Physician Payments Sunshine Act a Wake-Up Call

As required by the Physician Payments Sunshine Act and subsequent final rules, released by CMS earlier this year, beginning September 2014, medical device manufactures, pharmaceutical companies and group purchasing organizations ("GPOs") will be required to disclose payments of $10 or greater made to physicians, hospitals, and other providers on an annual basis. The data collection begins August 1, 2013, and runs through December 31, 2013. The report is due to CMS by March 31, 2014. CMS will post the data on a public website at the end of September 2014. Subsequent annual postings will occur on June 30.

As required by law, CMS must provide physicians 45 days to review, question, and revise reported information before it is posted online. It is striking that anything over $10 has a requirement to be disclosed; however, as with most rules, there are exceptions. Some of these exceptions include:

• OTC drugs and class I and II medical devices (i.e., suture materials and elastic bandages);

• Gifts or payments valued at $10 with the caveat that the aggregate amount of the payments do not exceed $100 annually; and

• Patient education materials and items that are for the patient or used with patients.

Physicians should also be cognizant of related laws and, in particular, the federal physician self-referral statute, the Stark Law. A provision in the law is the Voluntary Self-Referral Disclosure Protocol (SRDP). Under this provision, providers and suppliers can self-disclose actual or potential infractions of the Stark Law.

Self-disclosing can be likened to adding a stroke when the ball moves in golf. No one but the golfer may know, but if he does not disclose and is "caught" for the infraction, he could be precluded from participation in the game. Likewise, by disclosing and taking the penalty "up-front," while there may be an extra penalty assessed - in a physician or provider’s case a fine and settlement posting on the CMS website - the cost is significantly less than if the "infraction" is discovered and relayed by other means.

An example of this is the recent March 2013 settlement posting by CMS of $317,620. Here, a hospital in Louisiana self reported that its "arrangement with certain physicians, a professional staffing organization, and a physician practice group did not comply with the personal services arrangements and isolated transactions." [John Garver, III and Kelly Koeninger, New Settlement Reached Under Stark Self-Referral Disclosure Protocol (American Health Lawyers Practice Group Alert – subscription required (April 8, 2013)].

The Sunshine Act may in fact make it easier to comply with Stark and other relevant laws because of the transparency. Providers should consider self disclosure as a viable alternative and assess the enterprise risks from both a financial and reputational standpoint.