Medicare and State Health Care Programs: Fraud and Abuse; Safe Harbor for Certain Electronic Prescribing Arrangements Under the Anti-Kickback Statute, 59015-59027 [05-20315]

Download as PDF Federal Register / Vol. 70, No. 195 / Tuesday, October 11, 2005 / Proposed Rules (2) Determining medical improvement and its relationship to your abilities to do work. * * * (In addition, see paragraph (b)(8) of this section if you work during your current period of eligibility based on disability or during certain other periods.) * * * * * * * * (5) Evaluation steps. * * * The steps are as follows. (See paragraph (b)(8) of this section if you work during your current period of eligibility based on disability or during certain other periods.) * * * * * (8) If you work during your current period of eligibility based on disability or during certain other periods. (i) We will not consider the work you are doing or have done during your current period of eligibility based on disability (or, when determining whether you are eligible for expedited reinstatement of benefits under section 1631(p) of the Act, the work you are doing or have done during or after the previously terminated period of eligibility referred to in section 1631(p)(1)(B) of the Act) to be past relevant work under paragraph (b)(5)(vi) of this section or past work experience under paragraph (b)(5)(vii) of this section. In addition, if you are currently entitled to disability benefits under title II of the Social Security Act, we may or may not consider the physical and mental activities that you perform in the work you are doing or have done during your current period of entitlement based on disability, as explained in paragraphs (b)(8)(ii) and (iii). (ii) If you are currently entitled to disability insurance benefits as a disabled worker, child’s insurance benefits based on disability, or widow’s or widower’s insurance benefits based on disability under title II of the Social Security Act, and at the time we are making a determination on your case you have received such benefits for at least 24 months, we will not consider the activities you perform in the work you are doing or have during your current period of entitlement based on disability if they support a finding that your disability has ended. (We will use the rules in § 416.990(i)(2) to determine whether the 24-month requirement is met.) However, we will consider the activities you do in that work if they support a finding that your disability continues or they do not conflict with a finding that your disability continues. We will not presume that you are still disabled if you stop working. (iii) If you are not a person described in paragraph (b)(8)(ii) of this section, we VerDate Aug<31>2005 15:52 Oct 07, 2005 Jkt 208001 will consider the activities you perform in your work at any of the evaluation steps in paragraph (f) of this section at which we need to assess your ability to function. * * * * * Subpart N—Determinations, Administrative Review Process, and Reopening of Determinations and Decisions 12. The authority citation for subpart N continues to read as follows: Authority: Secs. 702(a)(5), 1631, and 1633 of the Social Security Act (42 U.S.C. 902(a)(5), 1383, and 1383b). 13. Section 416.1403 is amended by removing the word ‘‘and’’ at the end of paragraph (a)(20), replacing the period at the end of paragraph (a)(21) with ‘‘; and’’, and adding new paragraph (a)(22) to read as follows: § 416.1403 Administrative actions that are not initial determinations. (a)* * * (22) Starting or discontinuing a continuing disability review. * * * * * [FR Doc. 05–20266 Filed 10–7–05; 8:45 am] BILLING CODE 4191–02–P DEPARTMENT OF HEALTH AND HUMAN SERVICES Office of the Secretary Office of Inspector General 42 CFR Part 1001 RIN 0991–AB39 Medicare and State Health Care Programs: Fraud and Abuse; Safe Harbor for Certain Electronic Prescribing Arrangements Under the Anti-Kickback Statute Office of Inspector General (OIG), HHS. ACTION: Proposed Rule. AGENCY: SUMMARY: As required by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), Public Law 108–173, this proposed rule would establish a new safe harbor under the Federal anti-kickback statute for certain arrangements involving the provision of electronic prescribing technology. Specifically, the safe harbor would protect certain arrangements involving hospitals, group practices, and prescription drug plan (PDP) sponsors and Medicare Advantage (MA) organizations that provide to specified PO 00000 Frm 00031 Fmt 4702 Sfmt 4702 59015 recipients certain nonmonetary remuneration in the form of hardware, software, or information technology and training services necessary and used solely to receive and transmit electronic prescription drug information. In addition, using our separate legal authority under section 1128B(b)(3)(E) of the Social Security Act (the ‘‘Act’’), we are also proposing separate safe harbor protection for certain electronic health records software and directly related training services. These exceptions are consistent with the President’s goal of achieving widespread adoption of interoperable electronic health records for the purpose of improving the quality and efficiency of health care, while maintaining the levels of security and privacy that consumers expect. To assure consideration, public comments must be delivered to the address provided below by no later than 5 p.m. on December 12, 2005. DATES: You may submit comments by any of the methods set forth below. In all cases, when commenting, please refer to file code OIG–405–P. • Mail—Office of Inspector General, Department of Health and Human Services, Attention: OIG–405–P, Room 5246, Cohen Building, 330 Independence Avenue, SW., Washington, DC 20201. Please allow sufficient time for us to receive mailed comments by the due date in the event of delivery delays. • Hand delivery/courier—Office of Inspector General, Department of Health and Human Services, Attention: OIG– 405–P, Room 5246, Cohen Building, 330 Independence Avenue, SW., Washington, DC 20201. Because access to the Cohen Building is not readily available to persons without Federal Government identification, commenters are encouraged to leave their comments in OIG’s drop box located in the main lobby of the building. • Federal eRulemaking Portal: https:// www.regulations.gov. Include agency name and identifier RIN 0991–AB36. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission. For information on viewing public comments, see section V of the Supplementary Information section preamble. ADDRESSES: FOR FURTHER INFORMATION CONTACT: Catherine Martin, Office of Counsel to the Inspector General, (202) 619–0335. SUPPLEMENTARY INFORMATION: E:\FR\FM\11OCP1.SGM 11OCP1 59016 Federal Register / Vol. 70, No. 195 / Tuesday, October 11, 2005 / Proposed Rules I. Background A. The Anti-Kickback Statute and Safe Harbors Section 1128B(b) of the Act (42 U.S.C. 1320a–7b(b), the anti-kickback statute) provides criminal penalties for individuals or entities that knowingly and willfully offer, pay, solicit, or receive remuneration in order to induce or reward the referral of business reimbursable under any of the Federal health care programs, as defined in section 1128B(f) of the Act. The offense is classified as a felony and is punishable by fines of up to $25,000 and imprisonment for up to five years. Violations of the anti-kickback statute may also result in the imposition of civil money penalties (CMPs) under section 1128A(a)(7) of the Act (42 U.S.C. 1320a– 7a(a)(7)), program exclusion under section 1128(b)(7) of the Act (42 U.S.C. 1320a–7(b)(7)), and liability under the False Claims Act, (31 U.S.C. 3729–33). The types of remuneration covered specifically include, without limitation, kickbacks, bribes, and rebates, whether made directly or indirectly, overtly or covertly, in cash or in kind. In addition, prohibited conduct includes not only the payment of remuneration intended to induce or reward referrals of patients, but also the payment of remuneration intended to induce or reward the purchasing, leasing, or ordering of, or arranging for or recommending the purchasing, leasing, or ordering of, any good, facility, service, or item reimbursable by any Federal health care program. Because of the broad reach of the statute, concern was expressed that some relatively innocuous commercial arrangements were covered by the statute and, therefore, potentially subject to criminal prosecution. In response, Congress enacted section 14 of the Medicare and Medicaid Patient and Program Protection Act of 1987, Public Law 100–93 (section 1128B(b)(3)(E) of the Act), which specifically required the development and promulgation of regulations, the so-called ‘‘safe harbor’’ provisions, that would specify various payment and business practices that would not be treated as criminal offenses under the anti-kickback statute, even though they may potentially be capable of inducing referrals of business under the Federal health care programs. Since July 29, 1991, we have published in the Federal Register a series of final regulations establishing ‘‘safe harbors’’ in various areas.1 These OIG safe harbor 1 56 FR 35952 (July 29, 1991); 61 FR 2122 (January 25, 1996); 64 FR 63518 (November 19, VerDate Aug<31>2005 15:52 Oct 07, 2005 Jkt 208001 provisions have been developed ‘‘to limit the reach of the statute somewhat by permitting certain non-abusive arrangements, while encouraging beneficial or innocuous arrangements.’’ (56 FR 35952, 35958; July 21, 1991). Health care providers and others may voluntarily seek to comply with safe harbors so that they have the assurance that their business practices will not be subject to any enforcement action under the anti-kickback statute, the CMP provision for anti-kickback violations, or the program exclusion authority related to kickbacks. In giving the Department of Health and Human Services the authority to protect certain arrangements and payment practices under the anti-kickback statute, Congress intended the safe harbor regulations to be evolving rules that would be updated periodically to reflect changing business practices and technologies in the health care industry. B. Section 101 of MMA Section 101 of the MMA added a new section 1860D to the Act, establishing a Part D prescription drug benefit in the Medicare program. As part of the new statutory provision, Congress, through section 1860D–4(e) of the Act, directed the Secretary to create standards for electronic prescribing in connection with the new prescription drug benefit, with the objective of improving patient safety, quality of care, and efficiency in the delivery of care.2 Section 1860D– 4(e)(6) of the Act directs the Secretary, in consultation with the Attorney General, to create a safe harbor to the anti-kickback statute that would protect certain arrangements involving the provision of nonmonetary remuneration (consisting of items and services in the form of hardware, software, or information technology or training services) that is necessary and used solely to receive and transmit electronic prescription drug information in accordance with electronic prescribing standards promulgated by the Secretary under section 1860D–4(e)(4) of the Act. Specifically, the safe harbor would set forth conditions under which the provision of such remuneration by hospitals, group practices, and PDP sponsors and MA organizations (collectively, for purposes of this preamble discussion, ‘‘Donors’’) to prescribing health care professionals, pharmacies, and pharmacists (collectively, for purposes of this 1999); 64 FR 63504 (November 19, 1999); and 66 FR 62979 (December 4, 2001). 2 See H.R. Conf. Rep. No. 108–391, 495 (2003). PO 00000 Frm 00032 Fmt 4702 Sfmt 4702 preamble discussion, ‘‘Recipients’’) would be protected. The OIG has a longstanding concern about the provision of free or reduced price goods or services to an existing or potential referral source. There is a substantial risk that free or reduced price goods or services may be used as a vehicle to disguise or confer an unlawful payment for referrals of Federal health care program business. Financial incentives offered, paid, solicited, or received in exchange for generating Federal health care business increase the risks of, among other problems: (i) Overutilization of health care items or services; (ii) increased Federal program costs; (iii) corruption of medical decision making; and (iv) unfair competition. Consistent with the structure and purpose of the antikickback statute and the regulatory authority at section 1128B(b)(3)(E) of the Act, we believe any safe harbor for electronic prescribing arrangements should protect innocuous or beneficial arrangements that would eliminate perceived barriers to the adoption of electronic prescribing without creating undue risk that the arrangement might be used to induce or reward the generation of Federal health care program business. We do not believe Congress, in enacting section 1860D–4(e)(6) of the Act, intended to suggest that a new safe harbor is needed for all or even most arrangements involving the provision of electronic prescribing items and services. In general, fair market value arrangements that are arm’s-length and do not take into account the volume or value of Federal health care program referrals, or arrangements that do not have as one purpose the generation of business payable by a Federal health care program, should not raise concerns under the anti-kickback statute. Simply put, absent the requisite intent, the antikickback statute is not violated. In addition, many arrangements can be structured to fit in existing safe harbors, including the safe harbors for discounts (42 CFR 1001.952(h)) and for remuneration offered to employees (42 CFR 1001.952(i)). Finally, parties may use the OIG advisory opinion process (42 CFR part 1008; https://oig.hhs.gov/ fraud/advisoryopinions.html) to determine whether their particular arrangements would be subject to OIG sanctions. In addition to the new safe harbor under the anti-kickback statute, section 1860D–4(e)(6) of the Act directs the Secretary to create a corresponding exception to section 1877 of the Act, commonly known as the physician selfreferral law. That exception is being E:\FR\FM\11OCP1.SGM 11OCP1 Federal Register / Vol. 70, No. 195 / Tuesday, October 11, 2005 / Proposed Rules promulgated through a separate rulemaking by the Centers for Medicare & Medicaid Services (CMS), the agency that administers the physician selfreferral law. We have endeavored to ensure as much consistency as possible between our proposed safe harbor and the corresponding exception proposed by CMS, given the differences in the respective underlying statutes. We intend the final rules to be similarly consistent. One significant difference in the statutory schemes is that fitting in an exception under section 1877 is mandatory, whereas complying with a safe harbor under the anti-kickback statute is voluntary. In other words, arrangements that do not comply with the electronic prescribing safe harbor will not necessarily be illegal under the anti-kickback statute. Rather, they will be subject to the customary case-by-case review under the statute. Another difference is that section 1877 applies only to referrals from physicians, while the anti-kickback statute applies more broadly. In certain respects, we are considering safe harbor standards that might impose stricter conditions than the corresponding exception to section 1877. In part, this reflects the separate purposes of the anti-kickback statute and section 1877, as well as the serious nature of the felony violation described by the anti-kickback statute. In essence, section 1877 of the Act sets a minimum standard for acceptable financial arrangements; the anti-kickback statute addresses residual risk that may be posed by arrangements that otherwise comply with a physician self-referral exception. As explained in the Phase I final physician self-referral rule promulgated by CMS, ‘‘many relationships that may not merit blanket prohibition under section 1877 of the Act can, in some circumstances and given necessary intent, violate the antikickback statute.’’ (66 FR 856, 863; January 4, 2001). II. Provisions of the Proposed Rule This proposed rule would add a new paragraph (x) to the existing safe harbor regulations at 42 CFR 1001.952. This new paragraph (x) would describe more specifically the items and services 59017 protected by the new safe harbor for prescribing drugs electronically; the individuals and entities that may provide the protected items and services; and the conditions under which providing the items and services to prescribing health care professionals, pharmacies, and pharmacists would be protected. In addition, using our separate legal authority at § 1128B(b)(3)(E) of the Act, as discussed below, we are proposing separate safe harbor protection for certain electronic health records software not covered by the MMA mandated safe harbor for electronic prescribing. These proposed safe harbors would, if promulgated, create separate and independent grounds for protection under the antikickback statute. For the convenience of the public, we are providing the following chart that lays out schematically the overall structure and approach of these proposals, details of which are provided below in Sections II. A and B. Readers are cautioned that the proposals contain additional conditions and information not summarized here. MMA-mandated electronic prescribing safe harbor Pre-interoperability electronic health records safe harbor Post-interoperability electronic health records safe harbor Section 101 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. Proposed: • Items and services that are necessary and used solely to transmit and receive electronic prescription drug information. • Includes hardware, software, internet connectivity, and training and support services. Section 1128B(b)(3)(E) of the Social Security Act. Section 1128B(b)(3)(E) of Social Security Act. Proposed: Software used solely for the transmission, receipt or maintenance of electronic health records. • Directly-related training services. • Software must include an electronic prescribing component. Standards with Which Donated Technology Must Comply. Proposed: • Foundation standards for electronic prescribing as adopted by the Secretary. Proposed: • Electronic prescribing component must comply with foundation standards for electronic prescribing as adopted by the Secretary. Permissible Donors ........................ Proposed: • As required by statute, permissible donors are hospitals (to members of their medical staffs), group practices (to physician members), PDP sponsors and MA organizations (to network pharmacists and pharmacies, and to prescribing health care professionals). Proposed: • Hospitals to members of their medical staffs. • Group practices to physician members. • PDP sponsors. • MA organization. Proposed: • Certified health records software. • Directly-related training services. • Software must include an electronic prescribing component. • Could include billing and scheduling software, provided that the core function of the software is electronic health records. Proposed: • Product certification criteria adopted by the Secretary Electronic prescribing component must comply with foundation standards for electronic prescribing as adopted by the Secretary, to the extent these standards are not fully incorporated into the product certification criteria. Proposed: • Hospitals to members of their medical staffs. • Group practices to physician members. • PDP sponsors. • MA organization. Authority for Proposed Exception .. Covered Technology ...................... VerDate Aug<31>2005 15:52 Oct 07, 2005 Jkt 208001 PO 00000 Frm 00033 Fmt 4702 Sfmt 4702 E:\FR\FM\11OCP1.SGM 11OCP1 59018 Federal Register / Vol. 70, No. 195 / Tuesday, October 11, 2005 / Proposed Rules MMA-mandated electronic prescribing safe harbor Pre-interoperability electronic health records safe harbor Post-interoperability electronic health records safe harbor Selection of Recipients .................. Proposed: • Donors may not take into account the volume or value of referrals from the recipient or other business between the parties. Proposed: • Donors may not take into account the volume or value of referrals from the recipient or other business between the parties. Value of Protected Technology ..... Proposed: • No specific dollar amount proposed for a cap on the value of protected technology. Proposed: • No specific dollar amount proposed for a cap on the value of protected items and services. Proposed: • Donors may use criteria to select recipients that are not directly related to the volume or value of referrals or other business generated between the parties. Proposed: • No specific dollar amount proposed for a cap on the value of protected items and services. • May be greater than the cap on pre-interoperability donations. A. Electronic Prescribing Safe Harbor Required Under Section 101 of the MMA: Paragraph (x) 1. Protected Nonmonetary Remuneration Section 1860D–4(e)(6) of the Act authorizes the creation of a safe harbor for the provision of items and services that are ‘‘necessary and used solely’’ to receive and transmit electronic prescription drug information. This proposed rule would clarify the items and services that would qualify for the new safe harbor (for purposes of this preamble discussion, ‘‘qualifying electronic prescribing technology’’). ‘‘Necessary’’ nonmonetary remuneration—First, consistent with the MMA mandate, the proposed safe harbor would protect items or services that are ‘‘necessary’’ to conduct electronic prescription drug transactions. This might include, for example, hardware, software, broadband or wireless Internet connectivity, training, information technology support services, and other items and services used in connection with the transmission or receipt of electronic prescribing information. However, the safe harbor would not protect arrangements in which a Donor provides items or services that are technically or functionally equivalent to items and services the Recipient currently possesses or has obtained. Thus, for example, under the proposed regulations, a Donor can provide a hand-held device capable of transmitting electronic prescribing information to the Recipient, even if the Recipient already has a desktop computer that could be used to transmit or receive the same information, because the mobility allowed by the hand-held device offers a material advantage over the desktop computer for Recipients who would use the device portably. By contrast, the provision of a second hand-held device would not qualify for safe harbor VerDate Aug<31>2005 15:52 Oct 07, 2005 Jkt 208001 protection if the Recipient already has a hand-held device sufficient to run the requisite electronic prescribing software. We do not interpret the term ‘‘necessary’’ to preclude upgrades of equipment or software that significantly enhance the functionality of the item or service. We believe restricting the exception to ‘‘necessary’’ items and services is important to minimize the potential for abuse. However, we recognize that Donors will not necessarily know which items and services the Recipient already possesses or has obtained. Accordingly, proposed § 1001.952(x)(7)(iv) would require the Recipient to certify that the items and services to be provided are not technically or functionally equivalent to items or services the Recipient already possesses or has obtained. The certification would need to be updated prior to the provision of any necessary upgrades or items and services not reflected in the original certifications. We are concerned that the certification process would be ineffective as a safeguard against fraud and abuse if it is a mere formality or if Recipients simply execute a form certification provided by a Donor. Therefore, we are proposing at § 1001.952(x)(8) that the Donor must not have actual knowledge of, and not act in reckless disregard or deliberate ignorance of, the fact that the Recipient possesses or has obtained items and services that are technically or functionally equivalent to those donated by the Donor. The Recipient would be protected only if the certification is truthful. We are soliciting comments about other ways to address this concern. We are also concerned that there may be a risk that Recipients would intentionally divest themselves of functionally or technically equivalent technology that they already possess to shift costs to Donors. We are soliciting public comments on how best to address this issue. PO 00000 Frm 00034 Fmt 4702 Sfmt 4702 ‘‘Used solely’’—In addition to the ‘‘necessary’’ standard, section 1860D– 4(e)(6) of the Act provides that the items and services must be ‘‘used solely’’ for the transmission or receipt of electronic prescribing information. We believe Congress included this requirement to safeguard against abusive arrangements in which the remunerative technology might constitute a payment for referrals because it might have additional value attributable to uses other than electronic prescribing. For example, a computer that a physician can use to conduct office or personal business might have value to the physician apart from its electronic prescribing purpose; if this value is transferred to the physician in connection with referrals, the statute would be implicated.3 Accordingly, the proposed safe harbor requires that the protected items and services be used solely to transmit or receive electronic prescribing information. We are concerned that Donors might provide software for free or reduced cost that bundles valuable general office management, billing, scheduling, or other software with the electronic prescribing features. Such additional remuneration would not meet the ‘‘used solely’’ requirement and would not be protected by the proposed electronic prescribing safe harbor; such arrangements potentially raise significant concerns under the antikickback statute, if any purpose of the provision of the bundled software is to induce or reward the generation of Federal health care program business. However, the Recipient would not be precluded from purchasing for fair market value additional technology not protected by the proposed safe harbor. We are mindful that hardware and connectivity services can be used for the receipt and transmission of a wide range 3 See, e.g., 56 FR 35952, 35978 (July 29, 1991) noting that a computer that has independent value to a physician may constitute an illegal inducement. E:\FR\FM\11OCP1.SGM 11OCP1 Federal Register / Vol. 70, No. 195 / Tuesday, October 11, 2005 / Proposed Rules of information services, including, but not limited to, electronic prescription information, and that many people may prefer to use a single, multi-functional device, especially a hand-held, rather than multiple single-use devices. Similarly, many people may prefer to use a single connectivity service. Accordingly, we are proposing using our regulatory authority under section 1128B(b)(3)(E) of the Act to create an additional safe harbor to protect the provision by Donors to Recipients of some limited hardware (including necessary operating system software) and connectivity services that are used for more than one function, so long as a substantial use of the item or service is to receive or transmit electronic prescription information. We propose to treat operating software as integral to the hardware and distinct from other software applications that are not necessary for the hardware to operate. Protection under this additional, separate safe harbor would not extend to the provision of items or services that are only occasionally used for electronic prescribing. The additional safe harbor would incorporate the definitions and conditions set forth in this proposed rulemaking for the MMA-mandated safe harbor and would also include conditions to address the additional risk of abuse posed by multi-functional items and services. We are soliciting public comment about the standards that should appear in an additional safe harbor for multi-functional hardware (including necessary operating system software) or connectivity services. In particular, we are soliciting public comment on methodologies for quantifying or ensuring that a substantial use of hardware and connectivity services is for the receipt or transmission of electronic prescribing information. We are also soliciting public comment on the nature and amount of any cap that we might impose on the value of the donated multi-functional hardware or connectivity services. 2. Donors and Recipients Protected by the Proposed Safe Harbor Section 1860D–4(e)(6) of the Act describes the parties that may be protected under the new safe harbor. Specifically, protection is afforded to: (1) Hospitals with respect to members of their medical staffs; (2) group practices with respect to prescribing health care professionals who are members of the group practice; and (3) PDP sponsors and MA organizations with respect to participating pharmacists and pharmacies, as well as prescribing VerDate Aug<31>2005 15:52 Oct 07, 2005 Jkt 208001 health care professionals. We address each category below. Hospitals/Medical Staff—Proposed § 1001.952(x)(1)(i) would protect donations of qualifying electronic prescribing technology provided by a hospital to physicians on its medical staff. We do not intend to interpret this provision as extending to physicians who do not routinely furnish services at the hospital. We do not intend for this exception to protect remuneration that is used to induce physicians who already use other hospitals to join the medical staff of a different hospital. We are soliciting public comment on whether we should include items or services provided to other individuals or entities (e.g., other health care prescribing professionals who treat patients at the hospital). Group Practices/Members—Proposed § 1001.952(x)(1)(ii) would protect donations of qualifying electronic prescribing technology provided by a group practice to its members who are prescribing health care professionals. For consistency with the regulations promulgated in accordance with section 1877 of the Act, we propose to interpret the terms ‘‘group practice’’ and ‘‘members’’ of a group practice consistent with existing definitions in section 1877(h)(4) of the Act and the regulations at 42 CFR 411.352 and 42 CFR 411.351, respectively. Those provisions make clear that a ‘‘group practice’’ must be a single legal entity with unified business operations and may not be an informal affiliation of physicians and that a ‘‘member’’ of a group practice refers to a physicianowner or physician-employee of the group practice. A ‘‘member’’ of the group practice, under § 411.351 does not include independent contractors of the group or persons who are not physicians. Because section 1877 of the Act deals only with physician referrals, application of its definition of a ‘‘member’’ of a group practice is not sufficient to define the full range of ‘‘prescribing health care professionals’’ included in section 1860D–4(e)(6) of the Act, and it is necessary for us to augment the definition in this proposed rule. Accordingly, for purposes of the proposed safe harbor, ‘‘prescribing health care professionals who are members of the group’’ would include prescribing professionals (e.g., nurse practitioners) who are owners or employees of the group and who are authorized to prescribe under applicable State licensing laws. Because the definition of ‘‘member’’ of the group practice under § 411.351 excludes independent contractors, we PO 00000 Frm 00035 Fmt 4702 Sfmt 4702 59019 are soliciting comments regarding whether and how a group practice may appropriately furnish qualifying electronic prescribing technology to physicians or other prescribing health care professionals who contract with the group to furnish services to the group’s patients. We do not believe that the inclusion by Congress of group practices and their members in section 1860D–4(e)(6) of the Act was intended to imply that the provision of qualifying electronic prescribing technology by a group practice to its members necessarily required a new safe harbor under the anti-kickback statute. In many circumstances, the provision of equipment or other resources by a medical group to its member health care professionals for use in furnishing services to the group’s patients would not raise fraud and abuse concerns under the anti-kickback statute. Moreover, for those situations where the statute may be implicated, many arrangements can be structured to fit in an existing safe harbor, including, for example, the safe harbors for personal services and management contracts or employee compensation at § 1001.952(d) and (i), respectively. Arrangements that do not fit in a safe harbor are not necessarily illegal under the anti-kickback statute. We believe Congress included these relationships in section 1860D–4(e)(6) of the Act simply to encourage group practices to adopt electronic prescription technology. PDP Sponsors and MA Organizations/ Pharmacies, Pharmacists, and Prescribing Health Care Professionals— Consistent with section 1860D–4(e)(6) of the Act, proposed § 1001.952(x)(1)(iii) would protect donations of qualifying electronic prescribing technology provided by a PDP sponsor or MA organization to prescribing health care professionals, participating pharmacies, and participating pharmacists. We propose to interpret the term ‘‘PDP sponsor’’ and ‘‘MA organization’’ consistent with the Medicare Prescription Drug Benefit regulations at 42 CFR 423.4 and 42 CFR 422.2, respectively. We propose to interpret the terms ‘‘pharmacy’’ and ‘‘pharmacist’’ consistent with applicable State licensing laws. We propose to interpret ‘‘prescribing health care professionals’’ as physicians or other health care professionals (e.g. nurse practitioners) licensed to prescribe drugs in the State in which the drugs are dispensed. Finally, we are soliciting comments on whether there is a need to protect other categories of Donors or Recipients, beyond those specifically set forth in E:\FR\FM\11OCP1.SGM 11OCP1 59020 Federal Register / Vol. 70, No. 195 / Tuesday, October 11, 2005 / Proposed Rules section 1860D–4(e)(6) of the Act, and if so, how best to address safe harbor protection for those individuals or entities. In particular, we are interested in comments addressing the types of individuals and entities that should be protected, the degree of need for protection, and the safeguards that should be imposed to protect against fraud and abuse. In general, we believe that only individuals and entities involved in the ordering, processing, filling, or reimbursing of prescriptions are likely to have sufficient need to justify inclusion in an electronic prescribing safe harbor. 3. Additional Conditions on the Provision of Qualifying Electronic Prescribing Technology Promoting Compatibility and Interoperability—Section 1860D–4(e)(6) of the Act is integral to the electronic prescribing drug program established by section 101 of MMA. Section 1860D– 4(e)(6) of the Act provides that, in order to qualify for the safe harbor, qualifying electronic prescription technology must be used to receive and transmit electronic prescription information in accordance with standards to be established by the Secretary for the Part D electronic prescription drug program. Consistent with section 1860(D)–4(e)(6) of the Act, proposed § 1001.952(x)(2) would require that the items and services be provided as part of, or be used to access, an electronic prescription drug program that complies with the standards established by the Secretary for these programs. We are soliciting comments on whether the safe harbor should protect qualifying electronic prescription technology that is used for the transmission of prescription information regarding items and services that are not drugs (e.g., supplies or laboratory tests). We believe that interoperability can serve as an important safeguard against fraud and abuse and mitigate the risk that a Donor’s offer of free or reduced price technology to a Recipient could be a means of maintaining or increasing referrals from the Recipient. With interoperable electronic prescribing technology, the Recipient would be free to transmit prescriptions to any appropriate pharmacy. At this time, there are no regulatory standards to ensure that electronic prescription information products are interoperable with other products. However, we note that interoperability may be required in the future under final regulations regarding the standards for the Part D prescription drug program. To the extent that either the hardware or software can be interoperable, the VerDate Aug<31>2005 15:52 Oct 07, 2005 Jkt 208001 proposed regulation at § 1001.952(x)(3) would prohibit Donors or their agents from taking any actions to disable or limit that interoperability or otherwise impose barriers to compatibility. We believe this condition is necessary to limit the ability of Donors to use the provision of electronic prescribing technology to tie Recipients to the Donor. We are considering defining the term ‘‘interoperable’’ in this context to mean the ability of different operating and software systems, applications, and networks to communicate and exchange data in an accurate, secure, effective, useful, and consistent manner. See generally 44 U.S.C. 3601(6) (pertaining to the management and promotion of electronic government services). We are soliciting public comment about this approach, our definition of the term ‘‘interoperable,’’ alternative means of ensuring the maximum level of interoperability, and the types of software currently available for electronic prescribing. Value of protected technology—To further safeguard against fraud and abuse, we believe it would be appropriate to limit the aggregate value of the qualifying electronic prescribing technology that a Donor could provide to a Recipient under the safe harbor. We are considering whether to limit the aggregate fair market value of all items and services provided to a Recipient from a single Donor. We believe a monetary limit is appropriate and reasonable to minimize the potential for fraud and abuse. We are soliciting public comment on the amount of a cap that would adequately protect the program against abuse, the methodology used to determine the cap (for example, fixed dollar amount, percentage of the value of the donated technology, or another methodology), whether the same cap would be adequate if there were protection for the donation of multi-functional hardware and connectivity services, whether the cap should be reduced over time, and whether the cap places a disadvantage on smaller entities that do not have the financial resources of larger chains or organizations. In addition, we are interested in public comments that address the retail and nonretail costs (i.e., the costs of purchasing from manufacturers, distributors, or other nonretail sources) of obtaining electronic prescribing technology and the degree to which potential Recipients may already possess items or services that could be used for electronic prescribing. We note that CMS has received varying estimates of the costs of implementing electronic prescribing through the comment PO 00000 Frm 00036 Fmt 4702 Sfmt 4702 process for the CMS E-Prescribing and the Prescription Drug Program proposed rule published on February 4, 2005 in the Federal Register (70 FR 6256). We caution that the cost of implementing an electronic prescribing program will not correlate necessarily to the amount of any cap if one is established. Moreover, we do not expect that donors will wish necessarily to donate the total amount that the technology costs or, depending on the size of a cap, the total amount ultimately protected in the final rule. While we are interested in obtaining detailed information about the costs of the full range of technology so as to be fully informed on this matter, we do not expect that the final regulations will protect all possible costs. We are considering various potential caps that would be no higher than any cap that may ultimately be imposed in the corresponding electronic prescribing exception under Section 1877 of the Act to be promulgated by CMS. We are considering measuring the monetary limit at fair market value to the Recipient (i.e., the retail value). We believe this approach is consistent with the anti-kickback statute’s intent requirement and would also minimize any competitive disadvantage for smaller entities that do not have the financial resources or potential volume of technology business of larger chains or organizations. We are considering setting an initial cap, which would be lowered after a certain period of time sufficient to promote the initial adoption of the technology. This would have the effect of encouraging investments in the desired technology while also ensuring that, once the technology has been widely adopted and its costs have come down, the safe harbor cannot be abused to disguise payments for referrals. We are soliciting public comment about this approach. Finally, we are soliciting comments on whether and, if so, how to take into account Recipient access to any software that is publicly available either free or at a reduced price. Other Conditions—Proposed §§ 1001.952(x)(5), (x)(6), and (x)(7) would incorporate additional conditions. Paragraph § 1001.952(x)(5) would provide that the Recipients (including their groups, employees, or staff) may not make the donation of qualifying electronic prescribing technology from Donors a condition of doing business with the Donor. Paragraph (x)(6) would provide that neither the eligibility of a Recipient to receive items and services from a protected Donor, nor the amount or nature of the items or services received, may be determined in a manner that E:\FR\FM\11OCP1.SGM 11OCP1 Federal Register / Vol. 70, No. 195 / Tuesday, October 11, 2005 / Proposed Rules takes into account the volume or value of the Recipient’s referrals or other business generated between the parties. This would not preclude selection criteria that are based upon the total number of prescriptions written by a Recipient, but would preclude criteria based upon the number or value of prescriptions written by the Recipient that are dispensed or paid by the Donor, as well as any criteria based on any other business generated between the parties. We are interested in comments with respect to other potential criteria for selecting medical staff recipients of donated technology. Also, the safe harbor would not protect arrangements that seek to induce a Recipient to change loyalties from other providers or plans to the Donor (e.g., a hospital using an electronic prescribing technology arrangement to induce a physician who is on the medical staff of another hospital to join the Donor hospital’s medical staff for a purpose of referring patients to the Donor hospital). Proposed § 1001.952(x)(7) would require the arrangement to be in writing, to be signed by the parties, to identify with specificity the items or services being provided and their values, and to include the certification described in section II.A.1 above. To permit effective oversight of protected arrangements, the writing must cover all qualifying electronic prescribing technology provided by the Donor (or affiliated parties) to the Recipient. For example, if a Donor provides a piece of hardware under one arrangement and subsequently provides a software program, the