By Nancy Ferris Published on May 14, 2007 Government Health IT

A long-awaited Internal Revenue Service memo has made it clear that nonprofit hospitals can give e-health records software and support services to their staff doctors without jeopardizing their tax-exempt status.

The May 11 memo was welcomed by health IT advocates, who had expressed concern that uncertainty about how the IRS might rule was inhibiting hospitals from including the doctors’ offices in their medical records networks.

The IRS memo cites Department of Health and Human Services regulations that created exemptions from anti-kickback and physician self-referral laws. Those regulations, which became final in August 2006, were intended to encourage hospitals to share their systems with doctors who practice at the hospitals.

The alignment between the IRS and HHS actions prompted Scott Wallace, president and chief information officer of the National Alliance for Health IT, to call the memo “absolutely as good as anyone could have hoped for.” He predicted it would encourage more doctors to use EHR systems. Once hospitals install such system for their internal operations, “the incremental cost of adding a physician is fairly low,” Wallace said.

“The AHA is pleased that the IRS moved quickly in responding to hospitals’ request for guidance on this important issue,” said Lawrence Hughes, regulatory counsel of the American Hospital Association.

According to the AHA, nearly 3,000 of the nation’s 4,936 community hospitals are nonprofit organizations.

The memo from Lois Lerner, the IRS’ director of exempt organizations, notes that some hospitals believe their medical staff physicians need financial incentives to use EHR software that would exchange information with hospital systems.

Wallace said such arrangements are likely to help especially with small medical practices, which have a much lower rate of EHR usage than larger practices.

Article: http://www.govhealthit.com, also see the HHS EHR Regulation here

To learn more about the ruling:

- read this Health Data Management item
- read the IRS ruling (.pdf)