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December 3, 2015

Giving the Gift of EHRs—Or Is That a Kickback?

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Earlier this week, the U.S. Attorney's Office for the District of South Carolina announced a $500,000 settlement with Piedmont Pathology Associates, Inc. and Piedmont Pathology, P.C., a diagnostic anatomic pathology group located in North Carolina, to settle allegations that it violated the False Claims Act by engaging in improper financial relationships with referring physicians.

The case was originally filed by a whistleblower, who was a former contract salesperson for the practice. The government and relator alleged that Piedmont provided Electronic Medical Record (EMR) software licenses to various physicians' practices in exchange for referrals. The government found that Piedmont Pathology provided EMR software licenses at little to no cost to nine physicians' practices close in time to when those practices entered contracts to refer specimens to their pathology lab.

As a result, the government maintained that the provision of the EMR software licenses by Piedmont violated the Anti-Kickback Statute (AKS). The AKS prohibits any person from knowingly and willfully paying remuneration (e.g., a thing of value) to any person with the intent to induce that person to purchase, prescribe, recommend, or refer a person for the furnishing of items or services payable under a Federal health care program. Claims submitted in violation of the AKS are considered tainted and are per se violations of the False Claims Act (FCA). The FCA allows the government to recover three times the actual damages caused by the improper claims and up to $11,000 in penalties per false claim.

Conduct that otherwise would violate the AKS does not do so if it falls within a safe harbor or statutory exception. Generally speaking, OIG has maintained that safe harbor protection requires compliance with all of the safe harbor's requirements. However, the OIG also has explained that noncompliance with a safe harbor does not make an arrangement illegal per se.

Interestingly, OIG—as well as the Centers for Medicare & Medicaid Services (CMS) for Stark law purposes—formally adopted a safe harbor to the AKS for EHRs in 2006 to allow hospitals or certain health care entities to provide physician practices with certain EHR systems and training on such programs. In December 2013, the agencies extended the application of the safe harbor until December 31, 2021.

While donations of EHRs would normally implicate the AKS and potentially the Stark Law, the EHR safe harbor was designed to encourage healthcare professionals and institutions to adopt and implement EHRs and allow smaller providers to accept EHR software without raising fraud and abuse concerns. Thus, so long as the arrangement meets all of the conditions of the EHR safe harbor, the transaction would not constitute remuneration or a kickback. See 42 C.F.R. § 1001.952(y).

Despite this safe harbor, cases such as these should not come as a surprise, as the government, including the Office of Inspector General (OIG) for the U.S. Department of Health and Human Services (HHS), have indicated increased scrutiny and enforcement related to EHRs. The Affordable Care Act provided significant incentives, as well as penalties, to require healthcare professionals, hospitals, and related stakeholders to adopt and "meaningfully use" EHRs as one way to improve quality of care and collect more data and information to measure patient outcomes.

As the healthcare delivery landscape continues to change and consolidate, the meaningful use and implementation of EHRs by healthcare professionals and institutions will only continue to grow in importance. Accordingly, this recent settlement and case should serve as a reminder to all stakeholders that the provision of EHR software and programs to physician practices should be structured under the applicable OIG safe harbor and CMS exception.

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