agreement regarding the software would have to include a description of the previously donated hardware (including its nature and value). Finally, we seek to minimize the potential for abuse and to ensure that the protected technology furthers the congressional purpose of promoting electronic prescribing as a means of improving the quality of care for all patients. We believe that any protected items and services must, to the extent possible, be usable by recipients for electronic prescribing for all patients to ensure that uninsured and nonMedicare patients receive the same benefits that the technology may engender, including reduction of errors and improvements in care. Some donated technology (such as software for tracking prescriptions or formularies of a particular MA organization’s patients) may not be applicable to all patients. However, other technology (for example, hand-held devices and software that transmits prescriptions to pharmacies) is potentially usable for all VerDate Aug<31>2005 15:52 Oct 07, 2005 Jkt 208001 patients, and recipients should not be restricted from using such technology for all patients. Accordingly, proposed § 1001.952(x)(4) would require that, where possible, recipients must be able to use the protected technology for all patients without regard to payor status. B. Proposed Electronic Health Records Safe Harbors Many in the hospital industry, among others, have raised the issue of the need for safe harbor protection for arrangements involving technology other than electronic prescribing. In many cases, such arrangements may qualify for safe harbor protection under existing safe harbors, such as the employee safe harbor (42 CFR 1001.952(i)), the discounts safe harbor (42 CFR 1001.952(h)), or the equipment rental safe harbor (42 CFR 1001.952(c)). Moreover, as explained above, arrangements that do not qualify for safe harbor protection are not necessarily illegal. In general, the provision of valuable technology to physicians or other sources of Federal health care program referrals poses a heightened risk of fraud or abuse. This risk increases as the value of the technology to the Recipient increases. In the preceding discussion of the proposed safe harbor for electronic prescribing technology, we noted a number of fraud and abuse risk areas; those risk areas would also apply to the provision of free or reduced price electronic health records technology. In many respects, the provision of electronic health records technology to physicians and others poses greater risk of fraud or abuse than the provision of electronic prescribing technology; electronic health records technology is inherently more valuable to physicians in terms of actual cost, avoided overhead, and administrative expenses of an office practice. Notwithstanding, we believe it may be possible to craft safe harbor conditions that would promote open, interconnected, interoperable electronic health records systems that help improve the quality of patient care and efficiency in the delivery of health care to patients, without protecting arrangements that serve as marketing platforms or mechanisms to influence inappropriately clinical decision making or tie physicians to particular providers or suppliers. The potential patient care and system efficiency benefits of interoperable and certified electronic health records technology are discussed in detail in the preamble to CMS’ contemporaneous notice of proposed rulemaking for an exception under section 1877 and are not repeated PO 00000 Frm 00037 Fmt 4702 Sfmt 4702 59021 here. Full interoperability of electronic health records technology would help reduce, but not eliminate, some risks of program and patient fraud and abuse (such as improper patient steering) by ensuring that donors would not be able to lock recipients into using the donor’s systems. Currently, uniform interoperability standards for electronic health records and certification requirements necessary to ensure interoperability do not exist. Accordingly, we are considering an incremental approach to safe harbor protection in this area. Specifically, we are proposing using our legal authority at section 1128B(b)(3)(E) of the Act to promulgate two safe harbors related to electronic health records software and directly related training services that are necessary and used to receive, transmit, and maintain electronic health records of the entity’s or physician’s patients. The first safe harbor would apply to donations made before adoption by the Secretary of product certification criteria, including criteria for interoperability, functionality, and privacy and security of electronic health records technology. These conditions are also referred to herein as ‘‘product certification criteria.’’ (For purposes of this rulemaking, this safe harbor will be referred to as the ‘‘pre-interoperability’’ safe harbor.) Once standards are identified and product certification criteria are developed for electronic health records and adopted by the Secretary, we believe some enhanced flexibility in the conditions applicable under a safe harbor for electronic health records may be appropriate, provided the safe harbor conditions as a whole sufficiently guard against fraud and abuse. A second safe harbor would apply to donations made after product certification criteria have been adopted. (For purposes of this rulemaking, this second safe harbor will be referred to as the ‘‘post-interoperability’’ safe harbor.) The post-interoperability safe harbor would recognize the reduction in the risk of fraud and abuse that may result from the ability to ensure that free or reduced price products provided under the safe harbor are interoperable and certified. Unlike electronic prescribing, Congress provided no direction with respect to any safe harbor for electronic health records. As discussed more fully below, any safe harbor of electronic health records technology will necessarily involve consideration of a number of important variables. Given this, as well as the inherent risk of fraud and abuse typically posed by gifts of free items and services to potential referral sources, we believe we do not E:\FR\FM\11OCP1.SGM 11OCP1 59022 Federal Register / Vol. 70, No. 195 / Tuesday, October 11, 2005 / Proposed Rules have sufficient information at this time to draft appropriate safe harbor language. However, we are soliciting public comments on the proposed scope and conditions for electronic health records safe harbors, as outlined below. 1. Proposed Pre-Interoperability Safe Harbor We are considering incorporating the following features in the preinteroperability safe harbor. Covered Technology—The preinteroperability safe harbor would protect electronic health records software (that is, software that is essential to and used solely for the transmission, receipt, and maintenance of patients’ electronic health records and electronic prescription drug information) and directly-related training services, provided that the software includes an electronic prescribing component. The required electronic prescribing component must consist of software that is used to receive and transmit electronically prescription drug information in accordance with standards established by the Secretary under the Part D electronic prescription drug program. We are soliciting comments on whether the exception should permit the electronic prescribing component of electronic health records software to be used for the transmission of prescription information regarding items and services that are not drugs (for example, supplies or laboratory tests). Additionally, we are soliciting comments with respect to whether we should require that electronic health records software include a computerized provider order entry (‘‘CPOE’’) component. The preinteroperability safe harbor would not protect the provision of other types of technology, including, but not limited to, hardware, connectivity services, billing, scheduling, or other similar general office management or administrative software services, or software that might be used by a Recipient to conduct personal business or business unrelated to the Recipient’s medical practice. While we would protect necessary training services in connection with the software, we would not protect the provision of staff to Recipients or their offices. We are mindful that there may be particular constituencies, such as rural area providers, that lack sufficient hardware or connectivity services to implement effective electronic health records systems. We are soliciting comments addressing these special circumstances. Any safe harbor would need to define ‘‘electronic health records.’’ As with VerDate Aug<31>2005 15:52 Oct 07, 2005 Jkt 208001 electronic prescribing technology, we are interested in public comments that address the software functions that should be included in the definition of ‘‘electronic health records’’; the types of software that should be protected; the retail and nonretail cost of such software; the manner in which such software is currently marketed; methods for defining the scope of protected software; and safeguards that might be imposed (either by definition or separately) to ensure that provision of the software cannot be used to camouflage unlawful payments for referrals or to tie impermissibly Recipients to Donors in a position to benefit from the Recipient’s referrals. The pre-interoperability safe harbor would require that the protected software and training services be ‘‘necessary’’ consistent with our interpretation of the term in section II.A.1, and we are considering including comparable documentation provisions, including comparable certifications by Recipients, to ensure that the safe harbor does not protect the provision of items or services that are technically or functionally equivalent to items and services the Recipient currently possesses or has obtained. As with electronic prescribing technology, we are concerned that there may be a risk that Recipients would intentionally divest themselves of functionally or technically equivalent technology that they already possess to shift costs to Donors, and we are soliciting public comments on whether and how to address this situation. Interoperability—In addition to requiring that the electronic prescribing component of the protected software comply with standards established by the Secretary for the Part D electronic prescription drug program, it would be important that neither Donors nor their agents take any actions to disable or limit interoperability of any component of the software or otherwise impose barriers to compatibility. We are also considering requiring that protected software comply with relevant Public Health Information Network preparedness standards, such as those related to BioSense. We are soliciting comments on these and other appropriate qualifications. In addition, electronic health records lack the program and beneficiary protections that exist under the Part D prescription drug program and related electronic prescription standards. We are considering including in the final safe harbor conditions designed to replicate these protections for electronic health records, including quality assurance measures. We are soliciting public PO 00000 Frm 00038 Fmt 4702 Sfmt 4702 comments on the most appropriate way to do so. Value of the Protected Technology— As with electronic prescribing, we are proposing limiting the aggregate value of the protected software and training services that a Donor could provide to a Recipient. The limit under the proposed pre-interoperability safe harbor would be directly related to the limit adopted in connection with the electronic prescribing safe harbor discussed at II.A.3. There, we note various alternatives we are considering in connection with a limiting cap and outline issues about which we are soliciting public comments. We are considering similar alternatives, and are interested in similar comments, in connection with a safe harbor for electronic health records. Given that electronic health records technology has high value to Recipients, we are considering several approaches, including: (1) An aggregate dollar cap; (2) a cap that would be set at a percentage of the value of the technology to the Recipient (thus requiring Recipients to share a portion of the costs and reducing windfall benefits to Recipients); or (3) a cap set at the lower of a fixed dollar amount or a percentage of the value of the technology to the Recipient. We are soliciting comments on how a cap under a safe harbor for electronic health records would relate to a cap under proposed § 1001.952(x) and how the value of technology provided under the final safe harbors would be aggregated. We are concerned that Donors may abuse the proposed exceptions for electronic prescribing items and services and electronic health records software and training services by selectively relying on both exceptions to maximize the value of technology provided to Recipients as a means of disguising payments for referrals. We believe conditions should be included in the final regulation to prevent this abuse and are considering requiring an overall cap on value, as well as documentation requirements that integrate all technology provided under the final exceptions. We are considering requiring an overall cap on the value of donated technology (such that the value of technology donated under the electronic prescribing safe harbor would count towards the total value of the software protected under the pre-interoperability safe harbor), as well as documentation requirements that integrate all technology provided under any safe harbor. Another concern, particularly in light of the cost of electronic health records technology, is that Donors may attempt E:\FR\FM\11OCP1.SGM 11OCP1 Federal Register / Vol. 70, No. 195 / Tuesday, October 11, 2005 / Proposed Rules to shift the financial burden of providing electronic health records technology to the Federal health care programs or beneficiaries. Accordingly, we would likely include a safe harbor condition that would prohibit such cost shifting. Finally, we are soliciting comments on whether and, if so, how to take into account Recipient access to any software that is publicly available either free or at a reduced price. Donors and Recipients—The preinteroperability safe harbor would protect the same categories of Donors and Recipients as the proposed § 1001.952(x)(1) and would define them similarly. We believe that Donors should be limited to hospitals, group practices, PDP sponsors, and MA organizations, because they have a direct and primary patient care relationship and therefore have a central role in the health care delivery infrastructure that justifies safe harbor protection for the furnishing of electronic health records technology that would not be appropriate for other types of providers and suppliers, including providers and suppliers of ancillary services. Moreover, hospitals, group practices, PDP sponsors, and MA organizations are potentially in a better position to promote widespread use of electronic health records technology that has the greatest degree of openness and interoperability. We do not believe that providers and suppliers of ancillary services, such as laboratories, have a comparable stake in advancing the goal of interoperable electronic health records for patients. In our experience, laboratories and others have used free or deeply discounted goods, such as computers and fax machines, to influence referrals improperly. Longstanding OIG guidance makes clear that gifts of equipment to referral sources that have value to the physicians are highly suspect under the anti-kickback statute.4 We are interested in comments regarding whether other categories of Donors or Recipients should be included and why. We are also interested in comments with respect to whether different or alternative conditions should apply to any category of donor. Other Conditions—Finally, to further reduce the risk of fraud and abuse, we would incorporate in the preinteroperability safe harbor for electronic health records certain other conditions described above in connection with proposed § 1001.952(x). These conditions would include the requirement at proposed 1001.952(x)(6) that neither the eligibility 4 See supra note 3. VerDate Aug<31>2005 15:52 Oct 07, 2005 Jkt 208001 of a recipient to receive items and services from a donor, nor the amount and nature of the items and services received, may be determined in a manner that takes into account the volume or value of the recipient’s referrals to the donor or other business generated between the parties. In addition, we would include the proposed anti-solicitation provision (§ 1001.952(x)(5)), the proposed documentation requirements (§ 1001.952(x)(7)), and the proposed allpayors requirement (§ 1001.952(x)(4)). Sunset Provision—We are considering whether to sunset the preinteroperability safe harbor discussed here once the post-interoperability safe harbor discussed in the next section becomes effective. Our intent is that the proposed preinteroperability safe harbor outlined above would promote the adoption of open, interconnected, interoperable electronic health records and electronic prescribing systems. We are interested in comments addressing whether this pre-interoperability safe harbor protection may have the unintended effect of impeding the beneficial spread of interoperable electronic health records systems by promoting closed or isolated systems or systems that effectively tie physicians to particular providers or suppliers. For example, a hospital that donates expensive technology to a physician may exercise control over that physician sufficient to preclude or discourage other systems or health plans from having access to the physician for their own networks. 2. Proposed Post-Interoperability Safe Harbor The adoption of uniform interoperability standards for electronic health records, as well as product certification criteria to ensure that products meet those standards, will help prevent certified technology from being used by unscrupulous parties to lock in streams of referrals or other business. While interoperability does not vitiate the risk (we are concerned that parties may use the offer or grant of free technology itself as a vehicle to capture referrals), it may mitigate the risk sufficiently to warrant different or modified safe harbor conditions. It would be important that the protected electronic health records software be certified in accordance with product certification criteria adopted by the Secretary, and that the electronic prescribing component comply with electronic prescribing standards established by the Secretary under the Part D program, to the extent those standards are not incorporated into the PO 00000 Frm 00039 Fmt 4702 Sfmt 4702 59023 product certification criteria. Once product certification criteria are adopted for interoperable electronic health records technology, we intend to finalize a post-interoperability safe harbor. In particular, we are considering a post-interoperability safe harbor that would include the conditions described above in section II.B.1 in connection with the pre-interoperability safe harbor, with the following differences. First, we are considering whether the safe harbor should protect additional software applications, provided electronic prescribing and electronic health records are the core functions of the protected software. We intend to protect systems that improve patient care rather than systems comprised solely or primarily of technology that is incidental to the core functions of electronic prescribing and electronic health records. As with the preinteroperability safe harbor, technology protected under this safe harbor must include an electronic prescribing component and may not be used by a Recipient solely to conduct personal business or business unrelated to the Recipient’s medical practice. We are soliciting public comments with respect to whether we should also or instead require that electronic health records software include a CPOE component. We are also soliciting public comments on what types of software should be protected under the safe harbor and methods for ensuring that electronic prescribing and electronic health records are the core functions of the donated technology. Second, we are considering whether to protect categories of Donors or Recipients, beyond those specifically set forth in section 1860D–4(e)(6) of the Act and whether different or alternative conditions should apply to any category of permissible Donors or Recipients. We are interested in comments addressing the types of individuals or entities that should be protected, the degree of need for protection, and the safeguards that should be imposed to protect against fraud and abuse. Third, in light of the enhanced protection against some types of fraud and abuse offered by certified, interoperable systems, we are considering permitting Donors to use selective criteria for choosing Recipients, provided that neither the eligibility of a recipient, nor the amount or nature of the items or services, is determined in a manner that directly takes into account the volume or value of referrals or other business generated between the parties. We are considering enumerating several selection criteria E:\FR\FM\11OCP1.SGM 11OCP1 59024 Federal Register / Vol. 70, No. 195 / Tuesday, October 11, 2005 / Proposed Rules which, if met, would be deemed not to be directly related to the volume or value of referrals or other business generated between the parties (for example, a determination based on the total number of hours that the recipient practices medicine or a determination based on the size of the recipient’s medical practice). Selection