The Physician Payments Sunshine Act: A highlight of frequently asked questions

Issue: May 2013

ByTeresa I. Ford, Esq.

We are pleased to introduce attorney Teresa I. Ford, Esq., from Kirkland, Wash., as the guest author of this month’s column. Ms. Ford presents a timely discussion of the Physician Payment Sunshine Act that will be of interest and relevance to our readers.

B. Sonny Bal, MD, JD, MBA; and Lawrence H. Brenner, JD
Co-editors

The implementing regulations for the Physician Payments Sunshine Provision (the “Sunshine Act”) of the Patient Protection and Affordable Care Act (Section 6002) were finally published on Feb. 1. The Sunshine Act was a component of the Affordable Care Act and requires manufacturers of medical devices, drugs and biologics who participate in federal payment programs to report payments and items of value given to physicians and teaching hospitals. The long awaited regulations contained only a few surprises, but raised a few questions as well; these are the subject of this article.

As had been expected, the regulations confirm that most “transfers of value” to physicians, other health care personnel and teaching institutions must be reported to the federal government for disclosure to the public. “Transfers of value” include a variety of items, and is not limited to monetary payments. Expense reimbursement and in-kind transfers of value such as meals are also reportable under the Sunshine Act. Collection of data for reporting will begin on Aug. 1, 2013 and applies to all “applicable manufacturers” as that term is defined in the Sunshine Act (essentially, medical device, pharmaceutical companies and biologics distributors). The first reporting period will be Aug. 1, 2013 through Dec. 31, 2013 and all collected information must be reported by March 31, 2014. Thereafter, reporting will be annual.

B. Sonny Bal

Lawrence H. Brenner

Purpose of the Sunshine Act

Congressional sponsors of the Affordable Care Act (ACA) reporting provisions have said that the Sunshine Act is not designed to discourage or chill beneficial relationships between physicians and industry, but simply to ensure transparency. Even before the ACA, several states had enacted their own “sunshine” type laws. The federal Sunshine Act, when fully implemented, may create additional requirements for physicians living in states that already have a state law. In other states, federal law will govern the relevant disclosures.

Teresa I. Ford

Sen. Chuck Grassley (R-Iowa) takes credit for helping launch the Sunshine Act. Grassley said in a February news release that his investigation and oversight work exposed a number of “questionable financial relationships between drug companies and doctors. For example, at Stanford University, the chairman of psychiatry received a federal grant to study a drug, while partially owning as much as $6 million in stock in a company that was seeking federal approval of that drug,” the release noted. “After exposure, the federal government removed the individual from the grant.”

Applicable manufacturers are manufacturers of devices, drugs, biologics and other medical supplies whose products are covered by one or more federal health care reimbursement programs. The dollar payments to be reported will cover a wide array of purposes, including consulting, speaking engagements, advisory board service, travel, food, royalty payments and clinical research support. Also required to be reported are certain physician ownership interests in group purchasing organizations, and manufacturer entities such as drug and device companies. This last reporting requirement is of particular interest in that it was an unknown issue for some time.

When the final regulations were published, it became clear that the government was interested in extending transparency beyond just “working” or “customer” relationships that industry has with physicians, but also to investment/ownership interests, which traditionally have been considered private matters not requiring wide disclosure. While we have seen a shift in this paradigm since the advent of physician-owned distributorships (PODs), it was of definite interest that the government extended the disclosure requirements to these types of investments. For interested readers, the April 2013 issue of this column addressed the structure and legality of PODs, and heightened federal scrutiny of such financial structures.

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Open payments website

CMS has established (as of April 12, 2013) a website referred to as the “Open Payments” website. The Open Payments website can be found at www.cms.gov/Regulations-and-Guidance/Legislation/National-Physician-Payment-Transparency-Program/index.html and is where all reported information will be housed and made available to the general public (in a “user friendly” fashion, pursuant to the express language of the Sunshine Act). The first reported information will become available to the public on Sept. 1, 2014.

Aside from serving as a place where all payment information will eventually be inventoried, the website is also a useful resource for all affected by the reporting requirements of the Sunshine Act. For example, it contains the first round of frequently asked questions (FAQs), compiled by CMS, as well as various reference materials to help all affected navigate the myriad terms and definitions contained in the Sunshine Act. CMS anticipates additional rounds of FAQs in the coming months, which will also be posted on the Open Payments website.

While there is simply too much information contained in the website to address in this article, there are several things worth mentioning in this overview of the Sunshine Act. Orthopedic surgeons should visit the site and peruse the information it contains. You should know, for example, the details of your work with manufacturers, and personal investments and financial arrangement that are subject to reporting. Information on the website can also help one understand the reporting requirements in relation to hospital and patient disclosures.

