[Federal Register: October 11, 2005 (Volume 70, Number 195)]
[Proposed Rules]
[Page 59015-59027]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11oc05-11]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Office of the Secretary
Office of Inspector General
42 CFR Part 1001
RIN 0991-AB39
Medicare and State Health Care Programs: Fraud and Abuse; Safe
Harbor for Certain Electronic Prescribing Arrangements Under the Anti-
Kickback Statute
AGENCY: Office of Inspector General (OIG), HHS.
ACTION: Proposed Rule.
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SUMMARY: As required by the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003 (MMA), Public Law 108-173, this proposed
rule would establish a new safe harbor under the Federal anti-kickback
statute for certain arrangements involving the provision of electronic
prescribing technology. Specifically, the safe harbor would protect
certain arrangements involving hospitals, group practices, and
prescription drug plan (PDP) sponsors and Medicare Advantage (MA)
organizations that provide to specified recipients certain nonmonetary
remuneration in the form of hardware, software, or information
technology and training services necessary and used solely to receive
and transmit electronic prescription drug information. In addition,
using our separate legal authority under section 1128B(b)(3)(E) of the
Social Security Act (the ``Act''), we are also proposing separate safe
harbor protection for certain electronic health records software and
directly related training services. These exceptions are consistent
with the President's goal of achieving widespread adoption of
interoperable electronic health records for the purpose of improving
the quality and efficiency of health care, while maintaining the levels
of security and privacy that consumers expect.
DATES: To assure consideration, public comments must be delivered to
the address provided below by no later than 5 p.m. on December 12,
2005.
ADDRESSES: You may submit comments by any of the methods set forth
below. In all cases, when commenting, please refer to file code OIG-
405-P.
Mail--Office of Inspector General, Department of Health
and Human Services, Attention: OIG-405-P, Room 5246, Cohen Building,
330 Independence Avenue, SW., Washington, DC 20201.
Please allow sufficient time for us to receive mailed comments by
the due date in the event of delivery delays.
Hand delivery/courier--Office of Inspector General,
Department of Health and Human Services, Attention: OIG-405-P, Room
5246, Cohen Building, 330 Independence Avenue, SW., Washington, DC
20201.
Because access to the Cohen Building is not readily available to
persons without Federal Government identification, commenters are
encouraged to leave their comments in OIG's drop box located in the
main lobby of the building.
Federal eRulemaking Portal: http://www.regulations.gov.
Include agency name and identifier RIN 0991-AB36.
Because of staff and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. For information on viewing
public comments, see section V of the Supplementary Information section
preamble.
FOR FURTHER INFORMATION CONTACT: Catherine Martin, Office of Counsel to
the Inspector General, (202) 619-0335.
SUPPLEMENTARY INFORMATION:
[[Page 59016]]
I. Background
A. The Anti-Kickback Statute and Safe Harbors
Section 1128B(b) of the Act (42 U.S.C. 1320a-7b(b), the anti-
kickback statute) provides criminal penalties for individuals or
entities that knowingly and willfully offer, pay, solicit, or receive
remuneration in order to induce or reward the referral of business
reimbursable under any of the Federal health care programs, as defined
in section 1128B(f) of the Act. The offense is classified as a felony
and is punishable by fines of up to $25,000 and imprisonment for up to
five years. Violations of the anti-kickback statute may also result in
the imposition of civil money penalties (CMPs) under section
1128A(a)(7) of the Act (42 U.S.C. 1320a-7a(a)(7)), program exclusion
under section 1128(b)(7) of the Act (42 U.S.C. 1320a-7(b)(7)), and
liability under the False Claims Act, (31 U.S.C. 3729-33).
The types of remuneration covered specifically include, without
limitation, kickbacks, bribes, and rebates, whether made directly or
indirectly, overtly or covertly, in cash or in kind. In addition,
prohibited conduct includes not only the payment of remuneration
intended to induce or reward referrals of patients, but also the
payment of remuneration intended to induce or reward the purchasing,
leasing, or ordering of, or arranging for or recommending the
purchasing, leasing, or ordering of, any good, facility, service, or
item reimbursable by any Federal health care program.
Because of the broad reach of the statute, concern was expressed
that some relatively innocuous commercial arrangements were covered by
the statute and, therefore, potentially subject to criminal
prosecution. In response, Congress enacted section 14 of the Medicare
and Medicaid Patient and Program Protection Act of 1987, Public Law
100-93 (section 1128B(b)(3)(E) of the Act), which specifically required
the development and promulgation of regulations, the so-called ``safe
harbor'' provisions, that would specify various payment and business
practices that would not be treated as criminal offenses under the
anti-kickback statute, even though they may potentially be capable of
inducing referrals of business under the Federal health care programs.
Since July 29, 1991, we have published in the Federal Register a series
of final regulations establishing ``safe harbors'' in various areas.\1\
These OIG safe harbor provisions have been developed ``to limit the
reach of the statute somewhat by permitting certain non-abusive
arrangements, while encouraging beneficial or innocuous arrangements.''
(56 FR 35952, 35958; July 21, 1991).
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\1\ 56 FR 35952 (July 29, 1991); 61 FR 2122 (January 25, 1996);
64 FR 63518 (November 19, 1999); 64 FR 63504 (November 19, 1999);
and 66 FR 62979 (December 4, 2001).
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Health care providers and others may voluntarily seek to comply
with safe harbors so that they have the assurance that their business
practices will not be subject to any enforcement action under the anti-
kickback statute, the CMP provision for anti-kickback violations, or
the program exclusion authority related to kickbacks. In giving the
Department of Health and Human Services the authority to protect
certain arrangements and payment practices under the anti-kickback
statute, Congress intended the safe harbor regulations to be evolving
rules that would be updated periodically to reflect changing business
practices and technologies in the health care industry.
B. Section 101 of MMA
Section 101 of the MMA added a new section 1860D to the Act,
establishing a Part D prescription drug benefit in the Medicare
program. As part of the new statutory provision, Congress, through
section 1860D-4(e) of the Act, directed the Secretary to create
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.\2\
Section 1860D-4(e)(6) of the Act directs the Secretary, in consultation
with the Attorney General, to create a safe harbor to the anti-kickback
statute that would protect certain arrangements involving the provision
of nonmonetary remuneration (consisting of items and services in the
form of hardware, software, or information technology or training
services) that is necessary and used solely to receive and transmit
electronic prescription drug information in accordance with electronic
prescribing standards promulgated by the Secretary under section 1860D-
4(e)(4) of the Act. Specifically, the safe harbor would set forth
conditions under which the provision of such remuneration by hospitals,
group practices, and PDP sponsors and MA organizations (collectively,
for purposes of this preamble discussion, ``Donors'') to prescribing
health care professionals, pharmacies, and pharmacists (collectively,
for purposes of this preamble discussion, ``Recipients'') would be
protected.
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\2\ See H.R. Conf. Rep. No. 108-391, 495 (2003).
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The OIG has a longstanding concern about the provision of free or
reduced price goods or services to an existing or potential referral
source. There is a substantial risk that free or reduced price goods or
services may be used as a vehicle to disguise or confer an unlawful
payment for referrals of Federal health care program business.
Financial incentives offered, paid, solicited, or received in exchange
for generating Federal health care business increase the risks of,
among other problems: (i) Overutilization of health care items or
services; (ii) increased Federal program costs; (iii) corruption of
medical decision making; and (iv) unfair competition. Consistent with
the structure and purpose of the anti-kickback statute and the
regulatory authority at section 1128B(b)(3)(E) of the Act, we believe
any safe harbor for electronic prescribing arrangements should protect
innocuous or beneficial arrangements that would eliminate perceived
barriers to the adoption of electronic prescribing without creating
undue risk that the arrangement might be used to induce or reward the
generation of Federal health care program business.
