Medicare Program; Physicians' Referrals to Health Care Entities With Which They Have Financial Relationships: Exception for Certain Electronic Health Records Arrangements, 21308-21314 [2013-08312]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 78, Number 69 (Wednesday, April 10, 2013)]
[Proposed Rules]
[Pages 21308-21314]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-08312]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 411

[CMS-1454-P]
RIN 0938-AR70


Medicare Program; Physicians' Referrals to Health Care Entities 
With Which They Have Financial Relationships: Exception for Certain 
Electronic Health Records Arrangements

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise the exception to the physician 
self-referral prohibition for certain arrangements involving the 
donation of electronic health records items and services. Specifically, 
it would extend the sunset date of the exception, remove the electronic 
prescribing capability requirement, and update the provision under 
which electronic health records technology is deemed interoperable. In 
addition, we are requesting public comment on other changes we are 
considering.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on June 10, 2013.

ADDRESSES: In commenting, please refer to file code CMS-1454-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to https://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1454-P, P.O. Box 8013, 
Baltimore, MD 21244-8013.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1454-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. Alternatively, you may deliver (by hand or 
courier) your written comments ONLY to the following addresses prior to 
the close of the comment period:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
call telephone number (410) 786-9994 in advance to schedule your 
arrival with one of our staff members.
    Comments erroneously mailed to the addresses indicated as 
appropriate for hand or courier delivery may be delayed and received 
after the comment period.

[[Page 21309]]

    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Michael Zleit, (410) 786-2050.

SUPPLEMENTARY INFORMATION: 
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: https://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.
    Comments received by CMS will be shared with the HHS Office of 
Inspector General.

I. Executive Summary

A. Purpose of the Regulatory Action

    Section 1877 of the Social Security Act (the Act), codified at 42 
U.S.C. 1395nn, also known as the physician self-referral statute: (1) 
prohibits a physician from making referrals for certain designated 
health services (DHS) payable by Medicare to an entity with which he or 
she (or an immediate family member) has a financial relationship 
(ownership interest or compensation arrangement), unless an exception 
applies; and (2) prohibits the entity from submitting claims to 
Medicare for those referred services, unless an exception applies. The 
statute establishes a number of exceptions and grants the Secretary the 
authority to create additional regulatory exceptions for financial 
relationships that do not pose a risk of program or patient abuse. 
Since the original enactment of the statute in 1989, we have published 
a series of final rules interpreting the statute and promulgating 
numerous exceptions.
    In accordance with this authority, we published an exception to 
protect certain arrangements involving the provision of interoperable 
electronic health records software or information technology and 
training services. The final rule for this exception was published on 
August 8, 2006 (71 FR 45140) (hereinafter referred to as the August 
2006 final rule) and is scheduled to sunset on December 31, 2013 (See 
42 CFR 411.357(w)(13)). The purpose of this proposed rule is to update 
certain aspects of the electronic health records exception and to 
extend the sunset date.

B. Summary of the Major Provisions

    This proposed rule would amend the current exception in at least 
three ways. First, the proposed rule would update the provision under 
which electronic health records software is deemed interoperable. 
Second, we propose to remove the requirement related to electronic 
prescribing capability from the exception. Third, we propose to extend 
the sunset date of the exception. In addition to these proposals, we 
are soliciting public comment on other possible amendments to the 
exception, including limiting the scope of protected donors, and adding 
or modifying conditions to limit the risk of data and referral lock-in.

C. Costs and Benefits

    The proposed rule would modify an already-existing exception to the 
physician self-referral statute. This exception permits certain 
entities to provide technology-related items and services to certain 
parties to be used to create, maintain, transmit, or receive electronic 
health records. The proposed modifications to the exception do not 
impose new requirements on any party. This is not a major rule, as 
defined at 5 U.S.C. 804(2). It is also not economically significant, 
because it would not have a significant effect on program expenditures, 
and there are no additional substantive costs to implement the 
resulting provisions. The proposed rule would update the provision 
under which electronic health records software is deemed interoperable, 
and remove the requirement related to electronic prescribing 
capability, and extend the exception's expiration date (currently set 
at December 31, 2013). We expect these proposed changes to continue to 
facilitate the adoption of electronic health records technology.

