Life Science Compliance Update

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December 21, 2011

Physician Payment Sunshine Act: CMS Proposed Rule - Impact on Continuing Medical Education, Medical Societies and Patient Organizations

Interperting Sunshine
Last week’s proposed rule for the Physician Payment Sunshine Act (Section 6002 of the Affordable Care Act) had some troubling provisions, particularly to the continuing medical education (CME) community.  Specific provisions of the proposed rule will also likely impact non-profit patient and disease advocacy organizations as well as professional medical associations.   

The Act lists the categories for the nature of payment or other transfer of value that “applicable manufacturers” must use to describe each payment they make to a “covered recipient” (physicians and teaching hospitals).   The Act and the proposed regulations use a general “catchall” provision that enables the Department of Health and Human Services (HHS) to add additional categories under the reporting. 

HHS unfortunately used this general provision in the proposed rule in a way that would require additional reporting from organizations, including but not limited to, CE providers, professional medical associations, patient advocacy groups, and other non-profit organizations.  Under this proposal, these organizations may become responsible for reporting to manufacturers all payments and transfers of value they make to covered recipients, even though these payments are indirect (third party payments) and these groups do not fall within the definition of “covered recipient.”   

As discussed in more detail below, if your group or organization receives from an “applicable manufacturer,” a research or educational grant, or any other kind of payment or transfer of value that falls within the “nature of payment” category, and you use any portion of that payment or transfer of value towards a covered recipient—physician or teaching hospital—and the applicable manufacturer is “aware” of the covered recipient’s identity, the applicable manufacturer is required to report how much your organization or group—even though you yourself is not a covered recipient—paid the covered recipient. 

This means that the applicable manufacturer may directly contact you or the covered recipient you employed for the designated services to find out the amount of the payment or transfer of value and the nature, magnitude, and extent of the payment. 

Accordingly, this proposal would create a great and unnecessary burden on these providers that is neither good public policy nor consistent with the intent of Congress.  Indeed, the Act as passed by Congress specifically exempted CME providers from reporting by specifying that only direct payments (payments from manufacture to physicians and teaching hospitals) be reported. 

CMS should be credited for listening to comments from CE providers and other stakeholders for excluding from reporting any offerings of buffet meals, snacks or coffee at booths at conferences or other similar events where it would be difficult for applicable manufacturers to definitively establish the identities of the individuals who accept the offerings.

The crux of the issue is:

  • CMS lumped in Accredited and Non Accredited CME in the definition of direct payment for serving as faculty in continuing education program.
  • CMS used a catch all section on awareness of identity of the recipient to force CME providers to report payments to teaching hospitals and

 The section, originally intended to support market research is being applied to all 3rd party payments and transfers of value.

Here’s how it works.

  1. Applicable manufacturer makes payment to a third party ie CME provider
    1. A third-party (CME provider) is anyone or group that is not a “covered recipient” meaning not a teaching hospital or physician as defined by the proposed rule
    2. The third pary -- CME provider then makes a payment to a “covered recipient”
      1. A teaching hospital or physician as defined by the rule
      2. Under the proposed rule, if the applicable manufacturer is aware of the identity of covered recipient being paid by the third party, that payment must be reported. 

Issues around CME 

  1. CMS used broad criteria to define awareness: an applicable manufacturer is aware of a covered recipient’s identity if the individual’s identity is “publicly available.”
  2. CMS gave no guidance as to when awareness of identity matters: before, during or after the transfer of value or payment
  3. CMS gave no guidance as to how this will impact third parties
  4. CMS gave no guidance about the process of applicable manufacturers contacting third party’s or the covered recipients they paid to inquire about such payments/transfers of value

Recommendation/Comment 

1.  Indirect payments made to “covered recipients” from third parties that received payments from an applicable manufacturer should be exempt from reporting.   In other words, payments made to accredited CE providers, patient and disease advocacy groups, and professional medical associations, who then indirectly pay “covered recipients,” should be exempt from reporting.  

