Physician Payment Sunshine Act Signals New Dawn for Compliance
Monday, November 14, 2011
Once upon a time, physicians and their families used to be able to enjoy exotic cruises sponsored by pharmaceutical companies where their only obligation, it seems, was to sign in briefly at sparsely attended meetings before embarking on offshore adventures. It’s been awhile since the sun slowly set on the wake of the last ship’s sybaritic junket.
Photo: Joseph J. Feltes, JD
Today, the Federal Physician Payment Sunshine Act — part of national healthcare reform — signals a new dawn of transparency, compliance obligations, and regulatory scrutiny. Beginning January 1, 2012, manufacturers of drugs, devices, biologicals or medical supplies, covered by Medicare, Medicaid or other federal healthcare program, must report to the Department of Health and Human Services all payments or transfers of value they make to physicians or teaching hospitals.
The Sunshine Act applies to payments or transfers of value covering a broad array of activities, including: consulting fees; compensation for services other than consulting; honoraria; gifts; entertainment; food; travel (including specified destinations); education and research; charitable contributions; royalties or licenses; current or prospective ownership or investment interests (other than through publicly traded securities or mutual funds); direct compensation for serving as faculty or as a speaker for medical education programs; grants; or falling within the catchall “any other nature of payment or other transfer of value as defined by the Secretary of HHS.” Additionally, if the payment or transfer of value relates to marketing, education, or research which pertains to a covered drug, biological, device or supply, that also must be reported, along with the name of the covered product.
Remaining outside the aura are certain excluded items that need not have to be reported, such as the transfer of items having a value of less than $10 (unless the items exceed an annual aggregate of $100); product samples for patient use not intended to be sold; educational materials that directly benefit patients or are intended for patient use; the loan of a covered device for 90 days or less for evaluation purposes; items or services provided under a contractual warranty; certain discounts and rebates; and in-kind items used to provide charity care, to name a few.
Covered manufacturers must disclose to the Secretary in electronic form the name of the physician (or teaching hospital); the physician’s business address, specialty and National Provider Identifier; the amount of payment or value of transfer; the dates on which payments or transfers are made; a description of whether payment or transfer was made in cash or cash equivalents, in-kind items or services, or stocks or stock options. This information will be stored in a database.
While the burden of reporting rests with covered manufacturers, access to and use of the electronic information stored in the database can be accessed by the media, consumers, the Office for Inspector General, and by prosecutors. That could pose potential liability risk to physicians for non-compliance with federal Anti-Kickback (illegal remuneration), the Stark laws (financial interest), or the False Claims Act (ill-gotten gain). It also could create potential reputational damage — fairly or unfairly — if it were to appear that research was flawed or a physician’s choice of drug was influenced by payments or other transfers of value.
The Wall Street Journal, in an investigational piece (December 20, 2010), reported that five spine surgeons at Norton Hospital in Louisville, Kentucky, who performed the third-most spinal fusions of Medicare patients in the country, had received more than $7 million in “royalties” from Medtronic, the nation’s biggest manufacturer of spinal implants.
The WSJ indicated that it had “mined” certain Medicare databases as the source of its exposé. The new Sunshine Act likely will eliminate the need to dig deeply, since the information will be collected in one database, there for the picking. Critics of the law, including Thomas Peter Stossel, MD, Professor of Medicine at Harvard Medical School, objects that the term “Sunshine” carries with it the “implicit aura of corruption,” which indeed is unfortunate.
Obviously, not all payments or transfers of value to physicians or teaching hospitals are tantamount to, or result in, a conflict of interest, breach of professional ethics in the selection of drugs or medical devices, or a violation of federal fraud and abuse laws. Physicians should not cease speaking, participating in clinical trials, and otherwise collaborating with manufacturers. But, physicians need to be mindful of the risk of exposure the Sunshine Act presents, and take prudent measures, so they do not get burned.
Joe Feltes is an attorney with Buckingham, Doolittle & Burroughs in Canton and a member of its Health & Medicine Practice Group. Mr. Feltes is also the Managing partner of Buckingham Canton.
MD News November/December 2011, Cleveland/Akron/Canton
There are many aspects of this article that boggle my mind. but, perhaps the most obvious is how positive the author seems to be about these developments, as if this law is a great boon to medical practice! Far from it, Mr. Feltes! This whole situation underscores how poorly represented practicing physicians have been in dealing with the push to reform us, given how unethical and scrupulous so many of us must be to merit this specific oversight. You see, Mr. Feltes, the real issues here start with the fact that physicians and their relationship with industry are not at all unique, however unjustified. These abuses occur in every industry. The first place we physicians should consider is why have we been singled out for such specific regulation? The justification is that it is critical to the public good to specifically stop these abuses by health providers. Maybe that is true, but certainly, our State and Federal legislators should be no less subject to this incredible scrutiny, not to mention many other professions, such as the legal profession. No the first issue is that we have been so poorly represented that we have become an easy whipping boy for reformists. The second issue is what a nightmare this law will be. It takes effect today, the first business day of 2012, but the specific regulations that will determine its actual implementation will not be finalized until the second half of this year. However, whatever those regulations are will apply for the entire year. This means that whatever is finally included in the definition of value given to physicians becomes a potential tax liability to them and their employers. Consider the tax implications of meals, for example. If a vendor buys a meal for the staff of a large practice, the physician not only assumes the tax liability for the value of his own meal as income to him or her, but the liability for the entire meal for all employees. That value will then be transferred to the employer of the physician, which must account the value of the meal for all employees, not including the physician and deduct it as a business expense or be taxed on the value. However, all of this detail obscures a basic point of reason, which has been lost in all of the easy shooting at health providers as unethical villains in our society: health providers, as anyone else in an economic endeavor have a need and have the right to interact with their vendors. In the current vogue to regulate health providers, legislators have abolished any reasonable opportunity for providers to interact with vendors, as any other economic group interacts with their vendors. And despite the articles in the Wall Street Journal and elsewhere, health providers, in my opinion, must worry substantially about how they got into a place where they and they alone became subject to such negative oversight.