We do not believe Congress, in enacting section 1860D-4(e)(6) of
the Act, intended to suggest that a new safe harbor is needed for all
or even most arrangements involving the provision of electronic
prescribing items and services. In general, fair market value
arrangements that are arm's-length and do not take into account the
volume or value of Federal health care program referrals, or
arrangements that do not have as one purpose the generation of business
payable by a Federal health care program, should not raise concerns
under the anti-kickback statute. Simply put, absent the requisite
intent, the anti-kickback statute is not violated. In addition, many
arrangements can be structured to fit in existing safe harbors,
including the safe harbors for discounts (42 CFR 1001.952(h)) and for
remuneration offered to employees (42 CFR 1001.952(i)). Finally,
parties may use the OIG advisory opinion process (42 CFR part 1008;
http://oig.hhs.gov/fraud/advisoryopinions.html) to determine whether
their particular arrangements would be subject to OIG sanctions.
In addition to the new safe harbor under the anti-kickback statute,
section 1860D-4(e)(6) of the Act directs the Secretary to create a
corresponding exception to section 1877 of the Act, commonly known as
the physician self-referral law. That exception is being
[[Page 59017]]
promulgated through a separate rulemaking by the Centers for Medicare &
Medicaid Services (CMS), the agency that administers the physician
self-referral law. We have endeavored to ensure as much consistency as
possible between our proposed safe harbor and the corresponding
exception proposed by CMS, given the differences in the respective
underlying statutes. We intend the final rules to be similarly
consistent. One significant difference in the statutory schemes is that
fitting in an exception under section 1877 is mandatory, whereas
complying with a safe harbor under the anti-kickback statute is
voluntary. In other words, arrangements that do not comply with the
electronic prescribing safe harbor will not necessarily be illegal
under the anti-kickback statute. Rather, they will be subject to the
customary case-by-case review under the statute. Another difference is
that section 1877 applies only to referrals from physicians, while the
anti-kickback statute applies more broadly.
In certain respects, we are considering safe harbor standards that
might impose stricter conditions than the corresponding exception to
section 1877. In part, this reflects the separate purposes of the anti-
kickback statute and section 1877, as well as the serious nature of the
felony violation described by the anti-kickback statute. In essence,
section 1877 of the Act sets a minimum standard for acceptable
financial arrangements; the anti-kickback statute addresses residual
risk that may be posed by arrangements that otherwise comply with a
physician self-referral exception. As explained in the Phase I final
physician self-referral rule promulgated by CMS, ``many relationships
that may not merit blanket prohibition under section 1877 of the Act
can, in some circumstances and given necessary intent, violate the
anti-kickback statute.'' (66 FR 856, 863; January 4, 2001).
II. Provisions of the Proposed Rule
This proposed rule would add a new paragraph (x) to the existing
safe harbor regulations at 42 CFR 1001.952. This new paragraph (x)
would describe more specifically the items and services protected by
the new safe harbor for prescribing drugs electronically; the
individuals and entities that may provide the protected items and
services; and the conditions under which providing the items and
services to prescribing health care professionals, pharmacies, and
pharmacists would be protected. In addition, using our separate legal
authority at Sec. 1128B(b)(3)(E) of the Act, as discussed below, we
are proposing separate safe harbor protection for certain electronic
health records software not covered by the MMA mandated safe harbor for
electronic prescribing. These proposed safe harbors would, if
promulgated, create separate and independent grounds for protection
under the anti-kickback statute. For the convenience of the public, we
are providing the following chart that lays out schematically the
overall structure and approach of these proposals, details of which are
provided below in Sections II. A and B. Readers are cautioned that the
proposals contain additional conditions and information not summarized
here.
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MMA-mandated Post-
electronic Pre-interoperability interoperability
prescribing safe electronic health electronic health
harbor records safe harbor records safe harbor
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Authority for Proposed Exception.............. Section 101 of the Section Section
Medicare 1128B(b)(3)(E) of 1128B(b)(3)(E) of
Prescription Drug, the Social Security Social Security
Improvement, and Act. Act.
Modernization Act
of 2003.
Covered Technology............................ Proposed: Proposed: Proposed:
Items and Software used solely Certified
services that are for the health records
necessary and used transmission, software.
solely to transmit receipt or Directly-
and receive maintenance of related training
electronic electronic health services.
prescription drug records. Software
information.. Directly- must include an
Includes related training electronic
hardware, software, services.. prescribing
internet Software component.
connectivity, and must include an Could
training and electronic include billing and
support services.. prescribing scheduling
component.. software, provided
that the core
function of the
software is
electronic health
records.
Standards with Which Donated Technology Must Proposed: Proposed: Proposed:
Comply. Foundation Electronic Product
standards for prescribing certification
electronic component must criteria adopted by
prescribing as comply with the Secretary
adopted by the foundation Electronic
Secretary.. standards for prescribing
electronic component must
prescribing as comply with
adopted by the foundation
Secretary.. standards for
electronic
prescribing as
adopted by the
Secretary, to the
extent these
standards are not
fully incorporated
into the product
certification
criteria.
Permissible Donors............................ Proposed: Proposed: Proposed:
As required Hospitals Hospitals
by statute, to members of their to members of their
permissible donors medical staffs.. medical staffs.
are hospitals (to Group Group
members of their practices to practices to
medical staffs), physician members.. physician members.
group practices (to PDP PDP
physician members), sponsors.. sponsors.
PDP sponsors and MA MA MA
organizations (to organization.. organization.
network pharmacists
and pharmacies, and
to prescribing
health care
professionals)..
[[Page 59018]]
Selection of Recipients....................... Proposed: Proposed: Proposed:
Donors may Donors may Donors may
not take into not take into use criteria to
account the volume account the volume select recipients
or value of or value of that are not
referrals from the referrals from the directly related to
recipient or other recipient or other the volume or value
business between business between of referrals or
the parties.. the parties.. other business
generated between
the parties.
Value of Protected Technology................. Proposed: Proposed: Proposed:
No specific No specific No specific
dollar amount dollar amount dollar amount
proposed for a cap proposed for a cap proposed for a cap
on the value of on the value of on the value of
protected protected items and protected items and
technology.. services.. services.
May be
greater than the
cap on pre-
interoperability
donations.
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A. Electronic Prescribing Safe Harbor Required Under Section 101 of the
MMA: Paragraph (x)
1. Protected Nonmonetary Remuneration
Section 1860D-4(e)(6) of the Act authorizes the creation of a safe
harbor for the provision of items and services that are ``necessary and
used solely'' to receive and transmit electronic prescription drug
information. This proposed rule would clarify the items and services
that would qualify for the new safe harbor (for purposes of this
preamble discussion, ``qualifying electronic prescribing technology'').
``Necessary'' nonmonetary remuneration--First, consistent with the
MMA mandate, the proposed safe harbor would protect items or services
that are ``necessary'' to conduct electronic prescription drug
transactions. This might include, for example, hardware, software,
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. However, the safe harbor would not protect arrangements in
which a Donor provides items or services that are technically or
functionally equivalent to items and services the Recipient currently
possesses or has obtained. Thus, for example, under the proposed
regulations, a Donor can provide a hand-held device capable of
transmitting electronic prescribing information to the Recipient, even
if the Recipient already has a desktop computer that could be used to
transmit or receive the same information, because the mobility allowed
by the hand-held device offers a material advantage over the desktop
computer for Recipients who would use the device portably. By contrast,
the provision of a second hand-held device would not qualify for safe
harbor protection if the Recipient already has a hand-held device
sufficient to run the requisite electronic prescribing software. We do
not interpret the term ``necessary'' to preclude upgrades of equipment
or software that significantly enhance the functionality of the item or
service.
