Passed as part of the Patient Protection and Affordable Care Act of 2010, the Physician Payment Sunshine Act (also known as the "PPSA" or the "Sunshine Act of 2013") seeks to create transparency and public awareness of financial relationships between health care providers and drug, medical device, biological and medical supply manufacturers. As part of the National Physician Payment Transparency Program (also known as "Open Payments"), beginning on August 1, 2013, applicable manufacturers and group purchasing organizations ("GPOs") will be required to make annual reports (beginning on March 31, 2014) to the Centers for Medicare and Medicaid Services ("CMS") of all qualified payments made to covered recipients. The information contained in these reports will then be aggregated by CMS, compiled in a CMS-administered database and be published to a publicly available website.

Although the PPSA does not impose any direct reporting requirements on physicians, an understanding of the PPSA is nonetheless important for physicians. All payment information reported under the PPSA will be made available to the public and will be directly linked to individual physicians. Any publishing of incorrect or misleading payment information could create appearances of impropriety or imply conflicts of interest detrimental to a physician's professional reputation and practice. From time to time, physicians will likely receive payments that will be publicly reported under the PPSA. It is important that all qualified payments are reported correctly, and that all payments received by physicians comply with any conflict of interest or other practice policy.

We recommend that each physician register with the Open Payments system to ensure timely notification of any payments reported on that physician's behalf. Physicians will also have the opportunity to sign up for Open Payments' email listserve in order to receive regular updates on the PPSA reporting process.

A BRIEF EXPLANATION OF THE PPSA

Who is required to make annual reports under the PPSA? The PPSA requires annual reports of all qualified payments to covered recipients be made by the manufacturer of any drug, medical device, biological or medical supply which is eligible for Medicare, Medicaid or CHIP reimbursement, and requires either a prescription (for drugs or biologicals) or FDA premarket approval or notification (medical devices and supplies) and group purchasing organizations ("GPOs") of any such drug, medical device, biological or medical supply.

NOTE: The PPSA does not impose any reporting requirements on physicians. Reporting is not required for any drug, medical device, biological or medical supply produced and used exclusively in-house.

Who is a covered recipient under the PPSA?

Under the PPSA, annual reports are required for qualified payments made to "covered recipients," which include:

  • Physicians, including both M.D.s and D.O.s;
  • Physician-Investors (from GPOs only);
  • Physician-Owners (from GPOs only); and
  • Teaching hospitals.

NOTE: Other medical professionals, including nurses, nurse practitioners, physician assistants and pharmacists, and non-professional employees are not covered recipients under the PPSA. Medical residents are not considered physicians for PPSA reporting purposes.

When is a qualified payment required to be reported under the PPSA?

The PPSA requires that all qualified "payments or other transfers for value" from an applicable manufacturer or GPO to a covered recipient be included in an annual report. "Qualified payments" under the PPSA include:

  • Consulting fees;
  • Other compensation for services;
  • Honoraria;
  • Gifts;
  • Entertainment;
  • Travel and lodging;
  • Education;
  • Research;
  • Charitable contributions;
  • Royalties or licenses;
  • A current or prospective ownership or investment interest;
  • Compensation for serving as faculty or as a speaker for at a non-qualified continuing education program; and
  • Grants

There are exclusions for certain payments, including but not limited to:

  • Transfers of value of less than $10, provided that the total value transferred by the applicable manufacturer or GPO to the covered recipient does not exceed $100 for the calendar year;
  • Product samples;
  • Educational materials intended for patient use or which directly benefit patients;
  • Loans of a medical device for a short-term trial period not exceeding 90 days;
  • Discounts and rebates;
  • Items used to provide charity care;
  • Food and beverage provided at a conference or similar event;
  • Compensation for speaking at a continuing education program only where:
    • The program is certified or accredited by the Accreditation Council for Continuing Medical Education, the American Academy of Family Physicians the American Dental Association, the American Medical Association, or the American Osteopathic Association
    • The applicable manufacturer or GPO does not pay the speaker, and
    • The applicable manufacturer or GPO has not selected the speaker, or otherwise provided a preselected list of acceptable speakers.

How is the amount of a payment determined?

For situations where the value of a qualified payment is not self-evident, CMS has issued flexible guidelines to determine the payment value to be reported. Value must be based upon the payment's fair market value in an open market, and must be determined from an objective standpoint, and not that of the recipient.

How are payment amounts allocated?

In most situations, it should be obvious to whom a payment is made. However, in the case of group practices, payment allocation is not always clear cut. In the group practice setting, the allocation of payments must be done on a case by case basis, and there is no de facto presumption that the payment should be allocated equally among all the practice's physicians. Factors to be considered when making the allocation include:

  • Which, if any, of the practice's physicians requested the payment; and
  • Whether the payment was made specifically on behalf of any physician(s) of the practice
  • Whether the payment is intended to benefit any physician(s) in particular, considering criteria such as a physician's practice area and scope of practice.

In situations where payment includes food or beverages made available to the practice staff, the payment amount allocated to each physician is the total value of the food or beverages provided divided by the total number of individuals to whom they were available, including all office staff and other personnel not considered covered recipients under the PPSA.

What information will be reported to CMS and made publicly available?

On March 31st of each year, beginning in 2014, applicable manufacturers and GPOs will file an annual report with CMS for the previous calendar year. All annual reports will include the physician's identity and NPI; the amounts paid during the past calendar year; the drug, device, or medical supply associated with the payment; the form of payment; the nature of the payment (e.g., Consulting, Gift, Travel, Entertainment, etc.); and the relationship between the physician and the manufacturers(s) and/or GPOs from whom they received qualified payments.