prescribing would increase
by about 10 percent annually over the next 5 years. We believe it is
likely that about one in five of those prescribers will receive
assistance under these exceptions. (Another one in five will receive
assistance under the exceptions already in place that apply to managed
care plans and group practices.)
These estimates depend primarily on the decisions of DHS Entities
as to whether to provide assistance to physicians for electronic health
information technology and the decisions of physicians and group
practices to implement these systems. We solicited information about
the intentions of DHS Entities to make donations of qualifying health
information technology to physicians and the willingness of physicians
and group practices to implement these systems.
Even if we were able to determine more precisely the number of
physicians who are currently engaged in, and the number of physicians
who will engage in, electronic prescribing, we cannot estimate with
certainty the number of those physicians who will receive donated items
and services. Some entities may be unwilling or unable to donate items
or services, and some physicians already have the requisite items and
services. In addition, we cannot estimate with certainty the cost of
the electronic health information technology that a physician will need
from a donor.
Although we do not know the cost of the electronic health
information technology, we describe below several studies of the costs
and benefits of equipping doctors with such technology. The speed of
adoption depends on the extent to which physicians realize net benefits
(discussed extensively in the proposed rule) and on the extent to which
our exceptions incrementally affect the costs and savings of the
technology.
One study of data on the costs associated with an internally-
developed electronic health records system for several internal
medicine clinics in an integrated delivery system indicated that
software development and maintenance would cost about $1,600 per
provider per year. (See Wang, supra.) Use of commercially available
software may cost twice as much. Financial benefits of electronic
health records include not having to ``pull'' patient charts whenever a
patient is to be seen and reduced transcription costs. In addition,
electronic clinical decision support has been shown to reduce ADEs and
redundant radiology and clinical laboratory tests; the maintenance of
up-to-date information about alternative drugs reduces the use of
expensive medications. Finally, when a medical record has complete and
accurate information about services provided, billing errors are
reduced, including failure to bill for a furnished service. The 5-year
cost-benefit analysis of the internally-developed electronic health
records system discussed above indicated savings per practitioner. (See
Wang, supra.)
In another article, Dr. Kenneth Adler reported on his 86-physician,
multi-specialty group practice's adoption of an electronic health
records system beginning in 2003. (Adler, K., ``Why It's Time to
Purchase an Electronic Health Records System,'' American Academy of
Family Practitioners, November/December 2004). This group practice
found that its electronic health records system improved communication,
access to data, and documentation, which led to better clinical and
service quality. The electronic health records system also saved the
group practice money, and Dr. Adler expects that other group practices
that adopt electronic health records systems will save money in
addition to the other benefits listed above.
In a third study, the Central Utah Multi-Specialty Clinic, a 59-
physician, 9-location group practice, installed an electronic health
records system in April 2002. (Barlow, S., et al., ``The Economic
Effect of Implementing an EMR in an Outpatient Clinical Setting,''
Journal of Healthcare Information Management, 18(1): 46-51 (2004)).
During its first year of operation, the group practice experienced
direct reductions in spending and increases in revenue of more than
$952,000 compared with the prior year, and anticipates savings of more
than $8.2 million over the first 5 years of implementation. Once again,
the savings are expected to result from reduced transcription costs, a
reduced number of paper charts and related maintenance (including
storage), and more appropriate coding because of improved
documentation. (This study did not include information about the start-
up or annual costs of the electronic health records system. Therefore,
caution should be used in drawing conclusions on any cost savings based
on the results of this study.)
Finally, we note that the Center for Information Technology
Leadership (CITL), in its 2003 report, ``The Value of Computerized
Provider Order Entry in Ambulatory Settings'' \1\ found that the
average first year total cost of a basic electronic prescribing
software system was approximately $3,000 per physician. This estimate
was based on a survey of commercially available software.
---------------------------------------------------------------------------
\1\ Center for Information Technology (CITL, a research
organization chartered in 2002) http://www.citl.org, Wellesley, MA
(781-416-9200) 2003 report: ``The Value of Computerized Provider
Order Entry in Ambulatory Care.''