II. Background

A. Physician Self-Referral Statute and Exceptions

    Section 1877 of the Social Security Act (the Act), 42 U.S.C. 
1395nn, also known as the physician self-referral law: (1) prohibits a 
physician from making referrals for certain designated health services 
(DHS) payable by Medicare to an entity with which he or she (or an 
immediate family member) has a financial relationship (ownership 
interest or compensation arrangement), unless an exception applies; and 
(2) prohibits the entity from submitting claims to Medicare for those 
referred services, unless an exception applies. The statute at 42 U.SC. 
1395nn(b)(4), establishes a number of exceptions and grants the 
Secretary of the Department of Health and Human Services (the 
Secretary) (HHS) the authority to create additional regulatory 
exceptions for financial relationships that do not pose a risk of 
program or patient abuse. Since the original enactment of the statute 
in 1989, we have published a series of final rules interpreting the 
statute and promulgating numerous exceptions.

B. The Electronic Health Records Items and Services Exception

    In the October 11, 2005 Federal Register (70 FR 59182), we 
published a proposed rule (the 2005 proposed rule) that would 
promulgate two exceptions to the physician self-referral law to address 
donations of certain electronic health records software and directly 
related training services, using our authority at section 1877(b)(4) of 
the Act. One proposed exception would have protected certain 
arrangements involving donations of electronic health records 
technology made before the adoption of certification criteria. The 
other proposed exception would have protected certain arrangements 
involving nonmonetary remuneration in the form of interoperable 
electronic health records software certified in accordance with 
criteria adopted by the Secretary and directly related training 
services. In the same issue of the Federal Register (70 FR 59015), the 
HHS Office of Inspector General (OIG) proposed similar language to 
establish a ``safe harbor'' under the Federal anti-kickback statute.
    On August 8, 2006 (71 FR 45140), we published a final rule that, 
among other things, finalized an exception at 42 CFR 411.357(w) \1\ 
(the ``electronic health records exception'') to the physician self-
referral prohibition for protecting certain arrangements involving 
interoperable electronic health records software or information 
technology and training services. Also, in the August 8, 2006 Federal 
Register (71 FR 45110), the OIG simultaneously published similar final 
regulations at 42 CFR 1001.952 that, among other things,

[[Page 21310]]

adopted a single safe harbor under the Federal anti-kickback statute 
for certain arrangements involving interoperable electronic health 
records software or information technology and training services. As 
set forth at 42 CFR 411.357(w)(13), the physician self-referral 
electronic health records exception is scheduled to sunset on December 
31, 2013.
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    \1\ For the reasons discussed in more detail in the preamble on 
August 8, 2006 final rule (71 FR 45140), we abandoned the proposal 
to have separate pre- and post-interoperability exceptions for 
electronic health records arrangements.
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    This proposed rule sets forth certain proposed changes to the 
electronic health records exception to the physician self-referral law. 
The OIG is proposing almost identical changes to the anti-kickback 
statute electronic health records safe harbor \2\ elsewhere in this 
issue of the Federal Register. We attempted to ensure as much 
consistency as possible between our proposed changes to the physician 
self-referral exception and OIG's safe harbor changes, despite the 
differences in the respective underlying statutes. We intend the final 
rules to be similarly consistent. Also, because of the close nexus 
between this proposed rule and OIG's proposed rule, we may consider 
comments submitted in response to OIG's proposed rule when crafting our 
final rule. Similarly, OIG may consider comments submitted in response 
to this proposed rule in crafting its final rule.
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    \2\ 42 CFR 1001.952(y).
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II. Provisions of the Proposed Rule

