Bill Moran and Betta Sherman

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1 Compliance TODAY July 2013 a publication of the health care compliance association How an eye doctor s son sees compliance an interview with Stephen Kiess Assistant General Counsel for Vidant Health See page Don t fear the Sunshine (but wear your sunscreen) Mary B. Langowski, Kristen E. Ratcliff, and Rebecca Jones McKnight 27 PATH rules for physician oversight and billing Bill Moran and Betta Sherman 31 Texting and mobile devices: Partners in health care Jim Sheldon-Dean and Vidyadhar Phalke 38 After an allegation: Conducting an effective, efficient internal investigation Rob Cepielik, Mike Little, and Greg Garrison This article, published in Compliance Today, appears here with permission from the Health Care Compliance Association. Call HCCA at with reprint requests.

2 by Mary B. Langowski, Kristen E. Ratcliff, and Rebecca Jones McKnight Don t fear the Sunshine (but wear your sunscreen) Financial relationships will be scrutinized industry-wide and providers should be prepared. Industry will report payments made to your health care providers. Industry data collection is required beginning August 1, 2013, and information goes public September 30, Prudent organizations will proactively manage potential conflicts of interest. Implications of transparency go beyond industry penalties. Mary B. Langowski (mary.langowski@dlapiper.com) is a Partner and Chair of the Health Care Regulatory and Policy group at DLA Piper in Washington DC. Kristen E. Ratcliff (kristen.ratcliff@dlapiper.com) is an Associate in DLA Piper s Health Care Sector in Washington DC. Rebecca Jones McKnight (rebecca.mcknight@dlapiper.com) is an Associate in DLA Piper s Health Care Sector in Austin, TX. If the broad light of day could be let in upon men s actions, it would purify them as the sun disinfects. Louis Brandeis 78% of physicians received drug samples; 35% of physicians received reimbursement for costs associated with professional meetings or continuing medical education; and 28% of physicians received payments for consulting, giving lectures, or enrolling patients in trials. Langowski Chronic exposure to the sun also causes premature aging, which over time can make the skin become thick, wrinkled, and leathery. With proper protection from UV radiation, most premature aging of the skin can be avoided. United States Environmental Protection Agency The existence of financial relationships between health care providers and pharmaceutical and medical device companies is well-documented. A 2007 study published in the New England Journal of Medicine found that 94% of the approximately 3,000 physicians surveyed had some type of financial relationship with the pharmaceutical industry. 1 Although the numbers varied across specialty and practice type, the survey showed that: 83% of physicians received food in the workplace; Consumer advocates have, especially over the past several years, asserted that requiring public disclosure of provider industry financial relationships will have a disinfecting effect, causing those on both Ratcliff sides of financial relationships to more carefully examine their intent and the potential for unintended negative effects on patient care and treatment choices. States have led the charge in recent years, imposing a variety of disclosure and reporting requirements. These state efforts provided McKnight metrics that helped drive movement at the federal level. In 2010, for example, the Vermont Attorney General reported that total payments to physicians from pharmaceutical

