HIMSS
Stark Exception and Anti-Kickback Safe Harbor:
What Providers Need to Know
October 5, 2006
Mr. Dave Schoolcraft, Partner, Miller Nash LLP
Ms. Laura D. Jantos, Principal, ECG Management Consultants, Inc.
MILLER NASH LLP
4400 Two Union Square
601 Union Street
Seattle, Washington 98101-2352
Telephone: 206-622-8484
E-mail: dave.schoolcraft@millernash.com
web site: www.millernash.com
Agenda
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Goals and Objectives

Background

Overview of the Exception/Safe Harbor

Key Considerations for Providers

Contractual Considerations

Conclusions and Questions
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Goals and Objectives
Our presentation focuses on donation from the physician perspective, as
a recipient of a health system-sponsored electronic health record (EHR).
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What composes the donation?
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How might the cost of donated technology compare to direct purchase
from a vendor?
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What does “interoperability” mean in the context of the donation?
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Do I need to change practice management (PM) systems to accept a
donation?
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If I accept a donation, what additional costs might my practice incur?

What key terms should be included in a contract for goods and services
with the enterprise donating the technology?
As a result of attending this Webinar, organizations will have the necessary
knowledge to negotiate with enterprises that intend to provide technology donations.
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Background

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The Stark law prohibits physicians from referring a Medicare patient to an entity for
certain designated health services (including inpatient and outpatient hospital
services) if the physician has a financial relationship with the entity, unless an
exception applies.
The Anti-Kickback Statute broadly prohibits either directly or indirectly giving,
receiving, offering, or soliciting payment for referrals.
It has become apparent to the government that technology could reduce costs and
improve quality related to prescribing.
In addition, CMS has been considering pay-for-performance (P4P) schemes to
encourage the adoption of electronic health records (EHRs).
The cost and complexity of a physician practice implementing an EHR can be
prohibitive but decreases significantly as the number of providers (and ability to
leverage centralized resources) increases.
Existing Stark exceptions and Anti-Kickback safe harbors, were too narrow to permit
hospitals to assist physicians with the acquisition of EHRs.
On August 8, 2006, HHS and CMS established a new Stark exception and AntiKickback safe harbor in order to enable hospitals (and other potential donors) to
provide information technology for e-prescribing and EHRs to physicians.
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Overview of the Rules Applicable to EHRs
Key provisions for physician recipients to
consider are as follows:

Donated technology may include EHRs, e-prescribing systems and
related services.
» EHRs must include e-prescribing capability through an e-prescribing
component or the ability to interface.
» Software must be interoperable.
» The technology and services must be “necessary and used
predominantly” to create, maintain, transmit, or receive electronic
health records.
– Commentary clarifies that PM software and related services may be
included.
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Permitted Donations
Included
EMR Software Licenses
PM Software Licenses
X

If integrated.

If there is a commitment
to implement the EMR.
Hardware
X
Connectivity
May be provided.
Interfaces
May be provided.
Staffing Assistance
Likely to not include
interfaces to competing
organizations.
No staff for abstracting,
scanning, or other practice
duties.
Training
X
Software Maintenance
X
Help Desk
X
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Excluded
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Additional Requirements
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The donation must not exceed 85% of the donor’s cost for the
technology.
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There must be a written agreement between the donor and recipient.
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Recipients may not be selected based on value or volume of referrals to
the donor (but may be selected based on other criteria).
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Exclusions include:
» Hardware.
» Provision of staff to the office.
» Software above and beyond clinical and business purposes of the
office.
» Disabling interoperable components of the software.
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Key Considerations for Providers
Overview
Myth
Reality
All information systems are the same.
Features and functions are highly variable.
There are benefits (financial and
otherwise) to systems implementation.
Desired benefits need to be planned, evaluated,
and mapped into the implementation to be
achieved. Efforts should not be underestimated.
Outsourcing is cost-effective.
Outsourcing may create a dependency from
which it is difficult to recover.
An integrated system is always better than
an interfaced system.
Many integrated systems are actually interfaced,
or there are gaps in the integration.
Vendors provide assistance in system
adoption.
Vendors assist in implementing the system but
do not necessarily ensure full system adoption.
Companies are stable.
The vendor market is volatile.
Newer technology is better.
Newer products may not be as feature-rich as
established products.
IT is not strategic.
Providing IT to practices is the new strategy.
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Key Considerations for Providers
Approaches for Donations
Most EHRs are being provided in one of two ways – as a unified
community patient record or as individual EHR databases.
Community Patient Record
Pros
Cons
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Individual Practice EHRs
The patient (and providers) can
view all information in one
location.
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Patient information is kept separate
for each practice level.
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Select data may be shared.
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Responsibility for security rests with
the practice.
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Costly brokering solutions are
not required.
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Recipients are strongly
dependent on one another to
create a secure, complete EHR.
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Brokering solutions may not be
mature and may detract from
individual EHR deployments.
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There may need to be
compromises in system setup to
accommodate the needs of the
group.
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Individual practices may not take
advantage of all economies of scale
of a group solution.
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Key Considerations for Providers
Option Comparison
Donated
Technology
Software Cost
Vendor-Direct
$$.
$$$$.
Hardware Cost $ to $$$$.
$.
$$$$.
Interfaces
Community lab may
be provided.
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None provided.
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High cost.
Superuser(s).
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Superuser(s).
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Application
manager(s).
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Trainer(s).
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Technician(s).
Staffing
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$ (until 12/31/13).
ASP-Direct
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Hospital likely
provided.
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Competing entity
may not be
enabled.
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Superuser(s).
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And others if
decentralized
model.
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Key Considerations for Providers
Option Comparison (continued)
Donated
Technology
ASP-Direct
Vendor-Direct
Ability to
Customize
Moderate.
Low.
High.
Effort to
Configure
Low.
Moderate.
High.
Other Benefits

Integration with
key local systems
and providers.
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Local support.
Other Risks
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Can the donor
become a vendor?
Monthly cost basis. Can tailor to practice
requirements.
Reliance on the
vendor.
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Need to build large
internal team.
Key Considerations for Providers
Questions to Evaluate a Donation

What responsibilities or obligations do the recipients have to one another and to
the donor? Are these fair and consistent with relative risk?
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What is included in the donation? What is the cost for additional services (e.g.,
additional interfaces)?
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What assurance does the recipient have that the services provided by the donor
will at least equal (if not exceed) services that would be provided directly by the
vendor?
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Does the recipient have any direct relationship with the vendor?
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If a shared EHR is being used, can A/R data be kept separate for each recipient?
Does the recipient have to migrate to the donor’s PM system?
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If the relationship is terminated, does the recipient have access to its own data?
How is data ownership defined in a shared EHR?
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If the recipient already has an EHR, can it receive a donation?
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What specific track record does the donor have in providing IT services to
physician practices?
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Contractual Considerations
In addition to standard terms and conditions, the following should
be considered in negotiating an agreement to receive a donation.
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Data ownership.
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Data conversion (to/from the donated system).
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Consequences of termination.
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Limitation of the practice’s risk.
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Interfaces with key systems.
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Provision of quality services.
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Provision of upgrades.
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Security.
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Testing.
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Conclusions and Questions
The Stark exception and Anti-Kickback safe harbor create a significant
opportunity for practices, but this opportunity should be weighed against
identified risks.
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Is the donor prepared to become a vendor?
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Does the donated system have appropriate functionality?
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Are all recipient costs well understood?
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Is the risk to the recipient appropriate?
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Can data be transferred if the agreement is terminated?
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Will fees be raised over the term, and what is the effect of the sunset of
the safe harbor?
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