Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Rules and Regulations 78751 

to section 12(d) of the National 

Technology Transfer and Advancement 

Act of 1995 (NTTAA) (15 U.S.C. 272 

note). 

Since tolerances and exemptions that 

are established on the basis of a petition 

under FFDCA section 408(d), such as 

the tolerance in this final rule, do not 

require the issuance of a proposed rule, 

the requirements of the Regulatory 

Flexibility Act (RFA) (5 U.S.C. 601 et 

seq.), do not apply. 

This final rule directly regulates 

growers, food processors, food handlers, 

and food retailers, not States or tribes, 

nor does this action alter the 

relationships or distribution of power 

and responsibilities established by 

Congress in the preemption provisions 

of FFDCA section 408(n)(4). As such, 

the Agency has determined that this 

action will not have a substantial direct 

effect on States or tribal governments, 

on the relationship between the national 

government and the States or tribal 

governments, or on the distribution of 

power and responsibilities among the 

various levels of government or between 

the Federal Government and Indian 

tribes, or otherwise have any unique 

impacts on local governments. Thus, the 

Agency has determined that Executive 

Order 13132, entitled ‘‘Federalism’’ (64 

FR 43255, August 10, 1999) and 

Executive Order 13175, entitled 

‘‘Consultation and Coordination with 

Indian Tribal Governments’’ (65 FR 

67249, November 9, 2000) do not apply 

to this final rule. In addition, this final 

rule does not impose any enforceable 

duty or contain any unfunded mandate 

as described under Title II of the 

Unfunded Mandates Reform Act of 1995 

(UMRA) (2 U.S.C. 1501 et seq.). 

Although this action does not require 

any special considerations under 

Executive Order 12898, entitled 

‘‘Federal Actions to Address 

Environmental Justice in Minority 

Populations and Low-Income 

Populations’’ (59 FR 7629, February 16, 

1994), EPA seeks to achieve 

environmental justice, the fair treatment 

and meaningful involvement of any 

group, including minority and/or lowincome populations, in the 

development, implementation, and 

enforcement of environmental laws, 

regulations, and policies. As such, to the 

extent that information is publicly 

available or was submitted in comments 

to EPA, the Agency considered whether 

groups or segments of the population, as 

a result of their location, cultural 

practices, or other factors, may have 

atypical or disproportionately high and 

adverse human health impacts or 

environmental effects from exposure to 

the pesticide discussed in this 

document, compared to the general 

population. 

XI. Congressional Review Act 

Pursuant to the Congressional Review 

Act (5 U.S.C. 801 et seq.), EPA will 

submit a report containing this rule and 

other required information to the U.S. 

Senate, the U.S. House of 

Representatives, and the Comptroller 

General of the United States prior to 

publication of the rule in the Federal 

Register. This action is not a ‘‘major 

rule’’ as defined by 5 U.S.C. 804(2). 

List of Subjects in 40 CFR Part 180 

Environmental protection, 

Administrative practice and procedure, 

Agricultural commodities, Pesticides 

and pests, Reporting and recordkeeping 

requirements. 

Dated: December 17, 2013. 

Lois Rossi, 

Director, Registration Division, Office of 

Pesticide Programs. 

Therefore, 40 CFR chapter I is 

amended as follows: 

PART 180—[AMENDED] 

■ 1. The authority citation for part 180 

continues to read as follows: 

Authority: 21 U.S.C. 321(q), 346a and 371. 

■ 2. In § 180.960, in the table, 

alphabetically add the following 

polymer before the entry for ‘‘Hexadecyl 

acrylate-acrylic acid copolymer * * *’’ 

to read as follows: 

§ 180.960 Polymers; exemptions from the 

requirement of a tolerance. 

* * * * * 

Polymer CAS No. 

* * * * * 

2,5-Furandione, polymer with 

ethenylbenzene, reaction 

products with polyethylenepolypropylene glycol 2- 

aminopropyl Me ether; 

minimum number average 

molecular weight (in amu), 

14,000 ............................... 162568–32–3 

* * * * * 

[FR Doc. 2013–31108 Filed 12–26–13; 8:45 am] 

BILLING CODE 6560–50–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 411 

[CMS–1454–F] 

RIN 0938–AR70 

Medicare Program; Physicians’ 

Referrals to Health Care Entities With 

Which They Have Financial 

Relationships: Exception for Certain 

Electronic Health Records 

Arrangements 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule revises the 

exception to the physician self-referral 

law that permits certain arrangements 

involving the donation of electronic 

health records items and services. 

Specifically, this final rule extends the 

expiration date of the exception to 

December 31, 2021, excludes laboratory 

companies from the types of entities 

that may donate electronic health 

records items and services, updates the 

provision under which electronic health 

records software is deemed 

interoperable, removes the electronic 

prescribing capability requirement, and 

clarifies the requirement prohibiting any 

action that limits or restricts the use, 

compatibility, or interoperability of 

donated items or services. 

DATES: With the exception of the 

amendment to § 411.357(w)(13), this 

regulation is effective on March 27, 

2014. The amendment to 

§ 411.357(w)(13) is effective on 

December 31, 2013. 

FOR FURTHER INFORMATION CONTACT: Lisa 

Ohrin, (410) 786–8852. 

SUPPLEMENTARY INFORMATION: 

I. Executive Summary 

A. Purpose of the Regulatory Action 

Section 1877 of the Social Security 

Act (the Act), codified at 42 U.S.C. 

1395nn, also known as the physician 

self-referral statute: (1) prohibits a 

physician from making referrals for 

certain designated health services (DHS) 

payable by Medicare to an entity with 

which he or she (or an immediate family 

member) has a financial relationship 

(ownership interest or compensation 

arrangement), unless the requirements 

of an exception are satisfied; and (2) 

prohibits the entity from submitting 

claims to Medicare for those referred 

services, unless the requirements of an 


tkelley on DSK3SPTVN1PROD with RULES
78752 Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Rules and Regulations 

1 42 CFR 1001.952(y). 

exception are satisfied. The statute 

establishes a number of exceptions and 

grants the Secretary the authority to 

create additional regulatory exceptions 

for financial relationships that do not 

pose a risk of program or patient abuse. 

Since the original enactment of the 

statute in 1989, we have published a 

series of final rules interpreting the 

statute and promulgating numerous 

exceptions. 

In accordance with our statutory 

authority, we published an exception to 

the physician self-referral law to protect 

certain arrangements involving the 

provision of interoperable electronic 

health records software or information 

technology and training services. The 

final rule for this exception was 

published on August 8, 2006 (71 FR 

45140) (hereinafter referred to as the 

August 2006 final rule) and is scheduled 

to expire on December 31, 2013 (see 42 

CFR 411.357(w)(13)). In the April 10, 

2013 Federal Register (78 FR 21308), we 

published a proposed rule that would 

update certain aspects of the electronic 

health records exception and extend the 

expiration date of the exception. The 

purpose of this final rule is to address 

the public comments received on the 

proposed rule and to finalize certain 

aspects of the proposed rule. 

B. Summary of the Final Rule 

This final rule amends the current 

exception in several ways. First, this 

final rule extends the expiration date of 

the exception to December 31, 2021. 

Second, it excludes laboratory 

companies from the types of entities 

that may donate electronic health 

records items and services. Third, this 

rule updates the provision under which 

electronic health records software is 

deemed interoperable. Fourth, this rule 

clarifies the requirement at 

§ 411.357(w)(3) prohibiting any action 

that limits or restricts the use, 

compatibility, or interoperability of 

donated items or services. Finally, it 

removes from the exception the 

requirement related to electronic 

prescribing capability. 

C. Costs and Benefits 

This final rule modifies an existing 

exception to the physician self-referral 

law. The exception permits certain 

entities to provide to physicians certain 

software and information technology 

and training and services necessary and 

used predominantly to create, maintain, 

transmit, or receive electronic health 

records. The modifications to the 

exception do not impose new 

requirements on any party. This is not 

a major rule, as defined at 5 U.S.C. 

804(2). It is also not economically 

significant, because it will not have a 

significant effect on program 

expenditures and there are no 

additional substantive costs to 

implement the resulting provisions. We 

expect the exception, as modified by 

this final rule, to continue to facilitate 

the adoption of electronic health records 

technology. 

II. Background 

A. Physician Self-Referral Statute and 

Exceptions 

Section 1877 of the Act, codified at 42 

U.S.C. 1395nn, also known as the 

physician self-referral statute: (1) 

prohibits a physician from making 

referrals for certain DHS payable by 

Medicare to an entity with which he or 

she (or an immediate family member) 

has a financial relationship (ownership 

interest or compensation arrangement), 

unless the requirements of an exception 

are satisfied; and (2) prohibits the entity 

from submitting claims to Medicare for 

those referred services, unless the 

requirements of an exception are 

satisfied. The statute at 42 U.S.C. 

1395nn(b)(4) establishes a number of 

exceptions and grants the Secretary the 

authority to create additional regulatory 

exceptions for financial relationships 

that do not pose a risk of program or 

patient abuse. Since the original 

enactment of the statute in 1989, we 

have published a series of final rules 

interpreting the statute and 

promulgating numerous exceptions. 

B. The Electronic Health Records Items 

and Services Exception 

On August 8, 2006 (71 FR 45140), we 

published a final rule that, among other 

things, finalized at § 411.357(w) an 

exception to the physician self-referral 

law for protecting certain arrangements 

involving interoperable electronic 

health records software or information 

technology and training services (the 

‘‘electronic health records exception’’). 

Also in the August 8, 2006 Federal 

Register (71 FR 45110), the Department 

of Health and Human Services’ (HHS) 

Office of Inspector General (OIG) 

published similar final regulations at 

§ 1001.952 that, among other things, 

adopted a safe harbor under the Federal 

anti-kickback statute (section 1128B(b) 

of the Act, codified at 42 U.S.C. 1320a– 

7b(b)) for certain arrangements 

involving interoperable electronic 

health records software or information 

technology and training services. As set 

forth at § 411.357(w)(13) and 

§ 1001.952(y)(13), the physician selfreferral law electronic health records 

exception and the Federal anti-kickback 

electronic health records safe harbor, 

respectively, are scheduled to expire on 

December 31, 2013. 

On April 10, 2013 (78 FR 21308), we 

published a proposed rule that would 

set forth certain proposed changes to the 

electronic health records exception. 

First, we proposed to update the 

provision under which electronic health 

records software is deemed 

interoperable. Second, we proposed to 

remove from the exception the 

requirement related to electronic 

prescribing capability. Third, we 

proposed to extend the expiration date 

of the exception. In addition to these 

proposals, we solicited public comment 

on other possible amendments to the 

exception, including our proposal to 

limit the types of entities that may 

donate electronic health records items 

and services under the exception and to 

add or modify conditions to limit the 

risk of data and referral lock-in. 

Elsewhere in the same issue of the 

Federal Register (78 FR 21314), OIG 

proposed almost identical changes to 

the Federal anti-kickback statute safe 

harbor. Within the limitations imposed 

by the differences in the respective 

underlying statutes, we attempted to 

ensure as much consistency as possible 

between our proposed modifications to 

the exception at § 411.357(w) and OIG’s 

proposed modifications to the safe 

harbor. We noted in the proposed rule 

that, due to the close nexus between our 

proposed rule and the OIG’s proposed 

rule, we might consider comments 

submitted in response to OIG’s proposal 

in finalizing this rule. 

This final rule adopts some of the 

proposed changes to the electronic 

health records exception to the 

physician self-referral law. First, this 

final rule extends the expiration date of 

the exception to December 31, 2021. 

Second, it excludes laboratory 

companies from the types of entities 

that may donate electronic health 

records items and services under the 

exception. Third, this rule updates the 

provision under which electronic health 

records software is deemed 

interoperable. Fourth, this rule clarifies 

the requirement at § 411.357(w)(3) 

prohibiting any action that limits or 

restricts the use, compatibility, or 

interoperability of donated items or 

services. Finally, it removes from the 

exception the requirement related to 

electronic prescribing capability. 

Elsewhere in this issue of the Federal 

Register, the OIG is finalizing almost 

identical changes to the electronic 

health records safe harbor 1 under the 

Federal anti-kickback statute. We 

attempted to ensure as much 


tkelley on DSK3SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Rules and Regulations 78753 

consistency as possible between our 

changes to the physician self-referral 

law exception and OIG’s safe harbor 

changes. We have considered and 

responded to the timely comments we 

received as well as those received by 

OIG. Similarly, OIG considered 

comments submitted in response to our 

proposed rule in crafting its final rule. 

For purposes of this final rule, we treat 

comments that were made with respect 

to the Federal anti-kickback statute as if 

they had been made with respect to the 

physician self-referral law, except where 

they relate to differences in the 

underlying statutes. 

III. Provisions of the Proposed 

Regulations and Analysis of and 

Responses to Public Comments 

We received approximately 110 

timely items of correspondence for the 

proposed rule. We summarize and 

respond to comments later in this 

section of the final rule. For ease of 

reference, we divided the comments and 

responses into the following categories: 

the deeming provision; the electronic 

prescribing provision; the ‘‘sunset’’ 

provision; and additional proposals and 

considerations. 

A. The Deeming Provision 

Our current electronic health records 

exception requires at § 411.357(w)(2) 

that the donated software must be 

‘‘interoperable’’ (as defined at § 411.351) 

at the time it is provided to the 

physician. This provision further 

provides that software is deemed to be 

interoperable if a certifying body 

recognized by the Secretary has certified 

the software no more than 12 months 

prior to the date it is provided to the 

physician. We proposed two 

modifications to § 411.357(w)(2), which 

is known as the ‘‘deeming provision.’’ 

Both modifications to the deeming 

provision were proposed to reflect 

recent developments in the Office of the 

National Coordinator for Health 

Information Technology’s (ONC) 

certification program. 

The first proposed modification 

would reflect ONC’s responsibility for 

authorizing certifying bodies. The 

second would modify the timeframe 

during which donated software must be 

certified. Currently, to comply with the 

deeming provision, the exception 

requires donated software to be certified 

no more than 12 months prior to the 

date of donation. 

