• CMS Advisory Opinion Approves Free Physician Use of Interface to Hospital Electronic Health Information System
  • June 25, 2008 | Authors: Stephen T. Moore; Lisa R. Munch
  • Law Firm: Hinshaw & Culbertson LLP - Rockford Office
  • On May 28, 2008, the Centers for Medicare & Medicaid Services (“CMS”) published an advisory opinion concerning a nonprofit hospital system’s proposal to subsidize the costs of customized software interfaces for use by physicians on its medical staffs. The software would permit the ordering or communicating of laboratory tests or procedures performed by the hospitals using the interface. CMS concluded that based on the facts presented, the proposed arrangement does not create a compensation arrangement as defined in the provisions of the Social Security Act commonly known as the Stark Law.

    Factual Background
    The members of the medical staffs of the nonprofit hospital system’s hospitals currently have the option of reviewing laboratory reports for the hospitals’ patients over a protected Internet connection (“Physician Practice Interface”) to a proprietary health care software information system (“Information System”). Under the proposed arrangement the medical staff members would permit free access to the Information System for the limited purpose of viewing, ordering and communication of laboratory tests and procedures furnished by the hospital. The hospital proposed to pay for any and all developmental costs and to purchase required licenses. The functionality of the system will be limited to the hospital prescribed services and could not be altered to perform any alternative functions. Additionally, the physicians would be prohibited from reselling, otherwise transferring or assigning the licenses. Finally, the hospital system certified that no other items or services would be provided to the physicians permitted to use the Information System.

    Stark Law
    The federal law commonly known as the “Stark Law” prohibits a physician from referring Medicare patients for certain health care services deemed “designated health services” (“DHS”) to an entity with which the physician or a member of his or her family has a “financial relationship,” unless an exception applies. The Stark Law also prohibits the DHS entity from submitting claims to Medicare for DHS that are furnished as a result of a prohibited referral. A “financial relationship” is defined as a direct or indirect ownership or investment interest in any entity that furnishes DHS or a compensation arrangement involving remuneration, direct or indirect, between a physician and a DHS entity. The Stark Law defines a compensation arrangement as “any arrangement involving any remuneration between a physician (or an immediate family member of such physician) and an entity other than an arrangement involving only remuneration described in subparagraph (C).” Such remuneration includes “[t]he provision of items, devices or supplies that are used solely … to order or communicate the results of tests or procedures for such entity.”

    In the advisory opinion CMS noted that the hospital system represented that the Physician Practice Interface:   “(1) would be used only to order or communicate the results of tests and procedures furnished by the [hospital system]; (2) cannot be modified to perform an alternate function; and (3) cannot be resold, transferred or assigned by [a medical staff member].”  Based upon these representations, CMS concluded that the Stark Law did not apply to this proposed arrangement, because the proposed arrangement did not meet the Stark Law definition of “compensation arrangement.” CMS also made it clear that its analysis was specifically limited to the use of the Physician Practice Interface to order or communicate results of tests and procedures furnished by the hospitals. CMS did not make a determination regarding compliance with the Stark Law if the hospital or physicians used the Physician Practice Interface for other purposes.

    Cautionary Notes
    First, while this advisory opinion provides valuable guidance, this advisory opinion, like all others issued by CMS, may be relied upon only by the hospital system requesting the opinion.

    Second, CMS advised that this opinion did not consider whether Stark Law would apply if the software interface would be used for purposes other than those described by the hospital system. Thus, if a health care provider is considering a similar arrangement, but where the functionality of the software interface is other than as described in the specific scenario underlying the advisory opinion, legal analysis is required to determine whether Stark Law applies and, if so, whether the activity falls within a recognized exception, such as for Electronic Prescribing and Electronic Health Record Arrangements.

    Third, this CMS advisory opinion fails to address whether the proposed arrangement violates the Anti-Kickback Statute. Thus, further legal analysis is recommended to a hospital considering an arrangement of the type described in the advisory opinion, particularly in light of the criminal penalties which may result from a violation of the Anti-Kickback Statute.

    Finally, this advisory opinion fails to address whether a hospital’s tax exemption status might be jeopardized by the provision of a free interface to its health information system to members of its medical staff. Further legal analysis of applicable IRS guidance on electronic health record arrangements between tax exempt entities and medical staff members is recommended.