We believe restricting the exception to ``necessary'' items and
services is important to minimize the potential for abuse. However, we
recognize that Donors will not necessarily know which items and
services the Recipient already possesses or has obtained. Accordingly,
proposed Sec. 1001.952(x)(7)(iv) would require the Recipient to
certify that the items and services to be provided are not technically
or functionally equivalent to items or services the Recipient already
possesses or has obtained. The certification would need to be updated
prior to the provision of any necessary upgrades or items and services
not reflected in the original certifications. We are concerned that the
certification process would be ineffective as a safeguard against fraud
and abuse if it is a mere formality or if Recipients simply execute a
form certification provided by a Donor. Therefore, we are proposing at
Sec. 1001.952(x)(8) that the Donor must not have actual knowledge of,
and not act in reckless disregard or deliberate ignorance of, the fact
that the Recipient possesses or has obtained items and services that
are technically or functionally equivalent to those donated by the
Donor. The Recipient would be protected only if the certification is
truthful. We are soliciting comments about other ways to address this
concern.
We are also concerned that there may be a risk that Recipients
would intentionally divest themselves of functionally or technically
equivalent technology that they already possess to shift costs to
Donors. We are soliciting public comments on how best to address this
issue.
``Used solely''--In addition to the ``necessary'' standard, section
1860D-4(e)(6) of the Act provides that the items and services must be
``used solely'' for the transmission or receipt of electronic
prescribing information. We believe Congress included this requirement
to safeguard against abusive arrangements in which the remunerative
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; if this value is
transferred to the physician in connection with referrals, the statute
would be implicated.\3\ Accordingly, the proposed safe harbor requires
that the protected items and services be used solely to transmit or
receive electronic prescribing information.
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\3\ See, e.g., 56 FR 35952, 35978 (July 29, 1991) noting that a
computer that has independent value to a physician may constitute an
illegal inducement.
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We are concerned that Donors might provide software for free or
reduced cost that bundles valuable general office management, billing,
scheduling, or other software with the electronic prescribing features.
Such additional remuneration would not meet the ``used solely''
requirement and would not be protected by the proposed electronic
prescribing safe harbor; such arrangements potentially raise
significant concerns under the anti-kickback statute, if any purpose of
the provision of the bundled software is to induce or reward the
generation of Federal health care program business. However, the
Recipient would not be precluded from purchasing for fair market value
additional technology not protected by the proposed safe harbor.
We are mindful that hardware and connectivity services can be used
for the receipt and transmission of a wide range
[[Page 59019]]
of information services, including, but not limited to, electronic
prescription information, and that many people may prefer to use a
single, multi-functional device, especially a hand-held, rather than
multiple single-use devices. Similarly, many people may prefer to use a
single connectivity service. Accordingly, we are proposing using our
regulatory authority under section 1128B(b)(3)(E) of the Act to create
an additional safe harbor to protect the provision by Donors to
Recipients of some limited hardware (including necessary operating
system software) and connectivity services that are used for more than
one function, so long as a substantial use of the item or service is to
receive or transmit electronic prescription information. We propose to
treat operating software as integral to the hardware and distinct from
other software applications that are not necessary for the hardware to
operate.
Protection under this additional, separate safe harbor would not
extend to the provision of items or services that are only occasionally
used for electronic prescribing. The additional safe harbor would
incorporate the definitions and conditions set forth in this proposed
rulemaking for the MMA-mandated safe harbor and would also include
conditions to address the additional risk of abuse posed by multi-
functional items and services. We are soliciting public comment about
the standards that should appear in an additional safe harbor for
multi-functional hardware (including necessary operating system
software) or connectivity services. In particular, we are soliciting
public comment on methodologies for quantifying or ensuring that a
substantial use of hardware and connectivity services is for the
receipt or transmission of electronic prescribing information. We are
also soliciting public comment on the nature and amount of any cap that
we might impose on the value of the donated multi-functional hardware
or connectivity services.
2. Donors and Recipients Protected by the Proposed Safe Harbor
Section 1860D-4(e)(6) of the Act describes the parties that may be
protected under the new safe harbor. Specifically, protection is
afforded to: (1) Hospitals with respect to members of their medical
staffs; (2) group practices with respect to prescribing health care
professionals who are members of the group practice; and (3) PDP
sponsors and MA organizations with respect to participating pharmacists
and pharmacies, as well as prescribing health care professionals. We
address each category below.
Hospitals/Medical Staff--Proposed Sec. 1001.952(x)(1)(i) would
protect donations of qualifying electronic prescribing technology
provided by a hospital to physicians on its medical staff. We do not
intend to interpret this provision as extending to physicians who do
not routinely furnish services at the hospital. We do not intend for
this exception to protect remuneration that is used to induce
physicians who already use other hospitals to join the medical staff of
a different hospital. We are soliciting public comment on whether we
should include items or services provided to other individuals or
entities (e.g., other health care prescribing professionals who treat
patients at the hospital).
Group Practices/Members--Proposed Sec. 1001.952(x)(1)(ii) would
protect donations of qualifying electronic prescribing technology
provided by a group practice to its members who are prescribing health
care professionals. For consistency with the regulations promulgated in
accordance with section 1877 of the Act, we propose to interpret the
terms ``group practice'' and ``members'' of a group practice consistent
with existing definitions in section 1877(h)(4) of the Act and the
regulations at 42 CFR 411.352 and 42 CFR 411.351, respectively. Those
provisions make clear that a ``group practice'' must be a single legal
entity with unified business operations and may not be an informal
affiliation of physicians and that a ``member'' of a group practice
refers to a physician-owner or physician-employee of the group
practice. A ``member'' of the group practice, under Sec. 411.351 does
not include independent contractors of the group or persons who are not
physicians.
Because section 1877 of the Act deals only with physician
referrals, application of its definition of a ``member'' of a group
practice is not sufficient to define the full range of ``prescribing
health care professionals'' included in section 1860D-4(e)(6) of the
Act, and it is necessary for us to augment the definition in this
proposed rule. Accordingly, for purposes of the proposed safe harbor,
``prescribing health care professionals who are members of the group''
would include prescribing professionals (e.g., nurse practitioners) who
are owners or employees of the group and who are authorized to
prescribe under applicable State licensing laws.
Because the definition of ``member'' of the group practice under
Sec. 411.351 excludes independent contractors, we are soliciting
comments regarding whether and how a group practice may appropriately
furnish qualifying electronic prescribing technology to physicians or
other prescribing health care professionals who contract with the group
to furnish services to the group's patients.
We do not believe that the inclusion by Congress of group practices
and their members in section 1860D-4(e)(6) of the Act was intended to
imply that the provision of qualifying electronic prescribing
technology by a group practice to its members necessarily required a
new safe harbor under the anti-kickback statute. In many circumstances,
the provision of equipment or other resources by a medical group to its
member health care professionals for use in furnishing services to the
group's patients would not raise fraud and abuse concerns under the
anti-kickback statute. Moreover, for those situations where the statute
may be implicated, many arrangements can be structured to fit in an
existing safe harbor, including, for example, the safe harbors for
personal services and management contracts or employee compensation at
Sec. 1001.952(d) and (i), respectively. Arrangements that do not fit
in a safe harbor are not necessarily illegal under the anti-kickback
statute. We believe Congress included these relationships in section
1860D-4(e)(6) of the Act simply to encourage group practices to adopt
electronic prescription technology.