After the issuance of the August 2006 

final rule, ONC developed a regulatory 

process for adopting certification 

criteria and standards which is 

anticipated to result in a cyclical 

rulemaking process. (For more 

information, see ONC’s September 4, 

2012 final rule entitled ‘‘Health 

Information Technology: Standards, 

Implementation Specifications, and 

Certification Criteria for Electronic 

Health Record Technology, 2014 

Edition; Revisions to the Permanent 

Certification Program for Health 

Information Technology’’ (77 FR 

54163).) Our proposal would have 

modified the deeming provision to track 

ONC’s anticipated regulatory cycle. As a 

result, software would be eligible for 

deeming if, on the date it is provided to 

the physician, it has been certified to 

any edition of the electronic health 

record certification criteria that is 

identified in the then-applicable 

definition of Certified EHR Technology 

in 45 CFR part 170. By way of example, 

for 2013, the applicable definition of 

Certified EHR Technology includes both 

the 2011 and the 2014 editions of the 

electronic health record certification 

criteria. Therefore, in 2013, software 

certified to meet either the 2011 edition 

or the 2014 edition would have satisfied 

the requirement of the exception as we 

proposed to modify it. Additionally, we 

solicited comments on whether 

removing the current 12-month 

certification requirement would impact 

donations and whether we should retain 

the 12-month certification period as an 

additional means of determining 

eligibility under the deeming provision. 

After consideration of the public 

comments received, we are finalizing 

the proposed revisions to 

§ 411.357(w)(2) with one clarification to 

our proposed regulatory text to ensure 

that the deeming provision closely 

tracks ONC’s certification program. We 

are revising § 411.357(w)(2) to state that 

software is deemed to be interoperable 

if, on the date that it is provided to the 

physician, it has been certified by a 

certifying body authorized by the 

National Coordinator for Health 

Information Technology to an edition of 

the electronic health record certification 

criteria identified in the then-applicable 

45 CFR part 170. As we stated in the 

August 2006 final rule (71 FR 45156), 

we understand ‘‘that the ability of 

software to be interoperable is evolving 

as technology develops. In assessing 

whether software is interoperable, we 

believe the appropriate inquiry is 

whether the software is as interoperable 

as feasible given the prevailing state of 

technology at the time the items or 

services are provided to the physician 

recipient.’’ We believe that our final rule 

with respect to this requirement is 

consistent with that understanding and 

our objective of ensuring that software 

is certified to the current required 

standard of interoperability when it is 

donated. 

Comment: All of the commenters that 

addressed this issue in their comments 

supported the proposed modification 

that would amend the exception to 

recognize ONC as the agency 

responsible for authorizing certifying 

bodies on behalf of the Secretary, with 

one commenter requesting that we 

clarify that software need not be 

certified to ONC’s standards to be 

eligible for donation. 

Response: We appreciate the 

commenters’ support for this 

modification. With respect to the 

request for clarification, the commenter 

is correct that § 411.357(w)(2) does not 

require software to be certified to ONC’s 

standards in order to be eligible for 

donation. As we discussed in the 

August 2006 final rule (71 FR 45156), 

the deeming provision offers one way 

for parties to be certain that the 

interoperability requirement of 

§ 411.357(w)(2) is met at the time of 

donation. Even if donated software is 

not deemed to be interoperable, the 

arrangement would satisfy the 

interoperability requirement of the 

exception if the software meets the 

definition of ‘‘interoperable’’ at 

§ 411.351. 

Comment: One commenter expressed 

concerns about linking the 

interoperability requirement of the 

exception to ONC’s certification criteria 

and standards because they do not, in 

the commenter’s assessment, reflect 

contemporary views of interoperability. 

The commenter suggested that we 

instead implement a broad definition of 

interoperability adopted by the 

International Organization for 

Standardization or, alternatively, that 

we adopt interoperability functional 

definitions developed by the American 

National Standards Institute. 

Response: Although we are mindful 

that other non-governmental 

organizations may be developing their 

own standards to encourage the 

adoption of interoperable electronic 

health records technology, ONC’s 

certification criteria and standards are 

the core policies the Department is 

utilizing to accelerate and advance 

interoperability and health information 

exchange. On March 7, 2013, ONC and 

CMS jointly published a Request for 

Information (78 FR 14793) to solicit 

public feedback on a set of possible 

policies ‘‘that would encourage 

providers to routinely exchange health 

information through interoperable 

systems in support of care coordination 

across health care settings.’’ The process 

by which ONC considers the 

implementation of new certification 


tkelley on DSK3SPTVN1PROD with RULES
78754 Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Rules and Regulations 

2ONC has recently begun characterizing sets of 

adopted certification criteria as ‘‘editions.’’ 

criteria and standards is a public, 

transparent effort that allows the 

Department’s electronic health records 

technology experts to consider 

appropriately the comments submitted 

in light of the goal ‘‘to accelerate the 

existing progress and enhance a market 

environment that will accelerate [health 

information exchange] across providers. 

. . .’’ (78 FR 14795). 

We believe that it is reasonable and 

appropriate to link the deeming 

provision to ONC’s certification criteria 

and standards because of ONC’s 

expertise and its public process for 

considering and implementing its 

criteria and standards. ONC is the 

agency within the Department with 

expertise in determining the relevant 

criteria and standards to ensure that 

software is as interoperable as feasible 

given the prevailing state of technology. 

ONC expects to revise and expand such 

criteria and standards incrementally 

over time to support greater 

interoperability of electronic health 

records technology. (See the September 

4, 2012 final rule (77 FR 54269).) 

Additionally, we believe that utilizing 

ONC’s certification criteria and 

standards, which are implemented 

through a public process, affords the 

best opportunity for interested parties to 

comment on, understand, and 

ultimately implement those criteria and 

standards. Therefore, we are not 

adopting the commenter’s suggestion. 

Comment: One commenter stated that 

many electronic health records systems 

lack the capabilities to function within 

a patient-centered medical home. The 

commenter suggested that we finalize 

policies that further strengthen the use 

of core electronic health records 

features. 

Response: We are not adopting the 

commenter’s suggestion. As discussed, 

ONC is the agency within the 

Department with expertise in 

determining the relevant criteria and 

standards for electronic health records 

technology, including those related to 

the use of core features. The public 

process through which ONC’s 

certification criteria and standards are 

implemented affords the best 

opportunity for interested parties to 

comment on, understand, and 

ultimately implement those criteria and 

standards. 

Comment: Of the commenters that 

addressed the deeming provision, most 

supported our proposal to modify the 

timeframe within which donated 

software must have been certified to 

track more closely the current ONC 

certification program. Commenters 

asserted that aligning the exception’s 

certification timeframe with ONC’s 

certification program will provide 

donors and physician recipients more 

certainty about the deemed status of 

donated software because the software 

must be certified to meet only one set 

of standards on the same certification 

cycle to comply with both ONC’s 

certification criteria and the deeming 

provision of the exception. One 

commenter supported the modification, 

but suggested that the 12-month 

certification timeframe also be retained 

or, alternatively, that we allow software 

to be deemed to be interoperable if it 

has been certified to any edition of 

ONC’s electronic health record 

certification criteria. 

Response: We agree that aligning the 

exception’s certification timeframe with 

ONC’s certification program provides 

more certainty to donors and physician 

recipients. We believe that the 

modification we are making to the 

requirement at § 411.357(w)(2) will 

support the dual goals of the deeming 

provision: (1) to ensure that donated 

software is as interoperable as feasible 

given the prevailing state of technology 

at the time it is provided to the 

physician recipient; and (2) to provide 

donors and physician recipients a 

means to have certainty that donated 

software satisfies the interoperability 

requirement of the exception. 

We are not persuaded to adopt the 

commenter’s suggestion to retain the 12- 

month certification timeframe, as this 

would not ensure that software is 

certified to the current required 

standard of interoperability. In the 

course of evaluating the commenter’s 

suggestion, however, we realized that 

our proposed regulatory text may be too 

narrow to satisfy the dual goals of the 

deeming provision. Under our proposed 

regulatory text, software would be 

deemed interoperable if it was certified 

to an edition 2 of certification criteria 

referenced in the then-applicable 

definition of ‘‘Certified EHR 

Technology’’ at 45 CFR 170.102. That 

definition applies only to the Medicare 

and Medicaid Electronic Health Record 

Incentive Programs (the EHR Incentive 

Programs). See generally, 42 CFR part 

495. However, ONC also has the 

authority to adopt into its regulations in 

45 CFR part 170 certification criteria for 

health information technology, 

including electronic health records, that 

may not be referenced in the definition 

of ‘‘Certified EHR Technology’’ because 

they are not related to the EHR Incentive 

Programs. If we finalize the proposed 

regulatory text, software certified to 

criteria in editions not included in the 

definition ‘‘Certified EHR Technology’’ 

would not be eligible for deeming under 

the exception. Further, we have recently 

learned that ONC intends to retire 

outdated editions of certification criteria 

by removing them from the regulatory 

text in 45 CFR part 170. Accordingly, 

software certified to an edition 

identified in the regulations in effect on 

the date of the donation would be 

certified to a then-applicable edition, 

regardless of whether the particular 

edition was also referenced in the thenapplicable definition of Certified EHR 

Technology. Thus, we are finalizing 

revisions to § 411.357(w)(2) to track 

more closely ONC’s certification 

program in the deeming provision. We 

are finalizing a modification to our 

regulatory text to provide that software 

is deemed to be interoperable if, on the 

date it is provided to the physician 

recipient, it has been certified by a 

certifying body authorized by the 

National Coordinator for Health 

Information Technology to an edition of 

the electronic health record certification 

criteria identified in the then-applicable 

version of 45 CFR part 170. We believe 

that this is consistent with our intent, as 

articulated in the proposed rule, to 

modify the deeming provision by 

removing the 12-month timeframe and 

substituting a provision that more 

closely tracks ONC’s certification 

program. Further, we believe that the 

regulatory text, as modified, will 

support the goals of the deeming 

provision described previously. 

Comment: One commenter suggested 

that, for deeming purposes, we should 

require that software be certified to the 

latest edition of electronic health record 

certification criteria rather than any 

edition then applicable. This 

commenter also suggested that the 

electronic directory of service (e-DOS) 

standard should be a certification 

requirement for donated software, and 

asserted that both recommendations 

would help ensure electronic health 

records software is interoperable. 

Response: We decline to adopt the 

commenter’s suggested requirements for 

the exception at § 411.357(w). We 

believe that requiring donated software 

to be certified to editions that are 

adopted and not yet retired by ONC 

through its certification program 

ensures that the software is certified to 

interoperability standards updated 

regularly by the agency of the 

Department with the relevant expertise. 

Further, adding requirements to the 

ONC certification criteria and standards 

is outside the scope of this rulemaking. 

Therefore, we are not implementing the 

commenter’s suggestions. 


tkelley on DSK3SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Rules and Regulations 78755 

B. The Electronic Prescribing Provision 

At § 411.357(w)(11), our current 

electronic health records exception 

specifies that the donated software must 

‘‘contain [] electronic prescribing 

capability, either through an electronic 

prescribing component or the ability to 

interface with the physician’s existing 

electronic prescribing system that meets 

the applicable standards under 

Medicare Part D at the time the items 

and services are provided.’’ In the 

preamble to the August 2006 final rule 

(71 FR 45153), we stated that we 

included ‘‘this requirement, in part, 

because of the critical importance of 

electronic prescribing in producing the 

overall benefits of health information 

technology, as evidenced by section 101 

of the [Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003 (MMA), Pub. L. 108–173].’’ We 

also noted that it was ‘‘our 

understanding that most electronic 

health records systems already include 

an electronic prescribing component’’ 

(71 FR 45153). 

We continue to believe in the critical 

importance of electronic prescribing. 

However, in light of developments since 

the August 2006 final rule, we proposed 

to delete from the exception the 

requirement at § 411.357(w)(11). Based 

on our review of the public comments 

and for the reasons stated in the 

proposed rule, we are finalizing our 

proposal to eliminate the requirement 

that electronic health records software 

contain electronic prescribing capability 

in order to qualify for protection under 

the exception at § 411.357(w). 

Comment: Two commenters disagreed 

that it is no longer necessary to require 

the inclusion of electronic prescribing 

capability in donated electronic health 

records software. One of the 

commenters stated that it was 

encouraged by the growth in the number 

of physicians using electronic 

prescribing between 2008 and 2012, but 

believed that the requirement should 

remain for patient safety reasons 

because electronic prescribing is critical 

to lowering the incidences of 

preventable medication errors. 

Response: Like the commenters, and 

as we stated in the proposed rule (78 FR 

21311), we believe in the importance of 

electronic prescribing. However, we are 

persuaded that other existing policy 

drivers, many of which did not exist in 

August 2006 when the exception was 

promulgated, sufficiently support the 

adoption of electronic prescribing 

capabilities. We do not want to 

undermine important public policy 

goals by requiring redundant and 

sometimes expensive software 

capabilities that may not contribute to 

the interoperability of a given system. 

As we discussed in the proposed rule, 

electronic prescribing technology will 

remain eligible for donation under the 

electronic health records exception or 

under the electronic prescribing 

exception at § 411.357(v). We do not 

believe that removing this requirement 

would increase the risk of fraud or 

abuse posed by donations made 

pursuant to the exception. 

Comment: Many commenters 

supported our proposal to eliminate the 

requirement that donated software must 

include electronic prescribing capability 

at the time it is provided to the 

physician recipient, agreeing that 

developments since the promulgation of 

the exception make it unnecessary to 

retain this requirement. One of the 

commenters asserted that the goal of the 

requirement for the inclusion of 

electronic prescribing technology in 

donated electronic health records 

software—that is, increasing the use of 

electronic prescribing—had been 

achieved through the electronic 

prescribing incentive program 

authorized by the Medicare 

Improvements for Patients and 

Providers Act of 2008. 

Response: We appreciate the 

commenters’ support and, for the 

reasons explained in more detail 

previously in this final rule, we are 

eliminating the requirement at 

§ 411.357(w)(11) that donated electronic 

health records software must contain 

electronic prescribing capability, either 

through an electronic prescribing 

component or the ability to interface 

with the physician’s existing electronic 

prescribing system that meets the 

applicable standards under Medicare 

Part D at the time the items and services 

are provided. 

C. The ‘‘Sunset’’ Provision 

Protected donations under the current 

electronic health records exception 

must be made on or prior to December 

31, 2013. In adopting this requirement 

of the electronic health records 

exception, we acknowledged in the 

August 2006 final rule (71 FR 45162), 

‘‘that the need for donations of 

electronic health records technology 

should diminish substantially over time 

as the use of such technology becomes 

a standard and expected part of medical 

practice.’’ 

As we discussed in the proposed rule, 

although the industry has made great 

progress in the adoption and meaningful 

use of electronic health records 

technology, the use of such technology 

has not yet been adopted nationwide. 

Continued use and further adoption of 

electronic health records technology 

remains an important goal of the 

Department. We continue to believe 

that, as progress on this goal is 

achieved, the need for an exception for 

donations of electronic health records 

items and services should continue to 

diminish over time. Accordingly, we 

proposed to extend the expiration date 

of the exception to December 31, 2016, 

selecting this date for the reasons 

described in the proposed rule (78 FR 

21311). We also specifically sought 

comment on whether we should, as an 

alternative, select a later expiration date 

and what that date should be. For 

example, we stated that we were 

considering an expiration date of 

December 31, 2021 (78 FR 21311). In 

response to comments, we are extending 

the expiration date of the exception to 

December 31, 2021. 

