On September 30, the Center for Medicare & Medicaid Services (CMS) published the first set of data reported by pharmaceutical, medical device, biotechnology and medical supply companies, and group purchasing organizations (GPOs) related to payments and other transfers of value to physicians and teaching hospitals, as well as physician investment or ownership interests in those entities, as required by the Physician Payments Sunshine Act (the “Sunshine Act”). This payment data, which is publicly accessible on CMS’ Open Payments website (https://openpaymentsdata.cms.gov), revealed nearly $3.5 billion in payments made to physicians and teaching hospitals from pharmaceutical, medical device, biotechnology and medical supply companies, and GPOs from August 1 to December 1, 2013 alone. Public disclosure of these payments and ownership interests presents serious legal, regulatory and compliance risks, as well as reputational risk relating to conflicts of interest and quality of care. Physicians and hospitals will want to proactively review the reported data in order to be fully prepared to respond to the possibilities of increased public scrutiny from the press and their patients and potential government enforcement efforts spurred by increased transparency.
Unfortunately, while the data is accessible, the site is cumbersome and not intuitive. CMS has expressed its intention to make the site far more user-friendly in the future.
Overview of Sunshine Act ReportingThe Sunshine Act requires most manufacturers of drugs, medical devices, medical supplies or biologicals (called Applicable Manufacturers and GPOs) to report any payments or transfers of value made to “Covered Recipients.” Covered Recipients include Physicians (M.D.s, D.O.s, dentists, optometrists, podiatrists and licensed chiropractors) and Teaching Hospitals (all hospitals that receive direct or indirect graduate medical education payments from Medicare). Apart from a few specific exceptions, Applicable Manufacturers and GPOs must report all remuneration to Physicians and Teaching Hospitals that exceed $10 per payment or $100 in the aggregate per calendar year. Reportable payments cover a wide variety of categories, such as consulting fees, compensation for speaking and other services, honoraria, gifts, entertainment, food and beverage, travel and lodging, education, research funding and grants, charitable contributions, licenses and royalties, current or prospective investment and ownership interests, compensation for speaking at certain educational and continuing education events, space rentals and facilities fees.
Additionally, the Sunshine Act requires reporting of ownership and investment interests in Applicable Manufacturers and GPOs held by Physicians or their immediate family members. Reportable ownership and investment interest include securities which are not publicly traded (stock, partnership shares, limited liability company membership interests), stock options and other equity incentives (except those received as compensation until exercised), and loans or other debt instruments secured by property or revenue of an Applicable Manufacturer or GPO.
Why Sunshine Act Reporting Data MattersAnti-Kickback implications: The federal Anti-Kickback Statute, as well as similar state laws, prohibits the offering, provision or receipt of remuneration of any kind, whether directly or indirectly, in exchange for or to induce referrals or ordering of goods, services or other items covered by a federal health care program. Payments or other transfers of value made to Physicians by Applicable Manufacturers or GPOs may violate the Anti-Kickback Statute if even one purpose of the payment was to induce a Physician to make referrals, use medical devices or supplies, or prescribe medications. Prosecutors, investigators and the press will likely scrutinize the data reported under the Sunshine Act along with other information, including Medicare and Medicaid claims data, in efforts to allege correlations between payments to health care providers and referral, prescription and ordering patterns that indicate violations of the Anti-Kickback Statute.
Stark Law implications: Under the Physician Self-Referral Law (more commonly known as the Stark Law) and similar state self-referral laws, Physicians are prohibited from referring certain services payable under Medicare, including clinical laboratory services, physical and occupational therapy, durable medical equipment, and prosthetic devices, to entities with which they or their immediate family members have a financial relationship, unless a Stark Law exception applies. Sunshine Act disclosures could create serious doubt regarding the validity of the use of medical devices, medical supplies or the prescription of medications by Physicians, other members of their practices and hospital departments if they were offered by an Applicable Manufacturer or GPO that made payments to Physicians or in which Physicians have an ownership or investment interest. If no Stark law exception applies to the Physician payments, ownership or investment interests reported under the Sunshine Act, government officials will have the information they need to seek repayment and possibly impose civil monetary penalties.
False Claims Act implications: The False Claims Act prohibits health care providers from knowingly presenting a false claim for payment to federal and state governments. Under the Patient Protection and Affordable Care Act, claims resulting from a violation of the Anti-Kickback Statute now also violate the False Claims Act, with the maximum penalty for each claim increased to three times the amount of the claim plus $11,000. The False Claims Act allows whistleblowers to file a qui tam complaint and receive 15 to 30 percent of the total recovery. Based on the compelling financial incentives created by the Patient Protection and Affordable Care Act, the tremendous increase in the filing of qui tam complaints over the past several years will likely continue. Health care providers can, however, be sure that the possibility of sharing in a False Claims Act windfall will prompt more widespread and persistent mining of Sunshine Act reporting data to find opportunities to file potentially lucrative qui tam claims.
Reputational and other implications: Public disclosure of payments to Physicians by Applicable Manufacturers and GPOs and physician ownership interests in those entities will further contribute to public scrutiny of physician ordering and prescription practices. Even perfectly legal financial relationships may result in the perception that inappropriate financial payments influenced physicians’ clinical decisions, potentially resulting in reputational damage to physicians and hospitals. Physicians should be prepared to respond to questions from patients about their ordering and prescription practices.
ConclusionWith so much at stake, health care providers who choose to ignore the Sunshine Act data reported on the Open Payments website do so at their own peril. We recommend that hospitals, physicians and physician practices review all data reported on the Open Payments website, as well as their internal policies and procedures, as soon as possible. Health care providers should consult with experienced health care counsel to thoroughly evaluate the legal, regulatory, compliance and reputational risks presented by the recently reported Sunshine Act data and determine the best course of action to mitigate those risks to the fullest extent possible.