---------------------------------------------------------------------------
The following are our responses to comments to the Regulatory
Impact Analysis in the proposed rule:
Comment: One commenter asserted that the estimate that we used in
the proposed rule for the cost of information technology items and
services is too low. Another commenter estimated that electronic health
records systems cost between $700 and $800 per physician per month
during the first 5 years of implementation. A third commenter estimated
that the implementation cost for each physician will range from $15,000
to $35,000. Another commenter asserted that donors will probably donate
approximately $5,000 per physician and that no donor will provide items
and services worth over $35,000 per physician. One commenter agreed
that donations will result in a reduction of the utilization of
unneeded
[[Page 45168]]
health care services. Finally, a commenter agreed that there should not
be a significant impact on small businesses.
Response: We recognize that the cost of implementing information
technology in the physician office setting currently appears to be
substantial, with benefits that will be recognized, but not
immediately. Recently, Robert Miller and colleagues at the University
of California, San Francisco, presented findings from case studies of
14 sole practitioners and small group practices in twelve States. They
found that start-up costs average $44,000 per physician and annual
maintenance costs average $8,400 per physician per year. However, they
also found that the physicians recoup their investment costs in 2.5
years, with over half of the financial benefits coming from improved
billing services. In addition, physician practice revenues increased by
$17,000 per year and efficiency savings and gains from greater
physician productivity averaged $15,800 per physician per year.
(Miller, Robert H., et al., ``The Value of Electronic Health Records in
Solo or Small Group Practices, Health Affairs, September/October 2005.)
We presented information above in this section from a recent Modern
Healthcare survey that indicated a breakdown of the funding that 501
health care executives anticipated that their institutions will spend
to help physician practices with information technology. (Conn, Joseph,
``Subsidies: Ready to give, but * * *,'' Modern Healthcare, S5,
February 13, 2006). The figures in that article are not considerably
different from the commenter's estimates.
Comment: One commenter believes that donors will be concerned about
the direct impact to their patient populations and the common good.
Response: We hope that donors will recognize that physicians need
systems that will work for their patients and practices. We believe
that the studies we have cited indicate the importance of physicians
being able to use the systems they are purchasing and implementing. If
a system does not work for a physician, he or she will abandon the
system.
We believe that donations protected under this exception will
create no net costs to the economy. This rule will permit cost-
shifting, allowing DHS Entities to bear financial burdens that
otherwise would have been borne by physicians and their patients. We
anticipate that electronic prescribing and electronic health records
technology ultimately should save donor entities and physicians the
costs and other burdens associated with incorrect drug prescribing or
dispensing, and result in reductions in the costs of medical
transcribing and other paperwork. Similarly, obtaining accurate health
records in a timely manner should benefit patients, physicians, and DHS
Entities. The November 7, 2005 E-Prescribing final rule (70 FR 67586)
cites an estimate from the CITL that nationwide adoption of electronic
prescribing will eliminate nearly 2.1 million ADEs per year. In turn,
this reduction of ADEs will prevent nearly 1.3 million provider visits,
more than 190,000 hospitalizations, and more than 136,000 life-
threatening ADEs. We hope to see a significant reduction in ADEs each
year as nationwide adoption of electronic health information technology
occurs.
We estimate that 10 percent of the 609,562 physicians who provide
Part B services to Medicare beneficiaries (60,956 physicians) will
adopt electronic prescribing and electronic health records technology
each year. We believe it is likely that DHS Entities will donate
software or other items or services to no more than one-fifth (or 20
percent) of these physicians (or to fewer than 12,191 physicians) under
these exceptions, and perhaps another one-fifth (or 20 percent) of
these physicians (again fewer than 12,191 physicians) will receive
donations under the existing exceptions that apply to managed care
services and to group practices. We estimate that, at most, each
physician will receive a total of $3,000 worth of donated items and
services per donation under the exceptions. Therefore, assuming that 2
percent of physicians (\1/5\ of the 10 percent of physicians adopting
the technology per year) will receive $3,000 worth of donated
electronic health information technology, annual donations approximate
$36 million.
We expect that many physicians already own handheld devices and
will have begun to computerize their own medical practices. We also
expect that DHS Entities will see immediate benefits from the expanded
use of electronic prescribing and electronic health records technology.
We anticipate that these savings will be greater than the costs
incurred by donor entities using these exceptions, but we cannot
quantify the savings at this time.