A. The Deeming Provision

    Our current electronic health records exception to the physician 
self-referral law specifies at Sec.  411.357(w)(2) that the donated 
software must be interoperable at the time it is provided to the 
physician. As discussed in the March 7, 2013 (78 FR 14795) request for 
information (RFI), ``HHS envisions an information rich, person-
centered, high performance health care system where every health care 
provider has access to longitudinal data on patients they treat to make 
evidence-based decisions, coordinate care and improve health 
outcomes.'' Additionally, as emphasized in this RFI, interoperability 
will play a critical role in supporting this vision. Interoperability 
is also an important concept in the context of the electronic health 
records exception. Although we have long been concerned that parties 
could use the donation of technology to capture referrals, we have 
viewed interoperability as a potential mitigating factor, or safeguard, 
to justify other exception conditions that are less stringent than 
might otherwise be appropriate in the absence of interoperability. This 
is because if the donated technology is interoperable, the recipient 
will be able to use it to transmit electronic health records not only 
to the donor, but to others, including competitors of the donor, and 
will not be ``locked in'' to communications with the donor only.\3\ For 
purposes of this exception, ``interoperable'' (as defined at Sec.  
411.351) means ``able to communicate and exchange data accurately, 
effectively, securely, and consistently with different information 
technology systems, software applications, and networks, in various 
settings; and exchange data such that the clinical or operational 
purpose and meaning of the data are preserved and unaltered.'' The 
current provisions of the electronic health records exception state 
that for purposes of meeting the condition set forth in Sec.  
411.357(w)(2), ``software is deemed to be interoperable if a certifying 
body recognized by the Secretary has certified the software no more 
than 12 months prior to the date it is provided to the physician.'' We 
propose to update two aspects of this deeming provision to reflect the 
current Office of the National Coordinator for Health Information 
Technology (ONC) certification program for electronic health record 
technology.
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    \3\ See (70 FR 59186) and (71 FR 45155).
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    First, we propose to modify Sec.  411.357(w)(2) to reflect that ONC 
is responsible for ``recognizing'' certifying bodies, as referenced in 
this provision.\4\ To become a certifying body ``recognized'' by the 
Secretary, an entity must successfully complete an authorization 
process established by ONC. This authorization process constitutes 
Secretary's recognition as a certifying body. Accordingly, we propose 
to revise the phrase ``recognized by the Secretary'' in the second 
sentence of paragraph (w)(2) to read ``authorized by the National 
Coordinator for Health Information Technology.''
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    \4\ See 42 U.S.C. 300jj-11(c)(5).
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    Second, we propose to modify the portion of this provision 
concerning the time period within which the software must have been 
certified. Currently, the electronic health records exception deeming 
provision requires that software must have been certified within no 
more than 12 months prior to the date of donation in order to ensure 
that products have an up-to-date certification. Subsequent to issuing 
the final electronic health records exception, ONC developed a 
regulatory process for adopting certification criteria and standards. 
That process is anticipated to occur on a 2-year regulatory interval. 
(For more information, see ONC's September 4, 2012 final rule titled 
``Health Information Technology: Standards, Implementation 
Specifications, and Certification Criteria for Electronic Health Record 
Technology'', 2014 Edition; Revisions to the Permanent Certification 
Program for Health Information Technology (77 FR 54163).) Further, some 
certification criteria could remain unchanged from one edition of 
electronic health record certification criteria to the next. Thus, the 
current 12-month timeframe is not in line with the anticipated 2-year 
regulatory interval and does not account for the fact that some 
certification criteria may not change from one edition to the next. 
Therefore, we propose to modify this portion of the exception by 
removing the 12-month timeframe and substituting a provision that more 
closely tracks the current ONC certification program. Accordingly, we 
propose that software would be eligible for deeming if, on the date it 
is provided to the recipient, it has been certified to any edition of 
the electronic health record certification criteria that is identified 
in the then applicable definition of Certified EHR Technology in 45 CFR 
part 170. For example, for 2013, the applicable definition of Certified 
EHR Technology identifies both the 2011 and 2014 editions of the 
electronic health record certification criteria and the 2014 edition. 
Therefore, in 2013, software certified to meet either the 2011 edition 
or the 2014 edition could satisfy the exception provision as we propose 
to modify it. The current definition of Certified EHR Technology 
applicable for 2014, however, identifies only the 2014 edition. Thus, 
based on that definition, in 2014, only software certified to the 2014 
edition could satisfy our proposed, modified provision. Future 
modifications to the definition of Certified EHR Technology could 
result in the identification of other editions to which software could 
be certified and satisfy our proposed, modified provision. As we stated 
in the 2006 final rule (71 FR 45156), we understand ``that the ability 
of software to be interoperable is evolving as technology develops. In 
assessing whether software is interoperable, we believe the appropriate 
inquiry is whether the software is as interoperable as feasible given 
the prevailing state of technology at the time the items or services 
are provided to the physician recipient.'' We believe our proposed 
change is consistent with that understanding and our objective of 
ensuring that products are certified to the current standard of 
interoperability when they are donated. We seek