Even though an applicable manufacturer may be aware of the identity of a covered recipient, payment is not direct; it is being made from a third party, and such payments were explicitly excluded in the Act.  These third parties all have in place significant regulations and rules in place to ensure that such payment is for objective, evidence-based, scientific activities that will benefit patients and health care professionals, and should be exempt from this reporting requirement.  Adding an additional layer of regulations would pose a significant burden on these groups, which would make it more difficult for them to fulfill their purposes and goals. 

2.  For a payment or transfer of value from an applicable manufacturer to a third party, who then indirectly pays a “covered recipient,” if the applicable manufacturer is unaware of the identity of the covered recipient at the time the payment or transfer of value is made, the third party and covered recipient should be exempt from reporting.  

A payment or transfer of value that is made to a third party indirectly—a third party that does not fall under the definition of “covered recipient”—should be exempt for reporting when the applicable manufacturer is unaware of the identity of the covered recipient at the time the payment or transfer of value is made.  Third parties, such as CE providers, non-profit patient advocacy or disease advocacy group, or professional medical organizations, all have in place significant firewalls, regulations, and rules of conduct to ensure independence, accountability, and objectivity in their activities. 

Provisions Adversely Affecting CE Providers and Other Groups 

1. CE providers and any other organization or group to which applicable manufacturers make payments to as third parties are not “covered recipients.”  

CE providers and other groups are not “covered recipients.”  They are not physicians or teaching hospitals as defined in the proposed rule.  This means that payments from an applicable manufacturer to a CE provider are not required under the law to be reported, since only those payments to a “covered recipient” are required to be reported.  

2.  CMS cannot interpret categories for “education” and “grant” to include payments to CE providers because CE providers are not “covered recipients.” 

3.  CMS has created a new category of nature of payments, using its “catchall” provision, requiring applicable manufacturers to report payments to a third party when the applicable manufacturer is “aware” of the identity of the covered recipient, who is receiving the payment directly from the third party.  

The Act excludes the reporting of payments or other transfers of value that an applicable manufacturer makes indirectly to a covered recipient through a third party when the applicable manufacturer is unaware of the identity of the covered recipient.  However, CMS maintained that when the “applicable manufacturer is aware of the covered recipient's identity,” the payment must be reported.  

Under this proposed interpretation of the exclusion, if a CE provider – who is not a covered recipient --received an educational grant from an applicable manufacturer, and either 1) the CE provider included names of faculty in a CE proposal or 2) the applicable manufacturer learned of the faculty’s participation in the CE event, the applicable manufacturer would have to report the payment to the faculty. This proposal is extremely problematic for a several reasons. 

First, how would the applicable manufacturer go about learning the amount of payment to the CE faculty?  Would every time that a CE company gets a CE grant, the applicable manufacturer would have to wait until the point they learned of the faculty/recipient, and then call the CE company and find out the amount the faculty was paid?  More importantly, CMS did not account for the fact that under CE regulations and rules, interaction and contact between CE providers and manufacturers is extremely limited, particularly in areas such as payments and faculty, and this would expose CE providers to a new burden that could compromise a CE provider’s ability to provide objective, high quality CE.  And as discussed below, if this is CMS’ interpretation, they have not calculated the regulatory burden or costs on CE providers and other groups. 

4.  CMS has provided no guidance as to the exact nature and timing of when an applicable manufacturer becomes “aware” of the covered recipient’s identity.   

CMS provides no explicit guidance on at what point during the process a CE grant is awarded, an applicable manufacturer is “aware” of the covered recipient’s identity.  Is it “awareness” at any time, prior to the payment or transfer or value, or after?  For example, say a CE provider applies for a CE grant, and there are no designated faculty, no faculty have been hired or reached out to, and only the CE scientific staff have worked on the proposal.  If the CE company is awarded a grant at this stage, the applicable manufacturer has awarded an educational grant in which they were “unaware” of the identity of a covered recipient.  

