Life Science Compliance Update

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June 14, 2013

Physician Payment Sunshine Act: Four Tips for Manufacturers, Physicians and Hospitals

A recent article from Med City News highlighted 4 Tips for applicable manufacturers and 4 tips for physicians regarding compliance with the finalized rules implementing the Physician Payments Sunshine Act. The article was written by Michael J. Summerhill is a partner and Lauren S. Berheide is an associate in the Litigation Practice Groupat the Chicago law firm of Freeborn & Peters LLP.

For "Applicable Manufacturers"

  1. Determine if you company meets the definition of applicable manufacturer. This requires looking at the finalized definition in the final rule, and an analysis about "common ownership" and "operating" in the U.S. The authors note that companies should consider "parent companies, subsidiaries, and any other entities with 5 percent or more of total ownership when determining if you, and the companies with which you have a relationship with, must report under the Sunshine Act." They also reminded companies that "if you attempt to make payments indirectly through a foreign company to avoid compliance, you still must report these payments as they are "indirect payments" or "other transfers of value" that must be reported.
  2. Applicable manufacturers should "establish a system for gathering data and reporting"; examine "your company's data management system"; and determine whether you need "additional employees or resources, such as software, in order to collect and record data." Also, "[i]dentify what employees or individuals will be in charge of managing or overseeing this process" and decide "who you will use as your two points of contact to be used in communications related to submitted data you must register and designate these individuals when you transmit your report." Finally, companies must decide who will be the responsible executive for signing the attestation statement—which could include the "CEO, CFO, CCO, or another representative" and determine what process that individual will use to review the report and data before it is submitted.
  3. Become extremely familiar with what information must be gathered, tracked, and reported. Review payments made in the past and "anticipate making in the future to determine what types of data you will need to gather and what you will have to report before your obligation to collect data begins." This includes information from the nature of payment categories (e.g., meals, travel, etc.) and forms of payment (e.g., cash, stock). After becoming familiar with this data, they recommend considering how disclosure will "impact your relationship with physicians, hospitals, or researchers? What are your customers' concerns? If your company doesn't know these concerns, open a dialogue and communicate with your customers." The authors also recommend to begin gathering information about the payments you will likely have to report such as: physician names, business address, and national provider identifier (NPI) and specialty.
  4. With respect to the last recommendation, manufacturers must be extremely careful about deciding to create an assumptions document, even if they don't plan to submit it to CMS (since it is discretionary). Specifically, an assumptions document is problematic because reporting based on assumptions "would be open to prosecution," and other HHS divisions, the Department of Justice (DOJ), or OIG could request access to the documents as part of an audit or investigation into an AM.

On the other hand, reasonable and well-thought-out assumptions could assist in showing that any omission or improperly reported data was not the result of deliberate ignorance or reckless disregard that could lead to increased penalties. Accordingly, manufacturers must carefully weigh these concerns, and should draft such documents with an eye towards how an OIG or DOJ investigator or attorney would interpret them.

For Physicians and Hospitals

  1. Register with CMS to receive notifications about what information is reported.
  2. Determine what payments you have received in the past that would be reported under the Sunshine Act. (See #3 above).
  1. "Consider how future reporting could impact your business and the likely response of customers and patients. Communicate and open a dialogue with any 'applicable manufacturers' from whom you anticipate receiving payments. If you voice your concerns ahead of time, this will save both physicians/hospitals and applicable manufacturers any unneeded surprises at reporting time.
  1. Keep track of what payments or transfers you receive that must be reported. (See #3 above).
  1. Fifth, consider preparing explanations for these payments to communicate to patients who inquire about them. To discuss such payments or their publication with patients, physicians and hospitals should refer to the Partnership for Healthy Dialogues.
  1. Finally, review the data after is submitted. If you've registered with CMS you will be notified about a 45 day period to review any data submitted and you have the opportunity to dispute reported data and request corrections.

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