Comment: Numerous commenters 

urged us to make permanent the 

exception at § 411.357(w). According to 

these commenters, a permanent 

exception could: (1) provide certainty 

with respect to the cost of electronic 

health records technology for 

physicians; (2) encourage adoption by 

physicians who are new entrants into 

medical practice or have postponed 

adoption based on financial concerns 

regarding the ongoing costs of 

maintaining and supporting an 

electronic health records system; (3) 

encourage adoption by providers and 

suppliers that are not eligible for 

incentive payments through the 

Medicare and Medicaid programs; and 

(4) preserve the gains already made in 

the adoption of interoperable electronic 

health records technology, especially 

where hospitals have invested in health 

information technology infrastructure 

through protected donations of such 

technology. According to some 

commenters, although the exception 

was implemented to encourage the 

adoption of health information 

technology, it is now a necessity for the 

creation of new health care delivery and 

payment models. Some commenters 

also stated their support for a permanent 

exception because the adoption of 

electronic health records technology has 

been slower than expected, and 

allowing the exception to expire in 2016 

would adversely affect the rate of 

adoption. Some of these commenters 

requested that, if CMS is not inclined to 

make the exception permanent, we 

extend the availability of the exception 

through the latest date noted in the 

proposed rule—December 31, 2021. 

Response: We agree with the 

commenters that the continued 

availability of the exception at 

§ 411.357(w) plays a part in achieving 


tkelley on DSK3SPTVN1PROD with RULES
78756 Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Rules and Regulations 

the Department’s goal of promoting 

electronic health records technology 

adoption. However, we do not believe 

that making the exception permanent is 

required or appropriate at this time. The 

permanent availability of the exception 

could serve as a disincentive to 

adopting interoperable electronic health 

records technology in the near-term. 

Moreover, as described in the proposed 

rule (78 FR 21312) and elsewhere in this 

final rule, we are concerned about 

inappropriate donations of electronic 

health records items and services that 

lock in data and referrals between a 

donor and physician recipient, among 

other risks. A permanent exception 

might exacerbate these risks over the 

longer term without significantly 

improving adoption rates. However, in 

light of other modifications we are 

making in this final rule to mitigate 

such ongoing risks, including removing 

laboratory companies as protected 

donors of electronic health records 

items and services, we are persuaded to 

permit use of the exception for more 

than the additional 3-year period that 

we proposed. 

The adoption of interoperable 

electronic health records technology 

still remains a challenge for some 

providers and suppliers despite progress 

in its implementation and meaningful 

use since the August 2006 promulgation 

of the exception at § 411.357(w). (See 

ONC’s Report to Congress on Health IT 

Adoption (June 2013) at http:// 

www.healthit.gov/sites/default/files/rtc_

adoption_of_healthit_and_

relatedefforts.pdf and the U.S. 

Department of Health and Human 

Services Assistant Secretary for 

Planning and Evaluation’s EHR Payment 

Incentives for Providers Ineligible for 

Payment Incentives and Other Funding 

Study (June 2013) at http:// 

aspe.hhs.gov/daltcp/reports/2013/

ehrpi.shtml.) Although we believe that 

the protection afforded by the exception 

encourages the adoption of such 

technology, its permanence is not 

essential to the achievement of 

widespread adoption. It is only one of 

a number of ways that physicians are 

incented to adopt electronic health 

records technology, including the 

incentives offered by the EHR Incentive 

Programs and the movement in the 

health care industry toward the 

electronic exchange of patient health 

information as a means to improve 

patient care quality and outcomes. 

Balancing our desire to encourage 

further adoption of interoperable 

electronic health records technology 

against our concerns about potential 

disincentives to adoption and the 

misuse of the exception to lock in 

referral streams, we are establishing a 

December 31, 2021 expiration date for 

the exception. We believe that this 

expiration date will support earlier 

adoption of electronic health records 

technology, provide a timeframe that 

aligns with the financial incentives for 

electronic health records adoption 

currently offered by the Federal 

government, and safeguard against 

foreseeable future fraud risks, while still 

providing adequate time for donors and 

physician recipients to maximize the 

financial incentives currently offered by 

the Federal government. 

Comment: Two commenters agreed 

that the availability of the exception at 

§ 411.357(w) should be extended, but 

not beyond December 31, 2016. One of 

these commenters asserted that a 

relatively short extension of the sunset 

date for the exception would allow a 

wider range of people to obtain access 

to health information technology 

services while not diminishing the 

incentive for providers to acquire, 

implement and standardize the 

necessary electronic health records 

systems. Another commenter supported 

our proposal to extend the availability 

of the exception through December 31, 

2016, and encouraged us to consider an 

additional extension as that date 

approaches. One commenter suggested 

that we extend the availability of the 

exception for at least 6 years, although 

a shorter or longer time period could be 

established after review of adoption 

rates across the range of providers that 

may or may not be eligible for 

meaningful use incentives under the 

EHR Incentive Programs. Other 

commenters supported our alternative 

proposal to extend the availability of the 

exception through December 31, 2021, 

which corresponds to the statutory end 

of the Medicaid incentive program. 

These commenters noted that more 

remains to be done to promote 

electronic health records technology 

adoption, and suggested that 

maintaining the exception through this 

date will help maximize the incentives 

for eligible physicians to adopt 

electronic health records technology 

and thereby increase use of electronic 

health records. Two other commenters 

suggested tying the expiration of the 

exception to the corresponding date for 

assessing ‘‘penalties’’ under the 

Medicare EHR Incentive Program in 

order to align appropriately Federal 

regulation of electronic health records 

technology adoption and use. 

Response: We share the commenter’s 

concerns regarding diminishing 

incentives for providers to acquire, 

implement and standardize the 

necessary electronic health records 

systems. However, after consideration of 

all of the comments on this issue, we 

believe that an extension of the 

exception would advance the 

Department’s goals regarding the 

adoption of interoperable electronic 

health records technology and 

improvements in patient care, while 

providing an incentive for providers to 

adopt electronic health records 

technology in the near-term. Therefore, 

we are extending the availability of the 

exception at § 411.357(w) through 

December 31, 2021, which corresponds 

to the end of incentive payments under 

the Medicaid EHR Incentive Program. 

We note that the two commenters that 

suggested tying the expiration of the 

exception to the corresponding date for 

assessing penalties under the Medicare 

EHR Incentive Program appear to 

misunderstand the duration of the 

downward payment adjustments under 

this program, which will continue until 

an eligible participant adopts and 

meaningfully uses appropriate 

electronic health records technology. 

(For additional information, see the July 

28, 2010 (75 FR 44448) final rule 

entitled ‘‘Medicare and Medicaid 

Programs; Electronic Health Record 

Incentive Program.’’) The practical effect 

of the commenters’ suggestion would be 

to extend permanently the exception at 

§ 411.357(w). For the reasons stated 

elsewhere in this final rule, we do not 

believe that making the exception 

permanent is required or appropriate at 

this time, and we are not adopting the 

commenters’ suggestion. 

Comment: A few commenters 

expressed general support for extending 

the availability of the exception, but did 

not specify whether the extension 

should be for 3 years, 8 years, or some 

other length of time. Commenters noted 

that failure to extend the availability of 

the exception would negatively impact 

the adoption of electronic health records 

technology, as well as its continued use. 

Response: As described previously, 

we are finalizing our alternative 

proposal to extend the exception 

through December 31, 2021. 

Comment: A number of commenters 

urged us to let the exception at 

§ 411.357(w) expire on December 31, 

2013. Some of the commenters asserted 

that the exception permits the exact 

behavior the law was intended to stop, 

namely, referrals tied to financial 

relationships between physicians and 

entities furnishing DHS, in this case, 

entities that donate electronic health 

records items and services. Other 

commenters asserted that the exception 

permits ‘‘legalized extortion’’ or 

provides ‘‘legal sanction to trample the 

competition.’’ Another commenter 


tkelley on DSK3SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Rules and Regulations 78757 

asserted that the inclusion of ‘‘nonmarket factors’’ (that is, the influence of 

donors, rather than end users) in the 

decision to adopt electronic health 

records technology may result in lower 

quality products or services and/or 

higher costs, often with an adverse 

impact on technology adoption and 

innovation. Still others asserted that, 

given the financial incentives that the 

government itself has provided, it is no 

longer necessary to spur the adoption of 

electronic health records technology 

through the underwriting of the cost of 

electronic health records technology by 

outside entities. 

Response: Although we appreciate the 

commenters’ concerns, we continue to 

believe that the exception serves to 

advance the adoption and use of 

interoperable electronic health records. 

However, we caution that a 

compensation arrangement involving 

the donation of electronic health records 

technology runs afoul of the physician 

self-referral law unless it satisfies each 

requirement of the exception at 

§ 411.357(w). Arrangements that 

disguise the ‘‘purchase’’ or lock-in of 

referrals and donations that are solicited 

by the physician recipient in exchange 

for referrals would fail to satisfy the 

requirements of the exception. We 

disagree with the commenters that 

asserted that encouragement for the 

‘‘underwriting’’ of electronic health 

records technology by organizations 

other than the government is no longer 

necessary, particularly in light of the 

developments in integrated patient care 

delivery and payment models. 

Comment: Numerous commenters 

suggested that the exception at 

§ 411.357(w) should sunset as 

scheduled on December 31, 2013, but 

only with respect to laboratories and 

pathology practices, ‘‘ancillary service 

providers,’’ entities not listed in section 

101 of the MMA (authorizing an 

exception for certain donations of 

electronic prescribing items and 

services), or entities that are not part of 

an accountable care organization or not 

integrated in a meaningful manner. 

Response: We consider these 

comments to be related to ‘‘protected 

donors’’ and address them in section 

III.D.1. of this final rule. 

D. Additional Proposals and 

Considerations 

1. Protected Donors 

As we discussed in the proposed rule, 

despite our goal of expediting the 

adoption of electronic health records 

technology, we have concerns about the 

potential for abuse of the exception by 

certain types of providers and suppliers 

(including suppliers of ancillary 

services that do not have a direct and 

primary patient care relationship and a 

central role in the health care delivery 

infrastructure). The OIG indicated that it 

has concerns related to the potential for 

laboratories and other ancillary service 

providers to abuse its safe harbor, as it 

has received comments suggesting that 

abusive donations are being made under 

the electronic health records safe 

harbor. In order to address these 

concerns, we proposed to limit the 

scope of protected donors under the 

electronic health records exception. 

In the proposed rule, we stated that 

we were considering revising the 

exception to cover only the MMAmandated donors we originally 

proposed when the exception was first 

established: hospitals, group practices, 

prescription drug plan sponsors, and 

Medicare Advantage (MA) 

organizations. We stated that we were 

also considering whether other 

individuals or entities with front-line 

patient care responsibilities across 

health care settings, such as safety net 

providers, should be included, and, if 

so, which ones. Alternatively, we stated 

that we were considering retaining the 

current broad scope of protected donors, 

but excluding specific types of donors— 

suppliers of ancillary services 

associated with a high risk of fraud and 

abuse—because donations by such 

suppliers may be more likely to be 

motivated by a purpose of securing 

future business than by a purpose of 

better coordinating care for beneficiaries 

across health care settings. In particular, 

we discussed excluding laboratory 

companies from the scope of 

permissible donors, as their donations 

have been the subject of complaints. We 

also discussed excluding other high-risk 

categories of potential donors, such as 

durable medical equipment (DME) 

suppliers and independent home health 

agencies. We sought comment on the 

alternatives under consideration, 

including comments (with supporting 

reasons) regarding particular types of 

providers or suppliers that should or 

should not be permitted to utilize the 

exception given its goals. 

Many commenters raised concerns 

about donations of electronic health 

records items and services by laboratory 

companies and strongly urged us to 

adopt our proposal to eliminate 

protection for such donations, either by 

excluding laboratory companies from 

the scope of protected donors (if we 

extend the availability of the exception), 

or by letting the exception sunset 

altogether. (For more detailed 

discussion of comments concerning the 

sunset provision, see section III.C. of 

this final rule.) Other commenters raised 

similar concerns, but did not suggest a 

particular approach to address them. 

We carefully considered the 

comments that we received on this 

proposal and, based on the concerns 

articulated by commenters and the 

wide-ranging support from the entire 

spectrum of the laboratory industry 

(from small, pathologist-owned 

laboratory companies to a national 

laboratory trade association that 

represents the industry’s largest 

laboratory companies), we are finalizing 

our proposal to exclude laboratory 

companies from the types of entities 

that may donate electronic health 

records items and services under the 

exception. We believe this decision is 

consistent with and furthers our 

continued goal of promoting the 

adoption of interoperable electronic 

health records technology that benefits 

patient care while reducing the 

likelihood that the exception will be 

misused by donors to secure referrals. 

We also believe that our decision will 

address situations identified by some of 

the commenters involving physician 

recipients conditioning referrals for 

laboratory services on the receipt of, or 

redirecting referrals for laboratory 

services following, donations from 

laboratory companies. 

Comment: Many commenters raised 

concerns that, notwithstanding a clear 

prohibition in the exception, laboratory 

companies are, explicitly or implicitly, 

conditioning donations of electronic 

health records items and services on the 

receipt of referrals from the physician 

recipients of those donations or 

establishing referral quotas and 

threatening to require the physician 

recipient to repay the cost of the 

donated items or services if the quotas 

are not reached. Some commenters 

suggested that such quid pro quo 

donations, and donations by laboratory 

companies generally, are having a 

negative effect on competition within 

the laboratory services industry 

(including increased prices for 

laboratory services) and impacting 

patient care, as referral decisions are 

being made based on whether a 

laboratory company donated electronic 

health records items or services, not 

whether that company offers the best 

quality services or turnaround time. A 

few commenters also raised concerns 

that laboratory companies are targeting 

potential physician recipients based on 

the volume or value of their anticipated 

referrals. 

Response: The current requirement at 

§ 411.357(w)(6) prohibits determining 

the eligibility of a physician recipient or 

the amount or nature of the items or 


tkelley on DSK3SPTVN1PROD with RULES
78758 Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Rules and Regulations 

services to be donated in a manner that 

directly takes into account the volume 

or value of referrals or other business 

generated between the parties. 

Accordingly, the quid pro quo 

arrangements and targeted donations 

described by the commenters would not 

satisfy this requirement of the 

exception. Such arrangements are not 

consistent with the purpose of the 

exception and can result in the precise 

types of harm the physician self-referral 

law is designed to prevent, such as 

financial self-interest that may affect a 

physician’s medical decision making. 

