On May 11, 2007, the IRS provided guidance on the issue of hospitals providing staff physicians with financial assistance to acquire and implement software that is used predominantly for creating, maintaining, transmitting or receiving electronic health records (“EHRs”) for their patients. The U.S. Department of Health and Human Services (“HHS”) issued final regulations on August 8, 2006 that allow hospitals to provide, within specific parameters, EHR software and technical support services to their medical staff physicians without violating the federal anti-kickback law and the physician self-referral law. Until now, it was uncertain as to whether the IRS would follow HHS’s lead.
The IRS has stated that it will not treat the benefits a hospital provides to its medical staff physicians as impermissible private benefit or inurement in violation of Section 501(c)(3) of the Internal Revenue Code if the benefit falls within the range of services that are permissible under the HHS EHR regulations and the hospital operates in the manner described below. In addition to complying with the HHS EHR regulations, the hospital must ensure that the services are available to all of its medical staff physicians. Moreover, the hospital must provide the same level of subsidy to all of its medical staff members or vary the level of subsidy by applying criteria related to meeting the healthcare needs of the community.