1. HIMSS Stark Exception and Anti-Kickback Safe Harbor: What Providers Need to Know Mr. Dave Schoolcraft, Partner, Miller Nash LLP Ms. Laura D. Jantos, Principal, ECG Management Consultants, Inc. October 5, 2006 MILLER NASH LLP 4400 Two Union Square 601 Union Street Seattle, Washington 98101-2352 Telephone: 206-622-8484 E-mail: dave.schoolcraft@millernash.comdave.schoolcraft@millernash.com web site: www.millernash.comwww.millernash.com

2. 785\90\102169(ppt) 1 Agenda n Goals and Objectives n Background n Overview of the Exception/Safe Harbor n Key Considerations for Providers n Contractual Considerations n Conclusions and Questions

3. 785\90\102169(ppt) 2 Goals and Objectives n What composes the donation? n How might the cost of donated technology compare to direct purchase from a vendor? n What does “interoperability” mean in the context of the donation? n Do I need to change practice management (PM) systems to accept a donation? n If I accept a donation, what additional costs might my practice incur? n What key terms should be included in a contract for goods and services with the enterprise donating the technology? Our presentation focuses on donation from the physician perspective, as a recipient of a health system-sponsored electronic health record ( EHR). As a result of attending this Webinar, organizations will have the necessary knowledge to negotiate with enterprises that intend to provide technology donations.

4. 785\90\102169(ppt) 3 Background n The Stark law prohibits physicians from referring a Medicare patient to an entity for certain designated health services (including inpatient and outpatient hospital services) if the physician has a financial relationship with the entity, unless an exception applies. n The Anti-Kickback Statute broadly prohibits either directly or indirectly giving, receiving, offering, or soliciting payment for referrals. n It has become apparent to the government that technology could reduce costs and improve quality related to prescribing. n In addition, CMS has been considering pay-for-performance (P4P) schemes to encourage the adoption of electronic health records (EHRs). n The cost and complexity of a physician practice implementing an EHR can be prohibitive but decreases significantly as the number of providers (and ability to leverage centralized resources) increases. n Existing Stark exceptions and Anti-Kickback safe harbors, were too narrow to permit hospitals to assist physicians with the acquisition of EHRs. n On August 8, 2006, HHS and CMS established a new Stark exception and Anti- Kickback safe harbor in order to enable hospitals (and other potential donors) to provide information technology for e-prescribing and EHRs to physicians.

5. 785\90\102169(ppt) 4 Overview of the Rules Applicable to EHRs n Donated technology may include EHRs, e-prescribing systems and related services. »EHRs must include e-prescribing capability through an e-prescribing component or the ability to interface. »Software must be interoperable. »The technology and services must be “necessary and used predominantly” to create, maintain, transmit, or receive electronic health records. –Commentary clarifies that PM software and related services may be included. Key provisions for physician recipients to consider are as follows:

6. 785\90\102169(ppt) 5 IncludedExcluded EMR Software LicensesX PM Software Licenses n If integrated. n If there is a commitment to implement the EMR. HardwareX ConnectivityMay be provided. InterfacesMay be provided.Likely to not include interfaces to competing organizations. Staffing AssistanceNo staff for abstracting, scanning, or other practice duties. TrainingX Software MaintenanceX Help DeskX Permitted Donations

7. 785\90\102169(ppt) 6 Additional Requirements n The donation must not exceed 85% of the donor’s cost for the technology. n There must be a written agreement between the donor and recipient. n Recipients may not be selected based on value or volume of referrals to the donor (but may be selected based on other criteria). n Exclusions include: »Hardware. »Provision of staff to the office. »Software above and beyond clinical and business purposes of the office. »Disabling interoperable components of the software.

8. 785\90\102169(ppt) 7 Key Considerations for Providers Overview MythReality All information systems are the same.Features and functions are highly variable. There are benefits (financial and otherwise) to systems implementation. Desired benefits need to be planned, evaluated, and mapped into the implementation to be achieved. Efforts should not be underestimated. Outsourcing is cost-effective.Outsourcing may create a dependency from which it is difficult to recover. An integrated system is always better than an interfaced system. Many integrated systems are actually interfaced, or there are gaps in the integration. Vendors provide assistance in system adoption. Vendors assist in implementing the system but do not necessarily ensure full system adoption. Companies are stable.The vendor market is volatile. Newer technology is better.Newer products may not be as feature-rich as established products. IT is not strategic.Providing IT to practices is the new strategy.

9. 785\90\102169(ppt) 8 Key Considerations for Providers Approaches for Donations Community Patient RecordIndividual Practice EHRs Pros n The patient (and providers) can view all information in one location. n Costly brokering solutions are not required. n Patient information is kept separate for each practice level. n Select data may be shared. n Responsibility for security rests with the practice. Cons n Recipients are strongly dependent on one another to create a secure, complete EHR. n There may need to be compromises in system setup to accommodate the needs of the group. n Brokering solutions may not be mature and may detract from individual EHR deployments. n Individual practices may not take advantage of all economies of scale of a group solution. Most EHRs are being provided in one of two ways – as a unified community patient record or as individual EHR databases.

10. 785\90\102169(ppt) 9 Key Considerations for Providers Option Comparison Donated TechnologyASP-DirectVendor-Direct Software Cost$ (until 12/31/13).$$.$$$$. Hardware Cost$ to $$$$.$.$$$$. Interfaces n Hospital likely provided. n Competing entity may not be enabled. Community lab may be provided. n None provided. n High cost. Staffing n Superuser(s). n And others if decentralized model. Superuser(s). n Superuser(s). n Application manager(s). n Trainer(s). n Technician(s).

11. 785\90\102169(ppt) 10 Key Considerations for Providers Option Comparison (continued) Donated TechnologyASP-DirectVendor-Direct Ability to Customize Moderate.Low.High. Effort to Configure Low.Moderate.High. Other Benefits n Integration with key local systems and providers. n Local support. Monthly cost basis.Can tailor to practice requirements. Other RisksCan the donor become a vendor? Reliance on the vendor. Need to build large internal team.

12. 785\90\102169(ppt) 11 Key Considerations for Providers Questions to Evaluate a Donation n What responsibilities or obligations do the recipients have to one another and to the donor? Are these fair and consistent with relative risk? n What is included in the donation? What is the cost for additional services (e.g., additional interfaces)? n What assurance does the recipient have that the services provided by the donor will at least equal (if not exceed) services that would be provided directly by the vendor? n Does the recipient have any direct relationship with the vendor? n If a shared EHR is being used, can A/R data be kept separate for each recipient? Does the recipient have to migrate to the donor’s PM system? n If the relationship is terminated, does the recipient have access to its own data? How is data ownership defined in a shared EHR? n If the recipient already has an EHR, can it receive a donation? n What specific track record does the donor have in providing IT services to physician practices?

13. 785\90\102169(ppt) 12 Contractual Considerations n Data ownership. n Data conversion (to/from the donated system). n Consequences of termination. n Limitation of the practice’s risk. n Interfaces with key systems. n Provision of quality services. n Provision of upgrades. n Security. n Testing. In addition to standard terms and conditions, the following should be considered in negotiating an agreement to receive a donation.

14. 785\90\102169(ppt) 13 Conclusions and Questions n Is the donor prepared to become a vendor? n Does the donated system have appropriate functionality? n Are all recipient costs well understood? n Is the risk to the recipient appropriate? n Can data be transferred if the agreement is terminated? n Will fees be raised over the term, and what is the effect of the sunset of the safe harbor? The Stark exception and Anti-Kickback safe harbor create a significant opportunity for practices, but this opportunity should be weighed against identified risks.