We urge those with information about 

such arrangements to contact the OIG’s 

fraud hotline at 1–800–HHS–TIPS or 

visit https://forms.oig.hhs.gov/

hotlineoperations/ to learn of other 

ways to report fraud. 

We appreciate the commenters’ 

support for our proposal to remove 

donations by laboratory companies from 

the protection of the exception. We 

believe that our decision to exclude 

laboratory companies from the scope of 

protected donors is the best way to 

encourage and facilitate the adoption of 

interoperable electronic health records 

technology without risk of program or 

patient abuse. 

Comment: Several commenters raised 

concerns about laboratory company 

arrangements with electronic health 

records technology vendors. The 

commenters described agreements 

involving laboratory companies and 

vendors that result in the vendors 

charging other laboratory companies 

high fees to interface with the donated 

technology or prohibiting other 

laboratory companies from purchasing 

the technology for donation to their own 

clients. One of the commenters also 

raised a concern that volume discount 

arrangements between laboratory 

companies and vendors of electronic 

health records technology are resulting 

in donations of electronic health records 

items and services that may not best suit 

the needs of the physician recipient. 

The commenter asserted that donor 

laboratory companies are pushing a 

particular vendor’s specific electronic 

health records system onto physician 

recipients because of the donor’s close 

relationship with the vendor. 

Response: Excluding potential 

competitors of the donor from 

interfacing with donated items or 

services, as described by the 

commenters, can result in data and 

referral lock-in. We discuss the issue of 

lock-in elsewhere in this final rule in 

more detail. 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. We also believe that 

the changes to § 411.357(w)(1) that we 

are finalizing regarding the types of 

entities that may donate electronic 

health records items and services will 

help address the commenter’s concern 

about the negative impact of 

relationships between laboratory 

companies and vendors on the selection 

of electronic health records technology 

by physicians. We stated in the August 

2006 final rule that, although physician 

recipients remain free to choose any 

electronic health records technology 

that suits their needs, we do not require 

donors to facilitate that choice for 

purposes of the exception. However, as 

we also stated in the August 2006 final 

rule (71 FR 45157), our regulations 

require donors to offer interoperable 

products and donors must not impede 

the interoperability of any electronic 

health records software they decide to 

offer. Any agreement between a donor 

and a vendor that precludes or limits 

the ability of competitors to interface 

with the donated electronic health 

records software would raise significant 

questions regarding whether the 

donation meets the requirement at 

§ 411.357(w)(3). 

Comment: Many commenters noted 

that several states—including Missouri, 

New Jersey, New York, Pennsylvania, 

Tennessee, Washington, and West 

Virginia—have prohibited or restricted 

donations of electronic health records 

technology by laboratory companies to 

address fraud and abuse concerns. Some 

of the commenters urged us to effectuate 

a similar prohibition or restriction by 

removing laboratory companies as 

potential donors under the exception. 

One of these commenters asserted that 

laboratory companies licensed in states 

that strictly prohibit them from donating 

to referring physicians all or part of the 

costs of electronic health records 

technology are put at a considerable 

disadvantage in the marketplace 

because of ‘‘the need for [electronic 

health records technology] subsidies to 

compete for business.’’ 

Response: We believe that our 

determination to exclude laboratory 

companies from the types of entities 

that may donate electronic health 

records items and services under the 

exception will address the fraud and 

abuse concerns referenced by the 

commenters. With respect to the 

commenter’s concern about being 

disadvantaged, we note that our 

decision to prohibit laboratory 

companies from utilizing the exception 

applies equally to all laboratory 

companies, regardless of their location. 

Comment: Several commenters, 

including a national laboratory trade 

association that represents the 

industry’s largest laboratory companies, 

took exception to what they perceived 

as an allegation that laboratory 

companies are solely responsible for 

problematic donations of electronic 

health records items and services. Some 

of these commenters asserted that 

electronic health records technology 

vendors are encouraging physicians to 

seek or demand donations from 

laboratory companies, and that 

physicians are threatening to withhold 

referrals or send laboratory business 

elsewhere if donations are not made. 

According to one commenter, because 

physicians are not paying for a 

significant portion of the cost of these 

items and services, electronic health 

records technology vendors are able to 

charge high prices and the size of 

donations (in dollars) has increased 

exponentially in recent years. The 

commenter also suggested that vendors 

may be manipulating pricing to 

maximize the amount a laboratory 

company pays for donated items and 

services while minimizing or 

eliminating any physician 

responsibility. Another commenter 

raised a related concern that electronic 

health records technology vendors have 

increased the costs of their products 

because they know that laboratories are 

paying for them. Generally, commenters 

raising concerns about the conduct of 

electronic health records technology 

vendors and physicians recommended 

that we remove laboratory companies 

from the universe of permissible donors 

under the exception. 

One commenter asserted that 

physicians are no longer choosing 

electronic health records technology 

based on which system is most 

appropriate, but rather based on which 

will produce the largest donation of 

items and services. Another commenter 

asserted that many physicians will 

change laboratory companies and seek a 

new donation once an existing donor 

laboratory company ceases to subsidize 

the physicians’ electronic health records 

technology costs. This commenter stated 

that such conversions to different 

electronic health records technology are 

not only inefficient, but undermine the 

spirit of the regulatory requirement that 

physicians do not possess the same or 

equivalent items or services as those 

being donated. 

Response: Our proposed modification 

related to the universe of donors 

potentially covered under the exception; 

thus, the focus of our discussion in the 

proposed rule was on donor conduct. 

Some of the comments we describe in 


tkelley on DSK3SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Rules and Regulations 78759 

this final rule also raise concerns about 

the conduct of physician recipients. In 

response, we are clarifying that we do 

not believe that problematic donations 

involving laboratory companies are 

solely the result of questionable conduct 

by laboratory companies. We believe 

that our decision to exclude laboratory 

companies from the universe of 

protected donors is the best way to 

reduce the risk of misuse of the 

exception at this time and addresses the 

concerns identified by the commenters. 

We note that § 411.357(w)(5) prohibits 

the physician recipient and the 

physician recipient’s practice from 

making the receipt, amount or nature of 

the donated items or services a 

condition of doing business with the 

donor. This provision recognizes the 

program integrity risk posed by a 

potential physician recipient who 

demands a donation in exchange for 

referrals. This type of quid pro quo 

arrangement is no less troubling than 

quid pro quo arrangements that 

originate with the donor and would not 

satisfy the requirements of the 

exception. Whether a quid pro quo 

donation is for an initial installation of 

a donated item or service or a 

conversion to a different donated item 

or service would not change our 

analysis. Additionally, we caution those 

engaging in conversion arrangements to 

be mindful of the limitations in the 

exception at § 411.357(w)(8) concerning 

the donation of equivalent items or 

services. 

Comment: Several commenters 

suggested that laboratory companies 

should be prohibited from donating 

electronic health records items and 

services to physicians or that physicians 

should pay for their own electronic 

health records technology. Other 

commenters asserted that laboratory 

companies do not share an essential 

interest in their referring clients having 

electronic health records technology. 

Still other commenters stated simply 

that laboratory companies represent a 

high risk of fraud and abuse. 

Response: Based on the complaints 

previously received by OIG, which are 

described in more detail in the proposed 

rule, and the information provided by 

the commenters regarding some of the 

arrangements between laboratory 

companies and physician recipients of 

donated electronic health records items 

and services, we agree that donations of 

electronic health records items and 

services by laboratory companies 

present a high risk of fraud and abuse. 

Exceptions promulgated using our 

authority under section 1877(b)(4) of the 

Act may provide protection from the 

physician self-referral law’s prohibitions 

only for those financial relationships 

that pose no risk of program or patient 

abuse. We do not believe that 

continuing to permit laboratory 

companies to make protected donations 

under the exception at § 411.357(w) 

would meet this standard. Therefore, we 

are modifying the requirements of the 

exception to eliminate laboratory 

companies from the types of entities 

that may provide donations under the 

exception. We do not agree with the 

commenters that laboratory companies 

necessarily do not have an essential 

interest in their referring clients having 

electronic health records technology. It 

is the behavior of laboratory companies 

and physician recipients of donations 

from laboratory companies of which we 

are aware that drives our determination 

to finalize our proposal to eliminate 

laboratory companies from the types of 

entities that may provide donations 

under the exception. 

Comment: A few commenters noted 

that, rather than electronic health 

records, laboratory companies typically 

use a laboratory information system 

(LIS), anatomic pathologist information 

system, and/or blood banking system to 

store and share patients’ laboratory 

results, and that these systems should 

not be confused with an electronic 

health record that includes a patient’s 

full medical record comprised of 

information from many medical 

specialties, including pathology. One of 

these commenters asserted that 

laboratories already bear the cost of 

establishing LIS interfaces that they 

provide to physicians in order to 

exchange laboratory services data 

electronically, and that clinical and 

anatomic laboratories could continue to 

do so legally even if they were no longer 

protected donors under the exception. 

One commenter lamented the costs 

associated with interfaces, other 

commenters requested that CMS clarify 

its position on the donation of interfaces 

by laboratory companies, and one 

commenter asserted that interfaces were 

not analogous to facsimile machines, 

which we have stated in the past may 

be provided to physicians under certain 

circumstances. 

Response: We appreciate the general 

information provided by the 

commenters regarding the various types 

of technology that laboratory companies 

generally use or do not use. The more 

relevant technology in the laboratory 

setting is the interface that exchanges 

data electronically between the 

laboratory and its referral sources. These 

comments provide us an opportunity to 

discuss more fully our position on the 

donation of interfaces by laboratory 

companies. 

Our decision to exclude laboratory 

companies from the universe of 

protected donors under the exception 

does not affect our interpretation of the 

physician self-referral law as it relates to 

whether the provision of an item or 

service qualifies as ‘‘remuneration’’ that 

establishes a compensation arrangement 

that implicates the law’s referral and 

billing prohibitions. In section 

1877(h)(1)(A) of the Act, ‘‘compensation 

arrangement’’ is defined as ‘‘any 

arrangement involving any 

remuneration’’ between a physician (or 

an immediate family member of such 

physician) and an entity furnishing 

DHS. Section 1877(h)(1)(B) of the Act 

defines ‘‘remuneration’’ to include ‘‘any 

remuneration, directly or indirectly, in 

cash or in kind.’’ However, under 

section 1877(h)(1)(C) of the Act, 

‘‘remuneration’’ does not include ‘‘the 

provision of items, devices, or supplies 

that are used solely to: (i) collect, 

transport, process, or store specimens 

for the entity providing the item, device, 

or supply; or (ii) order or communicate 

the results of tests or procedures for 

such entity.’’ Therefore, the provision of 

such items, devices or supplies does not 

result in a compensation arrangement 

that implicates the physician selfreferral law’s referral and billing 

prohibitions. We discussed this further 

in CMS Advisory Opinion 2008–01, 

which can be found at http:// 

www.cms.gov/Medicare/Fraud-andAbuse/PhysicianSelfReferral/

Downloads/CMS-AO-2008-01.pdf. 

Accordingly, the provision of certain 

interfaces, such as those described by 

the commenters, need not satisfy the 

requirements of § 411.357(w). 

We disagree with the commenter that 

asserted that interfaces are not 

sufficiently analogous to facsimile 

machines. We believe that a limited-use 

interface (as described previously) is the 

contemporary analog to the limited-use 

computer or facsimile described in the 

example from the 1998 proposed rule 

preamble (63 FR 1693 and 1694 (January 

9, 1998)). Moreover, the mode of 

technology is not restricted by the 

language of section 1877(h)(1)(c) of the 

Act nor is its cost, which is, in any 

event, outside the scope of this 

rulemaking. 

Comment: Several commenters 

inquired whether our proposal to 

prohibit use of the exception for 

donations of electronic health records 

items and services by laboratory 

companies would apply to suppliers of 

both anatomic and clinical pathology 

services, and suggested that our 

proposal should apply to both. 

Commenters also inquired about the 

application of this proposal to hospitals 


tkelley on DSK3SPTVN1PROD with RULES
78760 Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Rules and Regulations 

that operate laboratory companies for 

non-hospital affiliated customers. 

Raising concerns about an uneven 

playing field, some of these commenters 

urged us to exclude such hospitals from 

the universe of protected donors if we 

determined to exclude laboratory 

companies. One commenter suggested 

that we effectuate this limitation by 

restricting protected hospital donations 

to those made to the hospital’s 

employed physicians and the hospital’s 

wholly-owned physician practices. 

Response: Our proposal applied to 

‘‘laboratory companies’’ and did not 

distinguish between those that provide 

anatomic pathology services and those 

that provide clinical pathology services. 

We intend that references to ‘‘laboratory 

company’’ or ‘‘laboratory companies’’ 

include entities that furnish both types 

of DHS. 

With respect to the commenters’ 

suggestion to limit or prohibit hospital 

donations of electronic health records 

items and services, we appreciate the 

concerns articulated by the commenters, 

but are not adopting their suggestion at 

this time. We continue to believe that 

hospitals have a substantial and central 

stake in patients’ electronic health 

records. Further, the types and 

prevalence of the concerns that have 

been brought to the OIG’s attention and 

discussed elsewhere in this final rule 

about donations by laboratory 

companies have not arisen, to our 

knowledge, in the hospital-donation 

context. 

We are also clarifying that, if a 

hospital furnishes clinical laboratory 

services through a laboratory that is a 

department of the hospital for Medicare 

purposes (including cost reporting), and 

the hospital bills for the services 

through the hospital’s provider number, 

then the hospital would not be a 

‘‘laboratory company’’ and would 

continue to qualify as a protected donor 

under the modified exception. However, 

if a hospital-affiliated or hospital-owned 

company with its own supplier number 

furnishes clinical laboratory services 

that are billed using a billing number 

assigned to the company and not to the 

hospital, the company would be a 

‘‘laboratory company’’ and would no 

longer qualify as a protected donor. The 

ability of the affiliated hospital to avail 

itself of the exception would be 

unaffected. We remind readers that it is 

the substance, not the form, of an 

arrangement that governs under the 

physician self-referral law. 

Comment: One commenter requested 

that, if we finalize our proposal to 

exclude laboratory companies from the 

universe of protected donors, we 

specifically clarify that ‘‘[laboratory 

companies] are prohibited from 

providing [ ] software to physicians 

unless they comply with another one of 

the existing exceptions.’’ The 

commenter went on to cite examples of 

software leases and sales at fair market 

value that could potentially qualify for 

protection under an exception other 

than the one at § 411.357(w). 

