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Hospital Donation of Electronic Health Record to Physicians

By Michael A. Peer, CPA

In late 2006, the physician self-referral relief regulations become effective.  The intent of the regulations was to create non-monetary assistance to physicians to encourage their use of prevailing technologies.  The regulations created by the Centers for Medicare and Medicaid (CMS) and the Office of Inspector General (OIG) allows for two exceptions in the Stark law that permit hospitals to provide computer hardware and access to the hospital’s electronic health record (EHR), so long as the receipt of these items is not a condition of doing business with the hospital. Two key requirements to the hospital are that the physician cannot possess items or services equivalent to the items donated and hospital cannot limit the services to certain patients. 

Two Exceptions Provided in the Regulations

The regulations allow the following:

·         Electronic Prescribing Arrangements – hardware, software, and training services used solely to receive and transmit prescription information.

·         Electronic Health Records Arrangements – hardware, software, and training services used to create, maintain, transmit or receive an EHR.  The EHR software is required to have electronic prescribing capabilities and be interoperable at the time it is provided to the physician.  Furthermore, it must be certified as interoperable by a certifying body recognized by the Department of Health and Human Services within the last 12 months prior to providing the EHR to the physician (such as Certification Commission for Healthcare Information Technology).  CMS defines interoperable as the software is able to communicate and exchange data with different information technology systems and in such a way that the clinical meaning is not altered.

Technologies Hospitals Can Provide

·         EHR software and related licenses

·         Services that enable the physician to access the EHR such as wireless internet, but the hardware cannot be provided (modems, routers, electronic storage, etc.)

·         Data migration services

·         Clinical support and training

Cost sharing

Under the CMS regulations, the hospital may provide up to 85 percent of the cost of the hardware, software, and training.  The hospital and physician may negotiate any cost-sharing arrangement for these outlays, but the physician is required to pay at least 15 percent, but up to 100 percent of the cost outlays.  This payment must be made by the physician prior to receiving the use of the EHR not being financed by the hospital.

Special Considerations for Tax-exempt Hospitals

If you are a tax-exempt hospital, you should not only consider the CMS regulations, as outlined above, but consider pending IRS regulations of donating a portion of the EHR to a private individual or for-profit medical group.  The federal tax regulations state that “No part of the net earnings of a section 501(c)(3) organization may inure to the benefit of any private shareholder or individual. A private shareholder or individual is a person having a personal and private interest in the activities of the organization”.  While the IRS has not issued final regulations regarding these issues, hospitals should be prepared to show that this arrangement creates a community benefit or it may be includable into the physician’s income.  IRS regulations are expected to be issued in early 2007.

Hospital and Physician Agreement

A key document is the written agreement between the hospital and physician.  Following are some key components to be included in an agreement:

·         The hospital’s selection criteria of the EHR including cost information and key data supporting the selection.  Physicians may not want to pay for components that do not benefit their practice area.

·         The agreement should be specific to cost sharing agreements.  Not only will there be an initial cost, but a cost for annual updates and training that must be shared by the physician. 

·         The agreement should state how the data will be stored.  Stating whether all medical records commingled or if records for each physician maintained in “silos” must be stated in the agreement.

·         The agreement should state who specifically has the right to access the data and state if there is a limited number of users.

·         The agreement should also describe how the data will be provided to the physician should they separate from the hospital.  The physician may assume the data will be converted to another EHR, when the hospital assumes they will provide a hard copy of the record.

·         The agreement should provide an assessment of the community benefit.

·         The EHR certification of interoperability should be provided in the agreement as well as describing the EHR’s ability to provide electronic prescribing capabilities.

If your hospital is considering providing your EHR to members of the medical staff, it is important to seek legal counsel.  As indicated above, CMS, OIG and the IRS have very specific regulations that must be considered prior to commencing such an arrangement.

Michael Peer is manager of healthcare services at Kolb+Co. He has gained extensive experience working with clients in the health care and nonprofit industries. Michael specializes in attest services for hospitals, continuing care retirement communities, nonprofit entities, home health agencies and physician practices; financial analysis for integrated health care systems; financial modeling for hospitals and continuing care retirement communities; and tax exempt financing projects.  He can be reached at 888/461-8843, ext. 387 or mpeer@KolbCo.com.

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