[[Page 21311]]

comment on our proposal, including if removing the 12-month period 
would impact donations and whether we should consider retaining it as 
an additional means of determining eligibility under the deeming 
provision.

B. The Electronic Prescribing Provision

    Our current electronic health records exception at Sec.  
411.357(w)(11) specifies that the donated software must ``contain [* * 
*] electronic prescribing capability, either through an electronic 
prescribing component or the ability to interface with the physician's 
existing electronic prescribing system that meets the applicable 
standards under Medicare Part D at the time the items and services are 
provided.'' In the preamble to the August 2006 final rule (71 FR 
45153), we stated that we included ``this requirement, in part, because 
of the critical importance of electronic prescribing in producing the 
overall benefits of health information technology, as evidenced by 
section 101 of the [Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA), Public Law 108-173].'' We also noted 
at (71 FR 45153), it was ``our understanding that most electronic 
health records systems already include an electronic prescribing 
component.''
    We continue to believe in the critical importance of electronic 
prescribing. However, in light of developments since the August 2006 
final rule, we do not believe that it is necessary to retain a 
requirement related to electronic prescribing capability in the 
electronic health records exception. First, Congress subsequently 
enacted legislation addressing electronic prescribing. In 2008, 
Congress passed the Medicare Improvements for Patients and Providers 
Act of 2008 (MIPPA), Pub. L. 110-275. Section 132 of MIPPA authorized 
an electronic prescribing incentive program (starting in 2009) for 
certain types of eligible professionals. Further, in 2009, Congress 
passed the Health Information Technology for Economic and Clinical 
Health (HITECH) Act, Title XIII of Division A and Title IV of Division 
B of the American Recovery and Reinvestment Act of 2009 (ARRA), Pub. L. 
111-5. The HITECH Act at 42 U.S.C. 1395w-4(o), 1395ww(n), 1395f(l)(3), 
and 1396b(t) authorizes us to establish Medicare and Medicaid 
electronic health record incentive programs for certain eligible 
professionals, eligible hospitals, and critical access hospitals. The 
HITECH Act requires that eligible professionals under the Medicare and 
Medicaid electronic health record incentive programs demonstrate 
meaningful use of certified electronic health record technology, 
including the use of electronic prescribing. Second, the industry has 
made great progress related to electronic prescribing. Recent analysis 
by ONC notes an increase in the percentage of physicians electronic 
prescribing via electronic health record technology from 7 percent in 
2008 to 48 percent in 2012, reflecting rapid increases over the past 
few years in the rate of electronic health record-based electronic 
prescribing capabilities.\5\ Furthermore, the rules recently published 
to implement Stage 2 of the EHR Incentive Programs (77 FR 54198 and 77 
FR 53989), continue to encourage physicians' use of electronic 
prescribing technology.
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    \5\ State Variation in E-Prescribing Trends in the United 
States--available at: https://www.healthit.gov/sites/default/files/us_e-prescribingtrends_onc_brief_4_nov2012.pdf.
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    In light of these developments, we propose to delete the electronic 
prescribing condition at Sec.  411.357(w)(11).
    We believe that there are sufficient alternative policy drivers 
supporting the adoption of electronic prescribing capabilities. We also 
note that electronic prescribing technology would remain eligible for 
donation under the electronic health records exception or under the 
electronic prescribing exception at 42 CFR 411.357(v). We note that, 
unlike other provisions in the exception, the electronic prescribing 
condition was not imposed to satisfy the statutory requirement that 
regulatory exceptions promulgated under section 1877(b)(4) of the Act 
pose no risk of program or patient abuse. Rather, the condition was 
imposed to further the policy of encouraging donations that would 
produce the overall benefits of health information technology. 
Accordingly, we do not believe that removing the electronic prescribing 
condition would pose a risk of program or patient abuse for donations 
made under this exception.

