Donating EHR Software to a Facility

By: Jeffrey S. Baird, Esq.

Many pharmacies work with skilled nursing facilities (“SNFs”) and custodial care facilities (collectively referred to as “Facilities”). A Facility is a “referral source” to the pharmacy. Even though the Facility may give “patient choice,” if the pharmacy dispenses a drug to a Facility patient, the law considers the patient to be a “referral” from the Facility. If the pharmacy gives “anything of value” to the Facility, then the pharmacy is at risk of being construed to be “paying for a referral” … hence, a “kickback.”

Federal and state anti-kickback statutes (AKS)

The federal anti-kickback statute (“AKS”) applies to any patient covered by a federally funded health care program. The AKS prohibits the pharmacy from giving anything of value to a referral source in exchange for (i) referring, or arranging for the referral of, a federally funded health care program patient to the pharmacy or (ii) recommending the purchase of a product that is paid for by a federally funded health care program. Under the AKS, the party providing something of value (the pharmacy) and the party receiving something of value (the Facility) are both liable.

Separate and apart from the AKS, each state has its own anti-kickback statute. Some state anti-kickback statutes apply only when the payer is the state Medicaid program. Other state anti-kickback statutes apply even if the payer is commercial insurance or a cash-paying patient.

Complying with AKS and donating EHR software

Electronic medication administrative records (“eMARs”) are not required for DRR; hard copy records are acceptable. Nevertheless, a Facility may desire to utilize eMAR software (“Software”) for DRR and for other purposes. The Facility and a pharmacy (that receives referrals from the Facility) may wish to enter into an arrangement in which the pharmacy pays for the Software. It is at this juncture that the Facility and pharmacy find themselves on the proverbial “slippery slope.” Assume that the pharmacy receives referrals from the Facility and desires to pay for the Software. By virtue of paying for the Software, the pharmacy is providing “something of value” to the Facility … hence, the AKS is implicated.

The Office of Inspector General (“OIG”) has published a number of “safe harbors” to the AKS. If an arrangement complies with all of the elements of a safe harbor, then as a matter of law the AKS is not violated. If an arrangement does not comply with all of the elements of a safe harbor, then it does not mean that the AKS is violated. Rather, it means that the arrangement must be carefully scrutinized in light of the language of the AKS, court decisions, and other published guidance. The applicable safe harbor is the Electronic Health Records safe harbor (“EHR Safe Harbor”). It states than an entity may donate software and training services “necessary and used predominantly to create, maintain, transmit, or receive electronic health records” if the following 12 requirements are satisfied:

Donation regulations

The donation must be made to an entity engaged in delivery of health care by an entity (except for a laboratory company) that provides and submits claims for services to a federal health care program. A pharmacy is an acceptable donor and a Facility is an acceptable recipient.

The Software must be interoperable at the time it is provided to the recipient. Software is deemed to be interoperable if it has been certified by a certifying body authorized by the National Coordinator for Health Information Technology. Interoperable means that the Software is able to (i) “communicate and exchange data accurately, effectively, securely, and consistently with different information technology systems, software applications, and networks, in various settings,” and (ii) “exchange data such that the clinical or operational purpose and meaning of the data are preserved and unaltered.” The Software can be used for tasks like patient administration, scheduling functions, and billing and clinical support, but electronic health records purposes must be predominant.

• The donor cannot place a restriction on the use, compatibility, or interoperability of the item or service with other EHR systems.
• Receipt of items or services is not conditioned on doing business with the donor.
• Eligibility for, and the amount or nature of, the items or services provided is not based on the volume or value of referrals or other business generated between the parties.
• There must be a written, signed, agreement specifying: (i) the items and services; (ii) the donor’s cost of providing the items and services; and (iii) the amount of the recipient’s contribution.
• The recipient cannot already possess or have obtained items or services with similar capabilities as those provided by the donor.
• For items or services that can be used for any patient regardless of payer status, the donor does not restrict the recipient’s ability to use the items or services for any patient.
• The items and services do not include office staffing and are not used to conduct personal business or business unrelated to the recipient’s health care practice.
• The recipient must pay 15% of the donor’s cost for the items and services prior to receipt, and the donor cannot finance or loan funds for this payment.
• The donor’s cost for the items or services cannot be shifted to a federal health care program.
• Transfer of the items or service must occur on or before December 31, 2021.

As noted above, the Software can be used for services beyond the pharmacy’s DRR as long as (i) the Software is not used primarily for personal business or business unrelated to the Facility’s clinical operations, and (ii) the pharmacy does not restrict the Facility from otherwise using the Software or from interfacing with other electronic prescribing or electronic health records systems.

Evaluating your EHR software donation arrangement

If the arrangement does not comply with all of the elements of the EHR Safe Harbor, then the arrangement will need to be examined in light of the language of the AKS, court decisions, and other published guidance. An important guidance is the OIG’s December 7, 2012 Advisory Opinion No. 12-19, which addressed four proposed arrangements involving a pharmacy’s provision of items and services to Community Homes in which the pharmacy’s customers reside. The OIG opined that it would not impose administrative sanctions in connection with Proposals A – C, but would likely impose such sanctions against Proposal D. Under Proposal D, the pharmacy would provide to Community Homes a free sublicense for “Software Z” for use in connection with the pharmacy’s customers. In determining that Proposal D would likely result in administrative sanctions, the OIG pointed out the following: “Software Z is not interoperable. Data that a Community Home would create and store in Software Z, including MAR documentation, would not be readily transferable to other systems, resulting in Community Home data lock-in and, thereby, referral lock-in…[I]f a Community Home resident began receiving medications from the [donor pharmacy] and later decided to receive medications from another pharmacy, then the Community Home could face having to either transition that resident’s data to another system or assume the full payment for a Software Z sublicense. This situation could give rise to a significant incentive for the Community Homes to steer patients to the [donor pharmacy] rather than one of its competitor[s].”

Jeffrey S. Baird, Esq. is Chairman of the Health Care Group at Brown & Fortunato, P.C., a law firm based in Amarillo, Texas. He represents pharmacies, home medical equipment companies, and other health care providers throughout the United States. Mr. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization. He can be reached at (806) 345-6320 or jbaird@bf-law.com.