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MSBA Health Law Section November 17, 2006. Between Scylla and Charybdis: Navigating the Risks of Electronic Health Record Integration. Brian S. Felton Vice President and Associate General Counsel Allina Hospitals & Clinics Minneapolis, Minnesota.

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between scylla and charybdis navigating the risks of electronic health record integration

MSBA Health Law Section November 17, 2006

Between Scylla and Charybdis: Navigating the Risks of Electronic Health Record Integration

Brian S. Felton

Vice President and Associate General Counsel

Allina Hospitals & Clinics

Minneapolis, Minnesota


context and background
Context and Background
  • Historical efforts to integrate technologies between hospitals and physicians
    • Free computers for physician offices See 56 F.R. 35,978
    • Telemedicine transmission line subsidies See OIG Advisory Opinion 99-14
    • Remote access to hospital patient data
    • Electronic health record systems


context and background3
Context and Background
  • Federal laws have constrained efforts to integrate through donation of technology
    • Antikickback: A hospital may not provide IT to referring physicians as an inducement for referrals.
    • Stark: A physician may not refer patients for designated health services to a hospital that's providing the physician with valuable IT, unless a Stark exception applies.
    • Tax: A tax-exempt entity is limited in its ability to provide a private entity with IT for less than FMV, under private inurement and private benefit rules.


case study allina s excellian project
Case Study: Allina’s Excellian® Project
  • Scope: Includes hospital and ambulatory electronic health record and practice management (e.g., billing, scheduling) modules
  • Magnitude: System to be implemented at 76+ Allina locations, plus affiliated entities
  • Timeline: Project launched in 2003; completion expected in 2008
  • Cost: Estimated investment -- $300 million. Estimated annual return after implementation -- $65 million


allina s excellian integration efforts
Allina’s Excellian Integration Efforts
  • Objectives:
    • Extend our Excellian system to include affiliated independent physicians, and thereby:
      • Support movement toward a community health record
      • Improve quality across the continuum of care
      • Enhance patient satisfaction and the experience of care
      • Create cost-savings and other efficiencies for hospitals and physicians


allina s excellian integration efforts8
Allina’s Excellian Integration Efforts
  • Pre-2006 strategies:
    • Provide “full functionality” Excellian system (i.e., electronic health record and practice management) at fair market value
    • Provide physicians with limited remote access to Excellian system at little or no cost to facilitate care to Allina patients


allina s excellian integration efforts9
Allina’s Excellian Integration Efforts
  • Full Functionality Model: Physician Concerns
    • Why pay for bells and whistles we don’t need? Why buy a Cadillac if all we need is a Chevy?
    • What credit will we get for the extra hassles and expense of implementing early?
    • How do we recoup the loss to productivity during the initial weeks/months after go-live?
    • How do we pay for all this?


allina s excellian integration efforts10
Allina’s Excellian Integration Efforts
  • Limited Functionality Models: Allina Concerns
    • How can we move closer toward an integrated community health record?
    • How can we leverage our investment to further reduce the costs of care in our communities?
    • How can we do more to advance shared goals that depend on efficient, effective communication among all providers?


allina s excellian integration efforts11
Allina’s Excellian Integration Efforts

“How can we fully engage independent physicians in a strategy that is fundamentally changing how we care for patients?”



technology donation rules
Technology Donation Rules
  • Stark Exception:
    • Permits a DHS entity to donate electronic health record information technology (EHR IT) to referring physicians at less than FMV, provided certain conditions are met.
  • Antikickback Safe Harbor:
    • Permits a Medicare provider to donate EHR IT to any individual or entity at less than FMV, provided certain conditions are met.


conditions for technology donation
Conditions for Technology Donation
  • Conditions:
    • Donor doesn’t act to limit the IT’s interoperability or compatibility with other EHR systems.
    • Recipient pays 15% of donor’s cost of the technology before receiving the technology.
    • Donor doesn’t finance or loan funds to the recipient to pay for the technology.
    • Recipient doesn’t make receipt of the technology a condition of doing business with the donor.


conditions for technology donation14
Conditions for Technology Donation
  • Conditions (cont.):
    • Volume or value of recipient’s referrals isn’t directly used to determine eligibility for the technology.
    • The arrangement is set out in a written agreement that meets certain requirements.
    • Donor doesn’t knowingly provide technology equivalent to that already possessed by recipient.


conditions for technology donation15
Conditions for Technology Donation
  • Conditions (cont.):
    • Donor doesn’t restrict recipient’s ability to use the technology for any patient without regard to payor status.
    • The software contains electronic prescribing capability that meets Medicare Part D standards.
    • The transfer of technology is completed before December 31, 2013.


covered technology
Covered Technology
  • Covered technology (“Items and Services”) includes, for example:
    • interface and translation software,
    • rights, licenses and intellectual property related to EHR software,
    • connectivity services (including broadband and wireless internet services),
    • clinical support and information services related to patient care (but not separate research or marketing support),
    • maintenance services,
    • secure messaging,
    • “patient portal” software, and
    • training and support services.


covered technology17
Covered Technology
  • Covered technology (“Items and Services”) also includes:
    • EHR packages that include other functionality directly related to individual patient care and treatment (e.g., registration, scheduling, billing, clinical support software, etc.).
    • Application service provider models under which a physician receives access to computer-based EHR services over a network.


covered technology18
Covered Technology
  • Covered technology (“Items and Services”) excludes:
    • hardware (and operating software that makes the hardware function),
    • storage devices,
    • software with core functionality other than electronic health records (such as human resources or payroll software),
    • provision of staff to physicians or their offices (e.g., to migrate data from paper to electronic records), and
    • items and services used primarily to conduct personal business or business unrelated to the physician’s medical practice.


