Looking for a helping hand (part three of four)

When David Brailer first stepped onto the national stage in the spring of 2004, he laid out an ambitious program for promoting healthcare information technology that included leveraging hospitals’ investments in IT systems to benefit their affiliated physicians.

As the head of the newly created Office of the National Coordinator for Health Information Technology, Brailer, in his first public speech on May 19, at the TEPR 2004 trade show in Fort Lauderdale, Fla., noted that the low adoption levels of electronic medical-records systems by office-based physicians would prevent the nation from fully benefiting from a healthcare IT system.

“Physicians are the flexion point,” he said at the time. “It’s time to address the physician issue head-on.”

One of Brailer’s earliest national prescriptions called for a waiver of federal Stark and anti-kickback laws in hopes it would spur hospitals to provide physicians with the money, infrastructure, technical help and training needed to extend their IT systems to doctors’ offices.

Last August, the federal government responded to Brailer’s recommendation, several months after he stepped down as head of ONCHIT. The CMS published in the Federal Register a 32-page exception to Stark that would allow hospitals to subsidize electronic prescribing and electronic health-records systems with certain limitations (Aug. 7, 2006, p. 8).

Simultaneously, HHS’ inspector general’s office issued its own 38-page advisory on anti-kickback safe harbors for e-prescribing and EHR arrangements.

The regulatory relief gave a head start to for-profit hospitals, but leaders of not-for-profit healthcare organizations still feel constrained by federal tax laws. So far, the IRS has issued no clear guidance on the impact IT subsidies would have on the tax-exempt status of donor not-for-profits. The relief measures also required that the systems donated by hospitals be certified as “interoperable” with other IT systems. The HHS-supported Certification Commission for Health Information Technology is still working on interoperability testing criteria. Those criteria are expected to be ready for a new round of IT system testing in May, but it may be several more months before a new batch of EHR systems can be tested and CCHIT-certified.

In this year’s IT survey, Modern Healthcare again asked readers if they intend to embrace the federal waivers, asking “If they are finalized, will your organization extend IT benefits to affiliated physicians?”

This year, about 68% of respondents answered “yes,” while nearly 32% said “no.” Last year’s results were nearly the same, with 70% “yes” and 30% “no.”

What is different this year is how much more generous hospital leaders appear to be regarding physician IT subsidies.

Last year, a near-majority of respondents (46%) indicated their subsidy would be at the lowest contribution range on the survey—20% of the startup costs or less.

This year, just a third of respondents (33%) noted their contributions would be capped at the lowest level. Meanwhile, respondents selecting the highest range of contributions on the survey—81% to 100% of a physician’s IT costs—rose from not quite 14% to more than 21% this year.

Under the August waivers from HHS’ inspector general’s office and from the CMS, hospitals can contribute up to 85% of the cost to purchase or maintain a physician’s IT system.

“I think the starting point for this whole conversation is that providers and others who have already made an investment are the low-cost suppliers of this technology,” says Scott Wallace, president and CEO of the Chicago-based National Alliance for Health Information Technology. Hospitals that have not yet invested heavily in their own IT systems would find the idea of helping physicians buy and run an EMR “daunting,” Wallace says.

“For those who already have a fully operative system, there is a (return on investment) in making this donation,” Wallace says. “I was in a hospital in Peoria yesterday. They’re saying they want to connect all of the physicians in the community because their Medicaid patients keep showing up at the hospital. If you can get good information, that will make the cost of care cheaper.”

As for the not-for-profits and the IRS, “It’s a huge issue,” Wallace says. “A number of hospitals and entities have applied on their own for a number of private letter rulings that would say: Under these circumstances, you can do this. They’re being very cautious because the consequences are really severe,” Wallace says. “It’s kind of like the Medicare death penalty; the probability (of exclusion from Medicare) is very low but the consequences are very high, so people tend to avoid it.”

Other IT experts say the restrictions of Stark and anti-kickback laws, or even the IRS, are not the major stumbling blocks.

Erica Drazen is a vice president for emerging practices at First Consulting Group, where her job is “to look three to five years ahead and see (what’s) going to affect practice.” The way she sees it, when it comes to hospitals financing IT systems for their affiliated physicians, money has been and will remain the real major barrier.

“It’s been easy to say, we’d like to be able to help you, but the Stark laws forbid it,” Drazen says. “I do think the IRS thing is real, but after all, these changes were caused because of a national initiative to promote healthcare IT, but the major barrier is still the money, and it’s money on both sides. When you get the numbers all crunched, is there enough money on both sides to do this?”

From a purely financial perspective, the obvious thing for hospitals to do is extend IT to those physicians who are higher admitters, but using that as a criterion is not legal under the new waivers, Drazen says. Total volume of the practice, hours worked or prescriptions written (for e-prescribing software) are legitimate criteria hospitals can use.

Some hospitals, with more aggressive legal counsels, have requested “private letter rulings” on their specific plans and some have moved forward with IT extensions even under the current legal environment, she says. For them, the most common rationale hasn’t been financial.

“It’s to create ‘systemness,’ ” Drazen says. “If you are the only healthcare system in town, are the sole community provider, and you see it as your mission to improve the healthcare status of your community, you know sharing information across practices is important. That is the major motivation. It’s because it’s the right thing to do for improving community health.”

“It’s great now that it’s legal, but when you look at the number of physicians that might be affiliated with a community healthcare system, it’s lots, and these systems are expensive,” Drazen says.

Even if the IRS approves, “this isn’t going to open any floodgate, because of the money. And there are other barriers as well,” Drazen says. “If you’re a hospital doing this, you want to have as much uniformity out there in the community. You can’t have every doc choose their own system, but getting docs together to make a consensus decision is not easy. And supporting it is a whole other ball game than supporting an IT system within your own hospital.”

But the American Hospital Association views resolving the IRS issue as a critical next step. In a Nov. 15, 2006 letter to Lois Lerner, director of exempt organizations at the IRS, the AHA urged the agency “to consider health IT arrangements between hospitals and physicians as a priority for developing and issuing general guidance.”

In the six-page letter, the AHA argues that “well-established standards of federal tax law would permit hospitals to provide health IT to physicians without resulting in risk to the exempt status of these hospitals. By providing the technology, hospitals promote healthcare and to the extent physicians are benefited, it is merely incidental to the public benefit.”

Lawrence Hughes, regulatory counsel for the AHA, says the IRS has invited the association in for further discussions.

“We’re just asking for a public statement from the IRS to confirm that hospital arrangements where they donate IT to their physicians are acceptable to the IRS. We think that they are. We’re just asking for public confirmation.”

section, Information Technology: 2007.

Continue on in the series: Still the matter of money (part one of four); Eyes on the EHR (part two of four); More moving to entry level (part four of four).