3 and medical device companies dropped 13% from 2002 to 2009, after reporting requirements were implemented. 2 However, there are some who are quick to point out that the mere existence of a financial relationship is not necessarily improper, and does not mean that providers are making improper treatment decisions. Opponents of disclosure and reporting efforts at least in the way such efforts have been implemented to date believe that exposure to sunshine can in fact have negative consequences. They have questioned the ability of the public to draw appropriate conclusions from publicly available data, and noted the risk that these efforts, however well-intentioned, could unfairly tarnish the good work of many health care providers. Despite these criticisms, Congress passed the Physician Payment Sunshine Act (also known as the Sunshine Act) as part of health reform legislation in 2010 to establish regular public reporting of provider industry financial relationships. After a prolonged delay, the Centers for Medicare & Medicaid Services (CMS) published final regulations on February 8, 2013 to implement Sunshine Act requirements. 3 Stakeholders throughout the health care industry can expect continued scrutiny and attention as key implementation milestones draw closer. In the months leading up to the release of the final rule, Sunshine Act supporters, including Sen. Chuck Grassley (R-IA), criticized CMS for missing key deadlines. A vocal advocate for transparency around financial relationships in the health care marketplace and original sponsor of the Sunshine Act, Sen. Grassley called CMS s delay unacceptable and pledged to stay vigilant about how [the] law is implemented. As CMS rolls out the new reporting requirements, compliance officers may feel that all this exposure to sunshine is aging them prematurely. What do the new federal rules mean to you, and how can you prevent your organization from getting burned? Reporting requirements Under the final rules, 4 certain manufacturers of drugs, biologicals, and medical supplies are required to annually report to CMS certain payments and other transfers of value to physicians and teaching hospitals. These manufacturers, as well as group purchasing organizations (GPOs), are also required to annually report certain physician ownership and investment interests held by a physician or member of the physician s immediate family during the preceding calendar year. Applicable manufacturers and GPOs subject to the recently finalized regulations: must begin collecting data on August 1, must report their data to CMS by March 31, 2014, and on the 90th day of the calendar year each year thereafter. CMS will make this information publicly available on a designated CMS website for the first time on September 30, 2014 and by June 30 each year thereafter. Physicians and hospitals will generally have 45 days to review and correct data submitted by applicable manufacturers and GPOs. Key definitions Understanding the definitions used in CMS final regulations is the first step to determining what the new requirements mean for your organization. Several key definitions are discussed below. Applicable manufacturer Under the final regulations, applicable manufacturer broadly includes entities that operate in the United States and either (1) produce, prepare, propagate, compound or convert a covered drug, device, biological, or medical

4 supply for use by someone other than the entity or the entity s patients or (2) provide assistance or support for these functions or other functions such as the marketing, promotion, sale, or distribution of a covered product, as a result of common ownership. 5 Foreign entities that market or sell drugs within the United States generally fall within the definition of an applicable manufacturer, but hospitals, hospital-based and retail pharmacies, laboratories that manufacture a covered product solely for their own use or the use of their patients, and wholesalers and distributors that do not hold the title of a covered product are generally excluded. Covered drug, device, biological, or medical supply In addition, the final rule contains a two-part definition of a covered drug, device, biological, or medical supply. 6 First, payment for the drug, device, biological, or medical supply must be available under Medicare, Medicaid, or the Children s Health Insurance Program (CHIP). In addition, drugs and biologicals must require a prescription to be dispensed; and devices must be subject to premarket approval by or notification to the Food and Drug Administration (FDA). HHS notes that this definition thus excludes over-thecounter pharmaceuticals, as well as many Class I and II devices that are exempt from premarket notification requirements. Covered recipients The final rule defines covered recipients to include teaching hospitals and all physicians except those who are employees of an applicable Notably, the rule does not cover medical residents or other non-physician providers, such as nurse practitioners or physicians assistants. manufacturer. For purposes of this rule, physicians includes doctors of medicine and osteopathy, dentists, optometrists, and chiropractors who are legally authorized to practice by the state in which they work. HHS clarifies that this definition includes all licensed physicians, including those who are licensed, but do not see patients. Notably, the rule does not cover medical residents or other non-physician providers, such as nurse practitioners or physicians assistants. What are the requirements? The final rule requires applicable manufacturers to report payments or transfers of value made directly to covered recipients, as well as payments or transfers of value made to an entity or individual on behalf of or as requested by a covered recipient (e.g., a physician directs an applicable manufacturer to make a payment to a third party, which could include his/her favorite charity, religious organization, research fund, university, or other organization). Applicable manufacturers should make a reasonable, good faith effort to determine the value of a payment or other transfer of value by estimating the discernible economic value of the payment or transfer on the open market. To guide applicable manufacturers and GPOs in meeting reporting requirements, the final rule outlines the content that must be reported to CMS for each payment. 7 In addition to demographic data, applicable manufacturers must report the form and nature of the payment made to a covered recipient, assigning each payment or transfer of value to one category. The form of payment describes the type of payment made (e.g., cash, in-kind

