College of American Pathologists
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  On EMR donations, steer clear of troubled waters


CAP Today




August 2012
Feature Story

Jane Pine Wood

Many physician practices are requesting donations toward their electronic medical record software, as permitted through next year under the Stark law exception and Medicare anti-kickback law safe harbor. Jane Pine Wood, partner at the law firm McDonald Hopkins LLC, Dennis, Mass., spoke at the Executive War College about written donation policies, how to limit donations and try to win back lost work, EMR upgrades and replacements, and support fees and interfaces. Here, as an edited transcript, is more of the talk she gave in May at The Dark Report’s War College. (See the July issue for her advice on negotiating with hospitals for the technical component in the wake of the grandfather vote.)

Electronic medical record donations and interfaces are a continuing problem, and I’m hoping a year from now the problem will go away. It is still permissible within certain parameters to donate up to 85 percent of allowable EMR costs for your referral sources through the end of 2013. I hope most practices will have their EMRs by this time next year and you won’t have to worry about it.

The EMR donations are becoming increasingly difficult because many more practices are asking for them. A number of the sales reps for the EMR vendors are trying to sell their products by saying, ‘We have this friendly lab,’ or ‘If you switch your business to this lab it’ll pay for your EMR.’ There are now an increasing number of prohibited quid pro quo conversations, and there’s unfortunately not much that can be done about it.

I’ve seen some troubling paper trails coming from the vendors of the EMRs. If you have a friendly relationship with an EMR vendor, make sure the vendor trains its staff not to put anything in an e-mail or in writing about what you’re going to do. The vendor needs to make sure its sales staff knows what should and should not be said so it doesn’t come back to haunt you. If you are having conversations with a GI or dermatology or urology group, I’ll say the same: Make sure people are not putting things in e-mails, including sales reps within your own labs, particularly, ‘Let’s give it to so and so,’ or ‘We know this group will generate this much money. This is the return on investment.’ At the same time I recognize that in running a business you do have to make those determinations.

I’m going to assume no one in this room is running a charity and no one is going to donate toward an EMR unless there’s a business reason to do so. I much prefer from a legal standpoint that those business decisions, whether or not it makes sense to donate toward an EMR for a client or potential client, stay relatively oral. And any conversation that would be damaging—such as ‘We will make donations only to those whom we think will be referring a lot of business to us’—should be kept oral and in as small a circle as possible. I would love if they never took place, but I know they are going to take place. That’s my word of caution.

Here’s a brief review of what the most important requirements are in making donations to an EMR. The client always has to pay 15 percent. A surprising number of physicians think they can get 85 percent from one lab and 15 percent from another lab so they don’t ever have to pay their 15 percent. No—they have to pay their 15 percent. A large number are trying to back end their 15 percent, so you pay the first 85 percent and they pay their 15 percent in two years. No—your payment must be concurrent with or after their payment. They cannot hold their 15 percent payment off until the end.

Most important, the donation cannot be conditioned upon referrals of business. Two interrelated requirements: You can’t make a decision about to whom to make a donation based on referral potential, and the physician cannot request a donation conditioned upon referrals. But that’s why the donations are being made. So unfortunately two of the criteria are ones with which you will probably never be able to comply completely. A lot of my clients are asking if there is a compliant way they can formalize and put on paper to whom they will make donations. Unless you are willing to say you will open your donations to all practices in your community or maybe to any practice of 10 or more physicians up to so many dollars, which would generally be acceptable but broader than most of you would want, the answer is no.

The minute you say we’ll make donations to urologists, gastroenterologists, dermatologists, you’ve limited your donation in an impermissible manner. You can say you’ll make donations based on how many patients a practice sees but not on how much pathology work the group generates. So when I start to parse with clients how to come up with any written policy about to whom donations will be made, we find it is very difficult. Most are probably going to be better off without anything in writing than with something in writing.

A smaller pathology practice or one that wants to hold off opening the flood gates might say it will allocate $100,000 to EMR donations this year. And the shareholders vote on it, before they know that a big urology group, for example, is hinting for a donation. Then when the donation is done, it’s done. So if the GI or pediatric or other group comes up the next day to say, ‘We want our donation,’ you could say, ‘We only allocated $100,000 this year. We don’t have any more money to allocate.’ And you have documentation of it. That can be of some assistance.

Let’s say you’re a small lab that cannot or has chosen not to make donations. You’ve lost business and you go back to the urologists or gastroenterologists because you see them in the medical staff lounge and say, ‘I was talking to my lawyer. I went to this conference. I heard about all this risk. There’s language in which the government has said if you’re switching business to someone right after they made an EMR donation, it’s already highly suspect. If you give us at least half your business back, if not all of it, it would look better.’ They’ve actually enhanced their own compliance for whatever work they send back to you. And the lab that made the donation cannot force the practice to send its work because that’s a clear violation.

Alot of referring physician practices are finding that their EMRs are outdated and may not meet the meaningful use criteria. They’re now looking to upgrade or change the EMR. So they’re asking: ‘Can you pay toward an upgrade?’ Yes. The regulations make clear you can donate up to 85 percent toward an upgrade as long as that upgrade is going toward the EMR’s functionality. So if they’re upgrading so they’ll be qualified for meaningful use, that’s fine.

