Physician Payment Sunshine Act

The Centers for Medicare & Medicaid Services (CMS) has published its final Medicare physician fee schedule (PFS) rule for calendar year (CY) 2020.  In addition to updating rates for physician services, the final rule revises numerous other Medicare Part B policies.  Highlights of the final rule include the following: 

  • The final 2020 conversion factor is

The Senate Finance Committee recently called for federal agencies to begin investigating physician owned distributors’ (PODs) alleged noncompliance with the U.S. Physician Payment Sunshine Act (Sunshine Act, or Open Payments). The letter is addressed to the head of the Office of Inspector General (OIG) and the Administrator of the Centers for Medicare & Medicaid Services (CMS). If acted upon, the OIG/CMS investigations could change the landscape of the Sunshine Act in an important way: any resulting public enforcement would most likely be a first.

How the Sunshine Act Applies to PODs

The Sunshine Act requires applicable manufacturers and group purchasing organizations (GPOs) to annually disclose payments or transfers of value to covered recipients (physicians and teaching hospitals), as well as to disclose ownership or investment interests held by U.S. physicians or their immediate family members (with an exception for publicly traded companies).

PODs, which distribute revenue to their physician owners in a variety of ways, generally have obligations to file such reports under the Sunshine Act in one of two ways:

  1. The POD falls within the definition of a “GPO.” CMS defines a GPO as “an entity that (1) Operates in the United States; and (2) Purchases, arranges for or negotiates the purchase of a covered drug or device, biological, or medical supply for a group of individuals or entities, but not solely for use by the entity itself.”1 CMS has been clear that it intends this definition to include PODs.2
  2. The POD qualifies as an “applicable manufacturer.” To the extent that a POD takes title to a product, the Sunshine Act implementing regulations make clear that PODs are “subject to the same requirements as all other applicable manufacturers.”3

Sunshine Enforcement Landscape

Under the Sunshine Act, the knowing failure to disclose reportable payments or ownership interests is punishable by a civil monetary penalty of up to $10,000 for each item not timely reported. However, despite nearly a decade since enactment and five cycles of data reporting (this year will be the sixth), there have been no public enforcement actions. (We must acknowledge, however, the possibility that investigations may be ongoing and merely not yet publicly disclosed, or were resolved without penalty and therefore not publicly announced.)

Interestingly, the March 19, 2019, letter, written by Senators Chuck Grassley and Ron Wyden (Chairman and Ranking Member, respectively, of the U.S. Senate Finance Committee), appears to imply that the authors have knowledge of specific violations by PODs: “It has come to our attention that some physician owned distributorships (PODs) may be failing to disclose physician ownership or investment interest as required by the Physician Payment Sunshine Act (Sunshine Act).”
Continue Reading Senate Committee Calls for Sunshine Act/Open Payments Enforcement

CMS has just corrected an error in a 2016 rulemaking that inadvertently called for a 10-fold increase in certain “Sunshine Act” civil monetary penalties (CMPs).

Under section 1128G of the Social Security Act, applicable manufacturers must report annually to CMS any payments or other transfers of value to covered recipients. In addition, the statute requires

The Department of Health and Human Services (HHS) is increasing maximum civil monetary penalty (CMP) amounts applicable to HHS agencies and programs, in compliance with the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (which was part of the Bipartisan Budget Act of 2015).  The magnitude of the individual CMP increases varies depending on when the specific type of penalty was last adjusted and consequently how large a “catch-up” adjustment is applied.  Increases range from 1% to 150%.  For instance:
Continue Reading HHS Inflation Adjustment Rule Hikes CMPs Across Department Programs

For some time, we have been reporting on issues involving federal government scrutiny of physician-owned distributors (“PODs”). From the Department of Health and Human Services Office of Inspector General’s (“OIG”) issuance of the March 2013 OIG Special Fraud Alert (“Special Fraud Alert”), to the Reliance Medical Systems challenge to the Fraud Alert, to the

Today the Centers for Medicare & Medicaid Services (CMS) published the final rule to update the Medicare physician fee schedule (MPFS) for calendar year (CY) 2016. Despite the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) establishing a 0.5% conversion factor (CF) update for 2016, the final 2016 CF of $35.8279 actually is a decrease compared to the 2015 CF of $35.9335. This is because CMS has more than offset the 0.5% MACRA update with a -0.02% budget neutrality adjustment in addition to a -0.77% “target recapture amount” to reach a statutory target for savings achieved from misvalued code adjustments (discussed below). Final rates and policies are effective January 1, 2016, with certain exceptions. CMS is accepting comments until December 29, 2015 on a limited number of provisions of the rule (e.g., interim final work, practice expense, and malpractice RVUs; interim final new, revised, potentially misvalued HCPCS codes; and changes to the physician self-referral list of codes). The sweeping rule includes numerous policy provisions, including the following:
Continue Reading CMS Finalizes Medicare Physician Fee Schedule Rates, Policies for 2016

The next Medicare Payment Advisory Commission (MedPAC) meeting is scheduled for September 10-11, 2015. Topics on the agenda include, among others: developing a unified payment system for post-acute care; Medicare Advantage encounter data and star ratings; Medicare drug spending; and payments from drug and device manufacturers to physicians and teaching hospitals.

 The Office of Inspector General (OIG) of the Department of Health and Human Services has issued a report on “Overlap Between Physician-Owned Hospitals and Physician-Owned Distributors.”  The OIG reviewed 12 hospitals that self-identified as physician-owned and previously reported having purchased spinal devices from PODs.  The OIG attempted to determine whether physicians had an

As we reported last week, on May 21, 2015, the House Energy and Commerce Committee approved H.R. 6, the “21st Century Cures Act,” by a bipartisan, unanimous 51-0 vote. This major legislation is intended to accelerate the pace of medical cures in the United States through a variety of reforms addressing drug and device development and approval, clinical trial design, research funding, interoperability of health technology, and other issues. This blog post focuses on the bill’s proposed Sunshine Act (aka Open Payments) changes, which would broaden exclusions related to the provision of education-related payments or transfers of value.
Continue Reading 21st Century Cures Bill Includes Proposal to Broaden Sunshine Act Exclusions Related to Education

As part of the final 2015 Medicare physician fee schedule rule, CMS is adopting – with certain refinements – its proposed changes to the regulations implementing the Physician Payment Sunshine Act. By way of background, the Sunshine Act requires pharmaceutical and medical device manufacturers and group purchasing organizations to submit to CMS certain

CMS has released a beta version of its Open Payments search tool, which is intended to facilitate public review of payments and transfers of value made by drug and device manufacturers and group purchasing organization (GPOs) to physicians and teaching hospitals, as well as physician ownership information.  The tool allows the public to search

CMS has reopened the Open Payments system after it was taken offline temporarily to “resolve a data integrity issue.” According to a CMS press release, applicable manufacturers and group purchasing organizations (GPOs) had submitted intermingled data (e.g., wrong state license number or national provider identifier) for doctors with the same last and first names

CMS has taken the Open Payments system offline temporarily “to investigate a reported issue,” according to a recent CMS email announcement.  As a result, physicians, teaching hospitals, and authorized representatives may not register and review data related to payments by applicable manufacturers and applicable group purchasing organizations at this time. The shut-down of the system

Today the Centers for Medicare & Medicaid Services (CMS) issued an advance copy of the CY 2015 Medicare Physician Fee Schedule (PFS) proposed rule, which includes certain changes to the regulations implementing the Physician Payment Sunshine Act, also known as the Open Payments program. These proposed changes come just three days after the inaugural