December 31, 2013 – mark it on your calendar, if you haven’t already. That’s when the Stark law exception and the Anti-Kickback Statute (AKS) safe harbor, which enable donation of electronic health records (EHRs) to eligible providers, are set to expire.
On April 10, 2013, the Centers for Medicare & Medicaid Services (CMS) and the U.S. Department of Health & Human Services Office of Inspector General (OIG) released two proposed rules (here and here) to extend these opportunities at least through the EHR adoption time frame identified in the Health Information Technology for Economic and Clinical Health (HITECH) Act. If finalized, the amended exception and safe harbor will continue to permit hospitals and other “donors” to make payments up to 85% of the cost of acquiring and maintaining certain EHR items and services (such as license fees or implementation and support services) at least through the end of 2016. Although CMS and OIG accepted comments until June 10, 2013, the proposed rules are still awaiting congressional approval. Industry consensus has been that the extensions will be adopted; then again, everyone thought that a resolution would have been announced by now, and the delay is making some hospital leaders justifiably nervous.
If Congress doesn’t approve the extensions, organizations that are currently providing EHRs to community physicians using the Stark law and AKS provisions will need to modify current pricing to meet fair market value (FMV) parameters. And in most cases, FMV pricing is substantially higher than that allowed by the donation criteria.
If your organization falls into this category, we recommend that you consider the following:
- Which components of your current pricing strategy are offset by some level of donation and will therefore need to be modified to FMV if the Stark exception and safe harbor expire?
- What will be the market price for similar EHRs in 2014 and beyond, given EHR vendor competitiveness and increasing adoption?
In addition to the FMV analysis, we also recommend conducting an assessment of the commercial reasonableness (CR) of the arrangement. There may be instances where the health system’s costs to provide the EHR are higher than FMV. This may be due to the fact that the conclusions regarding the FMV of the service offering took into account lower prices of competing market alternatives, as required under FMV standards. To ensure the FMV pricing approach is appropriate, defensible, and meets CR, legal counsel and independent third-party advisory services should be consulted.
Given the uncertainties around congressional approval for extension of the Stark exception and safe harbor by the December 31 deadline, organizations that are currently providing subsidized EHR offerings to community physicians should consider notifying participating physicians of a potential price increase starting on January 1, 2014. As such, it is imperative that a health system that is currently leveraging the safe harbor provisions immediately initiate the process to develop an FMV pricing approach to ensure that it is prepared to arrive at and communicate a revised pricing structure to its customers.