  • This requirement can be met in either of two ways:
    • Satisfy the rules’ definition.
      • “Able to communicate and exchange data accurately, effectively, securely, and consistently with different information technology systems, software applications, and networks, in various settings; and exchange data such that the clinical or operational purpose and meaning of the data are preserved and unaltered.”
      • HHS recognizes that technology is evolving, and states the software must be “as interoperable as feasible” given the prevailing state of technology at the time of the donation.


  • Provide software that is “deemed” interoperable.
    • This is any software that has been certified, by a recognized certifying body, no more than 12 months before the date the software is provided to the physician.
    • Certification Commission for Healthcare Information Technology (CCHIT) is now officially recognized by HHS as a certifying body. (
    • CCHIT has certified numerous ambulatory EHRs according to criteria for functionality, security and interoperability.
    • Only current CCHIT interoperability requirement for ambulatory EHRs is ability to receive lab results; proposed new standards are more comprehensive.


physician selection criteria
Physician Selection Criteria
  • A determination of eligibility made based on any of the following will be deemed not to take directly into account the volume or value of referrals:
    • Total number of prescriptions written by the physician
    • Size of the physician’s medical practice (e.g., total patients, encounters or RVUs)
    • Total number of hours the physician spends practicing medicine
    • The physician’s overall use of technology
    • Membership on hospital’s medical staff
    • Level of uncompensated care provided by the physician
    • Any other “reasonable and verifiable” criterion that doesn’t directly take into account volume or value of referrals


cost sharing rules
Cost Sharing Rules
  • The physician must pay 15% of all costs of the technology (e.g., includes upgrade costs).
    • Total system costs versus incremental costs for access?
  • The rules do not expressly describe the 15% of costs as a floor, but expect clarification on this point.
  • Methods of cost allocation will be closely scrutinized to ensure no excess benefit to recipient (i.e., physician pays no less than 15% of the donor’s actual cost).
  • Rules encourage donors to use of a “reasonable and verifiable” method for allocating costs, and to retain contemporaneous and accurate documentation.


other issues
Other Issues
  • Do the rules provide relief for tax-exempt organizations?
    • No coordination between HHS and IRS on EHR donation rules. Comments on this topic were “out of scope.”
    • No corresponding IRS rule.
    • Public policy behind the regulations (i.e., to promote adoptoin of interoperable EHRs) should support a determination of community benefit.
    • Community benefit analysis should still be conducted and carefully documented, and selection criteria should support community benefit goals.


other issues24
Other Issues
  • Could a donor vary its recipients’ discounts based on factors unrelated to referrals?
    • A differential in cost-sharing between recipients will be scrutinized for any direct relationship to volume or value of referrals.
    • Absent such a relationship, the technology donation rules might allow greater flexibility to pay physicians for outcomes rather than effort.
    • Example: Adjust discount levels annually based on physicians’ success in achieving key quality targets, adopting predetermined evidence-based practices, or meeting patient satisfaction goals.


other issues25
Other Issues
  • Is there any circumstance under which a donor could provide a greater than 85% discount off its costs?
    • Yes, where the technology is not “remuneration.” See 69 FR 16113.
    • Otherwise, probably not. But a recipient could be compensated at FMV for providing services to the donor (e.g., “beta” services).
  • What secondary systems or services might donors want to price at FMV?
    • Systems that are independent from the EHR (e.g., document management)
    • Services that will continue beyond sunset date (e.g., support and maintenance)


other issues26
Other Issues
  • Is the donation taxable to the recipient as compensation/ revenue?
  • What might the cost-sharing requirement mean for refunds when software fails?
  • What representations should physicians ask of donors re: interoperability, selection criteria, cost allocation methodology, etc?


  • What documentation is recommended for an entity that intends to donate IT under the new rules?
    • Agreement between donor and recipient, and before the donation, reflecting the donated technology, its cost to the donor and the recipient’s contributions. Rules suggest adding third party vendor to physician agreement as a “prudent business practice.”
    • Selection criteria, rationale and data supporting selection of recipients against those criteria.
    • Cost allocation methodology and supporting data.
    • Rationale for any differential among recipients in level of cost-sharing.


  • Recommended documentation (cont.)
    • Community benefit assessment (for tax-exempt donors)
    • Certification or other basis for determining software is interoperable and contains suitable e-prescribing capability.
    • Determination of fair market value for any component of IT that is provided outside of the exception/safe harbor.
    • Consider documenting board or other senior level approval of selection criteria.
    • Communications verifying potential recipients do not already possess equivalent technology.


allina s next steps
Allina’s Next Steps
  • Revisit our Excellian project with several questions
    • How can the integration effort support Allina’s core strategies?
      • Accelerate progress toward our goal of “one patient, one record”
      • Enhance patient satisfaction and convenience
      • Advance our quality agenda
    • What could we realistically hope to accomplish within the next year?
    • What would it cost? What can we afford?


allina s next steps30
Allina’s Next Steps
  • Develop selection criteria
    • Define what constitutes an affiliate practice for Allina
    • Identify criteria
      • that are reasonable, objective/measurable, not directly related to referral volume or value, and
      • that match our requirements for an affiliate practice
    • Evaluate criteria (in conjunction with preferred pricing model) for affordability and practicality; adjust as required
  • Select targets and determine interest
  • Finalize affiliate list, prioritize and commence contracting


a few contracting considerations
A Few Contracting Considerations
  • Secure vendor commitments on certification
  • Obtain broad license rights to maximize flexibility
  • Pass through licensee obligations to users as appropriate
  • Consider sales tax issues (license vs. data services)
  • Anticipate key physician concerns
    • Data ownership and confidentiality
    • Termination rights and remedies
  • Don’t count on many billable hours!