If a CE provider is awarded a grant from an applicable manufacturer, who is completely unaware of the payment to a covered recipient at the time it is awarding the grant, this should completely dispel any need to report payments to faculty.  There is no possible way for an applicable manufacturer to attempt to influence the content or faculty selection of such program, since they were unaware of any faculty to begin with.  There is no need to publish these payments when the applicable manufacturer is unaware of a covered recipient’s identity at the time they are awarding a grant because the grant was awarded based on the educational and practice gaps and the scientific evidence contained in the proposal, rather than the faculty chosen. 

Moreover, there are significant rules and regulations in place that CE providers follow to choose faculty, and to require the reporting of such payments to CE faculty will be burdensome, and have adverse consequences on CE providers (discussed more fully below).   

5.  CMS has set an overwhelmingly broad standard by stating that applicable manufacturers are “aware” of a payment from a third party to a covered recipient if the covered recipient’s identity is “publicly available.”  Such a standard almost guarantees that any applicable manufacturer will be aware of a payment to a covered recipient from a third party.   

CMS explained that the exclusion of third party payments “hinges on whether an applicable manufacturer is "unaware" of the identity of the covered recipient.” 

CMS proposed “that an applicable manufacturer is aware of the identity of a covered recipient if the applicable manufacturer has actual knowledge of, or acts in deliberate ignorance or reckless disregard of, the identity of the covered recipient.”  For example, CMS noted that, “if an applicable manufacturer provides a payment through a third party to the department chairs at a specific hospital, this payment would need to be reported because even though the applicable manufacturer did not name the recipients, their identities are publicly available.” 

However, CMS does not recognize the unique ways CE providers operate and the significant regulations CE providers follow to ensure objectivity.  Almost every CE faculty who will present at a program has publicly available identities.  That is the nature of CE: faculty are on websites, particularly CE ones; work for medical schools, private practice, or hospitals that all have websites; and are advertised so physicians know where to find the best and most relevant CE programs for their individual needs.  Under this definition and example, CMS appears to be casting a broad sweeping requirement for applicable manufacturers: if a CE faculty member’s identity is “publicly available,” then it must be reported, even though a CE grant did not name the covered recipients. 

This requirement will make significant problems for CE providers.  Under ACCME rules and regulations, and Standards for Commercial Support, faculty must be selected without any input or contact with an applicable manufacturer whom the CE provider is seeking support from.  This requirement has been embedded in CME for many years to ensure the objectivity of faculty and content selection to ensure that any CE programs are scientific and evidence-based, and there are no signs of marketing.  However, under CMS’ proposed rule, it would appear as if to force applicable manufacturers to know whom the faculty are at the outset, effectively erasing this requirement.  

For example, if an applicable manufacturer will be held to know the identity of a “covered recipient” – in this case a CE faculty – whose identity is “publicly available” (which is pretty much all CE faculty) – then an applicable manufacturer might begin to require (for oversight, regulatory, compliance, and legal purposes) listing of faculty in CE grant proposals.  As a result, applicable manufacturers may then be able to choose proposals based on faculty, or by including faculty into its consideration, instead of solely considering the scientific merits and evidence-based nature of the proposal. 

For many years now, CE providers have strived to keep the selection of faculty out of manufacturers hands, and this proposed CMS rule would return that control to them or at least make it such that manufacturers would be considering faculty in addition to science. 

6.  CMS effectively used the category of “direct compensation” as a way to require “applicable manufacturers” to report the amount of CE grants they are paying to CE providers, even though a) CE providers are not covered recipients and b) such payments are excluded since CE providers are third parties. 