We note that a significant benefit of electronic health records was
recognized in 2005. Patients from the Veterans Administration (VA)
Hospital in New Orleans had been evacuated to other VA hospitals
throughout the United States because of the effects of Hurricane
Katrina. (See http://www1.va.gov/opa/pressrel/pressrelease.cfm?id=1152 1152). Because the VA system makes extensive use of electronic
prescribing and electronic health records, complete patient medical
information was quickly made available to VA clinicians throughout the
country. The Ochsner Clinic in New Orleans had also computerized its
patient records prior to Hurricane Katrina and, thus, was able to
recover its practice after the hurricane.
The estimates above are highly sensitive to assumptions. The cost
to the donor for the donated items and services might be significantly
higher or lower than discussed above. The rate of adoption may be
higher or lower than estimated. The proportion of physicians receiving
remuneration could be higher or lower than estimated, depending on the
willingness of DHS Entities to subsidize investment in health
information technology.
We also note that, at this time, there are mixed signals about the
potential of electronic prescribing and electronic health records to
reduce costs. For example, many estimates are based in part on the
reduction of medical errors. However, one study has also shown that
medical errors, and potentially costs, can increase if software is
poorly designed or implemented (Koppel, et al., 2005). Therefore,
achieving reliable cost savings requires a more substantial
transformation of care delivery that goes beyond simple use of any one
kind of health information technology.
This rule likely will have an effect on the actual rate of adoption
of electronic prescribing and electronic health records technology.
Potential donors may be unlikely to provide assistance unless they
believe it will accelerate the adoption of the technology. To the
extent adoption is advanced, the costs and benefits of these
technologies will be realized sooner. However, we are unable to provide
any quantitative estimate of the likely effect of these exceptions,
taken alone, in the larger panorama of all health information
technology investment decisions, market evolution, standards adoption,
and use of existing physician self-referral exceptions.
Finally, we believe it unlikely that annual effects will exceed
$100 million in the 5-year timeframe that we generally use in our
economic impact projections. If our estimate of the independent and
direct effects of these new exceptions is accurate, and if the
resulting acceleration in adoption is relatively small, this final rule
is not a major rule. However, we have completed all the elements of a
RIA because the uncertainty is so great.
[[Page 45169]]
Section 202 of the Unfunded Mandates Reform Act of 1995 requires
that agencies assess the anticipated costs and benefits of Federal
mandates before issuing any rule that may result in the mandated
expenditure by State, local, or tribal governments, in the aggregate,
or by the private sector, of $100 million in 1995 dollars (a threshold
adjusted annually for inflation and now approximately $120 million).
This final rule imposes no mandates. Any actions taken under this rule
are voluntary. Furthermore, such actions are likely to result in net
cost savings, not net expenditures. Any expenditure undertaken by
government-owned hospitals in their business capacity will not
necessarily have an impact on State, local, or tribal governments, or
their expenditure budgets, as such.
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 given
above, this final rule will not have a substantial effect on State or
local governments, nor does it preempt State law or have Federalism
implications.
B. Impact on Small Businesses
The RFA requires agencies to analyze options for regulatory relief
for small entities when a final rule may create 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 physicians are
considered small entities, either by nonprofit status or by having
revenues of less than $6 million a year. Almost all physicians in
private practice (or all practices of which they are members) are small
entities because their annual revenues do not meet the Small Business
Administration's $8.5 million threshold for small physician practices.
Individuals and States are not included in the definition of a small
entity, and this final rule will not have a financial impact on small
governmental entities.
We have determined that this final rule will not have a significant
impact on small entities because it does not increase regulatory burden
or otherwise meet the RFA standard of ``significant impact.'' While the
aggregate impacts may be substantial, it is unlikely that near term
effects on individual practitioners will be substantial as a proportion
of revenues (for example, neither a $3,000 donation nor a $450 cost
sharing contribution (15 percent of $3,000) is significant compared to
typical practice revenues in the hundreds of thousands of dollars). We
expect our new exceptions ultimately to be highly beneficial to
physicians and DHS Entities (most in both categories are small
entities), as well as to affected entities and persons who are not
``small entities'' as defined in the RFA: PDP sponsors, MA
organizations, and our beneficiaries.