PDP Sponsors and MA Organizations/Pharmacies, Pharmacists, and
Prescribing Health Care Professionals--Consistent with section 1860D-
4(e)(6) of the Act, proposed Sec. 1001.952(x)(1)(iii) would protect
donations of qualifying electronic prescribing technology provided by a
PDP sponsor or MA organization to prescribing health care
professionals, participating pharmacies, and participating pharmacists.
We propose to interpret the term ``PDP sponsor'' and ``MA
organization'' consistent with the Medicare Prescription Drug Benefit
regulations at 42 CFR 423.4 and 42 CFR 422.2, respectively. We propose
to interpret the terms ``pharmacy'' and ``pharmacist'' consistent with
applicable State licensing laws. We propose to interpret ``prescribing
health care professionals'' as physicians or other health care
professionals (e.g. nurse practitioners) licensed to prescribe drugs in
the State in which the drugs are dispensed.
Finally, we are soliciting comments on whether there is a need to
protect other categories of Donors or Recipients, beyond those
specifically set forth in
[[Page 59020]]
section 1860D-4(e)(6) of the Act, and if so, how best to address safe
harbor protection for those individuals or entities. In particular, we
are interested in comments addressing the types of individuals and
entities that should be protected, the degree of need for protection,
and the safeguards that should be imposed to protect against fraud and
abuse. In general, we believe that only individuals and entities
involved in the ordering, processing, filling, or reimbursing of
prescriptions are likely to have sufficient need to justify inclusion
in an electronic prescribing safe harbor.
3. Additional Conditions on the Provision of Qualifying Electronic
Prescribing Technology
Promoting Compatibility and Interoperability--Section 1860D-4(e)(6)
of the Act is integral to the electronic prescribing drug program
established by section 101 of MMA. Section 1860D-4(e)(6) of the Act
provides that, in order to qualify for the safe harbor, qualifying
electronic prescription technology must be used to receive and transmit
electronic prescription information in accordance with standards to be
established by the Secretary for the Part D electronic prescription
drug program. Consistent with section 1860(D)-4(e)(6) of the Act,
proposed Sec. 1001.952(x)(2) would require that the items and services
be provided as part of, or be used to access, an electronic
prescription drug program that complies with the standards established
by the Secretary for these programs. We are soliciting comments on
whether the safe harbor should protect qualifying electronic
prescription technology that is used for the transmission of
prescription information regarding items and services that are not
drugs (e.g., supplies or laboratory tests).
We believe that interoperability can serve as an important
safeguard against fraud and abuse and mitigate the risk that a Donor's
offer of free or reduced price technology to a Recipient could be a
means of maintaining or increasing referrals from the Recipient. With
interoperable electronic prescribing technology, the Recipient would be
free to transmit prescriptions to any appropriate pharmacy. At this
time, there are no regulatory standards to ensure that electronic
prescription information products are interoperable with other
products. However, we note that interoperability may be required in the
future under final regulations regarding the standards for the Part D
prescription drug program.
To the extent that either the hardware or software can be
interoperable, the proposed regulation at Sec. 1001.952(x)(3) would
prohibit Donors or their agents from taking any actions to disable or
limit that interoperability or otherwise impose barriers to
compatibility. We believe this condition is necessary to limit the
ability of Donors to use the provision of electronic prescribing
technology to tie Recipients to the Donor. We are considering defining
the term ``interoperable'' in this context 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. See generally 44 U.S.C. 3601(6)
(pertaining to the management and promotion of electronic government
services). We are soliciting public comment about this approach, our
definition of the term ``interoperable,'' alternative means of ensuring
the maximum level of interoperability, and the types of software
currently available for electronic prescribing.
Value of protected technology--To further safeguard against fraud
and abuse, we believe it would be appropriate to limit the aggregate
value of the qualifying electronic prescribing technology that a Donor
could provide to a Recipient under the safe harbor. We are considering
whether to limit the aggregate fair market value of all items and
services provided to a Recipient from a single Donor. We believe a
monetary limit is appropriate and reasonable to minimize the potential
for fraud and abuse. We are soliciting public comment on the amount of
a cap that would adequately protect the program against abuse, the
methodology used to determine the cap (for example, fixed dollar
amount, percentage of the value of the donated technology, or another
methodology), whether the same cap would be adequate if there were
protection for the donation of multi-functional hardware and
connectivity services, whether the cap should be reduced over time, and
whether the cap places a disadvantage on smaller entities that do not
have the financial resources of larger chains or organizations.
In addition, we are interested in public comments that address the
retail and nonretail costs (i.e., the costs of purchasing from
manufacturers, distributors, or other nonretail sources) of obtaining
electronic prescribing technology and the degree to which potential
Recipients may already possess items or services that could be used for
electronic prescribing. We note that CMS has received varying estimates
of the costs of implementing electronic prescribing through the comment
process for the CMS E-Prescribing and the Prescription Drug Program
proposed rule published on February 4, 2005 in the Federal Register (70
FR 6256). We caution that the cost of implementing an electronic
prescribing program will not correlate necessarily to the amount of any
cap if one is established. Moreover, we do not expect that donors will
wish necessarily to donate the total amount that the technology costs
or, depending on the size of a cap, the total amount ultimately
protected in the final rule. While we are interested in obtaining
detailed information about the costs of the full range of technology so
as to be fully informed on this matter, we do not expect that the final
regulations will protect all possible costs.
We are considering various potential caps that would be no higher
than any cap that may ultimately be imposed in the corresponding
electronic prescribing exception under Section 1877 of the Act to be
promulgated by CMS. We are considering measuring the monetary limit at
fair market value to the Recipient (i.e., the retail value). We believe
this approach is consistent with the anti-kickback statute's intent
requirement and would also minimize any competitive disadvantage for
smaller entities that do not have the financial resources or potential
volume of technology business of larger chains or organizations.
We are considering setting an initial cap, which would be lowered
after a certain period of time sufficient to promote the initial
adoption of the technology. This would have the effect of encouraging
investments in the desired technology while also ensuring that, once
the technology has been widely adopted and its costs have come down,
the safe harbor cannot be abused to disguise payments for referrals. We
are soliciting public comment about this approach. Finally, we are
soliciting comments on whether and, if so, how to take into account
Recipient access to any software that is publicly available either free
or at a reduced price.
Other Conditions--Proposed Sec. Sec. 1001.952(x)(5), (x)(6), and
(x)(7) would incorporate additional conditions. Paragraph Sec.
1001.952(x)(5) would provide that the Recipients (including their
groups, employees, or staff) may not make the donation of qualifying
electronic prescribing technology from Donors a condition of doing
business with the Donor. Paragraph (x)(6) would provide that neither
the eligibility of a Recipient to receive items and services from a
protected Donor, nor the amount or nature of the items or services
received, may be determined in a manner that
[[Page 59021]]
takes into account the volume or value of the Recipient's referrals or
other business generated between the parties. This would not preclude
selection criteria that are based upon the total number of
prescriptions written by a Recipient, but would preclude criteria based
upon the number or value of prescriptions written by the Recipient that
are dispensed or paid by the Donor, as well as any criteria based on
any other business generated between the parties. We are interested in
comments with respect to other potential criteria for selecting medical
staff recipients of donated technology. Also, the safe harbor would not
protect arrangements that seek to induce a Recipient to change
loyalties from other providers or plans to the Donor (e.g., 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 for a purpose of referring patients to
the Donor hospital).
Proposed Sec. 1001.952(x)(7) would require the arrangement to be
in writing, to be signed by the parties, to identify with specificity
the items or services being provided and their values, and to include
the certification described in section II.A.1 above. To permit
effective oversight of protected arrangements, the writing must cover
all qualifying electronic prescribing technology provided by the Donor
(or affiliated parties) to the Recipient. 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).