C. The Sunset Provision

    The electronic health records exception is scheduled to sunset on 
December 31, 2013. In adopting this condition of the electronic health 
records exception, we acknowledged ``that the need for donations of 
electronic health records technology should diminish substantially over 
time as the use of such technology becomes a standard and expected part 
of medical practice.'' Some have suggested that we extend the sunset 
date or even remove the sunset provision entirely.
    In recent years, electronic health record technology adoption has 
risen dramatically, largely as a result of the HITECH Act in 2009. For 
example, see, Farzad Mostashari, M.D., ScM., National Coordinator, ONC, 
U.S. Department of Health and Human Services, Testimony before the 
Subcommittee on Technology and Innovation Committee on Science and 
Technology, available at https://science.house.gov/sites/republicans.science.house.gov/files/documents/HHRG-112-SY19-WState-FMostashari-20121114.pdf, and HHS News Release, ``More than 100,000 
health care providers paid for using electronic health records,'' June 
19, 2012, available at https://www.hhs.gov/news/press/2012pres/06/20120619a.html; see also OIG, OEI Report OEI-04-10-00184, ``Memorandum 
Report: Use of Electronic Health Record Systems in 2011 Among Medicare 
Physicians Providing Evaluation and Management Services,'' June 2012, 
available at https://oig.hhs.gov/oei/reports/oei-04-10-00184.pdf. 
However, while the industry has made great progress, use of such 
technology has not yet been universally adopted nationwide, and 
continued electronic health record technology adoption remains an 
important Departmental goal. We continue to believe that, as this goal 
is achieved, the need for an exception for donations of such technology 
should continue to diminish over time. Accordingly, we propose to 
extend the sunset date to December 31, 2016. We selected this date 
because it corresponds to the last year in which one may receive a 
Medicare electronic health record incentive payment and the last year 
in which one may initiate participation in the Medicaid electronic 
health record incentive program. For more information, see ``CMS 
Medicare and Medicaid EHR Incentive Payment Milestone Timeline,'' 
available at Guidance/Legislation/EHRIncentivePrograms/downloads/
EHRIncentProgtimeline508V1.pdf. As an alternative to this proposed, 
extended sunset date of December 31, 2016, we are also considering 
establishing a later sunset date. For example, we are considering 
extending the sunset date to December 31, 2021, which corresponds to 
the end of the electronic health records Medicaid incentives. While 
these sunset dates are associated with specific Medicare and Medicaid 
electronic health record incentive programs, we recognize that not all 
health care providers to whom donations can be made are eligible for 
such incentives. These health care providers include, for example, many 
in the mental health and behavioral health communities as well as long-
term and

[[Page 21312]]

post-acute care facilities. We specifically solicit comment on our 
proposed extension of the sunset date to December 31, 2016. We also 
seek comment on whether we should, as an alternative, select a later 
sunset date and what that date should be.

