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How the Physician Payment Sunshine Act Could Affect Practice Revenue

By Greg Freeman  
   October 10, 2013

This provision of the healthcare law does not create new penalties for financial interactions with drug or device companies, or any other organization, but it may cause doctors to change some of their outside activities.

This article originally appeared in Managed Care Contracting & Reimbursement Advisor, October 2013.

The Physician Payment Sunshine Act, also known as the National Physician Payment Transparency Program and the Open Payments Program, is another part of the Patient Protection and Affordable Care Act that has physicians wondering just how it will affect their revenue and managed care reimbursement.

The good news is that it does not have to produce an adverse financial impact on your practice, though you may have to change some of your outside activities to keep the program from complicating how you provide care.

Enacted in February 2013, section 6002 of the ACA sets forth the Physician Payment Sunshine Act. Like most of the ACA, at its core the Sunshine Act is about transparency and public disclosure, explains Craig B. ­Garner, JD, an attorney in Santa Monica, Calif. The final regulations attempt to close practically every viable loophole that may have existed in prior versions of the Sunshine Act by requiring certain disclosures by manufacturers of drugs, devices, and biological or medical supplies who participate in any federally funded healthcare program.

Many group purchasing organizations (GPO) must also make similar disclosures, including but not limited to certain physician ownership or investment interests and certain payment information made by these entities to physicians. The deadline for compliance pursuant to these regulations is August 1, 2013, when these entities must begin to collect the information, and March 31, 2014, the date by which these entities must report information to the federal government.

Certain activities are exempted, such as taking samples from a drug company to distribute to patients. But most compensation or goods worth $10 or $100 aggregate in a year must be reported. (See the sidebar below for more details on how the law works.)

"This is forcing everyone to shine a bright light on how they are compensating physicians," Garner says. "On one hand, it's good we'll know how everyone is being compensated and who they are involved with. But on the other hand, if people are doing something wrong that they don't want everyone to know, they're probably not going to be that concerned about making a proper disclosure."

The act does not create new penalties for financial interactions with drug or device companies, or any other organization. The Stark Law and anti-kickback laws still apply in those areas, but the Sunshine Act now compels disclosure and enacts penalties for failing to comply.

"It does create more pressure for the physician," ­Garner says. "They are the ones who could be embarrassed if they don't want anyone to know about these transactions—if, for instance, they've been prescribing this medicine pretty heavily and it turns out they've been paid by the manufacturer. If that's the case, you have to clean up your act and comply with this act."

Companies will disclose doctors' names
The disclosure is made by the companies or GPOs, not the physicians, and Garner says most companies will not hesitate to list all the physicians they work with. They don't have anything to gain by keeping your name off the list and much to lose if they are found out of compliance, he explains. That means physicians must determine whether they are comfortable having their names listed as receiving money from the company, or whether they can give up that revenue for the sake of appearances, he says.

"The difficult cases will be those in which you are doing nothing improper and the relationship is entirely legitimate, yet it can give the appearance of some type of undue influence on your practice of medicine," ­Garner says. "Those cases will require you to assess how much that income means to you. There's not always something wrong with doing work for these companies, but there is such a stigma these days that any nexus can be negative."

The transparency program will have a profound effect on the relationship between physicians and the rest of the healthcare industry, says Robert ­Hitchcock, MD, FACEP, a practicing physician and vice president and chief medical informatics officer with T-System, a nationwide company based in Dallas that helps physicians improve efficiency and maximize revenue. He notes that the individual physician is largely powerless to control how the information is disclosed. Even if the physician disagrees with the company's intention to disclose a relationship, the company must go ahead with disclosure if no agreement has been reached in 60 days.

"What this means for most physicians is that they will seriously rethink any collaboration they might have with drug companies," Hitchcock says. "As a practicing physician, I really don't want my name on a list for having been to this CME and gotten this amount of money from Pfizer and this amount from Schering-Plough. I know that I personally will no longer be attending CME that is sponsored like that."

The looming disclosure is best known by those physicians who earn substantial income from their interactions with drug and device companies, but the requirements will affect nearly every practicing physician, says Hitchcock. General practitioners may be affected less, he theorizes, while specialists who are involved in more research could face choices about whether to continue.

Nearly all compensation covered
The definition of compensation requiring disclosure is broad, explains David Schweighoefer, JD, a partner with the law firm of Walter Haverfield in Cleveland. It includes cash, cash equivalent, in-kind items or services, stock, stock options, dividend interest, or any other kind of ownership interest or other kinds of payment. Included are consulting fees, honoraria, gifts, entertainment, education, research, royalties, license fees, speaking fees, and grants.

