An HHS rule that grants exceptions to federal fraud and abuse laws may be more of a bane than a boon for tax-exempt hospitals.
Healthcare lawyers said the months' old HHS ruling, which was intended to speed the use of health information technology by practicing physicians, instead could actually quell participation from a not-for-profit sector that's already under intense IRS scrutiny.
In August, HHS and its inspector general's office released a long-awaited rule that grants certain exceptions to the so-called Stark law, which prohibits doctors from referring patients to hospitals in which they have a financial stake, and created a safe harbor from anti-kickback statutes.
The new regulations, which take effect Oct. 10, allow hospitals and other organizations to donate e-prescribing, electronic health-records technology and support services to physicians. Under the rules, HHS also broadened exceptions and safe harbors in regards to who is qualified to donate health IT components and who is qualified to receive them.
HHS first announced the proposed rules October 2005, when many in the healthcare community said that until exceptions were made to the Stark and anti-kickback laws, provider adoption would stall. But even before that, Congress, under a provision in the Medicare Modernization Act, required HHS to create the exceptions. The rules fall in line with the Bush administration's push to boost the use of EHRs.
To be sure, many in the industry see the rulings as a help that would, in part, create a quick path to put health IT tools into the hands and onto the desktops of the provider community.
But relief from the physician self-referral laws, though welcomed, may have unintended consequences for tax-exempt hospitals wary that some donations may not pass muster with IRS auditors.
The IRS has increased its oversight of tax-exempt hospitals after a spate of shady hospital-physician deals.
In an e-mailed response, an IRS spokeswoman said: "(The) IRS understands that electronic health records offer significant opportunities to promote health for the benefit of the community by reducing medical errors, improving patient safety, and improving the efficiency and effectiveness of care. Therefore, the area is being carefully studied in terms of whether there are any exempt organization tax law barriers."
Under IRS regulations, any contribution from a tax-exempt organization must primarily serve a public benefit rather than an incidental private one for the recipient, said Gerry Hinkley, a partner with law firm Davis Wright Tremaine in San Francisco.
And there's the catch. While health policy analysts have argued strongly that moving patient data from the clipboard to the computer will have a life-saving effect for patients, questions abound about ancillary donations -- such as bookkeeping and claims software -- in which the immediate public benefit may be harder to prove, Hinkley said.
Now the legal departments at many not-for-profit hospitals are trying to find a workable solution to the HHS exceptions, even as they wonder how a regulation meant to help the hospital industry could instead hurt a large sector of it.
Also at play is an overriding sense that hospitals that have the coveted tax-exempt status are hypersensitive to doing anything that could have it revoked, Hinkley said.
Daniel Lohr, general counsel at Geisinger Health System, said his legal team has been closely following the issue. As health IT goes, Geisinger's system is fairly standard. But giving its doctors the software they need to create their own electronic charts -- allowable under the HHS rule -- complicates the matter under the IRS, he said.
Hinkley said hospitals could file a request with the IRS to get what's known as a private-letter ruling. The entire process could take a year to resolve, he added.
"The problem is that it doesn't seem to be on Congress' radar screen, and it doesn't seem to be on HHS' radar screen," Hinkley said. "Some kind of guidance on this topic is going to be required."