Response: We decline the 

commenter’s invitation to make this 

clarification. Exceptions set forth 

specific requirements that, if satisfied, 

assure the parties involved that 

physician referrals to the entity for DHS 

are not prohibited and that the entity 

may bill Medicare for the services 

furnished pursuant to those physician 

referrals. As we have stated in prior 

rulemakings, an arrangement need not 

satisfy the requirements of a particular 

exception. Rather, the parties to an 

arrangement may avail themselves of 

any applicable exception to protect the 

physician’s referrals to the DHS entity 

with which he or she (or an immediate 

family member) has a financial 

relationship. 

Comment: One commenter shared its 

concerns about a practice that it 

described as ‘‘post-donation insourcing.’’ The commenter stated that it 

is aware of situations in which 

laboratory companies are donating 

electronic health records technology to 

referring physicians only to have those 

physicians in-source their laboratory 

services shortly after the donation. The 

commenter suggested that the donations 

enable referring physicians to avoid 

bearing the full cost of electronic health 

records technology without continued 

referrals to the donating laboratory 

company. 

Response: We are not modifying the 

exception to address the commenter’s 

concern. We remind stakeholders that 

the exception does not require the 

physician recipient to make referrals to 

the donor. To the contrary, 

§ 411.357(w)(5) prohibits the physician 

recipient and his or her practice from 

making the receipt, amount, or nature of 

the donated items or services a 

condition of doing business with the 

donor. Moreover, § 411.357(w)(6) 

prohibits determining the eligibility of a 

physician recipient or the amount or 

nature of the items or services to be 

donated in a manner that directly takes 

into account the volume or value of 

referrals or other business generated 

between the parties. Whether protection 

is afforded under the exception to the 

types of arrangements described by the 

commenter will depend on whether all 

of the requirements of the exception are 

satisfied. 

Comment: Two commenters raised 

issues regarding the type of 

remuneration permissible under the 

exception at § 411.357(w). One 

commenter characterized the exception 

as allowing laboratory companies to 

donate funds to physician recipients to 

help them implement electronic health 

records technology. Another commenter 

noted that some donations from 

laboratory companies have included 

hardware. 

Response: We remind stakeholders 

that the exception at § 411.357(w) 

applies only to the donation of 

nonmonetary remuneration (in the form 

of software or information technology 

and training services) necessary and 

used predominantly to create, maintain, 

transmit, or receive electronic health 

records. As stated in the preamble to the 

August 2006 final rule (71 FR 45161), 

reimbursement for previously incurred 

expenses is not protected, as it poses a 

substantial risk of program and patient 

abuse. We also remind stakeholders that 

the exception does not protect the 

donation of hardware. 

Comment: Although the majority of 

commenters supported excluding 

laboratory companies from the types of 

entities that may donate electronic 

health records items and services under 

the exception, some commenters made 

other recommendations related to 

protected donors. A number of 

commenters recommended that we 

maintain our current scope of protected 

donors; that is, allow any entity (as 

defined at § 411.351) to provide 

electronic health records items and 

services to a physician. Some of these 

commenters stated that limiting the 

scope of protected donors could have an 

impact on specialists, who, according to 

the commenters, still have relatively 

low rates of electronic health records 

adoption. Along the same lines, one 

commenter stated that limiting the 

categories of donors that may seek 

protection under the exception will 

negatively impact physician recipients 

by preventing certain entities from 

helping to move the entire healthcare 

system toward more interoperable 

electronic health record systems. Others 

cautioned that restricting the universe of 

permissible donors will stymie 

innovation and restrict learning from 

the technology. Finally, some 

commenters contended that laboratory 

companies and other ancillary service 

providers have a legitimate clinical 

interest in donating electronic health 

records technology and that many 

physician practices depend on it. 

Some commenters, while 

acknowledging our concerns regarding 

abusive donation practices, suggested 


tkelley on DSK3SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Rules and Regulations 78761 

alternative means to address the 

concerns we articulated in the proposed 

rule. These commenters variously 

recommended that we strengthen 

interoperation requirements, provide 

physician education materials, or adopt 

enforcement policies to prevent abuses 

rather than limiting the universe of 

potential donors of electronic health 

records items and services. 

Response: We agree with many of the 

reasons articulated by the commenters 

supporting a fully expansive universe of 

protected donors under the exception. 

We recognize that limiting the universe 

of potential donors could constrain the 

ability of many physicians to adopt 

electronic health records technology. 

However, we are persuaded by the 

commenters that cited examples or 

patterns of program abuse by laboratory 

companies and are amending the 

exception to limit permissible donors 

under § 411.357(w) by excluding 

laboratory companies. Other than with 

respect to laboratory companies, the 

universe of protected donors will 

remain the same. We will continue to 

monitor and may, prior to the end of 

2021, reconsider in a future rulemaking 

the risk of program or patient abuse 

relating to the use of the exception by 

other donors or categories of donors. 

We appreciate the suggestions from 

commenters regarding alternative means 

of addressing abusive donation 

practices. However, our authority under 

section 1877(b)(4) of the Act permits us 

to establish exceptions to the physician 

self-referral law only where protected 

financial relationships would pose no 

risk of program or patient abuse. We do 

not believe that adopting the 

commenters’ alternative suggestions for 

addressing our concerns would meet 

this standard. 

Comment: We received a number of 

comments requesting that we retain 

certain categories of providers and 

suppliers within the universe of 

permissible donors of electronic health 

records items and services under the 

exception at § 411.357(w). For example, 

commenters that provide dialysis 

services specifically requested that they 

remain protected donors. One of the 

dialysis-provider commenters noted that 

excluding this specialty would have a 

chilling effect on the development and 

availability of the specialized electronic 

health records systems used by 

nephrologists. A few commenters 

requested that we continue to include 

hospitals and health systems as 

protected donors in order for them to 

retain the ability to assist physicians in 

adopting electronic health records 

technology. Other commenters 

requested that we explicitly retain home 

health agencies as permissible donors. 

In support of retaining home health 

agencies, one commenter stated that the 

depth, breadth, and frequency of 

communications between home health 

agencies and other direct care providers 

makes the use of interoperable 

electronic health records technology 

essential to improving clinical outcomes 

and financial efficiencies. We also 

received comments in support of 

retaining safety net providers and 

pharmacies as protected donors. 

Response: We agree generally with the 

thrust of these comments. We recognize 

the value of permitting entities that 

participate directly in the provision of 

health care to patients and that have a 

need to coordinate with care providers 

to donate electronic health records 

items and services to facilitate those 

interactions. We take no action in this 

final rule to prohibit entities other than 

laboratory companies from utilizing the 

exception. 

Comment: Some commenters agreed 

with the option we presented in the 

proposed rule to retain the ability of any 

DHS entity to donate electronic health 

records items and services, except 

suppliers of ancillary services 

associated with a high risk of fraud and 

abuse. A few of these commenters 

suggested that a targeted approach 

would minimize the risk of unintended 

consequences. One of these commenters 

asserted that we should exclude the 

particular individuals or entities that 

have been the subject of complaints. 

Another of these commenters 

specifically recommended that we target 

categories of suppliers with a history or 

pattern of abusive behavior. 

Other commenters variously 

recommended excluding laboratories, 

DME suppliers, home health agencies, 

or safety net providers from the types of 

entities that may donate electronic 

health records items and services under 

the exception. One commenter asserted 

that entities like laboratory companies 

and DME suppliers do not have an 

overarching and essential interest in 

having physicians use electronic health 

records, nor do they coordinate the 

patient’s care. In contrast, one 

commenter objected to singling out a 

provider or supplier type to exclude 

from the scope of protected donors. This 

commenter stated that such an action 

unjustly: (1) penalizes a whole category 

of providers or suppliers when most, in 

the commenter’s assessment, are lawabiding; and (2) supports other 

providers or suppliers that may have 

similar motivations. 

Response: We respond elsewhere in 

this final rule to the commenters who 

expressly recommended removing only 

laboratory companies from the universe 

of permissible donors. With respect to 

the other commenters, we note that, in 

the proposed rule (78 FR 21312), we 

specifically requested comments, ‘‘with 

supporting reasons,’’ regarding whether 

particular provider or supplier types 

should be prohibited from utilizing the 

exception at § 411.357(w). Some 

commenters suggested that we prohibit 

other types of entities from donating 

electronic health records items and 

services under the exception, but the 

comments did not provide specific 

examples of abusive practices with 

respect to donations of electronic health 

records items and services by such 

donors, nor did the comments indicate 

problems with other types of entities 

comparable to those that are arising in 

the context of laboratory companies. 

Finally, we do not agree with the 

commenters that laboratory companies, 

DME suppliers, home health agencies, 

safety net providers, or, for that matter, 

any other ‘‘ancillary’’ service providers 

necessarily do not have an overarching 

and essential interest in having 

physicians use electronic health 

records, or that they do not coordinate 

the patient’s care. It is the behavior of 

laboratory companies and physician 

recipients of donations from laboratory 

companies of which we are aware that 

drives our determination to finalize our 

proposal to exclude laboratory 

companies from the types of entities 

that may provide donations under the 

exception. We have not heard the same 

concerns about other categories of 

donors or types of donation 

arrangements and, therefore, believe it is 

premature to exclude potential donors 

(other than laboratory companies). We 

also decline to identify particular 

individuals or organizations in the 

regulation. 

Comment: A few commenters 

recommended restricting the entities 

that may donate electronic health 

records items and services under the 

exception to those types listed in the 

MMA. These commenters also suggested 

imposing additional restrictions on 

donations from this limited universe of 

donors. For example, one commenter 

recommended limiting the application 

of the exception to hospitals and 

providers operating in an integrated 

setting and to MA plans and providers 

under contract with them. Another 

commenter suggested limiting the 

application of the exception to a similar 

integration model, and to hospitals that 

donate electronic health records items 

and services to their employed 

physicians and the physician groups 

that they own. In contrast, one 


tkelley on DSK3SPTVN1PROD with RULES
78762 Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Rules and Regulations 

commenter suggested that limiting the 

protected donor types to the original 

MMA list would be too restrictive. The 

commenter believed that some provider 

types not listed in the MMA should 

have the opportunity to make donations 

(for example, ambulatory surgical 

centers that now perform many 

procedures previously only performed 

in hospitals). 

Response: We agree that providers 

and suppliers operating in an integrated 

environment need interoperable 

electronic health records. However, we 

do not believe that the need for this 

technology is limited to those 

individuals and entities in an integrated 

care setting. Patients may receive care 

from providers and suppliers that are 

not in the same integrated system, and 

the patient’s medical records need to be 

shared with those providers and 

suppliers that also care for the patient. 

The Department’s goal continues to be 

fostering broad adoption of 

interoperable electronic health records 

technology. In furtherance of that goal, 

we seek to limit the applicability of the 

exception vis-a`-vis permissible donors 

only to the extent necessary to prevent 

program and patient abuse. At this time, 

we believe that excluding laboratory 

companies from the types of entities 

that may utilize the electronic health 

records exception, rather than limiting 

the universe of permissible donors to 

the MMA list of donors (or some other 

subset of permissible donors) strikes the 

right balance between furthering the 

Department’s goal and preventing 

program and patient abuse. 

2. Data Lock-In and Exchange 

We solicited comments on what new 

requirements could be added to, or how 

we could modify existing requirements 

of, the exception at § 411.357(w) in 

order to achieve our goals of: (1) 

preventing misuse of the exception that 

results in data and referral lock-in; and 

(2) encouraging the free exchange of 

data (in accordance with protections for 

privacy). Additionally, we requested 

comments on whether such 

requirements, if any, should be in 

addition to, or in lieu of, our proposal 

to limit the entities whose donations of 

electronic health records items and 

services may qualify for protection 

under the exceptions. Finally, we 

solicited comments on possible 

modifications to § 411.357(w)(3), which 

requires that, in order to qualify for the 

protection of the exception, ‘‘[t]he donor 

(or any person on the donor’s behalf) 

does not take any action to limit or 

restrict the use, compatibility, or 

interoperability of the items or services 

with other electronic prescribing or 

electronic health records systems.’’ We 

solicited these comments to explore 

whether this requirement could be 

modified to reduce the possibility of 

data and referral lock-in. 

Comment: Many commenters asserted 

that the current requirements of the 

exception provide adequate safeguards 

to prevent donations of electronic health 

records items and services that result in 

data or referral lock-in between the 

donor and physician recipient. These 

commenters expressed general support 

for the investigation of arrangements 

that may not satisfy the requirements of 

the exception. Several of these 

commenters were also concerned that 

adding or modifying requirements may 

increase the burden of compliance and, 

therefore, lead to fewer entities willing 

to make appropriate donations of 

electronic health records items and 

services. 

Response: In general, we agree with 

these commenters. We are not 

persuaded to adopt significant new 

requirements or modifications to the 

exception to address the issue of data or 

referral lock-in. In addition, we do not 

wish to take any action that 

inadvertently discourages donors and 

physician recipients from entering into 

appropriate donation arrangements. 

However, we are making limited 

clarifications to § 411.357(w)(3) to 

reflect our intended meaning of this 

requirement and our interpretation of 

existing requirements for 

interoperability as it pertains to 

potential data or referral lock-in. We 

also remain committed to assisting our 

law enforcement partners in the 

investigation of potentially abusive 

arrangements that purport to satisfy the 

requirements of the exception but, in 

fact, do not. 

Comment: Several commenters 

expressed concerns about donations of 

electronic health records items and 

services that lead to data lock-in. As 

described elsewhere in this final rule, 

some commenters suggested that, 

although some donated electronic 

health records software has the ability to 

be interoperable, vendors may charge 

providers who do not use the same 

donated software high fees to interface 

with it. The commenters contended that 

these business practices result in 

electronic health records software that is 

not practically interoperable because 

non-donor providers cannot afford to 

connect to the donated electronic health 

records items and services. Other 

commenters expressed general concerns 

that donated electronic health records 

items or services are capable of 

interoperation, but that physician 

recipients implicitly agree to send 

referrals using the technology only to 

the donor. These commenters did not 

provide specific recommendations to 

modify the data lock-in requirements of 

the exception, but generally supported 

our efforts to prevent data lock-in. 

Two commenters representing 

laboratory companies expressed specific 

concerns about a feature of donated 

software that may lead to data lock-in. 

These commenters explained that some 

software is designed to limit the 

accessibility of data that is received 

from an electronic health records system 

that is different than the donated 

software. Most often, data sent from the 

non-donated electronic health records 

system cannot populate automatically in 

a patient’s electronic health record or 

other limits are placed on the portability 

of data sent from the non-donated 

electronic health records system. 

According to these commenters, the 

limited accessibility of the data makes it 

harder for the physician recipient to 

access and use it for clinical purposes. 

As a result, a physician recipient is 

more likely to utilize only the donor’s 

services to make sure that necessary 

data is easily accessible. These 

commenters asserted that there are no 

technical solutions to reducing the 

possibility of data lock-in; rather, the 

only solution is to remove laboratory 

companies from the types of entities 

whose donations may be protected 

under § 411.357(w). 