"The net appears to be thrown fairly widely to capture almost everything that would be a transfer of value," he says. "Nearly any way you can be compensated by a company is going to be included. That's not to say it's illegal.

Certain things are excluded, however. Educational materials for patients do not trigger the reporting requirement, and neither do rebates or discounts. Schweighoefer points out, however, that any transfer of monetary value to a physician's family member does count. Don't think you can get around the reporting requirement by having the company provide the compensation to your child, sister, or parent.

Most patients will not be concerned with whether you have a financial relationship with a healthcare company, Schweighoefer notes, but there will be some that challenge physicians about those relationships.

"In those few cases, you may want to be prepared to explain your relationship and why it does not affect your clinical decision-making," he says. "I have spoken with some physician clients who intend to explain that relationship, however innocuous, to the patient up front so that there is no misunderstanding later."

Social functions can put you on list
Even when attending professional meetings that are not sponsored by drug companies, Hitchcock says he will have to be careful about the social functions he attends. Breakfasts and social hours often are sponsored by drug companies, and Hitchcock says he will no longer attend those because his name would show up on the disclosure lists.

"I think once physicians see this happening, it's going to have a really chilling effect on their relationships with the healthcare industry," he says. "A lot of what is going to be disclosed is just a normal part of doing business, but I'm not sure I want my ownership value in a GPO, for instance, to be put out there for public consumption. It's like putting my taxes out there for anyone who wants to see."

Physicians must reexamine their relationships with drug and device makers, Hitchcock advises. More than ever before, he says, watch for the line between an informative interaction and the exchange of something that has monetary value. Talking with a drug company representative and accepting samples for your patients should be no problem, he says.

"Try to avoid, at all costs, accepting anything of monetary value," he says. "That will keep your name off the lists."

What the transparency program means to you
CMS is implementing the Open Payments Program to increase public awareness of financial relationships between manufacturers of drugs, devices, biologicals, and medical supplies, as well as between applicable group purchasing organizations , and physicians and teaching hospitals.

Relevant definitions
The following key definitions were included in recently adopted related regulations:

  • Applicable manufacturers are defined as those entities that operate in the United States and, subject to limited exceptions:
    • Are engaged in the production, preparation, propagation, compounding, or conversion of a covered drug, device, biological, or medical supply; or
    • Are entities under common ownership with an entity ­engaged in such activities, which provide assistance or support to such entities with respect to the production, preparation, propagation, compounding, conversion, marketing, promotion, sale, or distribution of a covered drug, device, biological, or medical supply.

 

  • Applicable GPOs are defined as those GPOs that operate in the United States and purchase, arrange for purchase, or negotiate the purchase of a covered drug, device, biological, or medical supply for a group of individuals or organizations that are not solely using the covered supply.
  • Covered products are defined as:
  • Any drug or biological for which payment is available under Medicare, Medicaid, or the Children's Health Insurance Program (CHIP), either separately or as part of a bundled payment, and requires a prescription to be dispensed
  • Any device or medical supply for which payment is available under Medicare, Medicaid, or CHIP, either separately or as part of a bundled payment, and requires premarket approval by, or premarket notification to, the FDA
  • Teaching hospitals are defined as hospitals that receive payment for Medicare direct graduate medical education, inpatient prospective payment system indirect medical education (IME), or psychiatric hospital IME programs.

Data collection and reporting requirements
Under the OPP, the primary responsibility of applicable manufacturers and applicable GPOs is to comply with the following reporting requirements on an annual basis:
Applicable manufacturers of covered products must report payments or other transfers of value they make to physicians and teaching hospitals to CMS.

  • Applicable manufacturers and applicable GPOs must report to CMS ownership or investment interests held by physicians or their immediate family members. Payments and other transfers of value to these physicians must also be reported.
  • In particular, applicable GPOs must report to CMS payments or other transfers of value made to physician owners or investors if they held ownership or an investment interest at any point during the reporting year.
  • For purposes of the OPP, reportable payments or other transfers of value include, but are not limited to, such things as consulting fees, honoraria, gifts, entertainment, food and beverages, travel and lodging, and research payments. Research payments or other transfers of value, however, may be delayed from publication on the website until the date of FDA approval or up to four years from the date of report (whichever is first), when made under a product research or development agreement in connection with:
    • Research on, or development of, a new drug, device, biological, or medical supply, or a new application of an existing drug, device, biological, or medical supply; or
    • Clinical investigations regarding a new drug, device, biological, or medical supply.

Penalties
Under the Affordable Care Act, applicable manufacturers and applicable GPOs may be subject to civil monetary penalties, capped annually at $150,000 for failure to report and $1,000,000 for known failure to report.

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