Finally, we seek to minimize the potential for abuse and to ensure
that the protected technology furthers the congressional purpose of
promoting electronic prescribing as a means of improving the quality of
care for all patients. We believe that any protected items and services
must, to the extent possible, be usable by recipients for electronic
prescribing for all patients to ensure that uninsured and non-Medicare
patients receive the same benefits that the technology may engender,
including reduction of errors and improvements in care. Some donated
technology (such as software for tracking prescriptions or formularies
of a particular MA organization's patients) may not be applicable to
all patients. However, other technology (for example, hand-held devices
and software that transmits prescriptions to pharmacies) is potentially
usable for all patients, and recipients should not be restricted from
using such technology for all patients. Accordingly, proposed Sec.
1001.952(x)(4) would require that, where possible, recipients must be
able to use the protected technology for all patients without regard to
payor status.
B. Proposed Electronic Health Records Safe Harbors
Many in the hospital industry, among others, have raised the issue
of the need for safe harbor protection for arrangements involving
technology other than electronic prescribing. In many cases, such
arrangements may qualify for safe harbor protection under existing safe
harbors, such as the employee safe harbor (42 CFR 1001.952(i)), the
discounts safe harbor (42 CFR 1001.952(h)), or the equipment rental
safe harbor (42 CFR 1001.952(c)). Moreover, as explained above,
arrangements that do not qualify for safe harbor protection are not
necessarily illegal.
In general, the provision of valuable technology to physicians or
other sources of Federal health care program referrals poses a
heightened risk of fraud or abuse. This risk increases as the value of
the technology to the Recipient increases. In the preceding discussion
of the proposed safe harbor for electronic prescribing technology, we
noted a number of fraud and abuse risk areas; those risk areas would
also apply to the provision of free or reduced price electronic health
records technology. In many respects, the provision of electronic
health records technology to physicians and others poses greater risk
of fraud or abuse than the provision of electronic prescribing
technology; electronic health records technology is inherently more
valuable to physicians in terms of actual cost, avoided overhead, and
administrative expenses of an office practice.
Notwithstanding, we believe it may be possible to craft safe harbor
conditions that would promote 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 serve as marketing platforms or
mechanisms to influence inappropriately clinical decision making or tie
physicians to particular providers or suppliers. The potential patient
care and system efficiency benefits of interoperable and certified
electronic health records technology are discussed in detail in the
preamble to CMS' contemporaneous notice of proposed rulemaking for an
exception under section 1877 and are not repeated here. Full
interoperability of electronic health records technology would help
reduce, but not eliminate, some risks of program and patient fraud and
abuse (such as improper patient steering) by ensuring that donors would
not be able to lock recipients into using the donor's systems.
Currently, uniform interoperability standards for electronic health
records and certification requirements necessary to ensure
interoperability do not exist. Accordingly, we are considering an
incremental approach to safe harbor protection in this area.
Specifically, we are proposing using our legal authority at section
1128B(b)(3)(E) of the Act to promulgate two safe harbors related to
electronic health records software and directly related training
services that are necessary and used to receive, transmit, and maintain
electronic health records of the entity's or physician's patients. The
first safe harbor would apply to donations made before adoption by the
Secretary of product certification criteria, including criteria for
interoperability, functionality, and privacy and security of electronic
health records technology. These conditions are also referred to herein
as ``product certification criteria.'' (For purposes of this
rulemaking, this safe harbor will be referred to as the ``pre-
interoperability'' safe harbor.) Once standards are identified and
product certification criteria are developed for electronic health
records and adopted by the Secretary, we believe some enhanced
flexibility in the conditions applicable under a safe harbor for
electronic health records may be appropriate, provided the safe harbor
conditions as a whole sufficiently guard against fraud and abuse. A
second safe harbor would apply to donations made after product
certification criteria have been adopted. (For purposes of this
rulemaking, this second safe harbor will be referred to as the ``post-
interoperability'' safe harbor.) The post-interoperability safe harbor
would recognize the reduction in the risk of fraud and abuse that may
result from the ability to ensure that free or reduced price products
provided under the safe harbor are interoperable and certified.
Unlike electronic prescribing, Congress provided no direction with
respect to any safe harbor for electronic health records. As discussed
more fully below, any safe harbor of electronic health records
technology will necessarily involve consideration of a number of
important variables. Given this, as well as the inherent risk of fraud
and abuse typically posed by gifts of free items and services to
potential referral sources, we believe we do not
[[Page 59022]]
have sufficient information at this time to draft appropriate safe
harbor language. However, we are soliciting public comments on the
proposed scope and conditions for electronic health records safe
harbors, as outlined below.
1. Proposed Pre-Interoperability Safe Harbor
We are considering incorporating the following features in the pre-
interoperability safe harbor.
Covered Technology--The pre-interoperability safe harbor would
protect electronic health records software (that is, software that is
essential to and used solely for the transmission, receipt, and
maintenance of patients' electronic health records and electronic
prescription drug information) and directly-related training services,
provided that the software includes an electronic prescribing
component. The required electronic prescribing component must consist
of software that is used to receive and transmit electronically
prescription drug information in accordance with standards established
by the Secretary under the Part D electronic prescription drug program.
We are soliciting comments on whether the exception should permit the
electronic prescribing component of electronic health records software
to be used for the transmission of prescription information regarding
items and services that are not drugs (for example, supplies or
laboratory tests). Additionally, we are soliciting comments with
respect to whether we should require that electronic health records
software include a computerized provider order entry (``CPOE'')
component. The pre-interoperability safe harbor would not protect the
provision of other types of technology, including, but not limited to,
hardware, connectivity services, billing, scheduling, or other similar
general office management or administrative software services, or
software that might be used by a Recipient to conduct personal business
or business unrelated to the Recipient's medical practice. While we
would protect necessary training services in connection with the
software, we would not protect the provision of staff to Recipients or
their offices. We are mindful that there may be particular
constituencies, such as rural area providers, that lack sufficient
hardware or connectivity services to implement effective electronic
health records systems. We are soliciting comments addressing these
special circumstances.
Any safe harbor would need to define ``electronic health records.''
As with electronic prescribing technology, we are interested in public
comments that address the software functions that should be included in
the definition of ``electronic health records''; the types of software
that should be protected; the retail and nonretail cost of such
software; the manner in which such software is currently marketed;
methods for defining the scope of protected software; and safeguards
that might be imposed (either by definition or separately) to ensure
that provision of the software cannot be used to camouflage unlawful
payments for referrals or to tie impermissibly Recipients to Donors in
a position to benefit from the Recipient's referrals.
The pre-interoperability safe harbor would require that the
protected software and training services be ``necessary'' consistent
with our interpretation of the term in section II.A.1, and we are
considering including comparable documentation provisions, including
comparable certifications by Recipients, to ensure that the safe harbor
does not protect the provision of items or services that are
technically or functionally equivalent to items and services the
Recipient currently possesses or has obtained. As with electronic
prescribing technology, we are concerned that there may be a risk that
Recipients would intentionally divest themselves of functionally or
technically equivalent technology that they already possess to shift
costs to Donors, and we are soliciting public comments on whether and
how to address this situation.
Interoperability--In addition to requiring that the electronic
prescribing component of the protected software comply with standards
established by the Secretary for the Part D electronic prescription
drug program, it would be important that neither Donors nor their
agents take any actions to disable or limit interoperability of any
component of the software or otherwise impose barriers to
compatibility. We are also considering requiring that protected
software comply with relevant Public Health Information Network
preparedness standards, such as those related to BioSense. We are
soliciting comments on these and other appropriate qualifications. In
addition, electronic health records lack the program and beneficiary
protections that exist under the Part D prescription drug program and
related electronic prescription standards. We are considering including
in the final safe harbor conditions designed to replicate these
protections for electronic health records, including quality assurance
measures. We are soliciting public comments on the most appropriate way
to do so.
