Some cautious of additions to IRS health IT ruling

By: Joseph Conn / HITS staff writer

Story posted: May 17, 2007 – 9:54 am EDT

Initial reactions to the long-awaited decision last week by the Internal Revenue Service to join HHS and the CMS in clearing a path for hospitals to subsidize healthcare information technology systems to affiliated physicians were overwhelmingly positive.

But in the passing of a few days and with sober reflection, not everyone sees the new IRS policy as an unalloyed good thing.

Healthcare lawyer Andrew Blustein, a partner with Garfunkel, Wild & Travis, Great Neck, N.Y., while joining the early voices saying the IRS ruling is “wonderful news,” also urged caution. “It’s a major step forward, but people need to realize there are some additions (in the ruling) that may not fit their particular program.”

HHS and the CMS last summer issued safe harbors to the federal anti-kickback law and exceptions to Stark laws prohibiting inducements for referrals in separate documents totaling more than 70 pages. Hospitals can qualify for the HHS and CMS dispensations by providing under specific conditions subsidized electronic medical-records systems and support to physician practices.

After the HHS and CMS rulings, attention turned almost immediately to the IRS. Not-for-profit hospitals were cautioned by their lawyers that IT contributions to for-profit organizations such as physician practices, though legal under the new Stark and anti-kickback modifications, could still jeopardize hospitals’ tax-exempt status.

By November 2006, the American Hospital Association sent a letter to Lois Lerner, director of the exempt organizations division at the IRS, asking for a broad ruling favoring the IT subsidies. Lerner’s response came last Friday in a two-page “field directive” memo she sent to two department directors under her division.

It said: “We will not treat the benefits a hospital provides to its medical staff physicians as impermissible private benefit or inurement in violation of section 501(c)(3) of the code if the benefits fall within the range of health IT items and services that are permissible under the HHS EHR regulations and the hospital operates in the manner described below.”

The IRS conditions were:

  • Hospitals must enter into health IT subsidy agreements with physicians receiving IT items and services.
  • Hospitals and physicians must comply with HHS rules.
  • “The health IT subsidy arrangements provide that, to the extent permitted by law, the hospital may access all of the electronic medical records created by a physician using the health IT items and services subsidized by the hospital.”
  • “The hospital ensures that the health IT items and services are available to all of its medical staff physicians.”
  • “The hospital provides the same level of subsidy to all of its medical staff physicians or varies the level of subsidy by applying criteria related to meeting the healthcare needs of the community.”

The key provisions of the HHS and CMS policies dovetailed, but the IRS memo outlines some unique features, according to Blustein.

Complete article here:


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