Nothing in this final rule meets any of the other thresholds
requiring in-depth analysis. Although it affects a substantial number
of small rural hospitals, there is no significant economic effect on
small rural hospitals (more than 3 to 5 percent of total costs/
revenues), it imposes no unfunded mandates or costs on either private
or public entities, and it neither preempts State law nor otherwise has
Federalism implications.
C. Conclusion
We have concluded that this final rule will not have a significant
economic effect. Although the final exceptions may shift costs from
physicians and patients to permissible donor entities and may lead to
faster adoption of health information technology with substantial
benefits, it is unclear whether, and we believe unlikely that, these
effects will reach the threshold of $100 million annually in the near
term, even though the long-term cumulative costs and benefits are
likely to be many times this threshold. This rule will remove a
potential obstacle to certain entities providing electronic prescribing
and electronic health records technology and services to physicians.
The rule will permit cost shifting, allowing DHS Entities to bear
financial burdens that otherwise would have been borne by physicians
and their patients. We believe that this rule will provide substantial
positive health effects on consumers and net positive economic effects
on affected entities, including physicians and DHS Entities.
We are not preparing analyses for either the RFA or section 1102(b)
of the Act because we have determined, and we certify, that this rule
will not have a significant economic impact on a substantial number of
small entities or a significant impact on the operations of a
substantial number of small rural hospitals.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
List of Subjects in 42 CFR Part 411
Kidney diseases, Medicare, Physician referral, Reporting and
recordkeeping requirements.
0
For the reasons set forth in the preamble, the Centers for Medicare &
Medicaid Services amends 42 CFR chapter IV part 411 as set forth below:
PART 411--EXCLUSIONS FORM MEDICARE AND LIMITATIONS ON MEDICARE
PAYMENT
0
1. The authority citation for part 411 is revised to read as follows:
Authority: Secs. 1102, 1860D-4(e)(6), 1871, and 1877(b)(4) and
(5) of the Social Security Act (42 U.S.C. 1302, 1395w-104(e)(6),
1395hh, and 1395nn(b)(4) and (5)).
Subpart J--Financial Relationships Between Physicians and Entities
Furnishing Designated Health Services
0
2. Section 411.351 is amended by adding the definitions of ``electronic
health record'' and ``interoperable'' in alphabetical order to read as
follows:
Sec. 411.351 Definitions.
* * * * *
Electronic health record means a repository of consumer health
status information in computer processable form used for clinical
diagnosis and treatment for a broad array of clinical conditions.
* * * * *
Interoperable means able to communicate and exchange data
accurately, effectively, securely, and consistently with different
information technology systems, software applications, and networks, in
various settings; and exchange data such that the clinical or
operational purpose and meaning of the data are preserved and
unaltered.
* * * * *
0
3. Section 411.357 is amended by adding paragraphs (v) and (w) to read
as follows:
Sec. 411.357 Exceptions to the referral prohibition related to
compensation arrangements.
* * * * *
(v) Electronic prescribing items and services. Nonmonetary
remuneration (consisting of items and services in the form of hardware,
software, or information technology and training services) necessary
and used solely to receive and transmit electronic prescription
information, if all of the following conditions are met:
(1) The items and services are provided by a--
(i) Hospital to a physician who is a member of its medical staff;
[[Page 45170]]
(ii) Group practice (as defined at Sec. 411.352) to a physician
who is a member of the group (as defined at Sec. 411.351); or
(iii) PDP sponsor or MA organization to a prescribing physician.
(2) The items and services are provided as part of, or are used to
access, an electronic prescription drug program that meets the
applicable standards under Medicare Part D at the time the items and
services are provided.
(3) The donor (or any person on the donor's behalf) does not take
any action to limit or restrict the use or compatibility of the items
or services with other electronic prescribing or electronic health
records systems.
(4) For items or services that are of the type that can be used for
any patient without regard to payor status, the donor does not
restrict, or take any action to limit, the physician's right or ability
to use the items or services for any patient.
(5) Neither the physician nor the physician's practice (including
employees and staff members) makes the receipt of items or services, or
the amount or nature of the items or services, a condition of doing
business with the donor.
(6) Neither the eligibility of a physician for the items or
services, nor the amount or nature of the items or services, is
determined in a manner that takes into account the volume or value of
referrals or other business generated between the parties.
