SEATTLE, WA USA -- HEALTHCARE UPDATE NEWS SERVICE(TM) -- OCTOBER 25, 2004: Establishing a regional health information organization (RHIO) presents a host of technical, regulatory, financial and practical challenges. Most would agree that in order for the regional health information organization system to be effective, community physicians must participate. Community physicians, however, generally do not have an economic incentive to invest in the technology needed to establish and support the system. This economic reality has prompted proponents of health information exchanges to explore methods of developing the network infrastructure that do not require physicians to make significant economic investment. When health care providers (such as hospitals or health systems) fund the development of a RHIO, the federal Stark and anti-kickback laws and regulations can pose a potential barrier. Despite a newly adopted exception, the Stark Law remains a serious obstacle to many types of health information systems. The federal anti-kickback statute creates a different and more fact specific set of risks.

The Federal Physician Self Referral or (Stark) law prohibits a physician from referring Medicare patients for certain designated health services (DHS) to an entity with which the physician has a financial relationship, unless an exception applies. 42 U.S.C. § 1395nn. The Stark Law is notorious for both its breadth and ambiguity. Given that virtually any remuneration could potentially create a financial relationship with a physician, Stark Law prohibitions must at least be considered if the development of the RHIO is directly or indirectly funded by a hospital or health system. There are essentially two approaches to addressing Stark issues: (1) construe the establishment of the network as not constituting remuneration to community physicians; (2) identify one or more Stark exceptions and structure physicians' relationship with the network to fit within an exception.

Some industry observers have argued that the establishment of a RHIO does not change the fundamental obligation of hospitals and other providers in the community to share information with physicians and others relating to common patients. Historically, hospitals have shared information by making copies of records, using the fax machine and employing other lower-tech methods of transmitting data. The establishment of a RHIO does not change the fundamental "benefit" a hospital provides to a physician when it transmits data to a physician concerning his or her patients. While this argument has merit, it has limits. The manner in which the hospital makes information available to providers in the community must be considered. Providing a complete computer system for the physician's office, for example, would appear to be beyond the pale.

At least four Stark exceptions may be useful in the context of establishing a RHIO. Each exception has its own requirements and limitations. The specific configuration of the network will determine which exception is most useful.

1. Non Monetary Compensation Up to $300. Stark includes an exception for non monetary compensation up to $300 per year. 42 C.F.R. § 411.357(k). This exception allows a referring physician to receive compensation from an entity in the form of items or services (not including cash or cash equivalents) that does not exceed an aggregate of $300 per year.
   
   Any form of non monetary compensation can be used under this exception so long as specific conditions are met, including that the compensation not be determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician.
   
   If a RHIO sponsor were to rely on the $300 exception to avoid Stark prohibitions, it may be difficult to value the benefit of the network to a physician and, once a value is established, the sponsor would face the additional challenge of ensuring the $300 limit is not exceeded.
   
   
2. Medical Staff Incidental Benefits. Stark also includes an exception for certain incidental benefits provided by hospitals to their medical staffs. This exception allows compensation in the form of items or services (not including cash or cash equivalents) from a hospital to its medical staff provided specific conditions are met. Centers for Medicare and Medicaid Services (CMS) recently expanded this exception to non-hospital facilities that have bona fide medical staffs. 42 C.F.R. § 411.357(m).
   
   In the commentary on the most recent regulations, CMS notes that the use of a dedicated computer terminal used only for hospital patients and services would benefit the hospital and is not considered to have independent value to the physician.
   
   Relying on the medical staff benefits exception in the context of a RHIO, however, is not always feasible. The exception would not solve the Stark issues for providers who do not have bona fide medical staffs. Moreover, this exception's application to health information networks may also be limited by some of the requirements, i.e., that the "communications devices" must be used "exclusively" to gain access to hospital records.
   
   
3. Payments at Fair Market Value. If the RHIO charges (or imposes some concrete obligation on) physicians for participation in or use of the network it may be possible to fit the arrangement within the Stark Law exception for payments by a physician for items or services at fair market value. 42 U.S.C. 1395nn(e)(8). As the name of the exception suggests, the key issue would be to determine whether the network charges are in fact fair market value for the services provided. Whether the charge takes into account the cost of system development or is limited to the incremental costs associated with the physician's use of the network is a factor in this analysis.
   
   
4. Community-Based Health Information Exchange. Earlier this year, CMS introduced a new exception that permits a hospital or other DHS entity to provide items or services "of information technology" to a physician to allow access to electronic health care records and complementary drug information systems, general health information, medical alerts, and related information for patients. C.F.R. § 411.357(u). The new exception is intended to encourage use of electronic technology. To qualify for this exception:
   • Items or services must be principally used by the physician as part of the community wide health information system;
   • The items or services must be provided to the physician in a manner that does not take into account the physician's volume or value of referrals;
   • The health information system (including both hardware and software) must be "community wide", that is, it must be available to all providers, practitioners and residents of the community who desire to participate; and
   • The arrangement does not violate the anti kickback statute or any federal or state laws or regulations governing billing or claims submission rules.