Healthcare Business News
Rep Jim McDermott

Lawmaker urges extension of safe harbor for EHRs

By Joe Carlson
Posted: March 28, 2013 - 6:45 pm ET

Normally, it would be illegal for a hospital to donate electronic medical-record software to an independent doctor who refers patients for treatment at the hospital. But federal officials created special rules to allow such transfers as a way to encourage healthcare providers to adopt the costly systems.

Those exceptions to the Stark law and the anti-kickback statute are due to expire at the end of the year, and observers say they would like to see quick action to renew them. Federal subsidies for EHR systems are slated to continue via Medicare until 2016.

On Thursday, Rep. Jim McDermott (D-Wash.) wrote a letter urging Greg Demske, chief counsel to HHS' inspector general, to extend exceptions soon so that providers “so that providers have the certainty that they need to continue engaging in efforts designed to promote care coordination.”

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“The safe harbor that your agency has established, which protects the donation of electronic health records under certain limited circumstances, is a common-sense policy,” McDermott wrote in the letter. “It encourages collaboration among providers, yet also contains rigorous requirements that providers must meet in order to protect the Medicare and Medicaid programs from the few unscrupulous providers who would donate electronic health record software in exchange for referrals.”

The anti-kickback law makes it illegal to give payments intended to influence medical care for Medicare patients, while Stark prohibits payments to induce referrals to hospitals. However, the CMS established a Stark exception to allow hospitals and medical labs to donate EHR software to physicians who might otherwise not invest the money to switch to electronic records. HHS' inspector general's office similarly set up a safe harbor to protect such donations from kickback scrutiny, provided the physicians cover 15% of the cost of the systems.

Officials with the Federation of American Hospitals, the Washington-based interest group for investor-owned health systems, made renewal of the EHR exceptions its top recommendation in a list of proposed safe harbors in a Feb. 26 letter to HHS (PDF).

“Without protections from prosecution under the fraud and abuse statutes, the healthcare industry will be reluctant to continue to undertake large capital investments to encourage the wide-scale adoption of EHRs,” according to the letter. The trade group urged regulators to extend the exceptions through 2016, when federal grants to encourage EHR adoption are set to end.

Although regulators have crafted dozens of exceptions and safe harbors to the Stark and the anti-kickback laws, the EHR rules are unique because they allow for donations of valuable goods. Most of the other exceptions simply allow hospitals, doctors and other groups to exchange goods at fair market value.

“The reason why this is important is there really isn't any other viable exception that would accommodate a donation of EMR technology,” said Bob Homchick, a partner with Davis Wright Tremaine in Seattle. “If all you can do is sell it to them at fair-market value, then the physician can go to a manufacturer. The whole issue is, we're doing this so that you can facilitate a physician's entry into the EHR system. And doctors aren't going to pay for this, because the return on investment isn't very good.”

The federal Office of Management and Budget been reviewing two proposed rules on the issue since Feb. 15, one regarding the Stark exception, and another on the anti-kickback safe harbor.

Jeff Smith, director of public policy at the College of Healthcare Information Management Executives, said he believes both provisions are likely to be extended before the year is out.

“These provisions are fairly safe, but we are going to definitely have to make sure that we are heard on this issue,” Smith said. “If you don't call out the positive benefits, then the provisions go away.”

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