Value of the Protected Technology--As with electronic prescribing,
we are proposing limiting the aggregate value of the protected software
and training services that a Donor could provide to a Recipient. The
limit under the proposed pre-interoperability safe harbor would be
directly related to the limit adopted in connection with the electronic
prescribing safe harbor discussed at II.A.3. There, we note various
alternatives we are considering in connection with a limiting cap and
outline issues about which we are soliciting public comments. We are
considering similar alternatives, and are interested in similar
comments, in connection with a safe harbor for electronic health
records. Given that electronic health records technology has high value
to Recipients, we are considering several approaches, including: (1) An
aggregate dollar cap; (2) a cap that would be set at a percentage of
the value of the technology to the Recipient (thus requiring Recipients
to share a portion of the costs and reducing windfall benefits to
Recipients); or (3) a cap set at the lower of a fixed dollar amount or
a percentage of the value of the technology to the Recipient.
We are soliciting comments on how a cap under a safe harbor for
electronic health records would relate to a cap under proposed Sec.
1001.952(x) and how the value of technology provided under the final
safe harbors would be aggregated. We are concerned that Donors may
abuse the proposed exceptions for electronic prescribing items and
services and electronic health records software and training services
by selectively relying on both exceptions to maximize the value of
technology provided to Recipients as a means of disguising payments for
referrals. We believe conditions should be included in the final
regulation to prevent this abuse and are considering requiring an
overall cap on value, as well as documentation requirements that
integrate all technology provided under the final exceptions. We are
considering requiring an overall cap on the value of donated technology
(such that the value of technology donated under the electronic
prescribing safe harbor would count towards the total value of the
software protected under the pre-interoperability safe harbor), as well
as documentation requirements that integrate all technology provided
under any safe harbor.
Another concern, particularly in light of the cost of electronic
health records technology, is that Donors may attempt
[[Page 59023]]
to shift the financial burden of providing electronic health records
technology to the Federal health care programs or beneficiaries.
Accordingly, we would likely include a safe harbor condition that would
prohibit such cost shifting. Finally, we are soliciting comments on
whether and, if so, how to take into account Recipient access to any
software that is publicly available either free or at a reduced price.
Donors and Recipients--The pre-interoperability safe harbor would
protect the same categories of Donors and Recipients as the proposed
Sec. 1001.952(x)(1) and would define them similarly. We believe that
Donors should be limited to hospitals, group practices, PDP sponsors,
and MA organizations, because they have a direct and primary patient
care relationship and therefore have a central role in the health care
delivery infrastructure that justifies safe harbor protection for the
furnishing of electronic health records technology that would not be
appropriate for other types of providers and suppliers, including
providers and suppliers of ancillary services. Moreover, hospitals,
group practices, PDP sponsors, and MA organizations are potentially in
a better position to promote widespread use of electronic health
records technology that has the greatest degree of openness and
interoperability. We do not believe that providers and suppliers of
ancillary services, such as laboratories, have a comparable stake in
advancing the goal of interoperable electronic health records for
patients. In our experience, laboratories and others have used free or
deeply discounted goods, such as computers and fax machines, to
influence referrals improperly. Longstanding OIG guidance makes clear
that gifts of equipment to referral sources that have value to the
physicians are highly suspect under the anti-kickback statute.\4\ We
are interested in comments regarding whether other categories of Donors
or Recipients should be included and why. We are also interested in
comments with respect to whether different or alternative conditions
should apply to any category of donor.
---------------------------------------------------------------------------
\4\ See supra note 3.
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Other Conditions--Finally, to further reduce the risk of fraud and
abuse, we would incorporate in the pre-interoperability safe harbor for
electronic health records certain other conditions described above in
connection with proposed Sec. 1001.952(x). These conditions would
include the requirement at proposed 1001.952(x)(6) that neither the
eligibility of a recipient to receive items and services from a donor,
nor the amount and nature of the items and services received, may be
determined in a manner that takes into account the volume or value of
the recipient's referrals to the donor or other business generated
between the parties. In addition, we would include the proposed anti-
solicitation provision (Sec. 1001.952(x)(5)), the proposed
documentation requirements (Sec. 1001.952(x)(7)), and the proposed
all-payors requirement (Sec. 1001.952(x)(4)).
Sunset Provision--We are considering whether to sunset the pre-
interoperability safe harbor discussed here once the post-
interoperability safe harbor discussed in the next section becomes
effective.
Our intent is that the proposed pre-interoperability safe harbor
outlined above would promote the adoption of open, interconnected,
interoperable electronic health records and electronic prescribing
systems. We are interested in comments addressing whether this pre-
interoperability safe harbor protection may have the unintended effect
of impeding the beneficial spread of interoperable electronic health
records systems by promoting closed or isolated systems or systems that
effectively tie physicians to particular providers or suppliers. For
example, a hospital that donates expensive technology to a physician
may exercise control over that physician sufficient to preclude or
discourage other systems or health plans from having access to the
physician for their own networks.
2. Proposed Post-Interoperability Safe Harbor
The adoption of uniform interoperability standards for electronic
health records, as well as product certification criteria to ensure
that products meet those standards, will help prevent certified
technology from being used by unscrupulous parties to lock in streams
of referrals or other business. While interoperability does not vitiate
the risk (we are concerned that parties may use the offer or grant of
free technology itself as a vehicle to capture referrals), it may
mitigate the risk sufficiently to warrant different or modified safe
harbor conditions. It would be important that the protected electronic
health records software be certified in accordance with product
certification criteria adopted by the Secretary, and that the
electronic prescribing component comply with electronic prescribing
standards established by the Secretary under the Part D program, to the
extent those standards are not incorporated into the product
certification criteria. Once product certification criteria are adopted
for interoperable electronic health records technology, we intend to
finalize a post-interoperability safe harbor.
In particular, we are considering a post-interoperability safe
harbor that would include the conditions described above in section
II.B.1 in connection with the pre-interoperability safe harbor, with
the following differences. First, we are considering whether the safe
harbor should protect additional software applications, provided
electronic prescribing and electronic health records are the core
functions of the protected software. We intend to protect systems that
improve patient care rather than systems comprised solely or primarily
of technology that is incidental to the core functions of electronic
prescribing and electronic health records. As with the pre-
interoperability safe harbor, technology protected under this safe
harbor must include an electronic prescribing component and may not be
used by a Recipient solely to conduct personal business or business
unrelated to the Recipient's medical practice. We are soliciting public
comments with respect to whether we should also or instead require that
electronic health records software include a CPOE component. We are
also soliciting public comments on what types of software should be
protected under the safe harbor and methods for ensuring that
electronic prescribing and electronic health records are the core
functions of the donated technology.
Second, we are considering whether to protect categories of Donors
or Recipients, beyond those specifically set forth in section 1860D-
4(e)(6) of the Act and whether different or alternative conditions
should apply to any category of permissible Donors or Recipients. We
are interested in comments addressing the types of individuals or
entities that should be protected, the degree of need for protection,
and the safeguards that should be imposed to protect against fraud and
abuse.
