HHS Proposes Sweeping Changes to AKS and Stark Law, Part 2: Cybersecurity Technology and Electronic Health Records

Mintz - Health Care Viewpoints

On October 17, 2019, the Department of Health & Human Services (HHS) published two proposed rules (one by the Office of Inspector General (OIG) and one by the Centers for Medicare & Medicaid Services (CMS)) that, if finalized, would implement significant changes to the Anti-Kickback Statute (AKS) and the Physician Self-Referral Law (commonly known as the Stark Law).  This post is the latest installment in our blog series covering these proposed rules.  Below we dive into: (i) the proposed new safe harbor and Stark Law exception for cybersecurity technology and related services, and (ii) significant proposed modifications to the existing safe harbor and exception for electronic health records (EHR) technology and services.  These proposed changes are designed to reduce the regulatory burden associated with the AKS and Stark Law while maintaining protections against fraud and abuse.

New Safe Harbor and Stark Law Exception for Cybersecurity Technology and Related Services

Health care providers are a high value target for cyber criminals.  Noting the increasing prevalence of cyber attacks, which result in patient harm and high costs to the health care industry, the OIG and CMS proposed a similar safe harbor and exception that would protect cybersecurity technology and related services if certain conditions are met.  The proposed safe harbor and exception are designed to promote interconnected and interoperable healthcare information technology systems and to allow the health care industry to take additional action to mitigate the risks posed by cyber attacks while minimizing the risk that these arrangements serve as payments for referrals or inappropriately influence clinical decision-making.  The proposed safe harbor and exception (and CMS and OIG’s commentary) are very similar, but a few differences are noted below.

The OIG and CMS are proposing the following key definitions:

  • Cybersecurity means “the process of protecting information by preventing, detecting, and responding to cyberattacks.”
  • Technology means “any software or other types of information technology, other than hardware.”

Importantly, hardware is excluded from the definition of “Technology.”  The OIG and CMS cited concerns that donations of valuable, multifunctional hardware (e.g., laptops and tablets) pose a higher risk of constituting a disguised payment for referrals.  Moreover, hardware generally is not necessary or used predominately to implement and maintain cybersecurity.  However, both the OIG and CMS are soliciting comments on whether there should be limited protection for specific types of hardware and what types of hardware should be protected.

The specific conditions that must be met for cybersecurity technology and services to satisfy the proposed safe harbor and exception are based upon the safe harbor and exception for EHR technology and services.  The proposed conditions are as follows:

  • Qualifying Technology. The OIG and CMS provided examples of technology and related services that would qualify, including software that provides malware prevention; data protection and encryption; developing, installing or updating cybersecurity software; cybersecurity training services; and cybersecurity risk assessments.  The OIG and CMS are considering deeming provisions that would provide assurance that a donation meets this condition.  Specifically, the OIG and CMS suggest that a donation would be deemed to meet this condition if the parties demonstrate that the donation furthers a recipient’s ability to comply with a written cybersecurity program that reasonably conforms to a widely recognized cybersecurity framework or set of standards.  The OIG and CMS are seeking comments on a practical method for demonstrating that donations would meet the potential deeming provisions, such as documentation or certifications.
  • Donor Conditions.  To qualify for protection, donors of the technology and services could not directly take into account the volume or value of referrals or other business between the parties when determining the eligibility of a potential recipient for the technology or services, or the amount or nature of the technology or services to be donated.

Additionally, donors could not condition the donation of technology or services, or the amount or nature of the technology or services to be donated, on future referrals.  Unlike similar requirements in both the EHR safe harbor and exception, the OIG and CMS are not proposing a list of criteria for a donation to be deemed to meet this condition because cybersecurity donations are more likely to be based on security risks and less likely to be based on considerations related to the volume and value of referrals or other business generated.

The proposed safe harbor and exception would not limit donors to particular types of individuals and entities, but the OIG and CMS are soliciting comments on whether any types of individuals or entities should be excluded and, if so, why.  CMS noted that “the fraud and abuse risks associated with cybersecurity are different than donations of other valuable technology, such as EHR items and services” but does not explain the basis for its statement.  This proposal is particularly remarkable given that the EHR safe harbor and exception were amended effective March 27, 2014 to prohibit EHR donations made by laboratories and durable medical equipment (DME) suppliers due to fraud and abuse concerns.  Many laboratories reported pressure from referring physicians to make donations and actually lobbied for the limitation, and the laboratory industry may wish to advocate for the same prohibition to apply under the proposed cybersecurity donations safe harbor and exception.

  • Conditions on Recipients.  Under both the proposed safe harbor and exception, potential recipients could not demand, explicitly or implicitly, a cybersecurity donation as a condition of doing business with the donor.  Surprisingly, the OIG and CMS are not proposing a requirement that recipients of cybersecurity software and technology contribute a portion of the costs (which differs from the 15 percent cost-sharing requirement in the EHR donations safe harbor and exception), but donors are free to require contribution.  The OIG and CMS do not think that that cost-sharing is necessary in the cybersecurity context, but, again, neither agency explains why cybersecurity donations are different from EHR donations.  The safe harbor also has no restriction on the type of individual or entity that can receive cybersecurity donations, but the OIG is specifically seeking comments on whether additional safeguards are needed if the recipient is a patient and whether patients should be protected recipients at all.
  • Written Agreement.  Under the proposed safe harbor, the arrangement would need to be set forth in a signed, written agreement that includes a general description of the technology and services to be provided and a reasonable estimate of the value of the donation. While CMS’s proposed exception includes a requirement that the arrangement be documented in writing, it does not require an agreement signed by the parties.  CMS expressed concern that a requirement for a signed agreement would lead to inadvertent violations of the Stark Law in situations where donors act quickly and prior to obtaining the physician’s signature.  Instead, the exception requires that the written documentation of the arrangement include: (i) the recipient of the donation; (ii) a general description of the technology and services to be provided; (iii) the timeframe of the donations; (iv) a reasonable estimate of the value of the donations; and (v), if applicable, any financial responsibility for the cost of the technology that is shared by the recipient.
  • Prohibition on Cost Shifting.  The proposed safe harbor – but not the exception – includes a condition prohibiting donors from shifting the costs of the cybersecurity donations on to Federal health care programs, such as claiming it as an administrative expensive on hospital cost reports.

