WASHINGTON – Hospitals are slowly showing interest in implementing electronic health records among physicians.
In the five months since new provisions enabling technology donations went into effect, more hospitals are inquiring about how they could provide electronic health record applications or e-prescribing packages for physicians in their service areas.
However, significant questions still surround the program, including whether such donations will put not-for-profit hospitals at risk for losing their tax-exempt status.
That issue was raised by the Internal Revenue Service in its review of the regulations, the rules for which were issued in August by the Office of the Inspector General of the Department of Health and Human Services. The rules provide exceptions for the Physician Self Referral Regulation, commonly called the Stark rule, and the Anti Kickback Act Safe Harbor, intended to thwart physician referrals to facilities in which they have a financial interest.
As of mid-February, the IRS had not ruled on whether such programs would jeopardize not-for-profits’ tax-exempt status, said a spokesperson for the American Hospital Association, which wrote a letter in November asking the IRS for guidance and a meeting to discuss an official ruling permitting donations to physicians.
“We think that the Stark and anti-kickback rules are an important step in removing a significant barrier to hospitals sharing IT with physicians,” the spokesperson said. “We know that there are hospitals poised to move ahead; they’re just waiting for the IRS guidance.”
Scott Wallace, chairman of the National Alliance for Healthcare Information Technology, says some leading hospital systems are moving quickly to take advantage of the new provisions and get IT into the hands of physicians in their service areas.
“It has opened up a whole new level of discussion about the business imperatives of connecting physicians,” he said. The exceptions are written broadly enough so that other entities, such as health plans or labs, can provide IT to physicians.
NAHIT raised several concerns about the exceptions when they were proposed in late 2005. Wallace said HHS took many of the comments into account when crafting the final regulations.
NAHIT is getting a lot of calls from interested facilities and systems, showing that there’s broad recognition of the economic common sense underlying the concept. But Wallace says such arrangements are not easily crafted.
“The incremental cost of connecting another physician, if you already have a system, is clearly very low,” he said. “Hospitals can’t give physicians any hardware, but the variable cost of the software, which can be given away, is about zero. But these are complex processes, and organizations have to create all kinds of security walls, data access protocols and storage protocols, as well as training for physicians. It’s not just a matter of buying another PC and you’re rolling.”
Hospitals’ willingness to donate EMR software depends on physicians’ willingness to adopt the technology, said Keith MacDonald, research director at the FCG Group, a Long Beach, Calif.-based consulting group. Some physician groups want to move forward slowly, for example, by implementing e-prescribing, while others are becoming more aggressive after seeing some of the benefits.
“The ones that have moved forward pretty quickly with this have figured out there’s a first-mover advantage,” he said. “Now they’re figuring out how to pay for it.”
The cost of such donations, and recovering them within the scope of the exceptions, is only one concern. Other hospitals and systems are moving slowly because of the legal complexities, he said.
“There are only a small handful of organizations that are ready to do this,” MacDonald said. “There (are) still a lot of details that need to be worked out and some due dilligence that has to happen. Hospitals have to get comfortable with it legally and with these new physician relationships.”