Hospitals Giving the Gift of Technology

Relaxed regulations may spark largesse, but when it comes to I.T. donations, nothing is really free. By Beckie Kelly Schuerenberg, Senior Editor Health Data Management 02/01/2007

There’s usually a huge disparity between the use of I.T. in hospitals and physician practices. But the Bush administration is betting that recent revisions to federal law will help change that.Last August, the Department of Health and Human Services published two final rules designed to ease restrictions on hospitals and other entities donating information technology to physicians and group practices.

Hospitals and other organizations have long been loath to make I.T. donations, fearing such activity would violate federal anti-kickback statutes and the Stark Act governing physician referrals. The final rules published in August made specific and conditional exceptions to those laws to permit I.T. donations, while continuing to restrict the referring of patients to facilities in which the referring physician has a financial interest.

HHS issued new exceptions to these laws to allow donations of electronic prescribing and electronic records software to help speed progress toward President Bush’s goal of having substantial adoption of clinical information systems by 2014.

In response, some hospitals are using these exceptions to develop and roll out I.T. donation or data sharing initiatives.

“There are a lot of reasons why hospitals want to work with physicians for I.T. adoption,” says Chantal Worzala, senior associate director for policy at the Chicago-based American Hospital Association. “The biggest one is being able to share information with them. They also feel physicians would be more willing to use technology in the hospital if they are already using it in their offices.”

Health care industry experts and legislators for several years have called for the creation of I.T. donation exceptions. But whether the resulting rules will have a dramatic effect on physician I.T. adoption is uncertain. The new exceptions are somewhat unclear, which has led some hospitals to delay donation plans as they mull over legal advice on what types of technology or related services are allowed.

Additionally, the new exceptions don’t address whether a not-for-profit organization would be at risk of losing its tax-exempt status for donating I.T.-something that would prevent some hospitals from creating such an initiative.

AHA requested the Internal Revenue Service make a ruling on this uncertainty. The association also issued an advisory interpretation of the new rules but is recommending each hospital consult with a lawyer before beginning a donation initiative, Worzala says.

“Having meaningful and very clear changes to the rules will facilitate hospitals’ plans to share I.T. resources with physicians,” she says. “But the way the rules came out, the requirements are sufficiently complex. It’s not the ‘bright line’ guidance we would have liked. It will take time for hospitals to work through what they want to do and what the regulations say.”

Interpreting the laws

The Centers for Medicare and Medicaid Services and the HHS Office of Inspector General each issued separate donation rules because there are two different regulations that govern contributions to physicians.

The Stark Act regulates the financial relationships that a hospital can have with physicians to prevent referrals for Medicare reimbursable services to facilities in which the referring physician has a financial interest. It does so by creating permissible financial relationship “exceptions”, explains Mark Lutes, a partner at Epstein, Becker & Green, a Washington-based law firm. CMS last August issued an exception to the Stark Act that creates an opportunity for a permissible financial relationship for the donation of e-prescribing and electronic records technology.

The anti-kickback statute, a criminal law enforced by the HHS Office of Inspector General, calls for the review of Medicare payments to determine whether a financial relationship exists between a hospital and a referring physician. It also describes a series of “safe harbors” where the intent of such a relationship is lawful. The OIG last August issued a new set of safe harbors that now makes the donation of e-prescribing and electronic records technology a lawful financial relationship, Lutes says.

While there are slight differences in the exceptions and safe harbors created for e-prescribing and electronic records technologies, the final rules are similar on some points. For example, they both require physicians to pay for at least 15% of the I.T., with all physicians paying an equal percentage.

The new rules also require donated e-prescribing and electronic records software to be interoperable as defined by the Certification Commission on Health Care Information Technology. Training, connectivity and maintenance services are permitted in the new exemptions; hardware and staffing are not.

Further, electronic records software donations can include other functionality related to the treatment of a patient, such as scheduling, billing and other clinical support features, Lutes says. It can’t, however, include other office functions, such as payroll or human resources applications.

While the rules might be ambiguous, they are a “facilitating step” toward physician adoption of I.T., Lutes says. But they aren’t enough to turn on the I.T. light for many physicians, he contends.

“This could be an important step for physicians for whom the financial barriers of I.T. were paramount,” he says. “But the adoption of technology is still a matter of physicians being convinced that it’s worth the pain of changing workflow. The psychological barriers surrounding this transition might be stronger than the financial ones for many group practices. And in those instances, the failure to adopt technology is not attributable to a lack of safe harbors or exceptions.”

Ensuring interest

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