criteria that are based upon the total number of prescriptions written by a Recipient would not be prohibited, but the proposed regulation would prohibit criteria based upon the number or value of prescriptions written by the Recipient that are dispensed or paid by the Donor, as well as any criteria directly based on any other business generated between the parties. The safe harbor would not protect arrangements that seek to induce a Recipient to change loyalties from other providers or plans to the Donor. We are soliciting public comments on criteria for selecting recipients of the donated technology. We expect that this approach would ensure that donated technology can be targeted at Recipients who use it the most in order to promote a public policy favoring adoption of electronic health records, while discouraging problematic direct correlations with Federal health care program referrals (for example, a hospital offering a physician 10 new computers for every 500 referrals of Medicare-payable procedures.) This approach would be a deliberate departure from other safe harbors based on the unique public policy considerations surrounding electronic health records and the Department’s goal of encouraging widespread adoption of interoperable electronic health records. We caution, however, that outside of the context of electronic health records, as specifically addressed in this proposed rule, both direct and indirect correlations between the provision of free goods or services and the volume or value of referrals or other business generated between the parties are highly suspect under the antikickback statute (and may evidence outright violations) and do not meet the requirements of other safe harbors under the statute or 42 CFR 1001.952. We are interested in public comments about this approach to selecting Recipients, including whether there may be unintended consequences that would inhibit the adoption of interoperable technology or lead to abusive arrangements and, if so, whether more or less restrictive conditions are appropriate. Fourth, we are considering a cap on the value of the donated interoperable software that may be larger than the cap under the pre-interoperability safe VerDate Aug<31>2005 15:52 Oct 07, 2005 Jkt 208001 harbor. With respect to a limiting cap, we are considering issues similar to those discussed in the preceding sections on the proposed electronic prescribing safe harbor and the proposed pre-interoperability safe harbor, and are interested in comments on those same issues as they might relate to a post-interoperability safe harbor. In sum, there are a number of ways in which a post-interoperability safe harbor might be structured, and flexibility in one condition might require tightening of another. We are interested in comments on the overall approach outlined above and how the various conditions might be crafted to ensure that the safe harbor conditions, taken as a whole, provide sufficient protection against fraud and abuse. C. Additional Solicitation of Public Comments: Community-Wide Health Information Systems The regulations promulgated in accordance with section 1877 of the Act include an exception at 42 CFR 411.357(u) for the provision of information technology items and services by certain entities to physicians to enable the physicians to participate in a community-wide health information system designed to enhance the overall health of the community. The systems must facilitate access to, and sharing of, electronic health care records and any complementary drug information systems, general health information, medical alerts, and related information for patients served by community providers and practitioners. Certain other conditions must also be satisfied. We have received a number of comments in response to our 2004 Annual Solicitation of New Safe Harbors and Special Fraud Alerts (69 FR 71766; December 10, 2004) requesting that we create a comparable safe harbor under the anti-kickback statute. While we have not determined whether such a safe harbor is needed or prudent, we are interested in public comments at this time addressing the need for, and conditions that should pertain to, such a safe harbor. Because of the close relationship between the topic of this proposed rulemaking and the suggested new safe harbor for community-wide health information systems, we believe it appropriate to solicit comments on the latter issue as part of this rulemaking. III. Regulatory Impact Statement We have examined the impact of this rule as required by Executive Order 12866, the Unfunded Mandates Reform Act of 1995, the Regulatory Flexibility PO 00000 Frm 00040 Fmt 4702 Sfmt 4702 Act (RFA) of 1980, and Executive Order 13132. Executive Order 12866 Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis must be prepared for major rules with economically significant effects (i.e., $100 million or more in any given year). This is not a major rule, as defined at 5 U.S.C. 804(2), and it is not economically significant, since it would not have a significant effect on program expenditures, and there are no additional substantive costs to implement the resulting provisions. This proposed rule would create new safe harbors under the anti-kickback statute for certain entities to provide technology-related items and services to certain parties for electronic prescribing and health record purposes. This proposal would merely create safe harbors under the anti-kickback statute for arrangements under which certain entities would help physicians and certain other individuals and entities with their electronic prescribing and health records expenses. In doing so, this rulemaking would impose no requirements on any party. Parties may voluntarily seek to comply with this provision so that they have assurance that their actions will not subject them to any enforcement actions under the anti-kickback statute. The safe harbors should facilitate the adoption of electronic prescribing and health records technology by filling a gap rather than creating the primary means by which physicians will adopt these technologies. In other words, we do not believe that Donors will fund all of the health information technology used by Recipients. However, since we cannot predict which entities will offer these items and services, we cannot determine with certainty the aggregate economic impact of this proposed rulemaking. We do not believe, however, that the impact of this electronic prescribing safe harbor rule would approach $100 million annually. Therefore, this proposed rule is not a major rule. We note that this proposed rule would remove a perceived obstacle to the provision of qualifying electronic prescribing technology and electronic health records software and directly related training services (for purposes of this Regulatory Impact Statement, herein E:\FR\FM\11OCP1.SGM 11OCP1 Federal Register / Vol. 70, No. 195 / Tuesday, October 11, 2005 / Proposed Rules referred to as ‘‘qualifying health information technology’’) by certain entities. Although this proposed rule applies to donations of qualifying health information technology by hospitals, group practitioners, PDP sponsors, and MA plans, we do not expect that many group practices, PDP sponsors or MA plans would use these proposed safe harbors (and in some cases, existing safe harbors may also be available or parties may use the OIG’s advisory opinion process). Notwithstanding, regardless of whether donations would be allowed under existing safe harbors or those that are included in this proposed rule, we encourage commenters to provide information on the costs that would likely be incurred by Donors that would choose to furnish qualifying health information technology to Recipients, as well as other related costs that would likely be incurred by both Donors and Recipients, such as costs incurred for changes in office procedures. Our analysis under Executive Order 12866 of the expenditures that entities may choose to make under this proposed rule is restricted by potential effects of outside factors, such as technological progress and other market forces, future certification standards, and the companion proposed physician self-referral exceptions. Furthermore, both the costs and potential savings of electronic prescribing, EHRs, computerized physician order entry, and billing and scheduling software vary to the extent to which each element operates as a stand alone system or as part of an integrated system. We welcome comments that will help identify both the independent and synergistic effects of these variables. As noted in the electronic prescribing proposed rule, which was published on February 4, 2005 (70 FR 6256, 6268– 6273), the Department expects that donors may experience net savings with electronic prescribing in place and patients would experience significant, positive health effects. We have not repeated that analysis in this proposed rule. Moreover, we have not replicated the extensive analysis of costs, benefits, and potential impact on patient care contained in the companion physician self-referral proposed rule. We believe the analysis set forth there may be similarly relevant to the potential impact of the proposed safe harbors. As also noted there, we assume that qualifying health information technology costs and benefits will be realized sooner or later. Even without government intervention, there is a lively market today, and as consensus standards evolve, that market will grow. VerDate Aug<31>2005 15:52 Oct 07, 2005 Jkt 208001 The question as to the regulatory impact for this proposed rule is: to what extent would the use of these proposed antikickback safe harbors accelerate adoption of electronic prescribing and EHRs, taking into account available policy instruments, notably the development of interoperable standards? The baseline information is uncertain. As described in more detail in the physician self-referral proposed rule, there are numerous estimates of adoption of electronic prescribing by health plans, hospitals, physicians, and (for prescribing of drugs only) pharmacies. As noted there, these estimates are highly sensitive to assumptions. For example, the maximum allowed remuneration might be as little as half as much or as much as twice as much. The rate of adoption might be higher or lower than estimated. The proportion receiving remuneration could be lower or higher than estimated, depending on willingness of hospitals, group practices, MA organizations and PDP sponsors to subsidize investments in health information technology. We are interested in comments on whether information exists that would allow more definite estimates as to the effects of these proposed safe harbors. Unfunded Mandates Reform Act Section 202 of the Unfunded Mandates Reform Act of 1995 requires that agencies assess the anticipated costs and benefits of Federal mandates before issuing any rule that may result in the mandated expenditure by State, local, or tribal governments, in the aggregate, or by the private sector, of $100 million in 1995 dollars (a threshold adjusted annually for inflation and now approximately $120 million). This proposed rule would impose no mandates. Any actions taken under this rule would be voluntary. Furthermore, such actions are likely to result in cost savings, not net expenditures, and any expenditures would be undertaken by government-owned hospitals in their business capacity, without any necessary impact on state, local, or tribal governments, or their expenditure budgets, as such. Regulatory Flexibility Act The Regulatory Flexibility Act (RFA) and the Small Business Regulatory Enforcement and Fairness Act of 1996, which amended the RFA, require agencies to analyze options for regulatory relief of small businesses. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and Government agencies. Most hospitals and most other providers and suppliers are small PO 00000 Frm 00041 Fmt 4702 Sfmt 4702 59025 entities, either by nonprofit status or by having revenues of $6 million to $29 million in any one year. Individuals and States are not included in the definition of a small entity. We are not preparing an analysis for the RFA because we have determined that this proposed rule would not have a significant impact on small businesses. We base our decision on the fact that we expect the rulemaking on electronic prescribing and health records to be beneficial to the affected entities because it will allow them to better reap the benefits of increased use of electronic prescribing and health records technology, including reduction of medical errors and increased operational efficiencies. In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 603 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a Metropolitan Statistical Area and has fewer than 100 beds. We are not preparing an analysis for section 1102(b) of the Act because we have determined that this rule would not have a substantial negative impact on the operations of a substantial number of small rural hospitals. If this rule has any impact, it would be a substantial positive impact in reducing costly medical errors and increasing operational efficiencies through the use of technology. Executive Order 13132 Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on State and local Governments, preempts State law, or otherwise has Federalism implications. Since this regulation does not impose any costs on State or local Governments, the requirements of Executive Order 13132 are not applicable. The Office of Management and Budget (OMB) has reviewed this rule in accordance with Executive Order 12866. IV. Paperwork Reduction Act In accordance with section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995, we are required to solicit public comments, and receive final OMB approval, on any information collection requirements set forth in rulemaking. The safe harbors promulgated in this proposed rule impose some minimal E:\FR\FM\11OCP1.SGM 11OCP1 59026 Federal Register / Vol. 70, No. 195 / Tuesday, October 11, 2005 / Proposed Rules information collection requirements. Specifically, for an arrangement to fall within the proposed safe harbors would have to fulfill the following documentation requirements: (1) There must be a writing signed by the parties; (2) the written agreement must identify the items or services being provided and their values; (3) the written agreement must incorporate or cross-reference prior relevant agreements; and (4) the written agreement must contain a certification by the Recipient that the items and services to be provided do not duplicate any existing items or services the Recipient already has or has obtained from another source. Compliance with a safe harbor under the Federal anti-kickback statute is voluntary, and no party is ever required to comply with a safe harbor. Instead, safe harbors merely offer an optional framework for structuring business arrangements to ensure compliance with the anti-kickback statute. All parties remain free to enter into arrangements without regard to a safe harbor, so long as the arrangements do not involve unlawful payments for referrals under the anti-kickback statute. Thus, we believe that the documentation requirements necessary to enjoy safe harbor protection do not qualify as an added paperwork burden in accordance with 5 CFR 1320.3(b)(2), because the requirements are consistent with usual and customary business practices and because the time, effort, and financial resources necessary to comply with the requirements would largely be incurred in the normal course of business activities. We are soliciting public comments with respect to these requirements. Comments on these requirements should be sent to the following address within 60 days following the Federal Register publication of this interim final rule: OIG Desk Officer, Office of Management and Budget, Room 10235, New Executive Office Building, 725 17th Street, NW., Washington, DC 20053, FAX: (202) 395–6974. V. Public Inspection of Comments and Response to Comments Comments will be available for public inspection beginning November 10, 2005 in Room 5518, 330 Independence Avenue, SW., Washington, DC on Monday through Friday of each week (Federal holidays excepted) between the hours of 9 a.m. and 4 p.m., (202) 619– 0089. Because of the large number of items of correspondence we normally receive on Federal Register documents published for comment, we are not able VerDate Aug<31>2005 15:52 Oct 07, 2005 Jkt 208001 to acknowledge or respond to them individually. We will consider all comments we receive by the date and time specified in the DATES section of this preamble, and will respond to the comments in the preamble of the final rule. List of Subjects in 42 CFR Part 1001 Administrative practice and procedure, Fraud, Grant programs— health, Health facilities, Health professions, Maternal and child health, Medicaid, Medicare. Accordingly, 42 CFR part 1001 would be amended as set forth below: PART 1001—[AMENDED] 1. The authority citation for part 1001 would be amended to read as follows: Authority: 42 U.S.C. 1302, 1320a–7, 1320a–7b, 1395u(j), 1395u(k), 1395w– 104(e)(6), 1395y(d), 1395y(e), 1395cc(b)(2)(D), (E) and (F), and 1395hh; and sec. 2455, Pub. L. 103–355, 108 Stat. 3327 (31 U.S.C. 6101 note). 2. Section 1001.952 would be amended by republishing the introductory text, and by adding (x) to read as follows: § 1001.952 Exceptions. The following payment practices shall not be treated as a criminal offense under section 1128B of the Act and shall not serve as the basis for an exclusion: * * * * * (x) Electronic Prescribing Items and Services. As used in section 1128B of the Act, ‘‘remuneration’’ does not include nonmonetary remuneration (consisting of items and services in the form of hardware, software, or information technology and training services) necessary and used solely to receive and transmit electronic prescription information, if all of the following conditions are met: (1) The items and services are provided— (i) In the case of a hospital, by the hospital to physicians who are members of its medical staff; (ii) In the case of a group practice, by the group practice to prescribing health care professionals who are members of the group practice; and (iii) In the case of a PDP sponsor or MA organization, by the sponsor or organization to pharmacists and pharmacies participating in the network of such sponsor or organization and to prescribing health care professionals. (2) The items and services are donated as part of, or are used to access, an electronic prescription drug program that meets the applicable standards PO 00000 Frm 00042 Fmt 4702 Sfmt 4702 under Medicare Part D at the time the items and services are furnished. (3) The donor (or any person on the donor’s behalf) must not take any actions to limit or restrict unnecessarily the use or compatibility of the items or services with other electronic prescription information items or services or electronic health information systems. (4) With respect to items or services that are of the type that can be used for any patient without regard to payor status, the donor may not restrict, or take any action to limit, the recipient’s right or ability to use the items or services for any patient. (5) The prescribing health care professional, pharmacy, or pharmacist (or any affiliated group, employee, or staff member) does not make the receipt of items or services a condition of doing business with the donor. (6) Neither the eligibility of a prescribing health care professional, pharmacy, or pharmacist for the items or services, nor the amount or nature of the items or services, is determined in a manner that takes into account the volume or value of referrals or other business generated between the parties. (7) The arrangement is set forth in a written agreement that— (i) Is signed by the parties; (ii) Specifies the items or services being provided and the value of those items and services; (iii) Covers all of the electronic prescribing items and services to be furnished by the donor (or affiliated parties) to the recipient; and (iv) Contains a certification by the recipient that the items and services are not technically or functionally equivalent to items and services the recipient already possesses or has obtained. The recipient will be deemed not to comply with this subparagraph if the certification the recipient provides is not full, complete, and accurate, to the best of the recipient’s knowledge. (8) The donor did not have actual knowledge of, and did not act in reckless disregard or deliberate ignorance of, the fact that the recipient possessed or had obtained items and services that were technically or functionally equivalent to those donated by the donor. Note to Paragraph (x): For purposes of paragraph (x) of this section, group practice shall have the meaning set forth at § 411.352; members of a group practice shall mean all persons covered by the definition of ‘‘member of the group practice’’ at § 411.351, as well as other prescribing health care professionals who are owners or employees of the group practice; prescribing health care professional shall mean a physician or other E:\FR\FM\11OCP1.SGM 11OCP1 Federal Register / Vol. 70, No. 195 / Tuesday, October 11, 2005 / Proposed Rules health care professional licensed to prescribe drugs in the State in which the drugs are dispensed; PDP sponsor or MA organization shall have the meanings set forth at §§ 423.4 and 422.2, respectively. Dated: March 15, 2005. Daniel R. Levinson, Acting Inspector General. Approved: August 12, 2005. Michael O. Leavitt, Secretary. [FR Doc. 05–20315 Filed 10–5–05; 10:49 am] BILLING CODE 4150–01–P VerDate Aug<31>2005 15:52 Oct 07, 2005 Jkt 208001 PO 00000 Frm 00043 Fmt 4702 Sfmt 4702 E:\FR\FM\11OCP1.SGM 11OCP1 59027