Alternative Proposed Condition for Protection of Cybersecurity Hardware.  As noted above, donations of hardware would not be protected under the safe harbor.  However, both the OIG and CMS are proposing alternative conditions that would protect cybersecurity hardware that a donor has determined to be reasonably necessary based on a risk assessment of its own organization and that of the recipient, provided that all applicable conditions listed above are also met.  Security risk assessments are a fundamental component of any cybersecurity infrastructure and are often overlooked by health care providers and other entities regulated by the Health Insurance Portability and Accountability Act of 1996 (HIPAA).  Recognizing that recipients may not have the resources to pay for their own risk assessments, the OIG and CMS note that one cybersecurity service that would be a protected donation under the proposed safe harbor and exception is a risk assessment.  Under the alternative proposal, donors could then make additional cybersecurity hardware donations that are reasonably necessary based on the risk assessments of the donor and recipients.

The OIG and CMS are soliciting comments on whether there should be additional safeguards to these alternative proposed conditions, such as whether they should be limited to certain types of hardware; whether there should be a contribution requirement of 5-30%; if there is a contribution requirement, whether there should be an exception for small and rural practices; and whether there should be a cap on the value of the donated hardware either in lieu of or in conjunction with a contribution requirement.

Modifications to the Existing Safe Harbor and Exception for Electronic Health Records

The EHR safe harbor and exception, which are substantially similar, protect certain arrangements involving the donation of interoperable EHR software or information technology and training services, provided certain criteria are satisfied.  Note that laboratory companies are excluded from the types of entities that may donate EHR items and services under the exception and the safe harbor.  The OIG and CMS are proposing the following modifications to the existing safe harbor and exception for EHR:

  • Deeming Provision.  Currently, the safe harbor and exception each have a deeming provision, which is an optional method of ensuring that donated items or services meet the interoperable condition by deeming software to be interoperable if it is certified under a certification program.  The OIG and CMS propose a minor change to clarify that the certification must be current as of the date of the donation, as opposed to the software having been certified at some point in the past but no longer maintaining certification on the date of the donation.
  • Information Blocking.  Currently the safe harbor and exception include a condition prohibiting any action to limit or restrict the use, compatibility, or interoperability of the items or services with other electronic prescribing or electronic health records systems (now known as information blocking). The OIG and CMS propose aligning this condition with the proposed information blocking definition in the implementing regulations for the 21st Century Cures Act, which sets forth a knowledge standard such that a health care provider engages in information blocking if it “knows that such practice is unreasonable and is likely to interfere with, prevent, or materially discourage access, exchange, or use of [EHR].”  The OIG proposes to use this knowledge standard for the safe harbor regardless of whether the donor is a health care provider or health plan, but it seeks comments on this approach.
  • Cybersecurity.  The OIG and CMS propose to amend the safe harbor and exception to clarify that certain cybersecurity software and services have always been protected under this safe harbor and exception, and to more broadly protect the donation of software and services related to cybersecurity.  Note that the proposed new safe harbor and exception specifically for cybersecurity donations (see above) are broader and include fewer conditions than the EHR safe harbor.  But the OIG and CMS would expand the EHR safe harbor and exception to expressly include cybersecurity donations so that it is clear that an entity donating EHR may also donate cybersecurity technology.
  • Sunset Date.  The EHR safe harbor and exception are set to sunset on December 31, 2021.  However, the OIG and CMS are proposing to eliminate the sunset provisions, noting that the continued availability of this safe harbor and exception supports HHS’s goal of promoting EHR adoption.
  • Definitions of “Electronic Health Records” and “Interoperability.”  The OIG and CMS are proposing minor modifications to align these terms with the statutory definitions in the 21st Century Cures Act.

The proposed rule also includes proposals under consideration:

  • Contribution Requirement.  Both the EHR safe harbor and exception include a requirement that the recipient pay 15 percent of the donor’s cost of the technology, which the OIG and CMS view as a method to address fraud and abuse risks. The OIG and CMS are considering alternatives including:
    • eliminating or reducing the percentage contribution required for small or rural practices;
    • reducing or eliminating the 15 percent contribution requirement for all recipients; and
    • modifying or eliminating the contribution requirement for updates to previously donated EHR software or technology.
  • Replacement Technology.  The OIG is considering deleting the condition that prohibits the donation of equivalent items or services.
  • Expanding the Scope of Protected Donors.  Currently the safe harbor limits protected donors to those who submit claims or requests for payment, either directly or through reassignment, to federal health care programs but specify certain prohibited donors, as discussed above.  The OIG is considering broadening the scope of protected donors under the safe harbor to include entities with indirect responsibility for patient care, such as accountable care organizations that are not health plans and that do not submit claims for payment.  CMS is not proposing any changes to the scope of protected donors for the EHR exception.

For more information on HHS’s proposed rules please see our high-level overview of key provisions in both proposed rules and Part 1 on value-based arrangements.  The proposed rules also include: (i) modifications to the safe harbors for personal services and management contracts and warranties; (ii) a new safe harbor for patient support tools and modifications to existing safe harbors related to beneficiary inducement; and (iii) clarification and guidance on key Stark Law terminology and requirements.  We will cover these topics in future installments of this blog series.

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