Washington Attorney General's Office Opinion Undermines Electronic Health Records Donation Programs

by Davis Wright Tremaine LLP

In 1949, the Washington Legislature enacted what has become known as the “anti-rebate statute,” codified as RCW Chapter 19.68. Rep. Eileen Cody recently asked the state Attorney General (AG)’s Office whether this statute allows a clinical laboratory to subsidize a physician’s acquisition of an electronic health record (EHR) system. The AG’s Office issued a formal opinion concluding that such donations are prohibited.1 Both the AG Office's analysis and conclusion are troubling. More specifically, the opinion casts a shadow on the federal government’s multi-billion dollar program to foster the adoption and meaningful use of EHRs. Following the guidance of the federal regulators, many hospitals and other providers in Washington have established programs to subsidize physician adoption of EHR technology.

One of the duties of the AG’s Office is to provide advice to legislators. The advice does not carry the force of law, but it may be cited as persuasive authority. Representative Ellen Cody trod a well-worn path when she posed the following question to the AG’s Office:

Under RCW 19.68.010, can a clinical laboratory licensed by the State of Washington lawfully make a monetary donation to a physician to cover 85 percent of the software cost of that physician's electronic health record (EHR) when the physician's office that is the recipient of the EHR donation either continues a referral arrangement with the laboratory, or subsequently initiates an arrangement for the referral [of] specimens to the donating laboratory for analysis?2

Section 19.68.010 has been charitably characterized as inscrutable. The state Supreme Court described the statute as “not a model of clarity.”3 The opinion calls it a “single, dense, 156-word sentence.” Various combinations of the clauses from the sentence can be strung together to prohibit many business relationships that exist among physicians and hospitals, clinical laboratories and other providers along the health care continuum.

That is exactly the route that the AG's Office took to reach its conclusion. It parsed the sentence in to four parts, with two in each column. Taking one part from column A and one part from column B, the AG's Office created a shorter sentence that prohibited the donation proposed by the laboratory.

The opinion emphasized that “donations are made to those physicians. . .” who refer patients to the laboratory. The opinion did not state directly whether the system was available on a community-wide basis, whether it was interoperable with other EHR systems or whether only physicians who refer to the laboratory were being offered the “donations.” Lacking those characteristics, the arrangement would not fit within the federal Stark law exceptions for community-wide health information systems, electronic prescribing items and services, or electronic health records item and services.4 Implicit in the AG Office's analysis, however, is that the proposed donation is perceived as a kickback because it goes only to those physicians that refer to the lab.

After offering a sweeping interpretation of RCW 19.68, the opinion goes on to state that it is not the AG Office's policy to consider federal law or preemption, and then promptly ignores that policy.
The opinion notes that the legislator’s request referenced the EHR donation safe harbor  regulation  promulgated by the Office of the Inspector General under the authority of the Anti-Kickback Act. After acknowledging the policy of promoting EHR use and the protections afforded by the safe harbor, the AG's Office cites a comment made by the OIG in 2005 for the proposition that the federal anti-kickback statute does not provide authority to preempt state anti-kickback laws.5

There are several problems with that analysis, but the most noteworthy is that the comments seem to foreclose the possibility that the federal EHR incentive program is allowed under state law. Like Chapter 19.68, federal law also generally prohibits financial arrangements between physicians and others. Federal law, however, is replete with narrowly defined exceptions. Chapter 19.68 has no meaningful exceptions that could be used to justify many common arrangements in the health care delivery system under the analysis of the AG's Office.

Under the AG Office's analysis of the anti-rebate statute, one phrase from column A and another from column B can be combined in a sentence that seems to prohibit Washington hospitals from assisting physicians in  becoming meaningful users of electronic health records. Equally troubling is the fact that the AG Office's analysis potentially undercuts the viability of a number of other common beneficial practices. Either the AG’s Office or the Washington Legislature should quickly address the  scope of the prohibitions under the state anti-rebate statute to avoid undermining EHR policy objectives and limit the conflicts between Washington state laws with federal statutes.


1 Attorney General's Office Opinion 2012 No. 7 can be viewed at http://www.atg.wa.gov/AGOOpinions/Opinion.aspx?section=archive&id=30767#.UMIp7XdkuAc
2 There was also a second question, which assumed that the first question elicited a response that the donation was permissible. That question dealt with whether an ongoing relationship between the physician and the laboratory would be subject to investigation (and potential sanctions) by the Medical Quality Assurance Commission. The AG's office never answered that question since it concluded that the business relationship in the first question was illegal.
3 Wright v Jeckle, 158 Wn.2d 375 (2006).
4 The three exceptions are at 42 C.F.R. 411.357(u), (v) and (w).
5 71 Fed. Reg. 45114 (August 8, 2006).


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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