Agencies

[Federal Register Volume 70, Number 195 (Tuesday, October 11, 2005)]
[Proposed Rules]
[Pages 59015-59027]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-20315]


=======================================================================
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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of the Secretary

Office of Inspector General

42 CFR Part 1001

RIN 0991-AB39


Medicare and State Health Care Programs: Fraud and Abuse; Safe 
Harbor for Certain Electronic Prescribing Arrangements Under the Anti-
Kickback Statute

AGENCY: Office of Inspector General (OIG), HHS.

ACTION: Proposed Rule.

-----------------------------------------------------------------------

SUMMARY: As required by the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA), Public Law 108-173, this proposed 
rule would establish a new safe harbor under the Federal anti-kickback 
statute for certain arrangements involving the provision of electronic 
prescribing technology. Specifically, the safe harbor would protect 
certain arrangements involving hospitals, group practices, and 
prescription drug plan (PDP) sponsors and Medicare Advantage (MA) 
organizations that provide to specified recipients certain nonmonetary 
remuneration in the form of hardware, software, or information 
technology and training services necessary and used solely to receive 
and transmit electronic prescription drug information. In addition, 
using our separate legal authority under section 1128B(b)(3)(E) of the 
Social Security Act (the ``Act''), we are also proposing separate safe 
harbor protection for certain electronic health records software and 
directly related training services. These exceptions are consistent 
with the President's goal of achieving widespread adoption of 
interoperable electronic health records for the purpose of improving 
the quality and efficiency of health care, while maintaining the levels 
of security and privacy that consumers expect.

DATES: To assure consideration, public comments must be delivered to 
the address provided below by no later than 5 p.m. on December 12, 
2005.

ADDRESSES: You may submit comments by any of the methods set forth 
below. In all cases, when commenting, please refer to file code OIG-
405-P.
     Mail--Office of Inspector General, Department of Health 
and Human Services, Attention: OIG-405-P, Room 5246, Cohen Building, 
330 Independence Avenue, SW., Washington, DC 20201.
    Please allow sufficient time for us to receive mailed comments by 
the due date in the event of delivery delays.
     Hand delivery/courier--Office of Inspector General, 
Department of Health and Human Services, Attention: OIG-405-P, Room 
5246, Cohen Building, 330 Independence Avenue, SW., Washington, DC 
20201.
    Because access to the Cohen Building is not readily available to 
persons without Federal Government identification, commenters are 
encouraged to leave their comments in OIG's drop box located in the 
main lobby of the building.
     Federal eRulemaking Portal: https://www.regulations.gov. 
Include agency name and identifier RIN 0991-AB36.
    Because of staff and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. For information on viewing 
public comments, see section V of the Supplementary Information section 
preamble.

FOR FURTHER INFORMATION CONTACT: Catherine Martin, Office of Counsel to 
the Inspector General, (202) 619-0335.

SUPPLEMENTARY INFORMATION:

[[Page 59016]]

I. Background

A. The Anti-Kickback Statute and Safe Harbors

    Section 1128B(b) of the Act (42 U.S.C. 1320a-7b(b), the anti-
kickback statute) provides criminal penalties for individuals or 
entities that knowingly and willfully offer, pay, solicit, or receive 
remuneration in order to induce or reward the referral of business 
reimbursable under any of the Federal health care programs, as defined 
in section 1128B(f) of the Act. The offense is classified as a felony 
and is punishable by fines of up to $25,000 and imprisonment for up to 
five years. Violations of the anti-kickback statute may also result in 
the imposition of civil money penalties (CMPs) under section 
1128A(a)(7) of the Act (42 U.S.C. 1320a-7a(a)(7)), program exclusion 
under section 1128(b)(7) of the Act (42 U.S.C. 1320a-7(b)(7)), and 
liability under the False Claims Act, (31 U.S.C. 3729-33).
    The types of remuneration covered specifically include, without 
limitation, kickbacks, bribes, and rebates, whether made directly or 
indirectly, overtly or covertly, in cash or in kind. In addition, 
prohibited conduct includes not only the payment of remuneration 
intended to induce or reward referrals of patients, but also the 
payment of remuneration intended to induce or reward the purchasing, 
leasing, or ordering of, or arranging for or recommending the 
purchasing, leasing, or ordering of, any good, facility, service, or 
item reimbursable by any Federal health care program.
    Because of the broad reach of the statute, concern was expressed 
that some relatively innocuous commercial arrangements were covered by 
the statute and, therefore, potentially subject to criminal 
prosecution. In response, Congress enacted section 14 of the Medicare 
and Medicaid Patient and Program Protection Act of 1987, Public Law 
100-93 (section 1128B(b)(3)(E) of the Act), which specifically required 
the development and promulgation of regulations, the so-called ``safe 
harbor'' provisions, that would specify various payment and business 
practices that would not be treated as criminal offenses under the 
anti-kickback statute, even though they may potentially be capable of 
inducing referrals of business under the Federal health care programs. 
Since July 29, 1991, we have published in the Federal Register a series 
of final regulations establishing ``safe harbors'' in various areas.\1\ 
These OIG safe harbor provisions have been developed ``to limit the 
reach of the statute somewhat by permitting certain non-abusive 
arrangements, while encouraging beneficial or innocuous arrangements.'' 
(56 FR 35952, 35958; July 21, 1991).
---------------------------------------------------------------------------

    \1\ 56 FR 35952 (July 29, 1991); 61 FR 2122 (January 25, 1996); 
64 FR 63518 (November 19, 1999); 64 FR 63504 (November 19, 1999); 
and 66 FR 62979 (December 4, 2001).
---------------------------------------------------------------------------

    Health care providers and others may voluntarily seek to comply 
with safe harbors so that they have the assurance that their business 
practices will not be subject to any enforcement action under the anti-
kickback statute, the CMP provision for anti-kickback violations, or 
the program exclusion authority related to kickbacks. In giving the 
Department of Health and Human Services the authority to protect 
certain arrangements and payment practices under the anti-kickback 
statute, Congress intended the safe harbor regulations to be evolving 
rules that would be updated periodically to reflect changing business 
practices and technologies in the health care industry.

