Shining a light

On September 30, payments and other transfers of value made by medical supply companies to physicians and teaching hospitals will be made public as a result of the Sunshine Act. HRMR explores the possible consequences.

On September 30, in accordance with the Federal Sunshine Act, the Centers for Medicare & Medicaid Services (CMS) Open Payments resource will become fully functional, making public previously undisclosed information about payments and other transfers of value made by pharmaceutical, device, biotech, and medical supply companies to physicians and teaching hospitals.

“Large companies will have to post information about hundreds if not thousands of physicians, and there are a lot of Doctor Smiths out there." 

According to CMS, the information—made available through a publically accessible website—“will be organized and designed to increase access to and knowledge about these relationships and to provide information to enable consumers to make informed decisions.”

In order to avoid any nasty surprises when the information is made public, physicians and teaching hospitals have until September 8 to review the information, which includes any payments or other transfers of value worth more than $10, or multiple smaller payments that add up to more than $100 over a 12-month period.

Reportable transactions include donations, grants, dinners, travel, honoraria, and could include something as small as a coffee and a croissant if the bill exceeded $10.

Physicians and teaching hospital representatives can access the information by registering in CMS’ enterprise portal (Enterprise Identification Management system—EIDM) and in the Open Payments system. Registration is a voluntary process, but it is required in order to review and dispute data reported by the industry that a physician or teaching hospital representative believes to be inaccurate or incomplete.

Laura Keidan Martin, national chair of the healthcare practice at Katten Muchin Rosenman LLP, says this is a precaution worth taking because there is every chance that mistakes will be made in the reporting.

“Large companies will have to post information about hundreds if not thousands of physicians, and there are a lot of Doctor Smiths out there. The chances that every applicable manufacturer is going to get everything right are very slim,” she says.

If a dispute occurs when reviewing the information, CMS says: “The physician or teaching hospital will be able to work with applicable manufacturers and group purchasing organizations to make any necessary corrections to the information before CMS releases data to the public.”

Ted Doolittle, a partner on the healthcare industry team at entrepreneurial law firm LeClair Ryan, believes that reviewing the information is a vital step, even for physicians who believe they have not accepted any reportable payments of transfers of value.

“I really hope that individual physicians consider getting themselves logged in to the program so that they have a chance to look at the information about them before it goes public,” he says. “There are going to be surprises—there will be things that people did not realise could be reported, for example a bus tour, or a reception.

“Doctors and the organizations that they work for could wind up getting surprised—and if there is some kind of issue, perhaps where the transfer of value is not a cash payment that the doctor most likely would be aware of, but is perceived as transfer of value by the manufacturer—a doctor could end up getting a call from a reporter.”

Media interest

Doolittle compares the arrival of the Open Payments resource with events in April when CMS for the first time made public a searchable database of the amounts that were paid to physicians for the year 2012.

“That sparked a host of stories in the press, inquiries by advocacy groups, and every local reporter immediately logged on to see who was the top paid doctor in his or her area,” he says. “This is going to be perhaps not as electrifying but still quite interesting, and there is the possibility that a local paper may find out about payments and decide to run a story on it—and all of a sudden there will be publicity and exposure in an area that was a little backwater that nobody knew about. There are a lot of opportunities for some wake-up calls.”
Media interest in large payments and transfers of value is likely to be high, agrees Martin—and the best way to deal with this is to stay ahead of the game.

“If there are large legitimate payments from industry I would want to get my PR department involved ahead of time to have a response prepared, and to explain why these large payments have been accepted.

“In many cases there is going to be a perfectly legitimate explanation but if I’m the CEO of a major academic medical center with a high profile, I do not want to be reactive when the story hits the paper—I want to be very proactive. It’s important to anticipate what the fallout might be and to be prepared to address it.”

Journalists are not the only people who will be sifting through this rich new source of data: it will also be of interest to prosecutors, perhaps looking for transactions that were intended to induce referrals, which would be subject to liability under the Anti-Kickback statute and FCA.

“They will be interested not just in the manufacturers giving the payment, but also in the physician receiving the payment,” says Martin. “Most prosecutions have focused on the big device and pharma companies, but there have been a few cases, especially where the doctor was the one holding out his hand, where the prosecutors have also gone after the physicians.

“It’s the same for teaching hospitals, many of which are tax-exempt and have the added layer of concern about their donor bases. If they are getting millions of dollars a year from the manufacturer, that could result in a bad news story, or worse, a prosecution that may cause donors to curtail their support.”

Quality of care issues

It is also worth considering that if a patient was injured, possibly as a result of the provider using a particular device or drug, information that suggests the provider chose to use these as a result of their special relationship with the manufacturer could drastically affect the outcome of any legal action.

“If an aggressive plaintiff’s attorney was trying to sue the device manufacturer or drug manufacturer on the basis that their device or the drug had caused an injury, then if there were payments to the doctor from the manufacturer there will be a basis to try to get that information into evidence at the trial and strengthen the case that the drug or the device was not medically necessary,” says Doolittle.

Martin agrees that there is potential for a plaintiff’s attorneys to argue that payments or transfers of value had an impact on physicians’ independent medical judgement.

“The concern is that if a physician has a sweet deal with a certain manufacturer, he might use that manufacturer’s implant even if a better one comes on the market from another manufacturer.

“The new disclosure of information might also raise questions as to whether a hospital or a physician is in the back pocket of a certain manufacturer or is only putting certain pharmaceuticals on its formulary because those are the pharmaceuticals manufactured by the pharma companies that are making the big donations or giving them big research grants.”

Getting ready

As its name implies, the Sunshine Act will shine a light into the inner workings of the relationships that exist between physicians, teaching hospitals, and their suppliers. It looks set to raise some uncomfortable questions, but also to promote greater care and transparency around these relationships.

“I don’t think any hospital or physician worth their salt wants to be perceived as being biased in their decision-making—they always want to do what’s best for the patient. But with the spotlight on the payments they receive from various companies that’s something that is open to question,” says Martin.

Doolittle believes it is difficult at present to fully anticipate the ways in which this new source of information will be used—but he expects there will be some surprises.

“As soon as the information is available we are going to see all sorts of creative uses of it which we can’t predict—there are a lot of people out there who are going to be using it for quality research, and asking whether there is any association for better or worse quality outcomes with this type of payment.

“We are not going to know some of the impacts until we see the whole thing pan out.”

In view of the impending disclosure, Martin says that the highest levels of leadership in teaching hospitals need to mobilize their organizations to pre-empt any problems.

“Every teaching hospital needs to get its arms around the arrangements it has with industry. They need to ask whether they are making their selections of vendors without any considerations of the payments being made, and they need to ensure that the process for selecting vendors is beyond reproach.”

As part of this process, she says, teaching hospitals need to lock down what they will accept from manufacturers. Several of her hospital clients want to be completely beyond reproach, so they have put in place a zero tolerance policy on gifts and travel, meals and entertainment.

“Not all hospitals will do a complete lockdown but they do need to think through the issue and determine how they are going to address it.

“They need to decide whether they want to regulate only the interactions of the physicians that they employ or also the interactions of every physician on their medical staff. Some don’t want even a physician who practices within their facility to have certain kinds of relationships with industry.”

In Martin’s experience most teaching hospitals have some kind of policy on vendor interactions, but physician groups are lagging behind.

“The real education that’s left to do is for the physician community because the teaching hospitals and the device and pharma manufacturers have seen this coming for a very long time and are now for the most part prepared to deal with this.

“I worry that some of the physicians and physician groups, even though there has been so much publicity about the Sunshine Act, do not understand how it’s all going to play out.”