CMS proposed that “Direct Compensation for Serving as a Faculty or as a Speaker for a Medical Education Program” be interpreted broadly to encompass all instances in which applicable manufacturers pay physicians to serve as speakers, and not just those situations involving "medical education programs."  Under this interpretation, CMS clearly identifies that the applicable manufacturer directly pays the physician to serve as a speaker for a medical education program, and not through a third party such as a CE provider.  CMS must ensure that this category does not include accredited CE programs, because these are not direct payments and CE providers are not covered recipients. 

7.  CMS proposed a broad interpretation of “Direct Compensation for Serving as a Faculty or as a Speaker for a Medical Education Program” to include payments to faculty for an accredited CE program even though a) CE providers are not covered recipients and b) such payments are excluded since CE providers are third parties. 

CMS acknowledged that its interpretation of “direct compensation … for medical education program[s]” does not allow for differentiation between continuing medical education (CME) accredited speaking engagements, and all other speaking engagements.   As a result, CMS must clearly show when reporting such payments to Congress, States, and the public, that direct payments for “medical education” and “speaking” are completely distinct and separate from accredited, third-party CE programs.  CMS should offer full explanations in its reports, electronic and print, about the differences of third party education and direct compensation programs. 

Moreover, CMS’ discussion of accredited CME programs in this nature of payment category is problematic in itself.  Accredited CME does not under any circumstances fall into the direct compensation category.  Payments made to faculty or speakers from a third party, such as a CE provider, is not direct compensation, and for the reasons noted above, should not fall into discussion of “awareness of identity.” 

8.  CMS has not calculated the regulatory burden on CE providers and other groups if it includes payments based on the “awareness” of identity standard.   

CMS did not calculate the financial impact or regulatory burden this requirement would impose on CE providers and similar groups.  CE providers, under this interpretation, would now need to dedicate staff to keeping track of payments to faculty, and maintaining oversight of when an applicable manufacturer becomes aware of a faculty’s identity, and then need to report that to the applicable manufacturer.  

CMS has not evaluated a) allowing CE providers or other groups making third party payments 45 days to review the accuracy of such payments if they are to be posted by applicable manufacturers b) the time, staff, costs, and resources on CE providers and other groups to communicate with applicable manufacturers about the nature and magnitude of such payments c) the adverse impact publishing faculty payments will have on the integrity, accountability, and independence in CE programs; and d) the burden this will place on recruiting faculty for CE programs.  In fact, CE providers under this proposal would have to track payments in accordance with the Sunshine regulations, such as travel, food, consulting, etc. 

We estimate that this would cost state accredited small CME providers such as community hospitals and local medical societies 300+ hours to collect and monitor this data.  And nationally accredited providers such as medical schools, medical associations and commercial CME providers 1600+ hours to comply.  Moreover, the vast majority of the 694 ACCME accredited CME providers are small businesses, who will face significant financial and resource difficulties implementing such work. 

9.  CMS did not define what an “agent of an applicable manufacturer” means. 

CMS proposed that awareness of the identity of the covered recipient by an agent of the applicable manufacturer will be attributed to the applicable manufacturer.  This is problematic because CMS does not offer guidance on what an “agent” means.  For example, if a physician who worked for Company X as a consultant, attended a CE program sponsored by Company X, does that mean that once the physician is “aware” of the faculty, he is acting in an “agent” role, and thus Company X must now find and report how much the faculty at that program were paid?  CMS needs to clearly define “agent” in this role, particularly with respect to being “aware” of a covered recipient’s payment at a third party function such as a CE event. 

Conclusion 

Ultimately, payments made to CE providers for education should not be reported because CE providers are not covered recipients.  Moreover, payments from CE providers to faculty of CE programs should not be published either because there are sufficient measures in place to ensure transparency, independence, and accountability within the CE community.  This is especially true considering CMS explicitly admitted that it has no empirical basis for estimating the frequency of such problems (inappropriate use), the likelihood that transparent reporting will reduce them, or the likely resulting effects on reducing the costs of medical care.

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