The physician practice might say, ‘We have this perfectly good EMR but it doesn’t qualify for meaningful use. We want a new one that qualifies for meaningful use.’ There’s nothing in the Stark exception or anti-kickback safe harbor that protects making a donation for a new EMR to replace one that works perfectly well just because the old one doesn’t qualify for meaningful use. I have to tell my clients that I can’t give them any assurance that that EMR donation is permissible. The pathologists or laboratory are usually happy to hear it, but their clients are obviously not happy. How do you deal with the fallout or the public relations issue with that GI or dermatology group that isn’t happy to hear your lawyer has said you can’t make the EMR donation for their new EMR to replace the old one? Usually I’ll suggest it may be helpful for them to have a conversation with their lawyer, or your lawyer can talk to their lawyer, to say: ‘If they accept an EMR donation that does not meet the Stark exception, every claim they file to the Medicare program for every patient service, for every office-based service, for every surgery, based on that EMR, now would be tainted and potentially a false claim.’

That means anyone can bring a whistleblower action and claim the False Claims Act penalties. Treble damages, $11,000 per claim. Most people don’t think the Office of Inspector General is going to go after them for a kickback issue. But I find that physicians are a lot more concerned these days about a whistleblower or someone on their staff or a competitor bringing whistleblower action against them. So you might get a little more traction there.

There’s nothing in the regulations that would prohibit a donation toward a subscription or a leased EMR. To me the biggest challenge is if payments are being made monthly, you have to track to make sure you’re not ahead of a client in making payments. And it might be much easier as a laboratory to say, ‘Let’s just cut an annual check for this.’ But maybe you’ve paid too soon and the client is sitting on a check with the client not having to turn any of that over to the vendor. I prefer that you pay the vendor directly and you pay the vendor in accordance with the schedule.

What about ongoing support fees and additional training? It’s going to vary based on when the decision was made and whether it’s a new client or an old client. If you decide when you make the initial donation to the EMR that you also will pay for maintenance and support through Dec. 31, 2013, that would be protected up to 85 percent.

But what about the client that already has an EMR? You didn’t donate toward it but they realize they missed the boat on getting a donation for their EMR. So now they’ll look for the lab to donate to the cost of maintenance and support. I cannot say that is specifically protected under the regulation. But there’s language in the preamble that is going to divide with my comfort level. It says the maintenance and support in that situation is not necessarily protected but because the safe harbor is ending in 2013, we’re not all that concerned, which is a wishy-washy way of saying they probably won’t go after you even if it’s not exactly in compliance. But then you read further and the preamble language from the government says, ‘But we are very concerned about donations made when a client is switching allegiance from one lab to another.’ So if you have an existing, longstanding client who’s been with you for five years and who has an EMR and asks you to pay the maintenance and support, chances are if you don’t pay it they’ll stay with you anyway. I’m not as concerned in that situation if you make the payment up to 85 percent.

But if it’s someone who wasn’t a client—someone who was with a competitor of yours and now you agree to make that maintenance and support payment and they switch their business to you, that is a much higher risk. Now you’re running contrary to that language in the preamble that says it is a problem when someone switches allegiance from one to another. Having that language in the preamble can also be useful to show a potential client. Or if you have a client who’s looking at switching work to someone else, you can say to that client, ‘Do you really want to switch work to this group if they buy your EMR because look at the risk you’re now putting yourself under in switching allegiance?’

How do we deal with interfaces? An interface can be dealt with in different ways. If you’re making an EMR donation and multiple interfaces are part of that donation, the interfaces are covered under the 85 percent. That’s okay. But a lot of times you’ll have clients who may or may not have an EMR already and they say they want you to put in the interface and ask you to pay for it, pointing out that labs pay 100 percent of interfaces. This is where I have to break it down.

If you have a client who is asking you to pay for an interface between your lab and their EMR and that interface is going to be used only to transmit requisitions and orders and lab results back, though I cannot provide you with language in any regulation that says that’s acceptable, I am going to sleep fairly well with that donation. The reason is we do have older guidance from the government regarding putting computers and fax machines in clinician offices where the government says it’s okay to do so solely for transmitting information between the client and the laboratory as long as it’s not used for any other reason. I’ll say in this context an EMR is accomplishing the same purpose, albeit more expensively.

However, I’ve had situations in which the urology group says, ‘We want you to have an interface to the lab, to the hospital, and to the imaging center.’ You can’t pay 100 percent of the other interfaces, and if you were going to pay for them, they would need to be in the context of an EMR donation where you’re paying only up to 85 percent in terms of the EMR implementation.

I am comfortable with 100 percent for interfaces within those guidelines, although I can’t give you a citation for it.

The exception to permit donations to EMRs was geared to hospitals or health systems or others helping to promote EMRs for medical staffs. It was not meant as this wink, wink, nod, nod, quid pro quo. And my research shows it to be a pathology laboratory practice in central or north central Texas that had sales reps who went out and, to their credit, pretty creatively said, ‘Here’s a safe harbor we could use. We have investment money. We have cash and can start making donations, beginning with GI, toward their EMRs.’ And then it took off.

In the preamble to the exception for the EMR donations, the government writes specifically that it is concerned about abuse with laboratories. So it’s something to which the government was sensitive. What’s happened since is that representatives of the pathology laboratory associations and private attorneys have called the Centers for Medicare and Medicaid Services OIG to say, ‘Do you have any idea what’s going on here? This is ridiculous. We have all these donations being made to switch business back and forth.’ What the attorneys are hearing, quietly, is, ‘Yeah, but you know the government has a big incentive, a big push. They don’t want us to put a chilling effect on EMRs right now so it’s going to have to be very bad.’

What that tells me is I probably am not going to have any independent investigations from the government just on EMRs. Any EMR investigation will probably come via a qui tam whistleblower or maybe even a local U.S. attorney’s office that has a different agenda. The view of the CMS OIG is it will end at the end of 2013 and it is hoping most of the issues will then disappear.