Dermatology World August 2011 : Page 15
management insights legal issues in practice able by a federal health care program. In laymen’s terms, this means that a hospital or laboratory generally can-not simply give goods or services to a physician practice for free, unless they can comply with a Stark exception and the safe harbors of the anti-kickback statute. In 2005, these were each revised to permit the donation of nonmonetary remuneration, including software or information technology and training services to create, maintain, transmit, or receive electronic health records (EHR), provided certain conditions were met. It is these conditions which can bedevil physician practices. One key question to ask when con-sidering a “donation” approach is what is actually being donated? Many times, smaller donor entities may offer simply to pay for a physician practice’s EHR system, either in terms of up-front costs, ongoing maintenance fees, or both. The federal regulations, however, prohibit donation of money alone — the donation must be non-monetary. Instead, the donor may donate goods (including software) or services (which can include maintenance services, but cannot include staff provided to physi-cian offices). The prohibition on monetary remu-neration becomes confusing in light of another of the federal requirements: the physician receiving the goods or services must pay, prior to their receipt, at least 15 percent of the costs to the donor of the EHR goods and services themselves. Frequently, this concept is discussed as if the donor is paying 85 percent of the physician’s cost. This is wrong. To comply, the donor must have already paid for the goods and services, and the recipient physician is simply repaying a portion of the donor’s costs. In addition, the regulations require that the physician pay at least 15 percent of the donor’s costs, but there is nothing stopping the donor from requiring that a physician pay more than 15 percent. Moreover, bear in mind that the regula-tions do not specify how the 15 percent is calculated. Therefore, physicians should not necessarily assume that the donor will cover 85 percent of both the initial payment and all ongoing pay-ments; the donation might not include, for example, ongoing maintenance fees or additional costs for incremental additions such as new modules for the software. Likewise, if the cost for the software license is on a per-user basis, any new users the physician adds may be at the physician’s own expense. The goods and services donated must also be interoperable, and the donor cannot donate the goods and ser-vices if they are equivalent to what the physician already has. The concept of “equivalency” has not been defined, but in general, if a physician already has software that can functionally do what the donated software does, it may be seen as “equivalent.” Lastly, to qualify from a technical perspective, the soft-ware must have electronic prescribing capabilities. Physician practices also may not make donation a requirement for continuing to do business with the donor, and the donor may not take into account the volume or value of any referrals between itself and the physi-cian practice. There must also be an agreement in writing specifying what is being donated, the donor’s costs, and the amount of the physician’s contribu-tion to those costs. These requirements are not difficult to satisfy, but they must be met to comply. PRacticalities While complying with the fraud and abuse requirements for the donation may be a relatively straightforward proposition, there are certain practi-cal hurdles. The first question — and a critical one at that — is the number of contracts to be signed. There are two typical donation scenarios: (1) the physician practice has a single contract either with the donor (which itself has a contract with the vendor/developer of the software), or (2) there is one contract with the donor and another contract with the vendor/developer. Each has different pros and cons. A one-contract approach (or a “lin-ear” downstreamed license) is the most common arrangement, but it has one chief downside: a lack of “contractual privity” between the physician and the software vendor. “Contractual privity” is a legal concept meaning that a party to a contract has the ability to enforce the terms of the contract against another party. When the physician practice has no direct contract with the vendor, it lacks the legal ability to make the vendor do anything. This can create a host of issues regarding the duties each of the respective parties has. For example, consider the issue of technical support. The license may say that the donor provides only low-complexity technical support, and the vendor provides higher-complexity support. Similarly, the vendor may be completely responsible for the installa-tion of the software and any training. Without a contract between the physi-cian and the vendor, the physician has no way to make the vendor meet his or her needs. So, if the vendor does not complete installation of the software on time, or if the vendor ceases to provide technical support for complex issues, the physician cannot compel it to do so, nor obtain damages from the vendor. A two-contract approach (or a “V-shaped” approach) resolves many of these is-sues, but will require more time and expense to review and negotiate the agreements. Either approach can raise issues relating to termination of the agree-ments. For example, in a linear model, Dermatology WorlD // August 2011 15
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