Going forward, pathologists and laboratories are no longer EHR donors

May 18, 2014

To eliminate business practices that ran contrary to the government’s intent, federal agencies have taken the necessary action of prohibiting laboratory companies from donating electronic health records.  The College of American Pathologists (CAP) has long advocated for this and other related changes, evidence of which can be found in the December 27 published regulations by the Centers for Medicare & Medicaid Services (CMS) and Department of Health and Human Services (HHS) Office of Inspector General (OIG). The CAP was pleased that referral decisions will no longer be premised on the highest EHR donation offer and that the selection of laboratories will be driven by referring physicians’ choices based on quality and service.

Prior to the effective date of the federal prohibition, nine states (CT, MA, MO, NY, NJ, PA, TN, WA, WV) had already acted to limit or otherwise prohibit these donations when made by laboratories to referring physicians. These state actions were the direct result of the CAP and state pathology society advocacy and our petition requests for formal state agency rulings or state
attorney general opinions.

Full-scale EHR donations by laboratories have in practical terms been quid pro quo arrangements for referrals. Recognition by the OIG and the CMS of these longstanding abuses and removal of laboratory companies as protected donors are true victories for the laboratory community, pathologists, and the patients they serve. The change in the rules had the support of a diverse group ranging from small, pathologist-owned laboratories to the industry’s largest national laboratory companies, according to HHS.

EHR technology at times had included features that “locked in” an ordering physician with the donor as other laboratories could not readily access the information in the donated EHR. Several interested stakeholders including the CAP wrote the OIG and the CMS about these impediments to clinical information and unfair market practices when commenting on the initial draft of the rules.

“We believe that our determination to exclude laboratory companies from the scope of protected donors will help address the data and referral lock-in risks posed by arrangements such as those described by the commenters,” HHS officials stated in the rule. “We also believe that the changes we are finalizing to the scope of protected donors will help address [one] commenter’s concern about the negative impact of relationships between laboratory companies and vendors on the selection of electronic health records technology by providers and suppliers.”

The CAP’s concerns date back to the inception of the safe harbor in 2006. Many pathologists and laboratories saw an adverse pattern develop and heighten as the regulatory environment on Meaningful Use and interoperability emerged and evolved. An EHR vendor would provide an estimate for a new EHR system to physician clients. The vendor then encouraged doctors to approach a pathology practice or laboratory to “pay for the system” by donating 85% of the cost of the system in accordance with the safe harbor. If the pathologist declined, the ordering physician switched referrals to a laboratory that would donate the EHR.

The ordering physician expressly stated that quicker turnaround times, access, satisfaction, and quality of care under a longstanding relationship for first class pathology services did not outweigh the benefits of obtaining a new EHR at a deeply discounted rate. The decision was a monetary consideration. Continuity of care for patients even with chronic conditions and patient satisfaction were for all intents and purposes disregarded.

Pathologists also have been exposed to other tactics akin to cherry-picking, where ordering physicians are targeted for an EHR donation by laboratories based on volume and value of services ordered. Post donation, in-sourcing had also been a problem as ordering physicians established a self-referral arrangement in their practices within months of receiving a donated EHR.

In numerous instances, CAP members had offered to fund the cost of an interface between a laboratory information system and the ordering physicians’ EHR system, thus enabling electronic test ordering and receipt of laboratory results. However, many ordering physicians balked at the offer, seeking instead donation of the full EHR.

While the new regulations on the anti-kickback safe harbor and Stark exception end the misuse with EHR donations, they do not affect donations of interfaces by laboratories. Donations of interfaces were permitted prior to the establishment of the safe harbor and Stark exception, and remain unchanged by the December 27 rules. 

Pathologists and laboratories applaud the administration for acting on what the CAP had  communicated to the OIG from the very beginning of the program. Laboratory donations through the safe harbor and exception do not promote the widespread adoption of EHRs that was intended. Widespread adoption under the original safe harbor was to be accomplished through donors that had a far broader stake in the full continuum of care, such as hospitals and delivery systems, than laboratories that became targets for abuse.

George F. Kwass, MD, FCAP, is the Chairman of the College of American Pathologists (CAP) Council on Government and Professional Affairs.