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HHS proposes extending Stark Law exception for EHR donations

If the exception to the Stark Law and anti-kickback laws' safe harbor for EHR donations to physicians are extended, will healthcare systems use them?

Proposals to keep donations of electronic health record software and services legal were met with mixed reactions by attorneys in the field familiar with both the legal theory and practical applications of the practice, which typically involves large hospitals giving EHR software and services to solo physicians and group practices.

Once they go into a system, it's very, very difficult to switch. So, for a lot of folks that are really conservative, they've just been delaying this decision as long as they possibly can.

Laird Pisto,
associate general counsel, MultiCare Health System

On April 9, the U.S. Department of Health and Human Services published two proposals: One would continue an exception to the Stark Law so hospitals could make EHR donations to solo docs and small group practices until 2016; the other would similarly extend an EHR donation safe harbor for federal anti-kickback laws under the Social Security Act.

For about two years, MultiCare Health System in Tacoma, Wash., has tried the so-called donation model to woo doctors into adopting the same EHR software it uses. The six-hospital system could subsidize 85% of the cost to doctors of EHR software under the Stark Law exception. Previously, it had been illegal for hospitals to donate software to independent doctors who refer patients to them for treatment.

With that exception set to expire at the end of 2013, Doctors weren't lining up to implement EHR software or switch from their existing software, so that approach was abandoned, according to Laird Pisto, associate general counsel at MultiCare. Pisto says he's not sure if MultiCare will offer donations again, even now that it seems likely the Stark exception will be extended three years.

"We did have some success with it, but it wasn't like people were flocking to our door," said Pisto, who also serves as co-chair of the American Health Lawyers Association Health Information & Technology Practice Group.

EHR adoption too slow?

Pisto is one of several healthcare attorneys who weighed in on the HHS proposals to extend the federal rules allowing hospitals to subsidize EHR software for doctors. "I think [EHR] adoption has been slower than anybody wanted or expected, and I don't see this extension as changing the adoption rate significantly," he said. "I think there's a pattern that's already been established. The early adopters have adopted, and the late adopters are still holding back."

Columbus, Ohio-based attorney Kevin Lyles was more optimistic about the potential of the two proposed extensions. "I really think the proposed rule, if adopted, will provide welcome relief to those hospitals who were trying to roll out their EHRs to community physicians," said Lyles, who represents hospitals and healthcare systems for the law firm Jones Day. About a dozen of Lyles' clients have already rolled out donation programs through the Stark exception.

'Free EHR' vendors might feel the pinch

Lyles said he expects the rules to make a big impact on the types of EHR systems that are adopted. With guaranteed subsidies for at least three years, independent doctors have an extra incentive to switch from their free or low-cost EHR software to software from giants like Epic Systems Corp. The Verona, Wis.-based EHR vendor doesn't sell directly to small hospitals or independents; instead, it deputizes client hospitals to do that work in markets where it makes sense.

Amy Leopard, a Nashville-based healthcare attorney with Bradley Arant Boult Cummings LLP, said she thinks the extension to 2016 will invigorate the donation program. Many hospitals have delayed the rollout of donation programs to interested physicians to allow time to adjust to their own EHR software implementations, and this gives them more time, she said.

According to Pisto, however, the fact that a sunset provision still exists could discourage some doctors from implementing EHR systems under the extension. Doctors could still have some uncertainty about how to pay for the software beyond 2016, when the extension ends. "They are looking for a long-term solution and not something with a three- to five-year window. And they realize that once they go into a system it's very, very difficult to switch," Pisto said. "So, for a lot of folks that are really conservative, they've just been delaying this decision as long as they possibly can."

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