By Karl A. Thallner, Jr., Esq.
The influential 1999 Institute of Medicine study, “To Err Is Human: Building a Safer Health System,” described the prevalence of preventable medical errors in the U.S. health care system, and outlined a comprehensive strategy to reduce such errors. The report indicated that orders errors are one of the most frequent types of errors in hospitals, and recommended computerized order entry as the chief technological solution to this problem. One form of computerized order entry is electronic prescribing, or “e-prescribing”, which enables a physician to write a prescription using a computer or a hand-held device and electronically transmit that prescription to a patient’s pharmacist.
Likewise, a recent Rand Corporation study found that electronic medical records systems, or “e-records,” could save money by reducing redundant care, speeding patient treatment, improving safety and keeping patients healthier. Indeed, although the study recognized the significant economic investment that would be required for the health care industry to implement e-records systems, it estimates that industry-wide adoption of such systems could save more than $81 billion annually and improve quality of care.
Medicare Modernization Act
It is no wonder, then, that the federal government is taking steps to promote the broader use of e-prescribing and e-records technologies. The most direct federal action to encourage e-prescribing is contained in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), the federal law that added Part D, the new prescription drug benefit, to the Medicare program. The MMA requires that electronic transmission of prescriptions for covered drugs prescribed for Part D eligible individuals must comply with uniform standards adopted by the Department of Health and Human Services. Just this past November, HHS published its “foundation standards” for e-prescribing.
In enacting the MMA, Congress apparently believed that Part D plan sponsors, Medicare managed care plans, hospitals and other entities that might otherwise facilitate the proliferation of e-prescribing systems would be hampered from doing so by federal fraud and abuse laws. In particular, for example, the federal anti-kickback statute could prohibit the furnishing of e-prescribing technology to a referral source to induce or reward the technology recipient’s referrals of federal health program patients. Similarly, the federal Stark law would bar a physician’s referrals to a provider of Medicare-covered “designated health services,” such as a hospital, if the physician receives e-prescribing technology from the provider, unless a Stark exception is available. Therefore, the MMA included a provision requiring federal agencies to create an additional Stark exception and a corresponding anti-kickback statute safe harbor that would allow the provision of e-prescribing technology that is necessary and used solely to receive and transmit electronic prescription information.
On October 11, 2005, the Office of Inspector General of HHS (OIG) and the Centers for Medicare & Medicaid Services (CMS) published proposals for the e-prescribing rules required by the MMA. At the same time, the OIG and CMS also published proposed rules providing additional safe harbors and Stark exceptions for e-records arrangements. The proposed rules constitute the initial step in the usual process for the development of regulations by providing the opportunity for public comment on the proposals.
These proposed rules are unusual, however, in that both agencies explicitly solicit public comment on so many features of their proposals. Clearly, the OIG and CMS believe that they need more information in order to craft regulations that facilitate the development and use of technologies that promote patient safety, quality of care and efficiency, while at the same time minimizing the risk that those arrangements might be used to induce or reward referrals. In fact, pending the receipt of public input, the agencies declined to publish the regulatory text for certain aspects of their proposals.
While the two agencies have endeavored to make their regulations complementary and consistent, there are some differences between the anti-kickback statute, over which the OIG has jurisdiction, and the Stark law, which is administered by CMS, that necessitated some differences between the new safe harbors and the new Stark exceptions. Further, each agency contemplates separate regulations for e-prescribing arrangements and e-records arrangements. In general, both agencies have imposed numerous conditions that reflect concerns that physicians and others that receive these technologies could be unduly influenced to make referrals to the entities that furnish the technologies to them. These conditions, if they are included in the final regulations, could limit the relief from fraud and abuse concerns that Congress sought to ensure.
In the view of the agencies, a critical factor in evaluating the risk of fraud and abuse is whether the technology being furnished is “interoperable.” The agencies define the term “interoperable” to mean “the ability of different information systems, software applications, and networks to communicate and exchange information in an accurate, secure, effective, useful, and consistent manner.” Because interoperable technologies could be broadly used (that is, not limited to communications between the recipient and the donor), the agencies believe that interoperability would reduce the risk that an entity would offer technology to a health care professional in an attempt to secure that professional’s referrals to the entity.
As a result, both the e-prescribing safe harbor and Stark exception require that any technology furnished must be used to receive and transmit electronic prescription information in accordance with the uniform e-prescribing standards adopted by HHS. The agencies acknowledge, however, that uniform interoperability standards and certification criteria for e-records technologies do not exist. Therefore each agency contemplates two sets of e-records regulations, the first of which would contain narrow pre-interoperability rules and the second of which would contain more relaxed post-interoperability rules. Under the pre-interoperability rules, e-records software would nevertheless have to be interoperable to the extent technologically feasible, and at all times, under both the e-prescribing and e-records rules, a donor of technology would be prohibited from limiting or disabling available interoperability.
The e-prescribing rules would protect such items as software, hardware, Internet connectivity, training and information technology support services for e-prescribing. Because the agencies perceive e-records technology as being more valuable than e-prescribing technology, the agencies consider the provision of e-records technology to pose greater risk of fraud and abuse. Therefore, the proposed e-records rules protect only the provision of software for the transmission, receipt and maintenance of patient e-records and directly-related training services, but not hardware, connectivity and related items and services. Both the proposed pre-interoperability and post-interoperability e-records rules would require that any donated software include an e-prescribing component meeting HHS’ standards.