B. Section 101 of MMA

    Section 101 of the MMA added a new section 1860D to the Act, 
establishing a Part D prescription drug benefit in the Medicare 
program. As part of the new statutory provision, Congress, through 
section 1860D-4(e) of the Act, directed the Secretary to create 
standards for electronic prescribing in connection with the new 
prescription drug benefit, with the objective of improving patient 
safety, quality of care, and efficiency in the delivery of care.\2\ 
Section 1860D-4(e)(6) of the Act directs the Secretary, in consultation 
with the Attorney General, to create a safe harbor to the anti-kickback 
statute that would protect certain arrangements involving the provision 
of nonmonetary remuneration (consisting of items and services in the 
form of hardware, software, or information technology or training 
services) that is necessary and used solely to receive and transmit 
electronic prescription drug information in accordance with electronic 
prescribing standards promulgated by the Secretary under section 1860D-
4(e)(4) of the Act. Specifically, the safe harbor would set forth 
conditions under which the provision of such remuneration by hospitals, 
group practices, and PDP sponsors and MA organizations (collectively, 
for purposes of this preamble discussion, ``Donors'') to prescribing 
health care professionals, pharmacies, and pharmacists (collectively, 
for purposes of this preamble discussion, ``Recipients'') would be 
protected.
---------------------------------------------------------------------------

    \2\ See H.R. Conf. Rep. No. 108-391, 495 (2003).
---------------------------------------------------------------------------

    The OIG has a longstanding concern about the provision of free or 
reduced price goods or services to an existing or potential referral 
source. There is a substantial risk that free or reduced price goods or 
services may be used as a vehicle to disguise or confer an unlawful 
payment for referrals of Federal health care program business. 
Financial incentives offered, paid, solicited, or received in exchange 
for generating Federal health care business increase the risks of, 
among other problems: (i) Overutilization of health care items or 
services; (ii) increased Federal program costs; (iii) corruption of 
medical decision making; and (iv) unfair competition. Consistent with 
the structure and purpose of the anti-kickback statute and the 
regulatory authority at section 1128B(b)(3)(E) of the Act, we believe 
any safe harbor for electronic prescribing arrangements should protect 
innocuous or beneficial arrangements that would eliminate perceived 
barriers to the adoption of electronic prescribing without creating 
undue risk that the arrangement might be used to induce or reward the 
generation of Federal health care program business.
    We do not believe Congress, in enacting section 1860D-4(e)(6) of 
the Act, intended to suggest that a new safe harbor is needed for all 
or even most arrangements involving the provision of electronic 
prescribing items and services. In general, fair market value 
arrangements that are arm's-length and do not take into account the 
volume or value of Federal health care program referrals, or 
arrangements that do not have as one purpose the generation of business 
payable by a Federal health care program, should not raise concerns 
under the anti-kickback statute. Simply put, absent the requisite 
intent, the anti-kickback statute is not violated. In addition, many 
arrangements can be structured to fit in existing safe harbors, 
including the safe harbors for discounts (42 CFR 1001.952(h)) and for 
remuneration offered to employees (42 CFR 1001.952(i)). Finally, 
parties may use the OIG advisory opinion process (42 CFR part 1008; 
https://oig.hhs.gov/fraud/advisoryopinions.html) to determine whether 
their particular arrangements would be subject to OIG sanctions.
    In addition to the new safe harbor under the anti-kickback statute, 
section 1860D-4(e)(6) of the Act directs the Secretary to create a 
corresponding exception to section 1877 of the Act, commonly known as 
the physician self-referral law. That exception is being

[[Page 59017]]

promulgated through a separate rulemaking by the Centers for Medicare & 
Medicaid Services (CMS), the agency that administers the physician 
self-referral law. We have endeavored to ensure as much consistency as 
possible between our proposed safe harbor and the corresponding 
exception proposed by CMS, given the differences in the respective 
underlying statutes. We intend the final rules to be similarly 
consistent. One significant difference in the statutory schemes is that 
fitting in an exception under section 1877 is mandatory, whereas 
complying with a safe harbor under the anti-kickback statute is 
voluntary. In other words, arrangements that do not comply with the 
electronic prescribing safe harbor will not necessarily be illegal 
under the anti-kickback statute. Rather, they will be subject to the 
customary case-by-case review under the statute. Another difference is 
that section 1877 applies only to referrals from physicians, while the 
anti-kickback statute applies more broadly.
    In certain respects, we are considering safe harbor standards that 
might impose stricter conditions than the corresponding exception to 
section 1877. In part, this reflects the separate purposes of the anti-
kickback statute and section 1877, as well as the serious nature of the 
felony violation described by the anti-kickback statute. In essence, 
section 1877 of the Act sets a minimum standard for acceptable 
financial arrangements; the anti-kickback statute addresses residual 
risk that may be posed by arrangements that otherwise comply with a 
physician self-referral exception. As explained in the Phase I final 
physician self-referral rule promulgated by CMS, ``many relationships 
that may not merit blanket prohibition under section 1877 of the Act 
can, in some circumstances and given necessary intent, violate the 
anti-kickback statute.'' (66 FR 856, 863; January 4, 2001).

II. Provisions of the Proposed Rule

    This proposed rule would add a new paragraph (x) to the existing 
safe harbor regulations at 42 CFR 1001.952. This new paragraph (x) 
would describe more specifically the items and services protected by 
the new safe harbor for prescribing drugs electronically; the 
individuals and entities that may provide the protected items and 
services; and the conditions under which providing the items and 
services to prescribing health care professionals, pharmacies, and 
pharmacists would be protected. In addition, using our separate legal 
authority at Sec.  1128B(b)(3)(E) of the Act, as discussed below, we 
are proposing separate safe harbor protection for certain electronic 
health records software not covered by the MMA mandated safe harbor for 
electronic prescribing. These proposed safe harbors would, if 
promulgated, create separate and independent grounds for protection 
under the anti-kickback statute. For the convenience of the public, we 
are providing the following chart that lays out schematically the 
overall structure and approach of these proposals, details of which are 
provided below in Sections II. A and B. Readers are cautioned that the 
proposals contain additional conditions and information not summarized 
here.

----------------------------------------------------------------------------------------------------------------
                                                    MMA-mandated                                    Post-
                                                     electronic       Pre-interoperability    interoperability
                                                  prescribing safe      electronic health     electronic health
                                                       harbor          records safe harbor   records safe harbor
----------------------------------------------------------------------------------------------------------------
Authority for Proposed Exception..............  Section 101 of the    Section               Section
                                                 Medicare              1128B(b)(3)(E) of     1128B(b)(3)(E) of
                                                 Prescription Drug,    the Social Security   Social Security
                                                 Improvement, and      Act.                  Act.
                                                 Modernization Act
                                                 of 2003.
Covered Technology............................  Proposed:             Proposed:             Proposed:
                                                 Items and    Software used solely   Certified
                                                 services that are     for the               health records
                                                 necessary and used    transmission,         software.
                                                 solely to transmit    receipt or            Directly-
                                                 and receive           maintenance of        related training
                                                 electronic            electronic health     services.
                                                 prescription drug     records.              Software
                                                 information..         Directly-     must include an
                                                 Includes      related training      electronic
                                                 hardware, software,   services..            prescribing
                                                 internet              Software      component.
                                                 connectivity, and     must include an       Could
                                                 training and          electronic            include billing and
                                                 support services..    prescribing           scheduling
                                                                       component..           software, provided
                                                                                             that the core
                                                                                             function of the
                                                                                             software is
                                                                                             electronic health
                                                                                             records.
Standards with Which Donated Technology Must    Proposed:             Proposed:             Proposed:
 Comply.                                         Foundation    Electronic    Product
                                                 standards for         prescribing           certification
                                                 electronic            component must        criteria adopted by
                                                 prescribing as        comply with           the Secretary
                                                 adopted by the        foundation            Electronic
                                                 Secretary..           standards for         prescribing
                                                                       electronic            component must
                                                                       prescribing as        comply with
                                                                       adopted by the        foundation
                                                                       Secretary..           standards for
                                                                                             electronic
                                                                                             prescribing as
                                                                                             adopted by the
                                                                                             Secretary, to the
                                                                                             extent these
                                                                                             standards are not
                                                                                             fully incorporated
                                                                                             into the product
                                                                                             certification
                                                                                             criteria.
Permissible Donors............................  Proposed:             Proposed:             Proposed:
                                                 As required   Hospitals     Hospitals
                                                 by statute,           to members of their   to members of their
                                                 permissible donors    medical staffs..      medical staffs.
                                                 are hospitals (to     Group         Group
                                                 members of their      practices to          practices to
                                                 medical staffs),      physician members..   physician members.
                                                 group practices (to   PDP           PDP
                                                 physician members),   sponsors..            sponsors.
                                                 PDP sponsors and MA   MA            MA
                                                 organizations (to     organization..        organization.
                                                 network pharmacists
                                                 and pharmacies, and
                                                 to prescribing
                                                 health care
                                                 professionals)..

[[Page 59018]]

 
Selection of Recipients.......................  Proposed:             Proposed:             Proposed:
                                                 Donors may    Donors may    Donors may
                                                 not take into         not take into         use criteria to
                                                 account the volume    account the volume    select recipients
                                                 or value of           or value of           that are not
                                                 referrals from the    referrals from the    directly related to
                                                 recipient or other    recipient or other    the volume or value
                                                 business between      business between      of referrals or
                                                 the parties..         the parties..         other business
                                                                                             generated between
                                                                                             the parties.
Value of Protected Technology.................  Proposed:             Proposed:             Proposed:
                                                 No specific   No specific   No specific
                                                 dollar amount         dollar amount         dollar amount
                                                 proposed for a cap    proposed for a cap    proposed for a cap
                                                 on the value of       on the value of       on the value of
                                                 protected             protected items and   protected items and
                                                 technology..          services..            services.
                                                                                             May be
                                                                                             greater than the
                                                                                             cap on pre-
                                                                                             interoperability
                                                                                             donations.
----------------------------------------------------------------------------------------------------------------

A. Electronic Prescribing Safe Harbor Required Under Section 101 of the 
MMA: Paragraph (x)
1. Protected Nonmonetary Remuneration
    Section 1860D-4(e)(6) of the Act authorizes the creation of a safe 
harbor for the provision of items and services that are ``necessary and 
used solely'' to receive and transmit electronic prescription drug 
information. This proposed rule would clarify the items and services 
that would qualify for the new safe harbor (for purposes of this 
preamble discussion, ``qualifying electronic prescribing technology'').
    ``Necessary'' nonmonetary remuneration--First, consistent with the 
MMA mandate, the proposed safe harbor would protect items or services 
that are ``necessary'' to conduct electronic prescription drug 
transactions. This might include, for example, hardware, software, 
broadband or wireless Internet connectivity, training, information 
technology support services, and other items and services used in 
connection with the transmission or receipt of electronic prescribing 
information. However, the safe harbor would not protect arrangements in 
which a Donor provides items or services that are technically or 
functionally equivalent to items and services the Recipient currently 
possesses or has obtained. Thus, for example, under the proposed 
regulations, a Donor can provide a hand-held device capable of 
transmitting electronic prescribing information to the Recipient, even 
if the Recipient already has a desktop computer that could be used to 
transmit or receive the same information, because the mobility allowed 
by the hand-held device offers a material advantage over the desktop 
computer for Recipients who would use the device portably. By contrast, 
the provision of a second hand-held device would not qualify for safe 
harbor protection if the Recipient already has a hand-held device 
sufficient to run the requisite electronic prescribing software. We do 
not interpret the term ``necessary'' to preclude upgrades of equipment 
or software that significantly enhance the functionality of the item or 
service.
    We believe restricting the exception to ``necessary'' items and 
services is important to minimize the potential for abuse. However, we 
recognize that Donors will not necessarily know which items and 
services the Recipient already possesses or has obtained. Accordingly, 
proposed Sec.  1001.952(x)(7)(iv) would require the Recipient to 
certify that the items and services to be provided are not technically 
or functionally equivalent to items or services the Recipient already 
possesses or has obtained. The certification would need to be updated 
prior to the provision of any necessary upgrades or items and services 
not reflected in the original certifications. We are concerned that the 
certification process would be ineffective as a safeguard against fraud 
and abuse if it is a mere formality or if Recipients simply execute a 
form certification provided by a Donor. Therefore, we are proposing at 
Sec.  1001.952(x)(8) that the Donor must not have actual knowledge of, 
and not act in reckless disregard or deliberate ignorance of, the fact 
that the Recipient possesses or has obtained items and services that 
are technically or functionally equivalent to those donated by the 
Donor. The Recipient would be protected only if the certification is 
truthful. We are soliciting comments about other ways to address this 
concern.
    We are also concerned that there may be a risk that Recipients 
would intentionally divest themselves of functionally or technically 
equivalent technology that they already possess to shift costs to 
Donors. We are soliciting public comments on how best to address this 
issue.
    ``Used solely''--In addition to the ``necessary'' standard, section 
1860D-4(e)(6) of the Act provides that the items and services must be 
``used solely'' for the transmission or receipt of electronic 
prescribing information. We believe Congress included this requirement 
to safeguard against abusive arrangements in which the remunerative 
technology might constitute a payment for referrals because it might 
have additional value attributable to uses other than electronic 
prescribing. For example, a computer that a physician can use to 
conduct office or personal business might have value to the physician 
apart from its electronic prescribing purpose; if this value is 
transferred to the physician in connection with referrals, the statute 
would be implicated.\3\ Accordingly, the proposed safe harbor requires 
that the protected items and services be used solely to transmit or 
receive electronic prescribing information.
---------------------------------------------------------------------------

