Favorable Stark Law Advisory Opinion on Information Technology Arrangement

30 May 2008 Publication
Authors: Maria E. Gonzalez Knavel Lawrence W. Vernaglia

Legal News Alert: Health Care

On May 29, 2008, the Centers for Medicare & Medicaid Services (CMS) published a favorable Stark Law Advisory Opinion on an information technology arrangement. The Stark Law prohibits a physician from referring certain “designated health services” to an entity with which the physician (or an immediate family member of the physician) has a financial relationship by ownership or compensation, unless at least one of several exceptions is met. Failure to meet an exception results in, among other things, the entity being unable to bill Medicare for the referred designated health services.

Hospitals are exploring various information technology options with physicians in their communities to improve the quality and speed of information flow and to improve the integration of physician and hospital services. There is a widely held agreement (in the government and the private sector) on the significant benefits to quality and prevention of medical errors such integrated health information systems provide. However, the Stark Law, even after the promulgation of the e-prescribing and Electronic Health Record (EHR) exceptions, can remain a barrier to the rollout of a variety of these options. In this Advisory Opinion, CMS makes clear that the basic access and integration of the hospital’s system with a physician’s systems for the purpose of ordering or communicating the results of laboratory tests or procedures furnished by the hospital is not compensation to the physician, even when the hospital incurs significant costs for the interface between the two systems.

The requestor (Requestor) in the Advisory Opinion was a non-profit corporation that owns hospitals that purchased information technology services designed to integrate the hospitals’ information systems with the electronic medical records of their medical staffs. The system was to be used “only to order or communicate the results of tests and procedures furnished by the Requestor and could not be used for any purpose other than the ordering or communicating of the results of tests or procedures furnished by the Requestor.” CMS noted that the Requestor further certified that the system cannot be “applied or altered” by the physicians to perform any alternative functions and the physicians may not resell or transfer their licenses to use the system.

While the opinion may be relied upon only by the Requestor, the opinion is nevertheless useful because it indicates CMS’s position on one of the core Stark compliance avenues on which vendors in this industry have relied. To the extent that the provision of information technology falls within the above limitations, a hospital should be able to provide such technology without charge to its physicians. A hospital’s provision of more comprehensive technologies to a physician is likely to be deemed compensation and must meet other Stark exceptions such as the exceptions for providing e-prescribing or EHR information technology.

Legal News Alert is part of our ongoing commitment to providing up-to-the minute information about pressing concerns or industry issues affecting our health care clients and colleagues. If you have any questions about this alert or would like to discuss this topic further, please contact your Foley attorney or any of the following individuals: 

Maria E. Gonzalez Knavel
Milwaukee, Wisconsin

Charles B. Oppenheim
Century City, California

Michael Scarano
San Diego/Del Mar, California

Lawrence W. Vernaglia
Boston, Massachusetts

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