Recent Changes in EHR Donation Rules

posted in: Blog | 0

Is your practice daunted by the costs of implementing an electronic health record (“EHR”) and entertaining the idea of using a donated EHR?  If so, continue reading about how the new Health and Human Services (“HHS”) Office of Inspector General (“OIG”) rules published on December 27, 2013 related to the EHR Safe Harbor could affect your decision.

The OIG has had a longstanding concern about the provision of free or reduced price goods or services to an existing or potential referral source (such as from a laboratory company or hospital to a physician practice).  The OIG believes that there is a serious risk that free or reduced-priced goods or services (such as donated EHRs) may be used as a vehicle to disguise or confer an unlawful payment for referrals of Federal health care program business.[1]  Unlawful payment for these referrals would result in a violation of the Anti-Kickback Statute (“AKS”).  Under the AKS, there are criminal penalties for individuals or entities that knowingly and willfully offer, pay, solicit, or receive remuneration in order to induce or reward the referral of business reimbursable under any of the Federal health care programs.  In fact, this type of business arrangement is considered a felony and is punishable by fines of up to $25,000, imprisonment for up to 5 years, and may result in exclusion from participation in Federal health care programs.[2]

To encourage the use of EHRs, the OIG published an EHR Safe Harbor in 2006 that describes permissible payment and business practices that would be “safe” from AKS penalties, even though they may potentially be capable of inducing referrals of business under Federal health care programs.[3]  Specifically, there is a carve-out for items and services in the form of software or information technology and training services necessary and used predominantly to create, maintain, transmit, or receive electronic health records, so long as certain conditions are met.  However, because the EHR safe harbor was set to expire on December 31, 2013, the OIG issued a final rule pushing back the expiration date and revising certain elements of the EHR Safe Harbor.[4]

First, the new rule explains that the donated software is now deemed to be “interoperable” if, on the date it is donated, it has been certified by the National Coordinator of Health Information Technology, to an edition of the EHR certification criteria identified in the then-applicable version of 45 CFR part 170.[5]  Previously, the safe harbor required the software to be certified by the HHS Secretary within no more than 12 months prior to the date of donation.  The OIG reasoned that when assessing whether software is interoperable, the appropriate inquiry is whether the software is as interoperable as feasible given the prevailing state of technology at the time the items or services are provided to the recipient.[6]  Thus, this modification would provide donors and recipients with certainty that donated software satisfies the interoperability requirement of the EHR Safe Harbor.

Second, the new rule removes the requirement that the EHR software contain electronic prescribing capability in order to qualify for protection under the HER Safe Harbor.[7]  The OIG reasoned that removing this provision was unlikely to increase the risk of fraud or abuse, as most EHR systems already include an electronic prescribing component.

Third, the new rule shifted the expiration or “sunset” of the EHR safe harbor from December 31, 2013 to December 13, 2021, to provide health care professionals with more time to adopt donated EHR technology and safeguard against foreseeable future fraud and risks.[8]  Additionally, the December 31, 2021 date conveniently corresponds with the end of the incentive payments under the Medicaid Incentive Program.

Fourth, the new rule no longer includes laboratory companies in the class of protected donors.[9]  The OIG acknowledged that some laboratory companies are unlawfully conditioning donations of EHR items and services on the receipt of referrals from the recipients of those donations or establishing referral quotas and threatening to require the recipient to repay the cost of the donation if the quotas are not reached.  The OIG believes that the removal of laboratory companies from the class of protected donors under the EHR Safe Harbor will hopefully reduce these types of quid-pro-quo arrangements by not affording them safe harbor protection from AKS liability.

Last, the new rule clarifies that as a condition of the EHR Safe Harbor, the donor is prohibited from taking any action to limit or restrict the use, compatibility, or interoperability of the donated items or services with other electronic prescribing or EHR systems, including but not limited to “(health information technology applications, products, or services).”[10]  Although the OIG has always stated that an action taken by a donor that limits the recipient’s use of the donated items with any other health information technology may impede the free exchange of data and limit the ability of providers and suppliers to coordinate care; the parenthetical added additional clarity.


1)      If your practice has not yet adopted an EHR or patient portal, you have until 2021 to take advantage of the revised EHR Safe Harbor, allowing you to receive donated or discounted software, technology, and training services from referral recipients, so long as the donation meets certain conditions, and is not donated by a laboratory company.


2)      After March 27, 2014, laboratory companies and health care providers will no longer receive safe harbor protection from AKS liability if the health care provider receives donated EHR software from a laboratory company.  Laboratory donors and health care provider recipients must either terminate donation agreements or properly restructure them prior to March 27, 2014.

Navigating the AKS Safe Harbors can be difficult, but failure to comply with the AKS can result in serious criminal and monetary penalties.  Please feel free to contact us at The Bittinger Law Firm with your questions or concerns.

[1] 71 F.R. 45110, 4511

[2] 42 U.S.C. 1320a-7b(b).

[3] 71 F.R. 45110 (CMS published similar EHR exceptions pertaining to the Stark physician self-referral law at 42 CFR. 411.357(w). 71 F.R. 45140 (Aug. 8, 2006).)

[4] 42 C.F.R. 1001.952(y)(13).

[5] 78 F.R. 79217.  42 C.F.R. 1001.952(y)(2).

[6] 71 F.R. 45110, 45126 (Aug, 8, 2006).

[7] 42 C.F.R 1001.952(y)(10).

[8] 42 C.F.R 1001.952(y)(13).

[9] 42 C.F.R 1001.952(y)(1)(i).

[10] 78 F.R. 79217,79218.  42 C.F.R. 1001.952(y)(3).