Third, in light of the enhanced protection against some types of
fraud and abuse offered by certified, interoperable systems, we are
considering permitting Donors to use selective criteria for choosing
Recipients, provided that neither the eligibility of a recipient, 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. We are
considering enumerating several selection criteria
[[Page 59024]]
which, if met, would be 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 recipient practices medicine or a determination based on the size
of the recipient's medical practice). Selection criteria that are based
upon the total number of prescriptions written by a Recipient would not
be prohibited, but the proposed regulation would prohibit criteria
based upon the number or value of prescriptions written by the
Recipient that are dispensed or paid by the Donor, as well as any
criteria directly based on any other business generated between the
parties. The safe harbor would not protect arrangements that seek to
induce a Recipient to change loyalties from other providers or plans to
the Donor. We are soliciting public comments on criteria for selecting
recipients of the donated technology.
We expect that this approach would ensure that donated technology
can be targeted at Recipients who use it the most in order to promote a
public policy favoring adoption of electronic health records, while
discouraging problematic direct correlations with Federal health care
program referrals (for example, a hospital offering a physician 10 new
computers for every 500 referrals of Medicare-payable procedures.) This
approach would be a deliberate departure from other safe harbors 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 proposed rule, both direct and indirect
correlations between the provision of free goods or services and the
volume or value of referrals or other business generated between the
parties are highly suspect under the anti-kickback statute (and may
evidence outright violations) and do not meet the requirements of other
safe harbors under the statute or 42 CFR 1001.952.
We are interested in public comments about this approach to
selecting Recipients, including whether there may be unintended
consequences that would inhibit the adoption of interoperable
technology or lead to abusive arrangements and, if so, whether more or
less restrictive conditions are appropriate.
Fourth, we are considering a cap on the value of the donated
interoperable software that may be larger than the cap under the pre-
interoperability safe harbor. With respect to a limiting cap, we are
considering issues similar to those discussed in the preceding sections
on the proposed electronic prescribing safe harbor and the proposed
pre-interoperability safe harbor, and are interested in comments on
those same issues as they might relate to a post-interoperability safe
harbor.
In sum, there are a number of ways in which a post-interoperability
safe harbor might be structured, and flexibility in one condition might
require tightening of another. We are interested in comments on the
overall approach outlined above and how the various conditions might be
crafted to ensure that the safe harbor conditions, taken as a whole,
provide sufficient protection against fraud and abuse.
C. Additional Solicitation of Public Comments: Community-Wide Health
Information Systems
The regulations promulgated in accordance with section 1877 of the
Act include an exception at 42 CFR 411.357(u) for the provision of
information technology items and services by certain entities to
physicians to enable the physicians to participate in a community-wide
health information system designed to enhance the overall health of the
community. The systems must facilitate access to, and sharing of,
electronic health care records and any complementary drug information
systems, general health information, medical alerts, and related
information for patients served by community providers and
practitioners. Certain other conditions must also be satisfied. We have
received a number of comments in response to our 2004 Annual
Solicitation of New Safe Harbors and Special Fraud Alerts (69 FR 71766;
December 10, 2004) requesting that we create a comparable safe harbor
under the anti-kickback statute. While we have not determined whether
such a safe harbor is needed or prudent, we are interested in public
comments at this time addressing the need for, and conditions that
should pertain to, such a safe harbor. Because of the close
relationship between the topic of this proposed rulemaking and the
suggested new safe harbor for community-wide health information
systems, we believe it appropriate to solicit comments on the latter
issue as part of this rulemaking.
III. Regulatory Impact Statement
We have examined the impact of this rule as required by Executive
Order 12866, the Unfunded Mandates Reform Act of 1995, the Regulatory
Flexibility Act (RFA) of 1980, and Executive Order 13132.
Executive Order 12866
Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). A regulatory impact
analysis must be prepared for major rules with economically significant
effects (i.e., $100 million or more in any given year).
This is not a major rule, as defined at 5 U.S.C. 804(2), and it is
not economically significant, since it would not have a significant
effect on program expenditures, and there are no additional substantive
costs to implement the resulting provisions. This proposed rule would
create new safe harbors under the anti-kickback statute for certain
entities to provide technology-related items and services to certain
parties for electronic prescribing and health record purposes. This
proposal would merely create safe harbors under the anti-kickback
statute for arrangements under which certain entities would help
physicians and certain other individuals and entities with their
electronic prescribing and health records expenses. In doing so, this
rulemaking would impose no requirements on any party. Parties may
voluntarily seek to comply with this provision so that they have
assurance that their actions will not subject them to any enforcement
actions under the anti-kickback statute. The safe harbors should
facilitate the adoption of electronic prescribing and 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 Donors will fund all of the health information
technology used by Recipients. However, since we cannot predict which
entities will offer these items and services, we cannot determine with
certainty the aggregate economic impact of this proposed rulemaking. We
do not believe, however, that the impact of this electronic prescribing
safe harbor rule would approach $100 million annually. Therefore, this
proposed rule is not a major rule. We note that this proposed rule
would remove a perceived obstacle to the provision of qualifying
electronic prescribing technology and electronic health records
software and directly related training services (for purposes of this
Regulatory Impact Statement, herein
[[Page 59025]]
referred to as ``qualifying health information technology'') by certain
entities. Although this proposed rule applies to donations of
qualifying health information technology by hospitals, group
practitioners, PDP sponsors, and MA plans, we do not expect that many
group practices, PDP sponsors or MA plans would use these proposed safe
harbors (and in some cases, existing safe harbors may also be available
or parties may use the OIG's advisory opinion process).
Notwithstanding, regardless of whether donations would be allowed under
existing safe harbors or those that are included in this proposed rule,
we encourage commenters to provide information on the costs that would
likely be incurred by Donors that would choose to furnish qualifying
health information technology to Recipients, as well as other related
costs that would likely be incurred by both Donors and Recipients, 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 proposed rule is restricted by
potential effects of outside factors, such as technological progress
and other market forces, future certification standards, and the
companion proposed physician self-referral exceptions. Furthermore,
both the costs and potential savings of electronic prescribing, EHRs,
computerized physician order entry, and billing and scheduling software
vary to the extent to which each element operates as a stand alone
system or as part of an integrated system. We welcome comments that
will help identify both the independent and synergistic effects of
these variables. As noted in the electronic prescribing proposed rule,
which was published on February 4, 2005 (70 FR 6256, 6268-6273), the
Department expects that donors may experience net savings with
electronic prescribing in place and patients would experience
significant, positive health effects. We have not repeated that
analysis in this proposed rule. Moreover, we have not replicated the
extensive analysis of costs, benefits, and potential impact on patient
care contained in the companion physician self-referral proposed rule.
We believe the analysis set forth there may be similarly relevant to
the potential impact of the proposed safe harbors. As also noted there,
we assume that qualifying health information technology costs and
benefits will be realized sooner or later. 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 for this proposed rule is: to what extent would the
use of these proposed anti-kickback safe harbors accelerate adoption of
electronic prescribing and EHRs, taking into account available policy
instruments, notably the development of interoperable standards? The
baseline information is uncertain. As described in more detail in the
physician self-referral proposed rule, there are numerous estimates of
adoption of electronic prescribing by health plans, hospitals,
physicians, and (for prescribing of drugs only) pharmacies. As noted
there, these estimates are highly sensitive to assumptions. For
example, the maximum allowed remuneration might be as little as half as
much or as much as twice as much. The rate of adoption might be higher
or lower than estimated. The proportion receiving remuneration could be
lower or higher than estimated, depending on willingness of hospitals,
group practices, MA organizations and PDP sponsors to subsidize
investments in health information technology. We are interested in
comments on whether information exists that would allow more definite
estimates as to the effects of these proposed safe harbors.
Unfunded Mandates Reform Act
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 proposed rule would impose no mandates. Any actions taken under
this rule would be voluntary. Furthermore, such actions are likely to
result in cost savings, not net expenditures, and any expenditures
would be undertaken by government-owned hospitals in their business
capacity, without any necessary impact on state, local, or tribal
governments, or their expenditure budgets, as such.
