In a significant development impacting the wider electronic health record (EHR) community, the HHS Office of Inspector General (OIG) on December 7 issued an Advisory Opinion (AO 11-18) approving an EHR vendor’s proposed transaction fee structure for charging customers that use the vendor’s new patient referral ordering system. Although the Advisory Opinion applies only to the specific requestors, the result is viewed favorably by both government and the EHR industry as an initial step in establishing market-based transaction charges for electronic transmission of health information under the nation’s developing Health Information Technology (HIT) infrastructure.

Under the proposed arrangement, described as a cloud-based “Coordination Service,” the EHR vendor’s product would facilitate the electronic transmission of requests for referrals, between so-called ordering (or referring) health professionals and receiving health professionals, which incude a variety of supporting information in standardized format, such as insurance authorization, the ordering health professional’s contact information and NPI (National Provider Identifier), the receiving health professional’s (referred to as a trading partner, where such professional has signed an agreement to participate in the Coordination Service) contact information and, to the extent needed or available, certain necessary clinical information taken from the patient’s EHR, as requested by the receiving health professional.

Three levels of fees are triggered by the service, namely a base transmission fee (capped at $1 per transaction), a functionality fee for recording information and attaching clinical information and a service fee for benefit eligibility and referral authorization. Ordering health professionals who subscribe to the Coordination Service would receive a discount of up to 35 percent off their current monthly EHR service fees. Receiving health professionals who sign a trading partner agreement (which entitles them to enhanced functionality and information) would be charged the transmission fee; otherwise the ordering health professional would be charged the transmission fee. Receiving health professionals that are trading partners also would be assessed the functionality fee and service fee (if applicable) (such services are not available if the receiving health professional is not a trading partner).

In the Advisory Opinion, the OIG stated that “the efficient exchange of health information between Health Professionals is a laudable goal” but that when “the [information] exchange takes place in the context of referrals, we must evaluate whether the means used to achieve that goal implicate the anti-kickback statute.” First, the OIG found that the transmission fee, other related service fees and the discount from the EHR service fees offered to ordering health professionals, would not violate the anti-kickback statute because the fees were not offered or received in return for the referrals, nor for the right to be included in the EHR vendor’s “network” of health professionals participating in the Coordination Service (which is open to any professional signing a trading partner agreement). Second, the OIG found that the three types of transaction fees were consistent with fair market value because they were unrelated to inducing the actual referrals and were determined in a manner that did not vary based on the value of the items or services that a receiving health professional might ultimately provide to federal healthcare program beneficiaries. Third, the transmission fee, charged on a “per-click” basis, was reasonable since it was charged on each transaction regardless of whether a patient actually received services from the receiving health professional.

The other fees were reasonable because they were related to the value-added services provided and were distinguishable from so-called “success fees” that are directly or indirectly tied to federal healthcare program payments. Further, the OIG concluded that the transaction fees would be unlikely to materially influence providers’ referral decisions, were expressly intended to facilitate the permissible purpose of exchanging information and would not necessarily result in preferences in referrals by health professionals, which are based on a variety of other factors (although the added convenience and ease of information exchange was recognized as an advantage that trading partners would receive over nontrading partners).

Therefore, the OIG concluded that, in the absence of any requisite intent to pay for, or induce, the referral of federally reimbursed items and services, no penalties under the anti-kickback statute or civil monetary penalties law would be applied to the proposed arrangement.

As a result of the favorable outcome in this proposed arrangement, industry experts predict that the development of fair market value transaction fees for electronic information exchange under the growing variety of EHR systems will be significantly advanced.

Photo of John Mulhollan John Mulhollan

John Mulhollan has actively served a variety of business and healthcare clients in Ohio and California, with a particular emphasis on the healthcare industry, for nearly ten years.

Mr. Mulhollan has experience counseling clients in a variety of substantive areas, including healthcare transactions…

John Mulhollan has actively served a variety of business and healthcare clients in Ohio and California, with a particular emphasis on the healthcare industry, for nearly ten years.

Mr. Mulhollan has experience counseling clients in a variety of substantive areas, including healthcare transactions and contractual negotiations involving Medicare and Medicaid fraud and abuse compliance, physician referral compliance under the Stark law and professional and facility licensing. He has assisted both nonprofit and for-profit clients with legal analysis and documentation of healthcare private offerings, joint venture agreements, leases and corporate governance matters in connection with complex transactions. Focused on providing sound, yet practical, advice, Mr. Mulhollan strives to understand and promote each client’s healthcare mission by providing legally compliant solutions to the challenges of today’s complex healthcare environment.

Mr. Mulhollan has represented large and small healthcare providers such as healthcare systems, individual hospitals and clinics, as well as physicians and ancillary healthcare businesses. The complex transactions he has handled range from single contractual services arrangements to large healthcare mergers and acquisitions. Examples include the acquisition of a county-owned community hospital by a nonprofit health system, shareholder relations and combinations with respect to private physician practices, and compliance and documentation support for a variety of healthcare ventures involving ambulatory surgery, diagnostic imaging and laboratory services. In addition to providing thorough legal analysis of business issues, Mr. Mulhollan is able to guide clients through complex issues ranging from Medicare/Medicaid certification, change of ownership and reimbursement implications of such transactions to detailed analysis and preparation of professional and vendor services agreements. He also provides guidance and support in the areas of operational restructuring of provider, supplier and medical group operations, including the expansion or contraction of services, outsourcing, marketing and development compliance and complex facility and vendor relationships.

Mr. Mulhollan has advised clients on a variety of organizational compliance efforts, including fraud and abuse and Stark law compliance and corporate policy development. He advises clients on physician professional services and on-call arrangements, medical director agreements, physician recruitment, graduate medical education and medical office leasing. Mr. Mulhollan has advised both healthcare and business clients on implementing the many requirements and compliance issues arising under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), as well as compliance with state medical privacy and professional licensing laws.

In addition, Mr. Mulhollan’s business practice includes general business advice to healthcare and non-healthcare clients, including mergers and acquisitions, governance, shareholder transactions, professional entity formation and compliance with government regulations.

Mr. Mulhollan is a member of the American, Ohio and Cleveland Metropolitan (Health Law Section) Bar Associations, as well as the American Health Lawyers Association.