    \3\ See, e.g., 56 FR 35952, 35978 (July 29, 1991) noting that a 
computer that has independent value to a physician may constitute an 
illegal inducement.
---------------------------------------------------------------------------

    We are concerned that Donors might provide software for free or 
reduced cost that bundles valuable general office management, billing, 
scheduling, or other software with the electronic prescribing features. 
Such additional remuneration would not meet the ``used solely'' 
requirement and would not be protected by the proposed electronic 
prescribing safe harbor; such arrangements potentially raise 
significant concerns under the anti-kickback statute, if any purpose of 
the provision of the bundled software is to induce or reward the 
generation of Federal health care program business. However, the 
Recipient would not be precluded from purchasing for fair market value 
additional technology not protected by the proposed safe harbor.
    We are mindful that hardware and connectivity services can be used 
for the receipt and transmission of a wide range

[[Page 59019]]

of information services, including, but not limited to, electronic 
prescription information, and that many people may prefer to use a 
single, multi-functional device, especially a hand-held, rather than 
multiple single-use devices. Similarly, many people may prefer to use a 
single connectivity service. Accordingly, we are proposing using our 
regulatory authority under section 1128B(b)(3)(E) of the Act to create 
an additional safe harbor to protect the provision by Donors to 
Recipients of some limited hardware (including necessary operating 
system software) and connectivity services that are used for more than 
one function, so long as a substantial use of the item or service is to 
receive or transmit electronic prescription information. We propose to 
treat operating software as integral to the hardware and distinct from 
other software applications that are not necessary for the hardware to 
operate.
    Protection under this additional, separate safe harbor would not 
extend to the provision of items or services that are only occasionally 
used for electronic prescribing. The additional safe harbor would 
incorporate the definitions and conditions set forth in this proposed 
rulemaking for the MMA-mandated safe harbor and would also include 
conditions to address the additional risk of abuse posed by multi-
functional items and services. We are soliciting public comment about 
the standards that should appear in an additional safe harbor for 
multi-functional hardware (including necessary operating system 
software) or connectivity services. In particular, we are soliciting 
public comment on methodologies for quantifying or ensuring that a 
substantial use of hardware and connectivity services is for the 
receipt or transmission of electronic prescribing information. We are 
also soliciting public comment on the nature and amount of any cap that 
we might impose on the value of the donated multi-functional hardware 
or connectivity services.
2. Donors and Recipients Protected by the Proposed Safe Harbor
    Section 1860D-4(e)(6) of the Act describes the parties that may be 
protected under the new safe harbor. Specifically, protection is 
afforded to: (1) Hospitals with respect to members of their medical 
staffs; (2) group practices with respect to prescribing health care 
professionals who are members of the group practice; and (3) PDP 
sponsors and MA organizations with respect to participating pharmacists 
and pharmacies, as well as prescribing health care professionals. We 
address each category below.
    Hospitals/Medical Staff--Proposed Sec.  1001.952(x)(1)(i) would 
protect donations of qualifying electronic prescribing technology 
provided by a hospital to physicians on its medical staff. We do not 
intend to interpret this provision as extending to physicians who do 
not routinely furnish services at the hospital. We do not intend for 
this exception to protect remuneration that is used to induce 
physicians who already use other hospitals to join the medical staff of 
a different hospital. We are soliciting public comment on whether we 
should include items or services provided to other individuals or 
entities (e.g., other health care prescribing professionals who treat 
patients at the hospital).
    Group Practices/Members--Proposed Sec.  1001.952(x)(1)(ii) would 
protect donations of qualifying electronic prescribing technology 
provided by a group practice to its members who are prescribing health 
care professionals. For consistency with the regulations promulgated in 
accordance with section 1877 of the Act, we propose to interpret the 
terms ``group practice'' and ``members'' of a group practice consistent 
with existing definitions in section 1877(h)(4) of the Act and the 
regulations at 42 CFR 411.352 and 42 CFR 411.351, respectively. Those 
provisions make clear that a ``group practice'' must be a single legal 
entity with unified business operations and may not be an informal 
affiliation of physicians and that a ``member'' of a group practice 
refers to a physician-owner or physician-employee of the group 
practice. A ``member'' of the group practice, under Sec.  411.351 does 
not include independent contractors of the group or persons who are not 
physicians.
    Because section 1877 of the Act deals only with physician 
referrals, application of its definition of a ``member'' of a group 
practice is not sufficient to define the full range of ``prescribing 
health care professionals'' included in section 1860D-4(e)(6) of the 
Act, and it is necessary for us to augment the definition in this 
proposed rule. Accordingly, for purposes of the proposed safe harbor, 
``prescribing health care professionals who are members of the group'' 
would include prescribing professionals (e.g., nurse practitioners) who 
are owners or employees of the group and who are authorized to 
prescribe under applicable State licensing laws.
    Because the definition of ``member'' of the group practice under 
Sec.  411.351 excludes independent contractors, we are soliciting 
comments regarding whether and how a group practice may appropriately 
furnish qualifying electronic prescribing technology to physicians or 
other prescribing health care professionals who contract with the group 
to furnish services to the group's patients.
    We do not believe that the inclusion by Congress of group practices 
and their members in section 1860D-4(e)(6) of the Act was intended to 
imply that the provision of qualifying electronic prescribing 
technology by a group practice to its members necessarily required a 
new safe harbor under the anti-kickback statute. In many circumstances, 
the provision of equipment or other resources by a medical group to its 
member health care professionals for use in furnishing services to the 
group's patients would not raise fraud and abuse concerns under the 
anti-kickback statute. Moreover, for those situations where the statute 
may be implicated, many arrangements can be structured to fit in an 
existing safe harbor, including, for example, the safe harbors for 
personal services and management contracts or employee compensation at 
Sec.  1001.952(d) and (i), respectively. Arrangements that do not fit 
in a safe harbor are not necessarily illegal under the anti-kickback 
statute. We believe Congress included these relationships in section 
1860D-4(e)(6) of the Act simply to encourage group practices to adopt 
electronic prescription technology.
    PDP Sponsors and MA Organizations/Pharmacies, Pharmacists, and 
Prescribing Health Care Professionals--Consistent with section 1860D-
4(e)(6) of the Act, proposed Sec.  1001.952(x)(1)(iii) would protect 
donations of qualifying electronic prescribing technology provided by a 
PDP sponsor or MA organization to prescribing health care 
professionals, participating pharmacies, and participating pharmacists. 
We propose to interpret the term ``PDP sponsor'' and ``MA 
organization'' consistent with the Medicare Prescription Drug Benefit 
regulations at 42 CFR 423.4 and 42 CFR 422.2, respectively. We propose 
to interpret the terms ``pharmacy'' and ``pharmacist'' consistent with 
applicable State licensing laws. We propose to interpret ``prescribing 
health care professionals'' as physicians or other health care 
professionals (e.g. nurse practitioners) licensed to prescribe drugs in 
the State in which the drugs are dispensed.
    Finally, we are soliciting comments on whether there is a need to 
protect other categories of Donors or Recipients, beyond those 
specifically set forth in

[[Page 59020]]

section 1860D-4(e)(6) of the Act, and if so, how best to address safe 
harbor protection for those individuals or entities. In particular, we 
are interested in comments addressing the types of individuals and 
entities that should be protected, the degree of need for protection, 
and the safeguards that should be imposed to protect against fraud and 
abuse. In general, we believe that only individuals and entities 
involved in the ordering, processing, filling, or reimbursing of 
prescriptions are likely to have sufficient need to justify inclusion 
in an electronic prescribing safe harbor.
3. Additional Conditions on the Provision of Qualifying Electronic 
Prescribing Technology
    Promoting Compatibility and Interoperability--Section 1860D-4(e)(6) 
of the Act is integral to the electronic prescribing drug program 
established by section 101 of MMA. Section 1860D-4(e)(6) of the Act 
provides that, in order to qualify for the safe harbor, qualifying 
electronic prescription technology must be used to receive and transmit 
electronic prescription information in accordance with standards to be 
established by the Secretary for the Part D electronic prescription 
drug program. Consistent with section 1860(D)-4(e)(6) of the Act, 
proposed Sec.  1001.952(x)(2) would require that the items and services 
be provided as part of, or be used to access, an electronic 
prescription drug program that complies with the standards established 
by the Secretary for these programs. We are soliciting comments on 
whether the safe harbor should protect qualifying electronic 
prescription technology that is used for the transmission of 
prescription information regarding items and services that are not 
drugs (e.g., supplies or laboratory tests).
    We believe that interoperability can serve as an important 
safeguard against fraud and abuse and mitigate the risk that a Donor's 
offer of free or reduced price technology to a Recipient could be a 
means of maintaining or increasing referrals from the Recipient. With 
interoperable electronic prescribing technology, the Recipient would be 
free to transmit prescriptions to any appropriate pharmacy. At this 
time, there are no regulatory standards to ensure that electronic 
prescription information products are interoperable with other 
products. However, we note that interoperability may be required in the 
future under final regulations regarding the standards for the Part D 
prescription drug program.
    To the extent that either the hardware or software can be 
interoperable, the proposed regulation at Sec.  1001.952(x)(3) would 
prohibit Donors or their agents from taking any actions to disable or 
limit that interoperability or otherwise impose barriers to 
compatibility. We believe this condition is necessary to limit the 
ability of Donors to use the provision of electronic prescribing 
technology to tie Recipients to the Donor. We are considering defining 
the term ``interoperable'' in this context to mean the ability of 
different operating and software systems, applications, and networks to 
communicate and exchange data in an accurate, secure, effective, 
useful, and consistent manner. See generally 44 U.S.C. 3601(6) 
(pertaining to the management and promotion of electronic government 
services). We are soliciting public comment about this approach, our 
definition of the term ``interoperable,'' alternative means of ensuring 
the maximum level of interoperability, and the types of software 
currently available for electronic prescribing.
    Value of protected technology--To further safeguard against fraud 
and abuse, we believe it would be appropriate to limit the aggregate 
value of the qualifying electronic prescribing technology that a Donor 
could provide to a Recipient under the safe harbor. We are considering 
whether to limit the aggregate fair market value of all items and 
services provided to a Recipient from a single Donor. We believe a 
monetary limit is appropriate and reasonable to minimize the potential 
for fraud and abuse. We are soliciting public comment on the amount of 
a cap that would adequately protect the program against abuse, the 
methodology used to determine the cap (for example, fixed dollar 
amount, percentage of the value of the donated technology, or another 
methodology), whether the same cap would be adequate if there were 
protection for the donation of multi-functional hardware and 
connectivity services, whether the cap should be reduced over time, and 
whether the cap places a disadvantage on smaller entities that do not 
have the financial resources of larger chains or organizations.
    In addition, we are interested in public comments that address the 
retail and nonretail costs (i.e., the costs of purchasing from 
manufacturers, distributors, or other nonretail sources) of obtaining 
electronic prescribing technology and the degree to which potential 
Recipients may already possess items or services that could be used for 
electronic prescribing. We note that CMS has received varying estimates 
of the costs of implementing electronic prescribing through the comment 
process for the CMS E-Prescribing and the Prescription Drug Program 
proposed rule published on February 4, 2005 in the Federal Register (70 
FR 6256). We caution that the cost of implementing an electronic 
prescribing program will not correlate necessarily to the amount of any 
cap if one is established. Moreover, we do not expect that donors will 
wish necessarily to donate the total amount that the technology costs 
or, depending on the size of a cap, the total amount ultimately 
protected in the final rule. While we are interested in obtaining 
detailed information about the costs of the full range of technology so 
as to be fully informed on this matter, we do not expect that the final 
regulations will protect all possible costs.
    We are considering various potential caps that would be no higher 
than any cap that may ultimately be imposed in the corresponding 
electronic prescribing exception under Section 1877 of the Act to be 
promulgated by CMS. We are considering measuring the monetary limit at 
fair market value to the Recipient (i.e., the retail value). We believe 
this approach is consistent with the anti-kickback statute's intent 
requirement and would also minimize any competitive disadvantage for 
smaller entities that do not have the financial resources or potential 
volume of technology business of larger chains or organizations.
    We are considering setting an initial cap, which would be lowered 
after a certain period of time sufficient to promote the initial 
adoption of the technology. This would have the effect of encouraging 
investments in the desired technology while also ensuring that, once 
the technology has been widely adopted and its costs have come down, 
the safe harbor cannot be abused to disguise payments for referrals. We 
are soliciting public comment about this approach. Finally, we are 
soliciting comments on whether and, if so, how to take into account 
Recipient access to any software that is publicly available either free 
or at a reduced price.
    Other Conditions--Proposed Sec. Sec.  1001.952(x)(5), (x)(6), and 
(x)(7) would incorporate additional conditions. Paragraph Sec.  
1001.952(x)(5) would provide that the Recipients (including their 
groups, employees, or staff) may not make the donation of qualifying 
electronic prescribing technology from Donors a condition of doing 
business with the Donor. Paragraph (x)(6) would provide that neither 
the eligibility of a Recipient to receive items and services from a 
protected Donor, nor the amount or nature of the items or services 
received, may be determined in a manner that

[[Page 59021]]

takes into account the volume or value of the Recipient's referrals or 
other business generated between the parties. This would not preclude 
selection criteria that are based upon the total number of 
prescriptions written by a Recipient, but would preclude criteria based 
upon the number or value of prescriptions written by the Recipient that 
are dispensed or paid by the Donor, as well as any criteria based on 
any other business generated between the parties. We are interested in 
comments with respect to other potential criteria for selecting medical 
staff recipients of donated technology. Also, the safe harbor would not 
protect arrangements that seek to induce a Recipient to change 
loyalties from other providers or plans to the Donor (e.g., a hospital 
using an electronic prescribing technology arrangement to induce a 
physician who is on the medical staff of another hospital to join the 
Donor hospital's medical staff for a purpose of referring patients to 
the Donor hospital).
    Proposed Sec.  1001.952(x)(7) would require the arrangement to be 
in writing, to be signed by the parties, to identify with specificity 
the items or services being provided and their values, and to include 
the certification described in section II.A.1 above. To permit 
effective oversight of protected arrangements, the writing must cover 
all qualifying electronic prescribing technology provided by the Donor 
(or affiliated parties) to the Recipient. For example, if a Donor 
provides a piece of hardware under one arrangement and subsequently 
provides a software program, the agreement regarding the software would 
have to include a description of the previously donated hardware 
(including its nature and value).
    Finally, we seek to minimize the potential for abuse and to ensure 
that the protected technology furthers the congressional purpose of 
promoting electronic prescribing as a means of improving the quality of 
care for all patients. We believe that any protected items and services 
must, to the extent possible, be usable by recipients for electronic 
prescribing for all patients to ensure that uninsured and non-Medicare 
patients receive the same benefits that the technology may engender, 
including reduction of errors and improvements in care. Some donated 
technology (such as software for tracking prescriptions or formularies 
of a particular MA organization's patients) may not be applicable to 
all patients. However, other technology (for example, hand-held devices 
and software that transmits prescriptions to pharmacies) is potentially 
usable for all patients, and recipients should not be restricted from 
using such technology for all patients. Accordingly, proposed Sec.  
1001.952(x)(4) would require that, where possible, recipients must be 
able to use the protected technology for all patients without regard to 
payor status.