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) and the Small Business
Regulatory Enforcement and Fairness Act of 1996, which amended the RFA,
require agencies to analyze options for regulatory relief of small
businesses. For purposes of the RFA, small entities include small
businesses, nonprofit organizations, and Government agencies. Most
hospitals and most other providers and suppliers are small entities,
either by nonprofit status or by having revenues of $6 million to $29
million in any one year. Individuals and States are not included in the
definition of a small entity. We are not preparing an analysis for the
RFA because we have determined that this proposed rule would not have a
significant impact on small businesses. We base our decision on the
fact that we expect the rulemaking on electronic prescribing and health
records to be beneficial to the affected entities because it will allow
them to better reap the benefits of increased use of electronic
prescribing and health records technology, including reduction of
medical errors and increased operational efficiencies.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 603 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a Metropolitan
Statistical Area and has fewer than 100 beds. We are not preparing an
analysis for section 1102(b) of the Act because we have determined that
this rule would not have a substantial negative impact on the
operations of a substantial number of small rural hospitals. If this
rule has any impact, it would be a substantial positive impact in
reducing costly medical errors and increasing operational efficiencies
through the use of technology.
Executive Order 13132
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on State
and local Governments, preempts State law, or otherwise has Federalism
implications. Since this regulation does not impose any costs on State
or local Governments, the requirements of Executive Order 13132 are not
applicable.
The Office of Management and Budget (OMB) has reviewed this rule in
accordance with Executive Order 12866.
IV. Paperwork Reduction Act
In accordance with section 3506(c)(2)(A) of the Paperwork Reduction
Act of 1995, we are required to solicit public comments, and receive
final OMB approval, on any information collection requirements set
forth in rulemaking.
The safe harbors promulgated in this proposed rule impose some
minimal
[[Page 59026]]
information collection requirements. Specifically, for an arrangement
to fall within the proposed safe harbors would have to fulfill the
following documentation requirements: (1) There must be a writing
signed by the parties; (2) the written agreement must identify the
items or services being provided and their values; (3) the written
agreement must incorporate or cross-reference prior relevant
agreements; and (4) the written agreement must contain a certification
by the Recipient that the items and services to be provided do not
duplicate any existing items or services the Recipient already has or
has obtained from another source.
Compliance with a safe harbor under the Federal anti-kickback
statute is voluntary, and no party is ever required to comply with a
safe harbor. Instead, safe harbors merely offer an optional framework
for structuring business arrangements to ensure compliance with the
anti-kickback statute. All parties remain free to enter into
arrangements without regard to a safe harbor, so long as the
arrangements do not involve unlawful payments for referrals under the
anti-kickback statute. Thus, we believe that the documentation
requirements necessary to enjoy safe harbor protection do not qualify
as an added paperwork burden in accordance with 5 CFR 1320.3(b)(2),
because the requirements are consistent with usual and customary
business practices and because the time, effort, and financial
resources necessary to comply with the requirements would largely be
incurred in the normal course of business activities.
We are soliciting public comments with respect to these
requirements. Comments on these requirements should be sent to the
following address within 60 days following the Federal Register
publication of this interim final rule:
OIG Desk Officer, Office of Management and Budget, Room 10235, New
Executive Office Building, 725 17th Street, NW., Washington, DC 20053,
FAX: (202) 395-6974.
V. Public Inspection of Comments and Response to Comments
Comments will be available for public inspection beginning November
10, 2005 in Room 5518, 330 Independence Avenue, SW., Washington, DC on
Monday through Friday of each week (Federal holidays excepted) between
the hours of 9 a.m. and 4 p.m., (202) 619-0089.
Because of the large number of items of correspondence we normally
receive on Federal Register documents published for comment, we are not
able to acknowledge or respond to them individually. We will consider
all comments we receive by the date and time specified in the DATES
section of this preamble, and will respond to the comments in the
preamble of the final rule.
List of Subjects in 42 CFR Part 1001
Administrative practice and procedure, Fraud, Grant programs--
health, Health facilities, Health professions, Maternal and child
health, Medicaid, Medicare.
Accordingly, 42 CFR part 1001 would be amended as set forth below:
PART 1001--[AMENDED]
1. The authority citation for part 1001 would be amended to read as
follows:
Authority: 42 U.S.C. 1302, 1320a-7, 1320a-7b, 1395u(j),
1395u(k), 1395w-104(e)(6), 1395y(d), 1395y(e), 1395cc(b)(2)(D), (E)
and (F), and 1395hh; and sec. 2455, Pub. L. 103-355, 108 Stat. 3327
(31 U.S.C. 6101 note).
2. Section 1001.952 would be amended by republishing the
introductory text, and by adding (x) to read as follows:
Sec. 1001.952 Exceptions.
The following payment practices shall not be treated as a criminal
offense under section 1128B of the Act and shall not serve as the basis
for an exclusion:
* * * * *
(x) Electronic Prescribing Items and Services. As used in section
1128B of the Act, ``remuneration'' does not include 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--
(i) In the case of a hospital, by the hospital to physicians who
are members of its medical staff;
(ii) In the case of a group practice, by the group practice to
prescribing health care professionals who are members of the group
practice; and
(iii) In the case of a PDP sponsor or MA organization, by the
sponsor or organization to pharmacists and pharmacies participating in
the network of such sponsor or organization and to prescribing health
care professionals.
(2) The items and services are donated 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 furnished.
(3) The donor (or any person on the donor's behalf) must not take
any actions to limit or restrict unnecessarily the use or compatibility
of the items or services with other electronic prescription information
items or services or electronic health information systems.
(4) With respect to items or services that are of the type that can
be used for any patient without regard to payor status, the donor may
not restrict, or take any action to limit, the recipient's right or
ability to use the items or services for any patient.
(5) The prescribing health care professional, pharmacy, or
pharmacist (or any affiliated group, employee, or staff member) does
not make the receipt of items or services a condition of doing business
with the donor.
(6) Neither the eligibility of a prescribing health care
professional, pharmacy, or pharmacist 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 or services being provided and the value
of those items and services;
(iii) Covers all of the electronic prescribing items and services
to be furnished by the donor (or affiliated parties) to the recipient;
and
(iv) Contains a certification by the recipient that the items and
services are not technically or functionally equivalent to items and
services the recipient already possesses or has obtained. The recipient
will be deemed not to comply with this subparagraph if the
certification the recipient provides is not full, complete, and
accurate, to the best of the recipient's knowledge.
(8) The donor did not have actual knowledge of, and did not act in
reckless disregard or deliberate ignorance of, the fact that the
recipient possessed or had obtained items and services that were
technically or functionally equivalent to those donated by the donor.
Note to Paragraph (x): For purposes of paragraph (x) of this
section, group practice shall have the meaning set forth at Sec.
411.352; members of a group practice shall mean all persons covered
by the definition of ``member of the group practice'' at Sec.
411.351, as well as other prescribing health care professionals who
are owners or employees of the group practice; prescribing health
care professional shall mean a physician or other
[[Page 59027]]
health care professional licensed to prescribe drugs in the State in
which the drugs are dispensed; PDP sponsor or MA organization shall
have the meanings set forth at Sec. Sec. 423.4 and 422.2,
respectively.
Dated: March 15, 2005.
Daniel R. Levinson,
Acting Inspector General.
Approved: August 12, 2005.
Michael O. Leavitt,
Secretary.
[FR Doc. 05-20315 Filed 10-5-05; 10:49 am]
BILLING CODE 4150-01-P