On August 1, 2006, the Centers for Medicare and Medicaid Services (CMS) and the Department of Health and Human Services (DHHS) released final rules outlining two new exceptions under the Stark law and the corresponding safe harbors under the Anti-Kickback Statute applying to donations of technology for electronic prescribing and electronic health records (EHR).  The rules will take effect on October 10, 2006.

       The two new safe harbors set forth conditions which allow certain healthcare entities such as hospitals and group practices to donate: (1) electronic prescribing technology; and (2) donate EHR technology to health care providers without violating the Anti-Kickback Statute.  To qualify for the e-prescribing technology safe harbor, certain criteria must be satisfied, including the following: 

• Technology that may be donated includes hardware, software, internet connectivity and training and support that are necessary and used solely to transmit and receive electronic prescription information;
• Covered donors and recipients are: (1) hospitals, to members of their medical staffs; (2) group practices, to prescribing healthcare professionals who are members of the group practice; and (3) prescription drug plan sponsors, to network pharmacies and prescribing healthcare professionals;
• Donors may not select recipients using any method that takes into account the volume or value of referrals from the recipients or other business generated between the parties;
• The donor must not limit or restrict the use or compatibility of the items/services with other e-prescribing systems or restrict the recipient’s right to use the items/services for any patient;
• The recipient must not make the receipt of the technology a condition of doing business with the donor; and
• The donor does not have actual knowledge of, or act in reckless disregard of, the fact that the recipient already has obtained equivalent items or services.  In other words, a donor must not provide technology that the donor is aware duplicates technology that the recipient already possesses.
• The EHR safe harbor requirements have features in common to the e-prescribing safe harbor but differ in the following ways:
• Hardware is not covered;
• There are only two categories of protected donors: (1) individuals/entities that provide covered services to Federal health care programs and (2) health plans.
• Recipients must pay 15% of the donor’s cost prior to receipt, and the donor must not finance this share of the provided cost; and
• The items and services must not include staffing at the recipient’s office and must not be used primarily to conduct business unrelated to clinical practice; 

       Failure to satisfy the safe harbor does not mean that an arrangement necessarily violates the statute but could entail risk depending on the facts and circumstances.

       CMS simultaneously released two new exceptions to the Stark law covering the same areas.  Because Stark prohibits a physician from making referrals for certain designated health services payable by Medicare to a health care entity with which the physician has a financial relationship, the donation of electronic e-prescribing technology or the software and training to create, maintain, transmit or receive electronic health records could be viewed as creating a financial relationship that would be subject to Stark.  For this reason, exceptions were adopted to permit certain entities, such as hospitals, to provide non-monetary assistance to physicians to encourage their use of new technology if certain criteria are satisfied.  The criteria for the two new exceptions track the safe harbor requirements.  Because the President’s announced goal is for every American to have electronic health records by 2014, both the EHR exception and the EHR safe harbor sunset on December 31, 2013.

       If you have any questions regarding the interpretation of these new rules, please contact the Firm’s health law department.