To hasten the day when all Americans have an electronic health record (EHR), last year, on August 8, 2006, the U.S. Department of Health and Human Services (“HHS”) issued regulations that would allow hospitals to provide certain software and technical support services to physicians without violating federal antikickback law. Because many physicians have been slow to invest in electronic health record systems, this new regulation is designed to encourage hospitals and health systems to step into the gap and offer software and services that support EHR systems.

This is a significant development for hospital-based laboratories. It creates new opportunities to build relationships with referring physicians. But it also creates new compliance exposure for laboratories which fail operate within the parameters of the law.

Recently the IRS weighed in on issue to provide further clarification. Titled “Hospitals Providing Financial Assistance to Staff Physicians Involving Electronic Health Records”, the IRS memo spells out the circumstances necessary to meet the safe harbor requirements of the HHS policy on the provision of software and technical support services by a hospital to physicians on staff.

Since the IRS lingo is complicated, to say the least, we asked Jane Pine Wood, attorney for McDonald Hopkins and a specialist in clinical laboratory and anatomic pathology legal matters, how this change would affect hospital laboratories. Wood responded, saying:

“The IRS memorandum offers greater assurance to tax-exempt hospitals that they can provide EHRs to members of their medical staffs, in compliance with the applicable Stark exception and the applicable safe harbor under the Medicare and Medicaid anti-kickback law, without jeopardizing their tax-exempt status. It is important to note that this memorandum provides approval only to those arrangements which comply fully with the numerous criteria of the Stark exception and anti-kickback law safe harbor.”

We also asked Wood if hospital laboratories should take any special steps to react to this memo. “For many laboratory clients, particularly gastroenterology and endoscopy providers, EHRs are increasingly important,” said Wood. “So,this IRS memorandum is of significant benefit to those tax-exempt hospitals who wish to make EHRs more accessible for their clients.”

And there you have it. Hospital laboratories that want to take advantage of the memo should carefully study the Stark exception and the applicable safe harbor under Medicare and Medicaid anti-kickback law to ensure full compliance. Once this due diligence is complete, hospital laboratories can safely make EHRs more accessible to their medical staff.

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Hospitals Providing Financial Assistance to Staff Physicians Involving Electronic Health Records