B. Proposed Electronic Health Records Safe Harbors

    Many in the hospital industry, among others, have raised the issue 
of the need for safe harbor protection for arrangements involving 
technology other than electronic prescribing. In many cases, such 
arrangements may qualify for safe harbor protection under existing safe 
harbors, such as the employee safe harbor (42 CFR 1001.952(i)), the 
discounts safe harbor (42 CFR 1001.952(h)), or the equipment rental 
safe harbor (42 CFR 1001.952(c)). Moreover, as explained above, 
arrangements that do not qualify for safe harbor protection are not 
necessarily illegal.
    In general, the provision of valuable technology to physicians or 
other sources of Federal health care program referrals poses a 
heightened risk of fraud or abuse. This risk increases as the value of 
the technology to the Recipient increases. In the preceding discussion 
of the proposed safe harbor for electronic prescribing technology, we 
noted a number of fraud and abuse risk areas; those risk areas would 
also apply to the provision of free or reduced price electronic health 
records technology. In many respects, the provision of electronic 
health records technology to physicians and others poses greater risk 
of fraud or abuse than the provision of electronic prescribing 
technology; electronic health records technology is inherently more 
valuable to physicians in terms of actual cost, avoided overhead, and 
administrative expenses of an office practice.
    Notwithstanding, we believe it may be possible to craft safe harbor 
conditions that would promote open, interconnected, interoperable 
electronic health records systems that help improve the quality of 
patient care and efficiency in the delivery of health care to patients, 
without protecting arrangements that serve as marketing platforms or 
mechanisms to influence inappropriately clinical decision making or tie 
physicians to particular providers or suppliers. The potential patient 
care and system efficiency benefits of interoperable and certified 
electronic health records technology are discussed in detail in the 
preamble to CMS' contemporaneous notice of proposed rulemaking for an 
exception under section 1877 and are not repeated here. Full 
interoperability of electronic health records technology would help 
reduce, but not eliminate, some risks of program and patient fraud and 
abuse (such as improper patient steering) by ensuring that donors would 
not be able to lock recipients into using the donor's systems.
    Currently, uniform interoperability standards for electronic health 
records and certification requirements necessary to ensure 
interoperability do not exist. Accordingly, we are considering an 
incremental approach to safe harbor protection in this area. 
Specifically, we are proposing using our legal authority at section 
1128B(b)(3)(E) of the Act to promulgate two safe harbors related to 
electronic health records software and directly related training 
services that are necessary and used to receive, transmit, and maintain 
electronic health records of the entity's or physician's patients. The 
first safe harbor would apply to donations made before adoption by the 
Secretary of product certification criteria, including criteria for 
interoperability, functionality, and privacy and security of electronic 
health records technology. These conditions are also referred to herein 
as ``product certification criteria.'' (For purposes of this 
rulemaking, this safe harbor will be referred to as the ``pre-
interoperability'' safe harbor.) Once standards are identified and 
product certification criteria are developed for electronic health 
records and adopted by the Secretary, we believe some enhanced 
flexibility in the conditions applicable under a safe harbor for 
electronic health records may be appropriate, provided the safe harbor 
conditions as a whole sufficiently guard against fraud and abuse. A 
second safe harbor would apply to donations made after product 
certification criteria have been adopted. (For purposes of this 
rulemaking, this second safe harbor will be referred to as the ``post-
interoperability'' safe harbor.) The post-interoperability safe harbor 
would recognize the reduction in the risk of fraud and abuse that may 
result from the ability to ensure that free or reduced price products 
provided under the safe harbor are interoperable and certified.
    Unlike electronic prescribing, Congress provided no direction with 
respect to any safe harbor for electronic health records. As discussed 
more fully below, any safe harbor of electronic health records 
technology will necessarily involve consideration of a number of 
important variables. Given this, as well as the inherent risk of fraud 
and abuse typically posed by gifts of free items and services to 
potential referral sources, we believe we do not

[[Page 59022]]

have sufficient information at this time to draft appropriate safe 
harbor language. However, we are soliciting public comments on the 
proposed scope and conditions for electronic health records safe 
harbors, as outlined below.
1. Proposed Pre-Interoperability Safe Harbor
    We are considering incorporating the following features in the pre-
interoperability safe harbor.
    Covered Technology--The pre-interoperability safe harbor would 
protect electronic health records software (that is, software that is 
essential to and used solely for the transmission, receipt, and 
maintenance of patients' electronic health records and electronic 
prescription drug information) and directly-related training services, 
provided that the software includes an electronic prescribing 
component. The required electronic prescribing component must consist 
of software that is used to receive and transmit electronically 
prescription drug information in accordance with standards established 
by the Secretary under the Part D electronic prescription drug program. 
We are soliciting comments on whether the exception should permit the 
electronic prescribing component of electronic health records software 
to be used for the transmission of prescription information regarding 
items and services that are not drugs (for example, supplies or 
laboratory tests). Additionally, we are soliciting comments with 
respect to whether we should require that electronic health records 
software include a computerized provider order entry (``CPOE'') 
component. The pre-interoperability safe harbor would not protect the 
provision of other types of technology, including, but not limited to, 
hardware, connectivity services, billing, scheduling, or other similar 
general office management or administrative software services, or 
software that might be used by a Recipient to conduct personal business 
or business unrelated to the Recipient's medical practice. While we 
would protect necessary training services in connection with the 
software, we would not protect the provision of staff to Recipients or 
their offices. We are mindful that there may be particular 
constituencies, such as rural area providers, that lack sufficient 
hardware or connectivity services to implement effective electronic 
health records systems. We are soliciting comments addressing these 
special circumstances.
    Any safe harbor would need to define ``electronic health records.'' 
As with electronic prescribing technology, we are interested in public 
comments that address the software functions that should be included in 
the definition of ``electronic health records''; the types of software 
that should be protected; the retail and nonretail cost of such 
software; the manner in which such software is currently marketed; 
methods for defining the scope of protected software; and safeguards 
that might be imposed (either by definition or separately) to ensure 
that provision of the software cannot be used to camouflage unlawful 
payments for referrals or to tie impermissibly Recipients to Donors in 
a position to benefit from the Recipient's referrals.
    The pre-interoperability safe harbor would require that the 
protected software and training services be ``necessary'' consistent 
with our interpretation of the term in section II.A.1, and we are 
considering including comparable documentation provisions, including 
comparable certifications by Recipients, to ensure that the safe harbor 
does not protect the provision of items or services that are 
technically or functionally equivalent to items and services the 
Recipient currently possesses or has obtained. As with electronic 
prescribing technology, we are concerned that there may be a risk that 
Recipients would intentionally divest themselves of functionally or 
technically equivalent technology that they already possess to shift 
costs to Donors, and we are soliciting public comments on whether and 
how to address this situation.
    Interoperability--In addition to requiring that the electronic 
prescribing component of the protected software comply with standards 
established by the Secretary for the Part D electronic prescription 
drug program, it would be important that neither Donors nor their 
agents take any actions to disable or limit interoperability of any 
component of the software or otherwise impose barriers to 
compatibility. We are also considering requiring that protected 
software comply with relevant Public Health Information Network 
preparedness standards, such as those related to BioSense. We are 
soliciting comments on these and other appropriate qualifications. In 
addition, electronic health records lack the program and beneficiary 
protections that exist under the Part D prescription drug program and 
related electronic prescription standards. We are considering including 
in the final safe harbor conditions designed to replicate these 
protections for electronic health records, including quality assurance 
measures. We are soliciting public comments on the most appropriate way 
to do so.
    Value of the Protected Technology--As with electronic prescribing, 
we are proposing limiting the aggregate value of the protected software 
and training services that a Donor could provide to a Recipient. The 
limit under the proposed pre-interoperability safe harbor would be 
directly related to the limit adopted in connection with the electronic 
prescribing safe harbor discussed at II.A.3. There, we note various 
alternatives we are considering in connection with a limiting cap and 
outline issues about which we are soliciting public comments. We are 
considering similar alternatives, and are interested in similar 
comments, in connection with a safe harbor for electronic health 
records. Given that electronic health records technology has high value 
to Recipients, we are considering several approaches, including: (1) An 
aggregate dollar cap; (2) a cap that would be set at a percentage of 
the value of the technology to the Recipient (thus requiring Recipients 
to share a portion of the costs and reducing windfall benefits to 
Recipients); or (3) a cap set at the lower of a fixed dollar amount or 
a percentage of the value of the technology to the Recipient.
    We are soliciting comments on how a cap under a safe harbor for 
electronic health records would relate to a cap under proposed Sec.  
1001.952(x) and how the value of technology provided under the final 
safe harbors would be aggregated. We are concerned that Donors may 
abuse the proposed exceptions for electronic prescribing items and 
services and electronic health records software and training services 
by selectively relying on both exceptions to maximize the value of 
technology provided to Recipients as a means of disguising payments for 
referrals. We believe conditions should be included in the final 
regulation to prevent this abuse and are considering requiring an 
overall cap on value, as well as documentation requirements that 
integrate all technology provided under the final exceptions. We are 
considering requiring an overall cap on the value of donated technology 
(such that the value of technology donated under the electronic 
prescribing safe harbor would count towards the total value of the 
software protected under the pre-interoperability safe harbor), as well 
as documentation requirements that integrate all technology provided 
under any safe harbor.
    Another concern, particularly in light of the cost of electronic 
health records technology, is that Donors may attempt

[[Page 59023]]

to shift the financial burden of providing electronic health records 
technology to the Federal health care programs or beneficiaries. 
Accordingly, we would likely include a safe harbor condition that would 
prohibit such cost shifting. Finally, we are soliciting comments on 
whether and, if so, how to take into account Recipient access to any 
software that is publicly available either free or at a reduced price.
    Donors and Recipients--The pre-interoperability safe harbor would 
protect the same categories of Donors and Recipients as the proposed 
Sec.  1001.952(x)(1) and would define them similarly. We believe that 
Donors should be limited to hospitals, group practices, PDP sponsors, 
and MA organizations, because they have a direct and primary patient 
care relationship and therefore have a central role in the health care 
delivery infrastructure that justifies safe harbor protection for the 
furnishing of electronic health records technology that would not be 
appropriate for other types of providers and suppliers, including 
providers and suppliers of ancillary services. Moreover, hospitals, 
group practices, PDP sponsors, and MA organizations are potentially in 
a better position to promote widespread use of electronic health 
records technology that has the greatest degree of openness and 
interoperability. We do not believe that providers and suppliers of 
ancillary services, such as laboratories, have a comparable stake in 
advancing the goal of interoperable electronic health records for 
patients. In our experience, laboratories and others have used free or 
deeply discounted goods, such as computers and fax machines, to 
influence referrals improperly. Longstanding OIG guidance makes clear 
that gifts of equipment to referral sources that have value to the 
physicians are highly suspect under the anti-kickback statute.\4\ We 
are interested in comments regarding whether other categories of Donors 
or Recipients should be included and why. We are also interested in 
comments with respect to whether different or alternative conditions 
should apply to any category of donor.
---------------------------------------------------------------------------

    \4\ See supra note 3.
---------------------------------------------------------------------------

    Other Conditions--Finally, to further reduce the risk of fraud and 
abuse, we would incorporate in the pre-interoperability safe harbor for 
electronic health records certain other conditions described above in 
connection with proposed Sec.  1001.952(x). These conditions would 
include the requirement at proposed 1001.952(x)(6) that neither the 
eligibility of a recipient to receive items and services from a donor, 
nor the amount and nature of the items and services received, may be 
determined in a manner that takes into account the volume or value of 
the recipient's referrals to the donor or other business generated 
between the parties. In addition, we would include the proposed anti-
solicitation provision (Sec.  1001.952(x)(5)), the proposed 
documentation requirements (Sec.  1001.952(x)(7)), and the proposed 
all-payors requirement (Sec.  1001.952(x)(4)).
    Sunset Provision--We are considering whether to sunset the pre-
interoperability safe harbor discussed here once the post-
interoperability safe harbor discussed in the next section becomes 
effective.
    Our intent is that the proposed pre-interoperability safe harbor 
outlined above would promote the adoption of open, interconnected, 
interoperable electronic health records and electronic prescribing 
systems. We are interested in comments addressing whether this pre-
interoperability safe harbor protection may have the unintended effect 
of impeding the beneficial spread of interoperable electronic health 
records systems by promoting closed or isolated systems or systems that 
effectively tie physicians to particular providers or suppliers. For 
example, a hospital that donates expensive technolo

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