D. Additional Proposals and Considerations

1. Protected Donors
    As we stated in the preamble to the August 2006 final rule (71 FR 
45156) for the electronic health records exception, ``[w]e [originally] 
proposed to limit the scope of protected donors under the electronic 
health records exception to hospitals, group practices, [prescription 
drug plan (PDP)] sponsors, and [Medicare Advantage (MA)] organizations, 
consistent with the MMA-mandated donors for the electronic prescribing 
exception.'' In the August 2006 final rule (71 FR 45156), we indicated 
that we selected these donors because they have a ``direct and primary 
patient care relationship and a central role in the health care 
delivery infrastructure that would justify protection under the 
exception for the provision of electronic health records technology 
that would not be appropriate for other types of providers and 
suppliers, including providers and suppliers of ancillary services.'' 
However, in the August 2006 final rule (71 FR 45157), we expanded the 
exception to permit donations by any DHS entity, stating that such an 
expansion ``will expedite adoption of electronic records,'' which was 
an important public policy goal. We also stated (71 FR 45157) that, 
``the requirements that donated software be interoperable and that 
physicians contribute 15 percent to the cost of the donated technology, 
and the limited duration of the exception * * *, if met, [would] 
provide adequate protection against program and patient abuse.''
    Notwithstanding this conclusion, we have concerns about the 
potential for abuse of the exception by other types of providers and 
suppliers (including providers and suppliers of ancillary services who 
do not have a direct and primary patient care relationship and a 
central role in the health care delivery infrastructure). The OIG also 
indicated that it has concerns related to the potential for 
laboratories and other ancillary service providers to abuse its safe 
harbor. The OIG has received comments suggesting that abusive donations 
are being made under the electronic health records safe harbor. For 
example, some of the responses OIG received to its annual solicitation 
of safe harbors and special fraud alerts (see the December 28, 2012 
Federal Register (77 FR 76434)) allege that donors are using the safe 
harbor to provide referral sources with items and services that appear 
to support the interoperable exchange of information on their face, 
but, in practice, lead to data and referral lock-in. Because of the 
close nexus of our regulations, we believe it is also prudent for us to 
explore the possibility of such providers and suppliers abusing the 
exception.
    Therefore, we propose to limit the scope of protected donors under 
the electronic health records exception, with the continued goal of 
promoting adoption of interoperable electronic health record technology 
that benefits patient care while reducing the likelihood that donors 
would misuse electronic health record technology donations to secure 
referrals. In this regard, we are considering revising the exception to 
cover only the original MMA-mandated donors: hospitals, group 
practices, PDP sponsors, and MA organizations. We are considering, and 
seek comments regarding, whether other individuals or entities with 
front-line patient care responsibilities across health care settings, 
such as safety net providers, should be included, and, if so, which 
ones. Alternatively, we are considering retaining the current 
definition of protected donors, but excluding specific types of donors. 
We are considering excluding suppliers of ancillary services associated 
with a high risk of fraud and abuse, because the donations by such 
suppliers may be more likely to be motivated by a purpose of securing 
future business than by a purpose of better coordinating care for 
beneficiaries across health care settings. In particular, we are 
considering excluding laboratory companies from the scope of 
permissible donors as their donations have been the subject of 
complaints. We are also considering excluding other high risk 
categories as well, such as durable medical equipment (DME) suppliers 
and independent home health agencies. We seek comment on the 
alternatives under consideration, including comments, with supporting 
reasons, regarding particular types of providers and suppliers that 
should or should not be protected donors given the goals of the 
exception.
2. Data Lock-In and Exchange
    In the preceding section, we propose to limit the scope of 
permissible donors as a means to prevent donations that subvert the 
intent of the exception--because they are used to lock in referrals--
from receiving protection under the exception. We are also considering 
inclusion of new or modified conditions in the exception as an 
alternative or additional means of achieving that result. We are 
particularly interested in new or modified conditions that would help 
achieve two related goals. The first goal is to prevent the misuse of 
the exception in a way that results in data and referral lock-in. The 
second, related goal is to encourage the free exchange of data (in 
accordance with protections for privacy). These goals reflect our 
interest, which we discussed previously, in promoting the adoption of 
interoperable electronic health record technology that benefits patient 
care while reducing the likelihood that donors would misuse electronic 
health record technology donations to secure referrals. The August 2006 
final rule requires donated software to be interoperable at the time it 
is donated to the physician. The software is deemed interoperable if it 
is certified as described previously. However, it has been suggested 
that even when donated software meets the interoperability requirements 
of the rule, policies and practices sometimes affect the true ability 
of electronic health record technology items and services to be used to 
exchange information across organizational and vendor boundaries.\6\ We 
seek comments on what new or modified conditions could be added to the 
exception for electronic health records to achieve our two goals and 
whether those conditions, if any, should be in addition to, or in lieu 
of, our proposal to limit the scope of permissible donors. For example, 
Sec.  411.357(w)(3) requires, as a condition of the exception that 
``[t]he donor (or any person on the donor's behalf) [* * *] not take 
any action to limit or restrict the use, compatibility, or 
interoperability of the items or services with other electronic 
prescribing or electronic health records systems.'' We solicit comment 
with regard to whether this condition could be modified to reduce the 
possibility of lock-in.
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    \6\ For more information on interoperability in health IT, see 
``EHR Interoperability'' on the HealthIT.gov Web site at https://www.healthit.gov/providers-professionals/ehr-interoperability. For 
further discussion of interoperability and other health IT issues, 
see Arthur L. Kellerman and Spencer S. Jones, ANALYSIS & COMMENTARY: 
What It Will Take to Achieve The As-Yet-Unfulfilled Promises Of 
Health Information Technology, Health Affairs. January 2013 32:163-
68.
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3. Covered Technology
    We received questions concerning whether certain items or services, 
for example services that enable the interoperable exchange of 
electronic