5 items or services, stocks, dividends). The nature of the payment describes the purpose for which the payment was made (e.g., charitable contribution, food and beverage, entertainment, consulting fee, honoraria, gift, travel and lodging, education, research, etc.). Where a payment fits into more than one category, applicable manufacturers should make a good faith effort to divide the expenses between all of the appropriate categories rather than submitting an aggregate estimate in just one category. In addition to direct payments, the final rule requires applicable manufacturers to report indirect payments made to a covered recipient through a third party when the applicable manufacturer requires, instructs, directs, or otherwise causes the third party to provide the payment or transfer of value to a covered recipient (e.g., when an applicable manufacturer makes a payment to a medical professional society, directing that the funds be used for physician grants). 8 The final rule does not require reporting of indirect payments when the applicable manufacturer and its agents are unaware of the covered recipient s identity for the duration of the reporting year through the second quarter of the subsequent year. If the applicable manufacturer becomes aware of the covered recipient s identify prior to this time, the payment must be reported. Finally, the final rule also requires each applicable manufacturer and GPO to annually report to CMS all ownership and investment interests in the applicable manufacturer or GPO that were held by a physician or member of the physician s immediate family during the preceding calendar year. This includes direct and indirect interests, although applicable manufacturers and GPOs do not have to report certain types of information (e.g., publicly traded securities or mutual funds) or indirect ownership and investment interests about which they do not know. 9 What s at stake? Under the new rule, CMS may impose civil monetary penalties upon applicable manufacturers and GPOs for failure to report the required information in a timely, accurate, or complete manner. 10 Penalties for failure to report a payment, transfer of value, ownership, or investment interest range from $1,000 to $10,000 with a maximum annual total penalty of $150,000. Penalties for the knowing failure to report required information are higher, ranging from $10,000 to $100,000 per payment, transfer, ownership, or investment interest not Health Care Auditing & Monitoring Tools The 1,000+ pages of materials in this toolkit includes more than 100 sample policies, procedures, guidelines, and forms to enhance your compliance auditing and monitoring efforts. The toolkit is updated twice a year with new tools: The first two updates are free, and an annual subscription can be purchased to receive subsequent updates. Find just one tool to help your program improve, and you ve achieved a positive return on your investment. For more information visit or call

6 reported as required, with a maximum annual total penalty of $1 million. To facilitate audits and enforcement actions, applicable manufacturers and GPOs should maintain all books, records, documents, and other materials for 5 years from the date the information is published on the CMS website. These civil monetary penalties are in addition to the longstanding risks and potential exposure associated with industry-provider financial relationships. Although the civil monetary penalties under the new rules are directed toward manufacturers and GPOs, providers should remain vigilant. More than ever before, those on each end of a financial relationship should carefully consider relationships before entering them. The potential for allegations under the Anti- Kickback Statute, False Claims Act, and Stark Law casts a much larger shadow. Preparing for days in the sun In April 2012, CMS published a webpage of resources for physicians, teaching hospitals, applicable manufacturers, and GPOs to use in determining what needs to be done to comply with the Sunshine Act s reporting requirements. As an initial step, compliance officers should consider reviewing these materials, signing up for the CMS Sunshine Act listserv notifications, and participating in future CMS webinars, calls, and meetings. To further appreciate the benefits of the Sunshine without getting burned (and without adding to the premature aging that may be an occupational hazard for compliance officers), consider the following additional actions: More than ever before, those on each end of a financial relationship should carefully consider relationships before entering them. Evaluating current processes for identifying and managing physician relationships. Within your organization, whom do you currently require to disclose financial relationships with industry? When do you initially request this information, and how frequently do you ask for updates? What tools do you use to help health care professionals take inventory of their financial relationships? Establishing an open dialogue with providers, remembering that a financial relationship is not in itself wrong. Conducting training on key conflict of interest policies. Emphasizing in your internal communication that, at times, physician s financial relationships may conflict with, or create an appearance of conflicting with, the physician s duties. Bringing potential conflicts to light early on to better equip all involved to handle it appropriately. Note that portions of this article also appear in Letting the light in under the Sunshine Act on the DLA Piper blog. 1. Eric G. Campbell, Russell L. Gruen, James Mountfort, et al: A National Survey of Physician-Industry Relationships, New England Journal of Medicine, April 26, 2007; 356 (2007): Pharmaceutical Marketing Disclosures: Report of Vermont Attorney General, William H. Sorrell, April 1, Available at 3. CMS later renamed the reporting program the National Physician Payment Transparency Program or Open Payments Fed. Reg (Feb. 8, 2013) CFR Id. 7. Id Id & (a)(1). 9. Id Id