A new sunset for EHR safe harbor

By Anthony Brino
12:53 PM

The federal government extended the life of the hospital-physician EHR “safe harbor” by almost a decade, while giving labs a much-sought exclusion.

The eight-year-old EHR exemption to the federal physician self-referral and kickback laws have been extended to 2021 by the Centers for Medicare & Medicaid Services (CMS) and the HHS Inspector General. In a year-end set of new regulations, CMS finalized the Stark law exception letting hospitals fund up to 85 percent of EHR costs for physicians, and the OIG outlined the related anti-kickback “safe harbor” for “protected donors.”

The Stark and anti-kickback laws date back to 1989, when Congress banned self-referrals in Medicare. The prohibition was later extended to Medicaid, and a number of exceptions have been added for legitimate business arrangements.

In 2006, as part of rules for the 2003 Medicare Modernization Act, CMS first created the exception for hospitals to help physician practices acquire EHR systems. After originally planning for the exemption to be phased out in 2013, in April 2013 CMS and OIG proposed sunsetting the policy in 2016.

The American Hospital Association (AHA), the Healthcare Information Management and Systems Society (HIMSS), and others encouraged the agencies to make the EHR exceptions permanent. Although it was “implemented to encourage the adoption of health information technology, it is now a necessity for the creation of new health care delivery and payment models,” as CMS summed up the comments it received in support of the idea. The new sunset of 2021 coincides with the end of the Medicaid EHR incentive program.

CMS and OIG made a few other changes to the policies, including how they determine EHR systems to be interoperable as part of complying with the safe harbor protection.

Currently, to meet the “deeming provision” software has to be certified within no more than 12 months prior to hospitals donating the systems to physician practices. Tracking the Office of the National Coordinator’s regulatory schedule, the OIG said that now it will consider the arrangements eligible “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.”

For 2013, that would include both the 2011 and 2014 certification editions. “Software certified to meet either the 2011 edition or the 2014 edition could satisfy the safe harbor provision,” the OIG wrote. “We believe our final rule with respect to this condition is consistent with that understanding and our objective of ensuring that software is certified to the current required standard of interoperability when it is donated.”

When they proposed the rules in April, CMS and OIG were mulling another change to the Stark/Anti-kickback policy: whether to expand the definition of EHR “protected donors” to clinical labs, equipment suppliers and home health agencies, or just limit it to hospitals, group practices, drug plan sponsors and Medicare Advantage plans.

The final rule ended up excluding only laboratory companies, in a hard-fought win for the American Clinical Laboratory Association and the College of American Pathologists, which argued that the “protected donor” arrangement left labs and pathologists with unnecessary burdens.

For pathology labs, “the volume of requests for donations from providers of laboratory and pathology services has escalated, as have the increasingly unsavory tactics employed,” the College of American Pathologists’ regulatory workgroup lead Gerald Hanson, MD, wrote to CMS earlier this year.

CAP members also had concerns about “functional lock-ins embedded in the donated EHR preventing full interoperability and access,” Hanson said. “Unfortunately, technical interoperability has not proven to be an adequate safeguard against the donation of software that operates to lock-in referral sources.”

Meanwhile, CMS leaders wrote that the decision is “consistent with and furthers our continued goal of promoting the adoption of interoperable electronic health records technology” while “reducing the likelihood that the exception will be misused by donors to secure referrals.”

The agency argued that the lab exclusion “will address situations identified by some of the commenters involving physician recipients conditioning referrals for laboratory services on the receipt of, or redirecting referrals for laboratory services following, donations from laboratory companies.”