Extent of reporting

Transfers of value $10 or greater (or annual transfers that total $100 or more) are required to be reported. The following are some highlights of interest from the first round of FAQs currently available for review on the Open Payments website which clarify this requirement, as well as providing guidelines for when the reporting requirement is triggered:

The date a payment/transfer of value is made is the date for reporting purposes. As so commonly happens, a physician will provide a consulting service to a company, but not be paid until several weeks (sometimes even months) later. It is the date of payment that triggers the reporting. Accordingly, services rendered before the Aug. 1, 2013 start of data collection date, but compensated after this date will be reportable as part of the first reporting due to the government on March 31, 2014.

Exceptions to CME speaking engagement fees. Monetary payments to physicians who are compensated for speaking at qualified CME events are not reportable as long as the following three criteria are met:

the CME program meets the accreditation or certification requirements and standards of the Accreditation Council for Continuing Medical Education, the American Academy of Family Physicians, the American Dental Association’s Continuing Education Recognition Program, the American Medical Association, or the American Osteopathic Association,
no applicable manufacturer selects or suggests the physician speaker for the event, nor does an applicable manufacturer provide the third party vendor with distinct, identifiable individuals to be considered as speakers for the accredited or certified continuing education programs; and
no applicable manufacturer directly pays the physician speaker.

Educational materials for patients are not reportable transfers of value. Materials traditionally provided by manufacturers for patient education and product support are not considered transfers of value for purposes of reporting. This includes things such as patient education brochures explaining procedures, literature supporting a product’s various claims, etc.

Reporting required for both direct and indirect payments. Regardless of to whom the payment is made, if it has any value to a physician or teaching hospital, it must be reported. Direct payments are those made directly to the physician or teaching hospital. Indirect payments are payments such as those made to a group practice on behalf of one or more physicians must still be reported in the individual physicians’ names.

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Notification of payments reported. Notification of reported information is available to physicians, physician owners/investors and teaching hospitals, but only if they have previously registered with CMS to receive such notification. The Open Payments website can direct you as to how to register and what information you will receive.

The foregoing is not an exhaustive list even of the FAQs that CMS published recently, let alone the requirements of the Sunshine Act. A thorough knowledge of what the Sunshine Act entails is necessary to navigate this latest regulatory volley. With additional FAQs coming in the near future, it should be reasonably easy to gain familiarity of the reporting regulations without having to spend too much time researching them, by visiting the website referenced. As more information of relevance to orthopedic surgeons becomes known, we will continue to update our readers.

There is no question that this new level of transparency is invasive and unique in many ways to physicians (and manufacturers) that are recipients of (or make products reimbursed by) funds from federal health care reimbursement programs. The Sunshine Act imposes significant new recordkeeping and reporting requirements for applicable manufacturers. Given the relatively low $10 threshold, applicable manufacturers will be required to collect and report a lot of data.

I consistently hear from my physician clients that the level of scrutiny applied to them is inequitable as compared to other professionals, including attorneys such as myself, or, even more annoying to my clients, lobbyists and other individuals working closely with government. I concur entirely. That said, the rules are the rules, and one must abide by them.

This legislation supporting the Sunshine Act was years in the making and even more years in the implementation. Being unhappy about the level of disclosure you will have to make is understandable, but do not under any circumstances ignore the requirement or attempt in any way to convince an applicable manufacturer that they should not report monies expended on your behalf, whether during a meal at the American Academy of Orthopaedic Surgeons meeting, during travel to a regional professional society meeting or a visit to a manufacturer’s plant and head office. Most attorneys believe that the federal government will be serious about the enforcement piece of this legislation and any knowing failure to report will likely have significant consequences. Companies face fines of $150,000 if they do not report and $1 million if they knowingly fail to report to CMS. The best practice at this point is to simply accept that this legislation is here and do your best to comply.

Discuss in OrthoMind

What do you think?

Will the Sunshine Act provisions dampen beneficial surgeon-industry relationships that have fostered innovation in orthopedic surgery?
Do you think the public will be interested in financial payments and relationships that their doctors may have with industry or will the public treat this additional barrage of web-based information as a passing curiosity?
In some cases, payments to physicians may be large, such as those related to licensing, patents and product development. Does public disclosure, in the absence of a thorough understanding of the precise value being exchanged in a business transaction, risk misperception and possibly fuel demands for yet more onerous regulation of the medical field?

For more information:

B. Sonny Bal, MD, JD, MBA; and Lawrence H. Brenner, JD, are partners in the law firm of BalBrenner/Orthopedic Law Center and are the exclusive providers of loss prevention, risk management and quality improvement services for the Orthopedic Physician’s Insurance Company. Brenner can be reached at lbrenner@balbrenner.com.
Teresa I. Ford, Esq., can be reached at the Law Offices of Teresa Ford, PC, 615 Market St. Suite C, Kirkland, WA 98033; 425-898-2140; email: tford@tfordlaw.