(7) The arrangement is set forth in a written agreement that--
(i) Is signed by the parties;
(ii) Specifies the items and services being provided and the
donor's cost of the items and services; and
(iii) Covers all of the electronic prescribing items and services
to be provided by the donor. This requirement will be met if all
separate agreements between the donor and the physician (and the donor
and any family members of the physician) incorporate each other by
reference or if they cross-reference a master list of agreements that
is maintained and updated centrally and is available for review by the
Secretary upon request. The master list should be maintained in a
manner that preserves the historical record of agreements.
(8) The donor does not have actual knowledge of, and does not act
in reckless disregard or deliberate ignorance of, the fact that the
physician possesses or has obtained items or services equivalent to
those provided by the donor.
(w) Electronic health records items and services. Nonmonetary
remuneration (consisting of items and services in the form of software
or information technology and training services) necessary and used
predominantly to create, maintain, transmit, or receive electronic
health records, if all of the following conditions are met:
(1) The items and services are provided by an entity (as defined at
Sec. 411.351) to a physician.
(2) The software is interoperable (as defined at Sec. 411.351) at
the time it is provided to the physician. For purposes of this
paragraph, 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.
(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.
(4) Before receipt of the items and services, the physician pays 15
percent of the donor's cost for the items and services. The donor (or
any party related to the donor) does not finance the physician's
payment or loan funds to be used by the physician to pay for the items
and services.
(5) Neither the physician nor the physician's practice (including
employees and staff members) makes the receipt of items or services, or
the amount or nature of the items or services, a condition of doing
business with the donor.
(6) Neither the eligibility of a physician for the items or
services, nor the amount or nature of the items or services, is
determined in a manner that directly takes into account the volume or
value of referrals or other business generated between the parties. For
purposes of this paragraph, the determination is deemed not to directly
take into account the volume or value of referrals or other business
generated between the parties if any one of the following conditions is
met:
(i) The determination is based on the total number of prescriptions
written by the physician (but not the volume or value of prescriptions
dispensed or paid by the donor or billed to the program);
(ii) The determination is based on the size of the physician's
medical practice (for example, total patients, total patient
encounters, or total relative value units);
(iii) The determination is based on the total number of hours that
the physician practices medicine;
(iv) The determination is based on the physician's overall use of
automated technology in his or her medical practice (without specific
reference to the use of technology in connection with referrals made to
the donor);
(v) The determination is based on whether the physician is a member
of the donor's medical staff, if the donor has a formal medical staff;
(vi) The determination is based on the level of uncompensated care
provided by the physician; or
(vii) The determination is made in any reasonable and verifiable
manner that does not directly take into account the volume or value of
referrals or other business generated between the parties.
(7) The arrangement is set forth in a written agreement that--
(i) Is signed by the parties;
(ii) Specifies the items and services being provided, the donor's
cost of the items and services, and the amount of the physician's
contribution; and
(iii) Covers all of the electronic health records items and
services to be provided by the donor. This requirement will be met if
all separate agreements between the donor and the physician (and the
donor and any family members of the physician) incorporate each other
by reference or if they cross-reference a master list of agreements
that is maintained and updated centrally and is available for review by
the Secretary upon request. The master list should be maintained in a
manner that preserves the historical record of agreements.
(8) The donor does not have actual knowledge of, and does not act
in reckless disregard or deliberate ignorance of, the fact that the
physician possesses or has obtained items or services equivalent to
those provided by the donor.
(9) For items or services that are of the type that can be used for
any patient without regard to payor status, the donor does not
restrict, or take any action to limit, the physician's right or ability
to use the items or services for any patient.
(10) The items and services do not include staffing of physician
offices and are not used primarily to conduct personal business or
business unrelated to the physician's medical practice.
(11) The electronic health records software contains 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.
[[Page 45171]]
(12) The arrangement does not violate the anti-kickback statute
(section 1128B(b) of the Act), or any Federal or State law or
regulation governing billing or claims submission.
(13) The transfer of the items or services occurs and all
conditions in this paragraph (w) are satisfied on or before December
31, 2013.
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare-Hospital Insurance; and Program No. 93.774, Medicare-
Supplementary Medical Insurance Program)
Dated: June 28, 2006.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
Approved: July 14, 2006.
Michael O. Leavitt,
Secretary.
[FR Doc. 06-6667 Filed 8-1-06; 8:45 am]
BILLING CODE 4120-01-P