[[Page 21313]]

health records data, fall within the scope of covered technology under 
the exception for electronic health records. The answer to such 
questions depends on the exact items or services that are being 
donated. In the August 2006 final rule (71 FR 45151), we explained that 
we interpreted ``software, information technology and training services 
necessary and used predominantly'' for electronic health records 
purposes to include the following, by way of example: ``interface and 
translation software; rights, licenses, and intellectual property 
related to electronic health records software; connectivity services, 
including broadband and wireless internet services; clinical support 
and information services related to patient care (but not separate 
research or marketing support services); maintenance services; secure 
messaging (for example, permitting physicians to communicate with 
patients through electronic messaging); and training and support 
services (such as access to help desk services).'' It also has been 
suggested that we modify the regulatory text (that is, Sec.  
411.357(w)) of the electronic health record exception to explicitly 
reflect this interpretation. We believe that the current regulatory 
text, when read in light of the preamble discussion, is sufficiently 
clear concerning the scope of covered technology, but we seek input 
from the public regarding this issue.

III. Collection of Information Requirements

    The provisions in this proposed rule would not impose any new or 
revised information collection, recordkeeping, or disclosure 
requirements. Consequently, this rule does not need additional Office 
of Management and Budget review under the authority of the Paperwork 
Reduction Act of 1995.

IV. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able 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, when we proceed with a subsequent document, we will 
respond to the comments in the preamble to that document.

V. Regulatory Impact Statement

    We have examined the impact of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 
1999) and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct 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 (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more in any 1 year). 
We believe this proposed rule does not reach the economic threshold for 
being considered economically significant, and thus, is not considered 
a major rule. We solicit comment on the assumptions and findings 
presented in this initial regulatory impact analysis.
    The proposed rule would extend the exception's expiration date 
(currently set at December 31, 2013), update the provision under which 
electronic health records software is deemed interoperable, and remove 
the requirement related to electronic prescribing capability. Neither 
this proposed rule nor the regulations it amends requires any entity to 
donate electronic health record technology to physicians, but we expect 
these proposed changes to continue to facilitate the adoption of 
electronic health record technology by filling a gap rather than 
creating the primary means by which physicians would adopt this 
technology.
    The summation of the economic impact analysis regarding the effects 
of electronic health records in the ambulatory setting, that is 
presented in the August 2006 final rule (71 FR 45164) still pertains to 
this proposed rule. However, since the August 2006 final rule, several 
developments have occurred to make us conclude that it is no longer 
necessary to retain a requirement related to electronic prescribing 
capability in the electronic health records exception. These 
developments include: (1) in 2008, Congress passed the Medicare 
Improvements for Patients and Providers Act of 2008 (MIPPA), Pub. L. 
110-275; (2) in 2009, Congress passed the Health Information Technology 
for Economic and Clinical Health (HITECH) Act, Title XIII of Division A 
and Title IV of Division B of the American Recovery and Reinvestment 
Act of 2009 (ARRA), Pub. L. 111-5; and (3) an increase over the past 
few years in the rate of electronic health record-based electronic 
prescribing capabilities.
    As discussed in more detail earlier in the preamble, section 132 of 
MIPPA authorized an electronic prescribing incentive program (starting 
in 2009) for certain types of eligible professionals. The HITECH Act 
authorizes us to establish Medicare and Medicaid electronic health 
record incentive programs for certain eligible professionals, eligible 
hospitals, and critical access hospitals. Also, the HITECH Act requires 
that eligible professionals under the Medicare and Medicaid electronic 
health record incentive programs demonstrate meaningful use of 
certified electronic health record technology, including the use of 
electronic prescribing. Specifically, the final rule of the Stage 2 
meaningful use (September 4, 2012; 77 FR 53968) includes more demanding 
requirements for electronic prescribing and identifies electronic 
prescribing as a required core measure. As a result, beginning in 
calendar year (CY) 2015 an eligible professional risks a reduction in 
the Medicare Physician Fee schedule amount that will otherwise apply 
for covered professional services if they are not a meaningful EHR user 
for an EHR reporting period during that year. Our intent remains to 
allow physicians not to receive products or services they already own, 
but rather to receive electronic health record technology that advances 
their adoption and meaningful use. Lastly, according to ONC, electronic 
prescribing by physicians using electronic health record technology has 
increased from 7 percent in December 2008 to approximately 48 percent 
in June 2012.\7\ Furthermore, the rules recently published to implement 
Stage 2 of the EHR Incentive Programs (77 FR 54198 and 77 FR 53989), 
continue to encourage physicians' use of electronic prescribing 
technology. Due to data limitations; however, we are unable to 
accurately estimate the level of impact the electronic health records 
exception has contributed to the increase in electronic prescribing. 
Therefore, we believe as a result of these legislative and regulatory 
developments advancing in parallel, the increase in the adoption of 
electronic prescribing using electronic health record technology will 
continue without

