February 6, 2013

Time is a Ticking: Meeting the Requirements for the Physician Payment Sunshine Act

As of last week, the compliance clock started ticking for companies affected by the Physician Payment Sunshine Act (PPSA).  The final ruling made it official that applicable health care manufacturers will now need to report annually to the Secretary of Health & Human Services (HHS) for certain payments, or other transfers of value to physicians and teaching hospitals organizations.

Applicable manufacturers include all companies operating in the U.S. that manufacture drugs, devices, biologics, or medical products that are reimbursable by the U.S. Federal Government or are under common ownership of such companies. Similar to other U.S. compliance requirements, the proposed rules suggest that the Sunshine Act will apply to all companies that manufacture products that are reimbursed by the U.S. federal government, irrespective of geographic location.

The ruling also finalized requirements for these same applicable manufacturers as well as Group Purchasing Organizations (GPOs) to annually report information about certain ownership or investment interests held by physicians and immediate family members of physicians, as well as payments and other transfers of value to such physicians. Based on the ruling, all applicable manufacturers will need to start collecting information starting this August through December 31, 2013.  The information is due to the Centers for Medicare & Medicaid Services (CMS) by March 31, 2014, and will also be published to a public website by September 30, 2014.

And if public scrutiny is not enough pressure, manufacturers or GPOs who fail to “timely, accurately, or completely” report the required information can be subject to a civil monetary penalty (CMP) ranging from $1,000 to $10,000 for each payment or transfer of value, or ownership or investment interest, not reported (up to $150,000) and from $10,000 to $100,000 for each “knowing” failure to report (up to $1,000,000). Furthermore, the CMPs are aggregated separately, and a manufacturer or GPO could be subject to a maximum penalty of $1,150,000.

While ending uncertainty that was created since the legislation was initially issued in December 2011, the goal of increased transparency and concern over conflicts of interest between physicians, teaching hospitals, GPOs and the healthcare industry manufacturers does not come without the cost of ramping up for compliance.  In fact, the final rules estimate the costs for the provisions to the new law to be close to $270 million for the first year, and $180 million annually thereafter.

In the end, this translates into increased pressures on both IT and Procurement professionals within these applicable manufacturers.  Finding the resources and means to now provide detailed information on payments or other transfers thus becomes a new burden that has a short timeline. What this means from a data standpoint now requires Health Care Provider (HCP) and Health Care Organization (HCO) information that includes –

  1. Covered recipient name, address, specialty
  2. National Provider Identifiers (NPIs) if available
  3. Amount of payment or transfer of value
  4. Date of payment
  5. Associated covered drug, device, biologic or medical supply (where applicable)
  6. Form of payment (selected from a pre-defined list)
  7. Nature of payment (selected from a pre-defined list)
  8. Third-party recipient, if applicable (e.g. charitable contribution on behalf of a physician)
  9. Ownership or investments associated with the applicable manufacturer (direct recipient and immediate family member[s])

As evidenced by the list of information requirements that needs to be submitted to CMS electronically, key issues around PPSA reporting demonstrates the potential variety of different data sources, such as tracking sales meeting, speaker fees, or attendance at a specific event and even knowing was allowable and what’s not.  For instance the Sunshine Act includes fourteen exceptions from disclosure. Some of these include:

  • Payments of less than $10 need not be reported unless payments to a covered recipient exceed $100 annually.
  • Educational materials and items (CMS added “items” in the Final Rule) intended for use by or with patients are not subject to the reporting requirements.
  • Discounts and rebates are excluded from reporting, which is notable because discounts and rebates create something of value flowing from a Manufacturer to a covered recipient.
  • Samples intended for patient use, including coupons and vouchers that patients can use to obtain samples, are exempt from the Sunshine Act’s requirements.

Furthermore, some of the costs may even come directly through invoices or expense receipts, or from third parties managing events and making payments on your behalf.  Reconciling all these items without a unique identifier and repository for all HCPs/HPOs becomes a near impossible task for organizations without supplier master data management.

What this ultimately means is that organizations that can establish a common supplier on-boarding process for HCPs/HPOs will avoid much of the manual efforts in collecting and analyzing data. And by using tools like HICX Supplier Manager and Supplier Portal, organizations can avoid the lengthy manual data cleansing and identification exercises required to aggregate and reconcile the different payment sources required to implement a successful PPSA compliance strategy.

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