Several other commenters generally 

endorsed our efforts to prevent data and 

referral lock-in. These commenters 

evidenced strong support for the free 

exchange of health information across 

different provider types to better 

coordinate care for patients. However, 

apart from supporting our efforts to 

ensure that electronic health records 

systems are interoperable, the 

commenters made no specific 

recommendations regarding 

modifications to the exception. 

Response: We share the commenters’ 

concerns about the interoperability of 

donated electronic health records 

software. Arrangements involving the 

donation of electronic health records 

software that has limited or restricted 

interoperability due to action taken by 

the donor or by any person on the 

donor’s behalf (which could include the 

physician recipient acting on the 

donor’s behalf) would fail to satisfy the 

requirement at § 411.357(w)(3) and 

would be inconsistent with an 

important purpose of the exception, 

which is to promote the use of 

technology that is able to communicate 

with products from other vendors. For 

example, arrangements in which the 

donor takes an action to limit the use, 


tkelley on DSK3SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Rules and Regulations 78763 

communication, or interoperability of 

the electronic health records items or 

services by entering into an agreement 

with the physician recipient to preclude 

or inhibit any competitor from 

interfacing with the donated items or 

services would not satisfy the 

requirement of § 411.357(w)(3). Other 

donation arrangements described by the 

commenters in which electronic health 

records technology vendors charge high 

interface fees to non-recipient providers 

or competitors may also fail to satisfy 

the requirements of § 411.357(w)(3). We 

believe that any action taken by a donor 

(or any person on behalf of the donor, 

including the electronic health records 

technology vendor or the physician 

recipient) to limit the use of the donated 

electronic health records items or 

services by charging fees to prevent nonrecipient providers and the donor’s 

competitors from interfacing with the 

donated items or services would pose 

legitimate concerns that parties were 

improperly locking in data and referrals, 

and that the arrangement in question 

would not satisfy the requirements of 

the exception. However, whether a 

donation actually satisfies the 

requirements of the exception depends 

on the specific facts of the donation 

arrangement. 

Comment: One commenter expressed 

concern regarding data lock-in and 

supported ensuring that donations of 

electronic health records items and 

services are transparent and free of any 

attempts to steer future business. 

Although it denied knowledge of any 

specific abuse of the exception, the 

commenter requested that we allow 

individuals or entities to remedy 

noncompliance with the physician selfreferral law due to a donation that may 

not be protected by the exception. The 

commenter suggested that the remedy 

for violation of the physician selfreferral law due to an arrangement’s 

failure to satisfy the requirements of the 

exception at § 411.357(w) should be to 

make physician recipients pay the fair 

market value of any costs for ongoing 

support of the donated electronic health 

records items or services. The 

commenter suggested allowing 3 years 

for the physician recipient to either pay 

full value for the donated electronic 

health records items and services or 

transition to a new system. 

Response: We appreciate the 

commenter’s concern and 

recommendation; however, we decline 

to make the suggested modification. 

Implementing the commenter’s 

suggestions would be outside the scope 

of our statutory authority under section 

1877(b)(4) of the Act to promulgate 

exceptions to the physician self-referral 

law that pose no risk of program or 

patient abuse. 

Comment: A few commenters urged 

us to amend the exception to require the 

physician recipient or the donor to 

participate in health information 

exchange with an electronic health 

records system that is different from the 

one donated. One commenter 

specifically suggested that the physician 

recipient should have to demonstrate 

exchange with at least one other 

electronic health records system within 

a certain timeframe after receipt of the 

donation. Another commenter suggested 

that the donor should have to—upon 

request—enable the physician recipient 

of the donation to engage in bidirectional exchange of data with 

competitors not using the same 

electronic health records system. 

Response: We appreciate the 

commenters’ recommendations; 

however, we are not modifying the 

exception to require the parties to an 

arrangement for the donation of 

electronic health records items and 

services to demonstrate interoperation. 

We question whether adequate 

demonstration of interoperation could 

occur only after the donation has been 

made, which would create uncertainty 

about whether the donation satisfies the 

requirements of the exception. This 

uncertainty would undermine the 

Department’s broad goal for the 

exception—that is, to support 

widespread adoption of interoperable 

electronic health records technology. 

However, it is our intent and 

expectation that interoperation of 

donated items and services will, in fact, 

occur, and we believe the requirements 

of the exception, in their entirety, 

promote such interoperation. Moreover, 

routine interoperation with systems 

other than those of the donor may be 

evidence that neither the donor nor any 

person on the donor’s behalf has taken 

any action to limit or restrict the use, 

compatibility, or interoperability of the 

items or services with other electronic 

prescribing or electronic health records 

systems, as required under 

§ 411.357(w)(3). 

Further, we note that the Department 

is considering a number of policies to 

accelerate and advance interoperability 

and health information exchange. As 

part of this process, ONC and CMS 

issued a notice requesting input from 

the public on possible policies and 

programmatic changes to accelerate 

electronic health information exchange 

among individuals and entities that 

furnish health care items and services, 

as well as new ideas that would be both 

effective and feasible to implement (78 

FR 14793). We believe that the process 

through which ONC and CMS will 

jointly act is better-suited than this 

exception to consider and respond to 

evolving functionality related to the 

interoperability of electronic health 

records technology. The paper that 

addresses the public comments we 

received and outlines the Department’s 

strategy for accelerating health 

information exchange is available at: 

http://www.healthit.gov/policyresearchers-implementers/acceleratinghealth-information-exchange-hie. 

Comment: In response to our 

solicitation of comments, some 

commenters provided suggestions as to 

how we could broaden the current 

requirements related to data lock-in. 

Two commenters suggested amending 

§ 411.357(w)(3), which prohibits the 

donor (or any person on the donor’s 

behalf) from taking any action to limit 

or restrict the use, compatibility, or 

interoperability of the items or services 

with other ‘‘electronic prescribing or 

electronic health records systems.’’ 

Specifically, the commenters suggested 

that we replace the reference to 

‘‘electronic prescribing or electronic 

health records systems’’ with ‘‘health 

information technology platforms or 

other health care providers.’’ The 

commenters asserted that this proposed 

change reflects the development of 

health information technology that may 

not be classified as an electronic health 

records system, but supports the free 

exchange of health information. These 

two commenters also suggested that we 

modify § 411.357(w)(3) to state that 

neither the donor nor the physician 

recipient may take any action to limit 

the interoperability of donated 

electronic health records items or 

services and that we require that the 

modified condition be included as part 

of the written agreement required under 

§ 411.357(w)(7). 

Another commenter suggested 

amending § 411.357(w)(3) by providing 

a non-exhaustive list of actions that 

would cause a donation not to satisfy 

this requirement and by establishing a 

process for entities to provide the 

Department with information about 

potential abuses of the exception. A 

representative of several health plans 

suggested modifying the exception to 

ensure that, in the context of health 

information exchange, the 

interoperability requirement of the 

exception requires that all key 

stakeholders, including health 

insurance plans, have access to the 

health information exchange. The 

commenter suggested that we modify 

the interoperability condition at 42 CFR 

411.357(w)(2) to prohibit restrictions on 

the communication and exchange of 


tkelley on DSK3SPTVN1PROD with RULES
78764 Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Rules and Regulations 

data with any covered entity as defined 

at 45 CFR 160.103. 

Response: The language in the 

existing regulatory text prohibits donors 

(or persons on the donor’s behalf) from 

taking any action to limit or restrict the 

use, compatibility, or interoperability of 

donated items or services with other 

‘‘electronic prescribing or electronic 

health records systems.’’ The term 

‘‘electronic prescribing or electronic 

health records systems’’ was intended to 

be broad in order to account for 

developments in the health information 

technology industry. Based on the 

commenters’ suggestions it appears, 

however, that stakeholders may have 

read this term more narrowly. This 

narrow reading is inconsistent with our 

intended meaning. We have always 

believed and continue to believe that an 

action taken by a donor (or on behalf of 

the donor) that limits the use, 

compatibility, or interoperability of 

donated items or services with any other 

health information technology may 

impede the free exchange of data and 

limit the ability of providers and 

suppliers to coordinate care, which is 

inconsistent with the goals of the 

exception. Therefore, we are clarifying 

42 CFR 411.357(w)(3) by adding, by way 

of example and without limitation, a 

non-exhaustive list of some of the forms 

of technologies that we believe are 

included within the meaning of the 

existing regulatory language. We are not 

adopting the commenters’ suggested 

edit, as we do not believe that it is 

necessary in light of our clarification. 

We also decline to modify 42 CFR 

411.357(w)(2) to prohibit restrictions on 

the communication and exchange of 

data with any covered entity as defined 

at 45 CFR 160.103. We believe that 

existing 42 CFR 411.357(w)(3), which 

we have clarified in this final rule as 

including health information technology 

applications, products, or services, 

promotes interoperability with a variety 

of providers and suppliers, as well as 

other health care entities that may play 

a role in the coordination of care, 

including health plans that operate 

health information technology 

applications, products, or services. 

We are also not adopting the 

commenters’ suggestion to modify the 

exception to state that neither the donor 

nor the physician recipient may take 

any action to limit the interoperability 

of donated electronic health records 

items or services. The requirement at 

§ 411.357(w)(3) prohibits the donor (or 

any person on behalf of the donor) from 

taking any action that limits or restricts 

the use, compatibility, or 

interoperability of the donated 

electronic health records items or 

services. To the extent that a physician 

recipient takes an action on the donor’s 

behalf to limit the use, compatibility, or 

interoperability of donated items or 

services, that donation would fail to 

qualify for protection under the 

exception. Because we see no obvious 

reason, other than at the behest of the 

donor or as a condition of the donation, 

why a physician recipient would take 

action to limit the use, compatibility, or 

interoperability of donated items or 

services, we believe that any action of 

this type by a physician recipient would 

be suspect. We are not making the 

suggested modification because we 

believe the concern articulated by the 

commenters is already addressed by the 

existing regulatory language and the 

policies we are adopting in this final 

rule. Accordingly, we are not making 

any corresponding revisions to require 

that the recommended provision be 

incorporated into the written agreement 

required under § 411.357(w)(7). 

Finally, we are not revising the 

exception to provide in regulation text 

examples of actions that may cause a 

donation not to satisfy the requirements 

of § 411.357(w)(3). Whether a donation 

satisfies the requirements of the 

exception requires a case-by-case 

analysis and depends on the specific 

facts of the donation. 

Comment: One commenter objected to 

the use of the exception to address the 

issue of data lock-in. The commenter 

contended that data lock-in may arise in 

response to legitimate concerns, such as 

the Health Insurance Portability and 

Accountability Act (HIPAA) privacy and 

security rules, liability issues, licensing 

requirements, and antitrust issues. 

Further, according to the commenter, 

data lock-in conditions may cause 

uncertainty for donors because parties 

may not be able to determine whether 

a donation satisfies the requirements of 

the exception until after donation. 

Response: Nothing in this final rule is 

intended to prohibit legitimate actions 

taken to ensure that electronic health 

records items and services appropriately 

protect data, including measures to 

ensure the privacy and security of 

health information data. We recognize 

that there may be appropriate security, 

privacy and other business reasons to 

protect data. This final rule addresses 

only actions that inappropriately lock in 

data, for example, locking in data to 

secure future referrals. 

Comment: One commenter expressed 

support for preventing electronic health 

records data lock-in and the free 

exchange of data. However, the 

commenter did not agree that additional 

requirements designed to promote these 

goals would be effective. Instead, the 

commenter suggested that we adopt 

payment models that continue to foster 

care coordination activities. 

Response: We appreciate the 

commenter’s suggestion; however, 

changes to our payment models are 

outside the scope of the proposed rule. 

We note that, in our joint Request for 

Information, we and ONC solicited 

input on options for improving several 

different CMS payment models to 

support better the adoption of 

interoperable electronic health records 

technology (78 FR 14797). As noted 

earlier, the paper that addresses the 

public comments we received and 

outlines the Department’s strategy for 

accelerating health information 

exchange is available at: http:// 

www.healthit.gov/policy-researchersimplementers/accelerating-healthinformation-exchange-hie. 

Comment: Two commenters suggested 

data lock-in could be limited by 

requiring electronic health records 

software to be open or ‘‘open source.’’ 

Both commenters asserted that open 

source software would limit data lockin due to the transparent nature of open 

source software. In addition, it would 

lead to greater interoperability of 

electronic health records systems. One 

commenter also suggested that we 

require mandatory advance disclosure 

of the operational and business policies 

and practices associated with the 

electronic health records technologies. 

One commenter suggested that we adopt 

the e-DOS standard as certification 

criteria for electronic health records. 

Response: Although we share the 

commenters’ support for the free 

exchange of health information where 

appropriate protections for privacy and 

security exist, we are not adopting their 

recommendations because software 

certification criteria and standards are 

determined by ONC and are, therefore, 

outside the scope of this rulemaking. 

3. Covered Technology 

In the proposed rule, we noted that 

we received questions concerning 

whether certain items or services fall 

within the scope of the technology 

potentially covered under the exception 

at § 411.357(w). There, we stated that 

the answer to such questions depends 

on the exact items or services being 

donated. We referenced our discussion 

in the August 2006 final rule regarding 

our interpretation of the term ‘‘software, 

information technology and training 

services necessary and used 

predominantly.’’ We stated that we 

believe that the current regulatory text, 

when read in light of the preamble 

discussion, is sufficiently clear 

concerning the scope of covered 


tkelley on DSK3SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Rules and Regulations 78765 

technology. Nonetheless, because we 

received suggestions from stakeholders 

to modify § 411.357(w) to reflect 

explicitly this interpretation, in the 

proposed rule (78 FR 21313), we sought 

comments from the public regarding 

this issue. After considering the public 

comments with respect to this issue, we 

determined not to make any changes to 

the regulation text to address the scope 

of covered technology. 

Comment: Several commenters stated 

that the regulatory text describing the 

scope of technology covered by the 

exception, when read in light of the 

August 2006 final rule preamble, is 

sufficiently clear. One of these 

commenters urged us not to revise the 

regulation in any way that might limit 

the scope of covered technology, limit 

the ability of donors and physician 

recipients in the design and selection of 

items and services, or create barriers to 

achieving interoperability. Other 

commenters agreed that the current 

definition of covered technology is 

appropriate, with two of these 

commenters suggesting that we revisit 

the definition in the future as health 

information technology evolves. Still 

other commenters asserted that the 

existing regulatory language can be 

interpreted to include ‘‘services that 

enable the interoperable exchange of 

electronic health records data;’’ thus, no 

revisions to the regulatory text are 

required. In contrast, one commenter 

suggested that we incorporate into the 

regulatory text the preamble language 

from the August 2006 final rule where 

we discussed examples of items and 

services that would qualify for coverage 

under the exception. Another 

commenter suggested that we revise the 

regulatory text to include as many 

examples of covered ‘‘software, 

information technology and training 

services’’ as possible while emphasizing 

that the list is not exhaustive. 

