Right now, theres a hospital administrator out there somewhere who wants to strangle whomever asked the Internal Revenue Service for its opinion on giving money to physicians to buy information technology.
Many hospitals have been using the legal uncertainty over IT subsidies to physicians as an excuse not to fork over millions of dollars to doctors to digitize their practices, clinics, and outpatient surgery and diagnostic centers. Under the federal tax code, the charitable assets of tax-exempt organizations such as not-for-profit hospitals cannot be used to benefit private individuals, including physicians.
Hospitals that violate that code could face special excise taxes or even risk losing their tax-exempt status. Thats a pretty powerful reason not to freely cut checks to doctors who have their hands out for money to acquire, install and implement IT in order to connect their practices to the hospitals where they admit and treat patients.
Leaders of both the hospital and physician communities as well as IT advocates say such a connection is essential to improving patient care. Better coordination of data begets better coordination of care begets safer patient care and better clinical outcomes. Its hard to argue with that. But until now, it was up to each sidehospitals and physiciansto buy their own IT systems and hope they work together. Most often, its the capital-deep hospital or hospital system with the state-of-the-art IT system cajoling the capital-shallow physician or group practice to buy a similarly fancy IT system. Study after study over the past few years has quantified the low penetration of various IT systems in the physician sector.
But on May 11, that paradigm shiftedhitting hospitals on the head. In a clearly written two-page legal memorandum, the IRS said not-for-profits can give money to doctors to buy electronic health-records systems without jeopardizing the hospitals tax-exempt status (May 14, p. 4). The IRS said such subsidies are permissible as long as the hospital-physician IT arrangements dont violate any other federal laws.
To avoid violating any other federal regulations like the anti-kickback statutes, which bar any form of remuneration to induce Medicare or Medicaid patient referrals, hospitals must make the same IT goods and services and the same level of subsidy available to all physicians on staff. In other words, hospitals cant play IT favorites with their heavy admitters. Even physicians with strained relations with their hospitals for various reasons can hit those facilities up for money, which should make for some pretty interesting negotiations.
Physicians with staff privileges at a hospital will be lining up in the chief information officers office for instructions on what IT systems to buy and where their vendors should send the bills. Physicians would be foolish not to jump on this opportunity to equip their practices with the latest IT at no expense to them.
The IRS did give hospitals two outs that could work in their favor. First, it said hospitals could vary the levels of subsidies depending on community health need. That means they could give more to a physician whom they could prove is more essential in carrying out their mission. So hospitals could offer bigger IT subsidies to recruit hard-to-find and much-needed medical specialists. Second, the IRS said hospitals that give IT subsidies to physicians should gain access to all patient records generated through subsidized IT systems.
As reporter Joseph Conn pointed out in his follow-up story (May 21, p. 12), some physicians may reject the subsidies as a risk to patient privacy. Others wont want hospitals nosing around in their practice habits and referral patterns. Checkbook closed.
Next time, hospitals, just enjoy the gray area.