EHR Donation – Stark/Anti-Kickback Exception Sunset Date Approaching

Are you prepared?

Background

December 31, 2013 – mark it on your calendar, if you haven’t already.  That’s when the Stark law exception and the Anti-Kickback Statute (AKS) safe harbor, which enable donation of electronic health records (EHRs) to eligible providers, are set to expire.  On April 10, 2013, the Centers for Medicare & Medicaid Services (CMS) and the U.S. Department of Health & Human Services Office of Inspector General (OIG) released two proposed rules (here and here) to extend these opportunities at least through the EHR adoption time frame identified in the Health Information Technology for Economic and Clinical Health (HITECH) Act.  If finalized, the amended exception and safe harbor will continue to permit hospitals and other “donors” to make payments up to 85% of the cost of acquiring and maintaining certain EHR items and services (such as license fees or implementation and support services) at least through the end of 2016.  Although CMS and OIG accepted comments until June 10, 2013, the proposed rules are still awaiting congressional approval.  Industry consensus has been that the extensions will be adopted; then again, everyone thought that a resolution would have been announced by now, and the delay is making some hospital leaders justifiably nervous.

Implications

If Congress doesn’t approve the extensions, organizations that are currently providing EHRs to community physicians using the Stark law and AKS provisions will need to modify current pricing to meet fair market value (FMV) parameters.  And in most cases, FMV pricing is substantially higher than that allowed by the donation criteria.

If your organization falls into this category, we recommend that you consider the following:

  • Which components of your current pricing strategy are offset by some level of donation and will therefore need to be modified to FMV if the Stark exception and safe harbor expire?
  • What will be the market price for similar EHRs in 2014 and beyond, given EHR vendor competitiveness and increasing adoption?

In addition to the FMV analysis, we also recommend conducting an assessment of the commercial reasonableness (CR) of the arrangement.  There may be instances where the health system’s costs to provide the EHR are higher than FMV.  This may be due to the fact that the conclusions regarding the FMV of the service offering took into account lower prices of competing market alternatives, as required under FMV standards.  To ensure the FMV pricing approach is appropriate, defensible, and meets CR, legal counsel and independent third-party advisory services should be consulted.

Conclusion

Given the uncertainties around congressional approval for extension of the Stark exception and safe harbor by the December 31 deadline, organizations that are currently providing subsidized EHR offerings to community physicians should consider notifying participating physicians of a potential price increase starting on January 1, 2014.  As such, it is imperative that a health system that is currently leveraging the safe harbor provisions immediately initiate the process to develop an FMV pricing approach to ensure that it is prepared to arrive at and communicate a revised pricing structure to its customers.

This entry was posted in EHR/EMR, Fair Market Value, Healthcare IT, Legislative & Regulatory Issues, Physician Strategy and tagged , , , , , , , by Asif Shah Mohammed. Bookmark the permalink.

About Asif Shah Mohammed

Asif joined ECG in 2008 with extensive experience in information technology (IT) and strategic planning and implementations for large health systems and multi-specialty physician practices. At ECG, his practice focuses on leveraging the use of information systems to address strategic and operational issues related to technology acquisitions and deployments. Recent client experience has included planning, developing, and executing a Project Management Office (PMO) for the statewide deployment of an ambulatory EHR; conducting financial analysis and defining the joint requirements for a shared technology platform between a faculty practice plan and a community hospital; and providing IT management leadership and operational support for a hospital-employed physician group. Previously, Asif worked as an IT Operations Manager at Gateway Health System, a Project Analyst at Jefferson Regional Medical Center, and an Account Manager/Consultant for Pacs Pro, Inc. He has a master of business administration degree from Owen Graduate School of Management at Vanderbilt University and a bachelor of science degree in electrical engineering from the University of Rochester.

4 thoughts on “EHR Donation – Stark/Anti-Kickback Exception Sunset Date Approaching

  1. Thank you for this post Mr. Shah. Can I assume that you will post an update once CMS has given their final ruling on this issue?

    • Thank you for your comment, Mr. Edmundson. We are continuing to monitor for any movement on this issue, and will definitely post an update if/when the ruling is finalized.

  2. Pingback: A Fond Farewell to 2013. | ECG Management Consultants, Inc.

  3. Pingback: Just in Time – EHR Stark Law Exception, Anti-Kickback Safe Harbor Extended Through December 31, 2021 | ECG Management Consultants, Inc.

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