Response: We agree that maintaining 

flexibility is important, particularly as 

health information technology evolves. 

We endeavor to avoid revisions to the 

regulation text that could inadvertently 

narrow the exception, which is intended 

to promote the adoption of interoperable 

electronic health records technology. 

Moreover, our interpretation of what is 

covered by the exception has not 

changed. As we stated in the proposed 

rule (78 FR 21313), whether specific 

items or services fall within the scope 

of covered technology under the 

exception depends on the exact items or 

services that are being donated. If the 

‘‘services that enable the interoperable 

exchange of electronic health records 

data’’ are of the type that do not meet 

the requirements for covered technology 

(for example, because they include 

hardware, storage devices, or have core 

functionality other than electronic 

health records), they would not be 

eligible for protection under the 

exception at § 411.357(w). 

For these reasons, we are not revising 

the regulation text at § 411.357(w) to 

identify any specific types of items or 

services that may be donated if the other 

requirements of the exception are 

satisfied. We are also not modifying the 

examples identified in the preamble 

discussion in the August 2006 final rule 

(71 FR 45151). The exception continues 

to protect nonmonetary remuneration in 

the form of software, information 

technology and training services 

necessary and used predominantly to 

create, maintain, transmit, or receive 

electronic health records. 

Comment: A few commenters 

requested clarification regarding 

whether third-party fees related to the 

exchange of health information, such as 

health information exchange service 

charges for interconnectivity, are 

‘‘covered technologies’’ under the 

exception. 

Response: The exception protects 

only nonmonetary remuneration, in the 

form of software and information 

technology and training services, that is 

necessary and used predominantly to 

create, maintain, transmit, or receive 

electronic health records. Whether 

particular items or services, such as 

interconnectivity services, may be 

donated under the exception depends 

on the exact items or services being 

donated. 

Comment: One commenter suggested 

that, in addition to maintaining as much 

flexibility as possible, we broaden the 

scope of the technology covered by the 

exception to include software and 

services used for care coordination, 

quality measurement, improving 

population health, or improving the 

quality or efficiency of health care 

delivery among parties. The commenter 

noted that some of these items may be 

covered by the waivers issued in 

connection with the Medicare Shared 

Savings Program (MSSP); however, 

because those waivers extend only to 

parties participating in that program, 

protection for the donation of items or 

services that advance the Department’s 

goal of encouraging the adoption of 

health information technology that 

supports public policy objectives is not 

available to other health care industry 

stakeholders. To advance these goals in 

a broader way, the commenter suggested 

that the exception be expanded to 

include items potentially covered by the 

MSSP pre-participation waiver, such as 

electronic health information exchanges 

that allow for electronic data exchange 

across multiple platforms, data 

reporting systems (including all-payer 

claims data reporting systems), and data 

analytics (including staff and systems, 

such as software tools, to perform 

analytic functions). Another commenter 

suggested that we broaden the scope of 

technology covered by the exception to 

include software separate from the 

certified electronic health records 

software as long as it is interoperable 

with the electronic health records 

software. The commenter gave as 

examples of such electronic health 

records-associated components ‘‘patient 

portals that support patient engagement, 

direct and other standards-compliant 

means for secure patient information 

exchange between providers, solutions 

to support transition care, and tools that 

may assist in inter- and intra-patient 

matching.’’ A third commenter urged us 

to consider a broader array of covered 

technologies, provided that they support 

policy goals such as reducing hospital 

readmissions and coordinated care 

across settings outside of traditional 

office settings, including telemonitoring 

and telemedicine. Another commenter 

suggested that we expand the protection 

of the exception to cover ‘‘any 

additional items or services that will be 

required or helpful in meeting Stage 2 

or Stage 3 requirements for [the EHR 

Incentive Programs].’’ 

Response: As stated previously, 

whether specific items or services fall 

within the scope of covered technology 

under the exception at § 411.357(w) 

depends on the exact items or services 

that are being donated. Some of the 

particular items and services that may 

be included within the broad categories 

identified by the commenters may be 

eligible for donation. For example, if a 

particular software product related to 

transitions of care was necessary and 

used predominantly to create, maintain, 

transmit, or receive electronic health 

records, then it would be eligible for 

donation, provided that the donation 

satisfied all of the other requirements of 

the exception. As noted previously in 

this final rule, software is not required 

to be certified to ONC certification 

criteria in order to be donated under the 

exception at § 411.357(w). Thus, 

software that is separate from certified 

software may still be eligible for 

donation if it satisfies the definition of 

‘‘interoperable’’ at § 411.351. 

To the extent that the commenters 

suggested that we expand the scope of 

the exception to protect items and 

services that are not already eligible for 

donation, we note that revision of the 

exception to include such items or 

services would be outside the scope of 


tkelley on DSK3SPTVN1PROD with RULES
78766 Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Rules and Regulations 

this rulemaking. In the proposed rule 

(78 FR 21313), with respect to the scope 

of technology potentially covered by the 

exception, we sought input from the 

public regarding the singular issue of 

‘‘whether the current regulatory text, 

when read in light of the preamble 

discussion, is sufficiently clear 

concerning the scope of covered 

technology.’’ With regard to whether the 

scope of the technology covered under 

the exception should be broadened—as 

opposed to clarified—we are mindful of 

the important issues raised by the 

commenters and may consider them in 

the future. Further, we note that other 

exceptions to the physician self-referral 

law exist to protect financial 

relationships between physicians and 

entities furnishing DHS. Depending on 

the circumstances, some of the 

arrangements described by the 

commenters may satisfy the 

requirements of another exception or 

may not implicate the physician selfreferral law. 

Comment: One commenter suggested 

that we define ‘‘equivalent technology’’ 

for purposes of the requirement in the 

exception that the donor of electronic 

health records items or services may not 

have actual knowledge of, or act in 

reckless disregard or deliberate 

ignorance of, the fact that the physician 

recipient possesses or has obtained 

items or services equivalent to those 

being donated. This commenter also 

suggested that we prohibit a physician 

from seeking or accepting a donation of 

electronic health records technology 

before a certain period of time has 

elapsed since the receipt of a previous 

donation. Another commenter urged us 

to eliminate maintenance and service 

agreements from the scope of potentially 

protected donations under the 

exception. In the alternative, the 

commenter suggested that we impose a 

restriction on the time period that 

donations of such services would be 

permitted. The commenter noted 

concerns that donors may use ongoing 

donations of maintenance and service 

agreements to lock in referrals from 

physician recipients. A commenter that 

urged us not to extend the availability 

of the exception suggested that we 

prohibit the donation of all technology 

except interfaces for reporting of 

laboratory results. 

Response: Although we appreciate the 

commenters’ suggestions, we are not 

making the requested changes. We 

believe that the modifications to and 

clarifications of § 411.357(w) adopted in 

this final rule and the clarifications 

offered in this preamble address the 

concerns raised by these commenters. 

Comment: One commenter asserted 

that the prohibition on donating 

equivalent items or services currently 

included in the exception locks 

physician practices into a vendor, even 

if they are dissatisfied with the 

technology, because the physician 

recipient must choose between paying 

the full amount for a new system and 

continuing to pay 15 percent of the cost 

of the substandard system. The 

commenter asserted that the cost 

differential between these two options is 

too high and effectively locks physician 

practices into electronic health records 

technology vendors. 

Response: Although we appreciate the 

commenter’s concern, we continue to 

believe that items and services are not 

‘‘necessary’’ if the physician recipient 

already possesses equivalent items or 

services. As we stated in the August 

2006 final rule (71 FR 45154), ‘‘the 

provision of equivalent items and 

services poses a heightened risk of 

abuse, [because] such arrangements 

potentially confer independent value on 

the physician recipient (that is, the 

value of the existing items and services 

that might be put to other uses) 

unrelated to the need for electronic 

health records technology.’’ Therefore, 

we are retaining the regulatory 

preclusion of protection for donation 

arrangements where the donor has 

actual knowledge of, or acts in reckless 

disregard or deliberate ignorance of, the 

fact that the physician recipient 

possesses or has obtained equivalent 

items or services. We expect that 

physicians would not select or continue 

to use a substandard system if it posed 

a threat to patient safety. 

Comment: One commenter referenced 

the proposed rule’s statement that 

‘‘software or information technology 

and training services necessary and 

used predominantly for electronic 

health records purposes’’ included 

‘‘information services related to patient 

care (but not separate research or 

marketing support services)’’ (78 FR 

21313). The commenter requested that 

we retract that statement and clarify that 

it is appropriate for health researchers to 

use data in electronic health records for 

research that is related to, for example, 

evidence-based medicine, population 

management, or other research, 

provided that the use complies with 

applicable Federal, state, and 

institutional requirements. 

Response: We decline to retract our 

statement in the proposed rule. To 

promote adoption of electronic health 

records without risk of abuse, the scope 

of items and services permitted to be 

donated under the exception is limited 

to electronic health records items and 

services in the form of software and 

information technology and training 

services that are ‘‘necessary and used 

predominantly to create, maintain, 

transmit, or receive electronic health 

records.’’ Donations of software used for 

research that is separate from clinical 

support and information services related 

to patient care are not consistent with 

the primary goals of the exception. 

The exception at § 411.357(w) 

addresses only the donation of 

electronic health records items and 

services, and not the use of data. Thus, 

the portion of the comment related to 

data use is outside the scope of this 

rulemaking. We note, however, that 

nothing in the exception prohibits the 

use of data in electronic health records 

systems for research purposes (assuming 

the parties comply with all other 

applicable laws, including HIPAA 

privacy protections). 

Comment: One commenter requested 

that CMS confirm that patient portals 

are within the scope of the technology 

potentially protected by the exception. 

Response: We are not certain what the 

commenter precisely means by ‘‘patient 

portals.’’ Patient portals come in a 

variety of forms; the key to the analysis 

is whether the specific item or service 

donated is: (1) In the form of software, 

information technology and training 

services and; (2) necessary and used 

predominantly to create, maintain, 

transmit or receive electronic health 

records. As we stated in the August 

2006 final rule in response to a 

commenter’s recommendation that the 

exception specifically protect the 

provision of patient portal software that 

enables patients to maintain on-line 

personal medical records, including 

scheduling functions (71 FR 45152), 

nothing in the exception precludes 

protection for patient portal software if 

it satisfies all of the requirements of the 

exception. 

E. Comments Outside the Scope of This 

Rulemaking 

In addition to the comments 

described and to which we responded 

previously, we received several 

comments from stakeholders, including 

suggestions on policy changes, that are 

outside the scope of this rulemaking. 

For example, one commenter raised 

concerns about a private insurer’s 

proposed fee schedule for laboratory 

services. Another commenter expressed 

concern about ‘‘outrageous bills’’ the 

commenter received from a laboratory 

company. Although we appreciate the 

commenters taking the time to present 

these concerns, we do not address them 

here, as they are outside the scope of 

this rulemaking. 


tkelley on DSK3SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Rules and Regulations 78767 

IV. Provisions of the Final Regulations 

For the most part, this final rule 

incorporates the proposed revisions 

stated in the proposed rule. Specifically, 

we are revising the exception to exclude 

laboratory companies from the types of 

entities that may donate electronic 

health records items and services under 

the exception, and are modifying the 

regulation text at § 411.357(w)(1) to 

effectuate this change. We are also 

amending § 411.357(w)(2) by deleting 

the phrase ‘‘recognized by the 

Secretary’’ and by replacing it with the 

phrase ‘‘authorized by the National 

Coordinator for Health Information 

Technology’’ and replacing the 12- 

month timeframe for certification of 

electronic health records software with 

a requirement that the software be 

certified to an edition of the electronic 

health record certification criteria 

identified in the then-applicable version 

of 45 CFR part 170 (ONC’s certification 

program). We are clarifying the 

requirement at § 411.357(w)(3) 

prohibiting any action that limits or 

restricts the use, compatibility, or 

interoperability of donated items or 

services. In addition, we are eliminating 

the requirement at § 411.357(w)(11) that 

donated electronic health records 

software include electronic prescribing 

capability. Finally, we are modifying 

§ 411.357(w)(13) to extend the 

expiration of the exception from 

December 31, 2013 to December 31, 

2021. 

V. Waiver of the Delay in the Effective 

Date 

Ordinarily, we provide a delay of at 

least 30 days in the effective date of a 

final rule after the date that the rule is 

issued. However, the 30-day delay in 

effective date can be waived if the rule 

grants or recognizes an exemption or 

relieves a restriction. We believe that it 

is appropriate to waive the 30-day delay 

in effective date for § 411.357(w)(13), 

which relieves a restriction on 

donations of electronic health records 

items and services. Specifically, this 

final rule amends § 411.357(w)(13) to 

extend the expiration of the existing 

exception from December 31, 2013 to 

December 31, 2021. Without a waiver of 

the requirement for a delayed effective 

date, the entire exception will expire on 

December 31, 2013 and will not be 

available to protect any ongoing 

donation arrangements or new 

donations of electronic health records 

items and services made to physicians 

after December 31, 2013. By waiving the 

30-day delay in effective date, the 

exception will not expire, thereby 

allowing parties to continue utilizing 

the exception to protect donations of 

electronic health records items and 

services. We stress, however, that 

donations of electronic health records 

items and services that occur between 

January 1, 2014 and the effective date of 

the remaining provisions of this final 

rule (March 27, 2014) will need to 

satisfy all of the requirements of the 

existing exception. The waiver of the 

30-day delay in effective date simply 

serves to maintain the status quo until 

the rest of this final rule becomes 

effective. 

The 30-day delay in effective date can 

also be waived if the agency finds for 

good cause that the delay is 

impracticable, unnecessary, or contrary 

to the public interest, and the agency 

incorporates a statement of the findings 

and reasons in the rule issued. We find 

that it is unnecessary to provide a 30- 

day delay in effective date for 

§ 411.357(w)(13) because an earlier 

effective date simply allows parties to 

continue making donations under the 

existing electronic health records items 

and services exception; it does not 

impose any new requirements or 

restrictions on potentially affected 

parties. Moreover, we find that a 30-day 

delayed effective date for 

§ 411.357(w)(13) is impracticable 

because it would cause the entire 

exception to expire, thereby nullifying 

this final rule. 

VI. Collection of Information 

Requirements 

The provisions in this final rule will 

not impose any new or revised 

information collection, recordkeeping, 

or disclosure requirements. 

Consequently, this rule does not need 

additional Office of Management and 

Budget review under the authority of 

the Paperwork Reduction Act of 1995. 