“Necessary and Used Solely”
To minimize the potential that a donation of technology could disguise a reward for referrals, the agencies’ proposals place emphasis on the MMA’s requirement that protected e-prescribing technologies must be “necessary and used solely” for e-prescribing. The proposed rules include the requirement that any technologies furnished must be “necessary,” meaning that the technology furnished must not be technically or functionally equivalent to items that the receiving physician or provider already possesses. For example, a hospital could provide a physician with a hand-held device for e-prescribing, despite the fact that the provider may have a desktop computer that performs the same function; however, if the physician already owns a hand-held device, the hospital could not provide a second device because the second device would not be “necessary” to facilitate increased e-prescribing. The proposed rules would require recipients to certify that the technologies they receive are necessary under this definition, and the agencies indicate that they are considering how to address the potential that a recipient would divest himself of technology in order to shift costs to donors.
The e-prescribing rules and the pre-interoperability e-records rules contain the additional requirement that any technologies furnished must be “used solely” to receive and transmit electronic prescription information or to receive, transmit and maintain e-records. The OIG and CMS explain that this requirement is necessary to safeguard against abusive arrangements in which technology might constitute a payment for referrals because it provides additional uses and benefits. For example, a computer or software provided to a physician that provides valuable general office management, billing and scheduling functions, in addition to e-prescribing, might not be protected under this standard.
Although not reflected in the proposed regulatory text, the agencies indicate that they are proposing an additional safe harbor and corresponding Stark exception to protect the provision of hardware and connectivity services which are multi-functional, so long as a “substantial use” of such items and services is to transmit and receive e-prescribing data. There is no indication that the “used solely” requirement will be similarly relaxed for e-records technology prior to interoperability. The proposed post-interoperability e-records rules would not include the “used solely” requirement; rather, technologies that perform additional functions may be protected as long as the “core functions” of the donated e-records software are e-prescribing and e-records transmission and management.
Donors and Recipients
The agencies describe three categories of donors and recipients that would be entitled to protection under the proposed safe harbors and Stark exceptions. First, the proposed rules would protect donations of qualifying e-prescribing and e-records technologies provided by a hospital to physicians on its medical staff who routinely furnish services at the hospital. The technology may not used to induce physicians practicing at a different hospital to join the staff of the donor hospital. Generally, the hospital may not select physicians to receive the technology based on the volume or value of referrals. Nevertheless, the agencies indicate that they might allow more flexibility in the selection of recipients of post-interoperability e-records technology by permitting donors to be selected based on criteria that are indirectly, but not directly, related to their referrals (such as size of medical practice).
Second, the proposed rules would allow group practices to furnish e-prescribing or e-records technologies to their members. Generally, both the proposed safe harbors and Stark exceptions would interpret the terms “group practice” and “members” consistent with existing Stark law provisions. The agencies note that a group practice’s provision of these technologies to its members would likely already fit within existing safe harbors and Stark exceptions, but the creation of the new safe harbors and Stark exceptions help to clarify that these arrangements are permissible under federal law. Third, the proposed rules would protect Part D plan sponsors and Medicare managed care plans that donate e-prescribing or e-records items and services to participating pharmacies, participating pharmacists and prescribing health care professionals.
Monetary Cap and Other Requirements
Both the OIG and CMS are considering whether to impose a cap on the aggregate fair market value of all technologies that may be provided by a donor to a recipient. The agencies indicate that a cap may be appropriate and reasonable to minimize the potential for fraud and abuse, presumably by limiting the economic benefit that can be conferred under the new rules. Neither agency has proposed a specific cap amount, but both have stated that the caps under the proposed safe harbors and corresponding Stark exceptions will be the same. The agencies caution, however, that they do not expect the final regulations to protect all possible costs to a recipient of such technologies, and suggest possible alternative approaches to establishing the caps (such as a fixed dollar amount or, alternatively, or a percentage of the value of donated technology).
The proposed rules contain additional conditions that are designed to reduce the possibility of fraud and abuse and to improve the quality of care for all patients. For example, agencies indicate that technology furnished under these rules should, to the extent possible, be used to treat all patients, so that the uninsured and non-federal health program beneficiaries are benefited. Additionally, the proposed rules would require that any arrangement for the provision of qualified technology be in a writing signed by the parties that specifically identifies the technology provided and its value, and including the recipient’s certification that he/she does not already possess functionally or technologically equivalent technology.
The proposed rules are one component of the government’s efforts to encourage the widespread use of e-prescribing and e-records technologies that could improve care and save money. The OIG and CMS are clearly looking for public input that will help them strike the right balance between encouraging the dissemination of these technologies and minimizing the risk of abusive arrangements. The many conditions in their proposals suggest that they put greater weight in the latter objective, however. In addition, the fundamental premise of these rules – that Part D plan sponsors, Medicare managed care plans and hospitals can and will foot the bill for the use of these technologies by physicians, pharmacies and other health care entities – is at least subject to question.
Karl A. Thallner, Jr., Esq., is a partner with the law firm of Reed Smith LLP, where he heads the health care law practice in the firm’s Philadelphia office.