[[Page 21314]]

making it necessary to retain the electronic prescribing capability 
requirement in the electronic health records exception.
---------------------------------------------------------------------------

    \7\ State Variation in E-Prescribing Trends in the United 
States--available at: https://www.healthit.gov/sites/default/files/us_e-prescribingtrends_onc_brief_4_nov2012.pdf.
---------------------------------------------------------------------------

    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. Most hospitals and most other providers and 
suppliers are small entities, either by nonprofit status or by having 
revenues of $7.0 million to $34.5 million in any 1 year. Individuals 
and States are not included in the definition of a small entity. The 
Secretary has determined that this proposed rule would not have a 
significant economic impact on a substantial number of small entities.
    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 for Medicare payment regulations and has fewer than 
100 beds. The Secretary has determined, that this proposed rule would 
not have a significant impact on the operations of a substantial number 
of small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2013, that 
threshold is approximately $141 million. This proposed rule would have 
no consequential effect on State, local, or tribal governments or on 
the private sector.
    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.
    In accordance with the provisions of Executive Order 12866, this 
rule was reviewed by the Office of Management and Budget.

List of Subjects for 42 CFR Part 411

    Kidney diseases, Medicare, Physician Referral, Reporting and 
recordkeeping requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services proposes to amend 42 CFR part 411 as set forth 
below:

PART 411--EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE 
PAYMENT

0
1. The authority citation for part 411 continues to read as follows:

    Authority: Secs. 1102, 1860D-1 through 1860D-42, 1871, and 1877 
of the Social Security Act (42 U.S.C. 1302, 1395w-101 through 1395w-
152, 1395hh, and 1395nn).

0
2. Section 411.357 is amended by:
0
A. Revising paragraph (w)(2).
0
B. Removing and reserving paragraph (w)(11).
0
C. In paragraph (w)(13), removing the date ``December 31, 2013'' and 
adding the date ``December 31, 2016'' in its place.
    The revision reads as follows:


Sec.  411.357  Exceptions to the referral prohibition related to 
compensation arrangements.

* * * * *
    (w) * * *
    (2) The software is interoperable (as defined in Sec.  411.351) at 
the time it is provided to the physician. For purposes of this 
paragraph (w), software is deemed to be interoperable if a certifying 
body authorized by the National Coordinator for Health Information 
Technology has certified the software to any edition of electronic 
health record certification criteria identified in the then-applicable 
definition of Certified EHR Technology in 45 CFR part 170, on the date 
it is provided to the physician.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: January 24, 2013.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: March 7, 2013
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2013-08312 Filed 4-8-13; 4:15 pm]
BILLING CODE 4120-01-P