VII. Regulatory Impact Analysis 

We have examined the impact of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), Executive 

Order 13563 on Improving Regulation 

and Regulatory Review (January 18, 

2011), the Regulatory Flexibility Act 

(RFA) (September 19, 1980, Pub. L. 96– 

354), section 1102(b) of the Act, section 

202 of the Unfunded Mandates Reform 

Act of 1995 (March 22, 1995; Pub. L. 

104–4), Executive Order 13132 on 

Federalism (August 4, 1999), and the 

Congressional Review Act (5 U.S.C. 

804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). A regulatory impact analysis 

(RIA) must be prepared for major rules 

with economically significant effects 

($100 million or more in any 1 year). We 

believe that this final rule does not 

reach the economic threshold for being 

considered economically significant 

and, thus, is not considered a major 

rule. It is not economically significant 

because it will not have a significant 

effect on program expenditures, and 

there are no additional substantive costs 

to implement the resulting provisions. 

The rule modifies an existing exception 

to the physician self-referral law, and 

the modifications would not impose 

additional substantive costs on those 

seeking to utilize the exception. Further, 

the donation of electronic health records 

items or services and the use of the 

exception to protect such donations is 

entirely voluntary. In section III. of this 

final rule, we provide a detailed 

discussion and analysis of the 

alternatives considered in this final rule, 

including those considered for 

extending the expiration date of the 

electronic health records exception, 

limiting the types of entities that may 

donate electronic health records items 

and services, and tying the timeframe 

for deeming electronic health records 

software to ONC’s certification program. 

Finally, we received no public 

comments specific to the RIA set forth 

in the proposed rule. 

This final rule extends the exception’s 

expiration date to December 31, 2021; 

excludes laboratory companies from the 

types of entities that may donate 

electronic health records items and 

services; updates the provision under 

which electronic health records 

software is deemed interoperable; 

clarifies the requirement at 

§ 411.357(w)(3) prohibiting any action 

that limits or restricts the use, 

compatibility, or interoperability of 

donated items or services; and removes 

the requirement related to electronic 

prescribing capability. Neither this final 

rule nor the regulations it amends 

requires any entity to donate electronic 

health records items and services to 

physicians, but we expect these changes 

to continue to facilitate the adoption of 

electronic health records technology by 

eliminating perceived barriers rather 

than creating the primary means by 

which physicians would adopt this 

technology. 

The summation of the economic 

impact analysis regarding the effects of 

electronic health records in the 

ambulatory setting that is presented in 


tkelley on DSK3SPTVN1PROD with RULES
78768 Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Rules and Regulations 

3See, for example, State Variation in EPrescribing Trends in the United States, available 

at http://www.healthit.gov/sites/default/files/us_eprescribingtrends_onc_brief_4_nov2012.pdf. 

4See, for example, State Variation in EPrescribing Trends in the United States, available 

at http://www.healthit.gov/sites/default/files/us_eprescribingtrends_onc_brief_4_nov2012.pdf. 

the August 2006 final rule (71 FR 45164) 

still pertains to this final rule. However, 

since the August 2006 final rule, several 

developments have occurred to make us 

conclude that it is no longer necessary 

to retain a requirement related to 

electronic prescribing capability in the 

electronic health records exception. 

These developments include the 

passage of two laws encouraging 

adoption of electronic prescribing and 

electronic health records: (1) the 

Medicare Improvements for Patients and 

Providers Act of 2008 (MIPPA), Public 

Law 110–275; and (2) the Health 

Information Technology for Economic 

and Clinical Health (HITECH) Act, Title 

XIII of Division A and Title IV of 

Division B of the American Recovery 

and Reinvestment Act of 2009 (ARRA), 

Pub. L. 111–5. In addition, there has 

been an increase over the past few years 

in the rate of electronic health recordsbased electronic prescribing 

capabilities.3

As discussed in more detail in the 

preamble to the proposed rule, section 

132 of MIPPA authorized an electronic 

prescribing incentive program (starting 

in 2009) for certain types of eligible 

professionals. The HITECH Act 

authorized us to establish the EHR 

Incentive Programs for certain eligible 

professionals, eligible hospitals, and 

critical access hospitals. Also, the 

HITECH Act required that eligible 

professionals under the EHR Incentive 

Programs demonstrate meaningful use 

of certified electronic health records 

technology, including the use of 

electronic prescribing. Specifically, the 

final rule for Stage 2 EHR Incentive 

Programs (September 4, 2012; 77 FR 

53968) includes more demanding 

requirements for electronic prescribing 

and identifies electronic prescribing as 

a required core measure. As a result, 

beginning in calendar year 2015, an 

eligible professional risks a reduction in 

the Medicare Physician Fee Schedule 

payment amount that will otherwise 

apply for covered professional services 

if he or she is not a meaningful 

electronic health records technology 

user for a reporting period during that 

year. Our intent remains to allow 

physicians not to receive products or 

services they already own, but rather to 

receive electronic health records items 

and services that advance the adoption 

and use of electronic health records. 

Lastly, according to ONC, electronic 

prescribing by physicians using 

electronic health records technology has 

increased from 7 percent in December 

2008 to approximately 48 percent in 

June 2012.4 Furthermore, the rules 

recently published to implement Stage 2 

of the EHR Incentive Programs (77 FR 

54198 and 77 FR 53989), continue to 

encourage physicians’ use of electronic 

prescribing technology. However, due to 

data limitations, we are unable to 

estimate accurately how much the 

electronic health records exception has 

contributed to the increase in electronic 

prescribing. Nevertheless, we believe 

that, as a result of recent developments, 

physician adoption of electronic 

prescribing and electronic health 

records technology will continue to 

increase despite removal of the 

electronic prescribing capability 

requirement in the electronic health 

records exception. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

entities, if a rule has a significant impact 

on a substantial number of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Most 

hospitals and most other providers and 

suppliers are small entities, either by 

nonprofit status or by having revenues 

of less than $7.0 million to less than 

$35.5 million in any 1 year. Individuals 

and States are not included in the 

definition of a small entity. This final 

rule does not result in an economic 

effect on small entities of 3 to 5 percent 

or more of their total revenues or costs. 

As a result, the Secretary has 

determined that this final rule will not 

have a significant economic impact on 

a substantial number of small entities. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 604 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a Metropolitan Statistical Area for 

Medicare payment regulations and has 

fewer than 100 beds. The Secretary has 

determined that this final rule would 

not have a significant economic impact 

on the operations of a substantial 

number of small rural hospitals (that is, 

an effect of more than 3 to 5 percent of 

their total revenues or costs). 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 requires 

that agencies assess anticipated costs 

and benefits before issuing any rule 

whose mandates require spending in 

any 1 year of $100 million in 1995 

dollars, updated annually for inflation. 

In 2013, that threshold is approximately 

$141 million. This final rule imposes no 

mandates and, as a result, will have no 

consequential effect on State, local, or 

tribal governments, or on the private 

sector, of $141 million or more. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it issues a final rule 

that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

For the reasons stated earlier, this final 

rule will not have a substantial effect on 

State or local governments, nor does it 

preempt State law or have Federalism 

implications. 

In accordance with the provisions of 

Executive Order 12866, this rule was 

reviewed by the Office of Management 

and Budget. 

List of Subjects for 42 CFR Part 411 

Kidney diseases, Medicare, Physician 

referral, Reporting and recordkeeping 

requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amends 42 CFR part 

411 as set forth below: 

PART 411—EXCLUSIONS FROM 

MEDICARE AND LIMITATIONS ON 

MEDICARE PAYMENT 

■ 1. The authority citation for part 411 

continues to read as follows: 

Authority: Secs. 1102, 1860D–1 through 

1860D–42, 1871, and 1877 of the Social 

Security Act (42 U.S.C. 1302, 1395w–101 

through 1395w–152, 1395hh, and 1395nn). 

■ 2. Section 411.357 is amended as 

follows: 

■ A. Revising paragraphs (w)(1) through 

(3). 

■ B. Removing and reserving paragraph 

(w)(11). 

■ C. In paragraph (w)(13), removing the 

date ‘‘December 31, 2013’’ and adding 

the date ‘‘December 31, 2021’’ in its 

place. 

The revision reads as follows: 

§ 411.357 Exceptions to the referral 

prohibition related to compensation 

arrangements. 

* * * * * 

(w) * * * 

(1) The items and services are 

provided to a physician by an entity (as 

defined at § 411.351) that is not a 

laboratory company. 


tkelley on DSK3SPTVN1PROD with RULES
Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Rules and Regulations 78769 

(2) The software is interoperable (as 

defined in § 411.351) at the time it is 

provided to the physician. For purposes 

of this paragraph, software is deemed to 

be interoperable if, on the date it is 

provided to the physician, it has been 

certified by a certifying body authorized 

by the National Coordinator for Health 

Information Technology to an edition of 

the electronic health record certification 

criteria identified in the then-applicable 

version of 45 CFR part 170. 

(3) The donor (or any person on the 

donor’s behalf) does not take any action 

to limit or restrict the use, compatibility, 

or interoperability of the items or 

services with other electronic 

prescribing or electronic health records 

systems (including, but not limited to, 

health information technology 

applications, products, or services). 

* * * * * 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: September 5, 2013. 

Marilyn Tavenner, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: December 12, 2013. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2013–30923 Filed 12–23–13; 4:15 pm] 

BILLING CODE 4120–01–P 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Part 95 

[ET Docket No. 08–59; FCC 12–54] 

Medical Body Area Networks 

AGENCY: Federal Communications 

Commission. 

ACTION: Final rule; announcement of 

effective date. 

SUMMARY: In this document, the Federal 

Communications Commission 

(‘‘Commission’’) announces that certain 

rules revised in the ‘‘Amendment of the 

Commission’s Rules to Provide 

Spectrum for the Operation of Medical 

Body Area Networks’’ adopted in a First 

Report and Order, ET Docket No. 08–59 

(FCC 12–54), to the extent it contained 

information collection requirements that 

required approval by the Office of 

Management and Budget (OMB) was 

approved on October 26, 2013. This 

document is consistent with the First 

Report and Order, which stated that the 

Commission would publish a document 

in the Federal Register announcing the 

effective date of those rules. 

DATES: The amendments to 47 CFR 

95.1215(c), 95.1217(a)(3), 95.1223 and 

95.1225 published at 78 FR 55715, 

September 11, 2012 are effective 

December 27, 2013. In addition the 

incorporation by reference listed in 47 

CFR 95.1223 of the rules is approved by 

the Director of the Federal Register as of 

December 27, 2013. 

FOR FURTHER INFORMATION CONTACT: 

Nancy Brooks, Policy and Rules 

Division, Office of Engineering and 

Technology, at (202) 418–7866, or 

email: Nancy.Brooks@fcc.gov. 

SUPPLEMENTARY INFORMATION: This 

document announces that, on November 

26, 2013 OMB approved, for a period of 

three years, the revised information 

collection requirements relating to 

Spectrum for the Operation of Medical 

Body Area Networks rules contained in 

the Commission’s First Report and 

Order, FCC 12–54, published at 78 FR 

55715, September 11, 2012. The OMB 

Control Number is 3060–0936. The 

Commission publishes this document as 

an announcement of the effective date of 

the rules. 

To request materials in accessible 

formats for people with disabilities 

(Braille, large print, electronic files, 

audio format), send an email to fcc504@

fcc.gov or call the Consumer and 

Governmental Affairs Bureau at (202) 

418–0530 (voice), (202) 418–0432 

(TTY). 

Synopsis 

As required by the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3507), 

the Commission is notifying the public 

that it received final OMB approval on 

November 26, 2013, for the information 

collection requirements contained in the 

modifications to the Commission’s rules 

in 47 CFR part 95. 

Under 5 CFR 1320, an agency may not 

conduct or sponsor a collection of 

information unless it displays a current, 

valid OMB Control Number. 

No person shall be subject to any 

penalty for failing to comply with a 

collection of information subject to the 

Paperwork Reduction Act that does not 

display a current, valid OMB Control 

Number. The OMB Control Number is 

3060–0936. 

The foregoing document is required 

by the Paperwork Reduction Act of 

1995, Public Law 104–13, October 1, 

1995, and 44 U.S.C. 3507. 

The total annual reporting burdens 

and costs for the respondents are as 

follows: 

OMB Control No.: 3060–0936. 

OMB Approval Date: November 26, 

2013. 

OMB Expiration Date: November 30, 

2016. 

Title: Sections 95.1215, 95.1217, 

95.1223 and 95.1225—Medical Device 

Radiocommunications Service 

(MedRadio). 

Form No.: N/A. 

Type of Review: Revision of a 

currently approved collection. 

Respondents: Business or other forprofit and not-for-profit institutions. 

Number of Respondents: 3,120 

respondents; 3,120 responses. 

Estimated Time per Response: 1–3 

hours. 

Frequency of Response: On occasion 

reporting requirement, third party 

disclosure requirement and 

recordkeeping requirement. 

Obligation to Respond: Required to 

obtain or retain benefits. Statutory 

authority for this information collection 

is contained in 47 U.S.C. 151 and 303 

of the Communications Act of 1934, as 

amended. 

Total Annual Burden: 9,120 hours. 

Total Annual Cost: $462,600. 

Privacy Act Impact Assessment: N/A. 

Nature and Extent of Confidentiality: 

No information is requested that would 

require assurance of confidentiality. 

Needs and Uses: The Commission 

received approval from the Office of 

Management and Budget (OMB) to 

revise OMB 3060–0936 to reflect new 

and/or modified information collections 

as a result of a First Report and Order. 

On May 24, 2012, the Commission 

released a Report and Order, ET Docket 

No. 08–59, FCC 12–54, titled: 

‘‘Amendment of the Commission’s rules 

to Provide Spectrum for the Operation 

of Medical Body Area Networks’’, these 

rules revised the requirements for 

manufacturers of transmitters for the 

‘‘Medical Device Radiocommunication 

Service’’ to include with each 

transmitting device a statement 

regarding harmful interference and to 

label the device in a conspicuous 

location on the device. The First Report 

and Order also adopted rules for 

‘‘Medical Body Area Network’’ (MBAN), 

which requires the Commission to 

establish a process by which MBAN 

users will register and coordinate the 

use of certain medical devices. The 

frequency coordinator will make the 

database available to equipment 

manufacturers and the public. The 

coordinator will also notify users of 

potential frequency conflicts. 

Federal Communications Commission. 

Marlene H. Dortch, 

Secretary, Office of the Secretary, Office of 

Managing Director. 

[FR Doc. 2013–30649 Filed 12–26–13; 8:45 am] 

BILLING CODE 6712–01–P 


tkelley on DSK3SPTVN1PROD with RULES