Sunshine Act

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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

President Trump has just signed into law HR 6, the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act.  The bipartisan legislation includes almost 200 provisions intended to strengthen opioid prevention and treatment efforts and bolster law enforcement tools.

Among many other things, the new law: 

  • Seeks to

…

CMS has announced inflation-adjusted de minimis reporting thresholds for 2018 under the Open Payments/Physician Payments Sunshine Act program.  Specifically, payments or transfers of value of less than $10.49 do not need to be reported in 2018, except when the total annual value of payments or other transfers of value to a covered recipient exceeds $104.90…

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…

On August 2, 2016, CMS is hosting a Special Open Door Forum Call on potential future changes to Open Payments/Physician Payments Sunshine Act requirements for reporting 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.  …
Continue Reading CMS Hosts Call on Potential Future Changes to Open Payments/Sunshine Act Reporting Requirements (Aug. 2)

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…

 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

Today 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…

On November 12, 2014, CMS published its final rule to update the Medicare physician fee schedule (MPFS) for CY 2015. Highlights of the sweeping rule include the following:

  • The Protecting Access to Medicare Act (PAMA) of 2014 provides for a 0% update to the conversion factor (CF) for MPFS services furnished between January 1, 2015 and March 31, 2015, with the CF adjusted afterwards according to the statutory Sustainable Growth Rate (SGR) formula. In the final rule, CMS determined that based on the zero percent update under PAMA and adjustments necessary to maintain budget neutrality, the CF for the first quarter of 2015 will be $35.8013 (compared to $35.8228 in 2014). CMS also announced that the CF for April 1, 2015 through December 31, 2015 will be $28.2239 – a 21.2% reduction — unless Congress establishes an alternative CF or otherwise modifies the SGR formula. While there is an expectation that Congress eventually will override this payment cut, the form any such action might take is speculative at this point.

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Continue Reading CMS Publishes Final 2015 Medicare Physician Fee Schedule Rule for 2015

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…

On July 11, 2014, CMS published its proposed rule to update the Medicare physician fee schedule for CY 2015. The proposed rule reflects enactment of the Protecting Access to Medicare Act (PAMA) of 2014, which provides for a 0% update to the conversion factor (CF) for MPFS services furnished between January 1, 2015 and March 31, 2015. In the Proposed Rule, CMS estimates that with the application of a budget neutrality adjustment, the CF for the first quarter of 2015 would be $35.7977 (compared to $35.8228 in 2014). Under PAMA, the CF will be adjusted on April 1, 2015 according to the Sustainable Growth Rate (SGR) formula unless Congress takes additional legislative action. CMS does not speculate on the CF that will be applicable April 1, 2015 through December 31, 2015, but CMS previously estimated that the SGR would result in about a 20.9% cut in MPFS payments for 2015 if Congress does not again intervene. There is an expectation that Congress eventually will override this payment cut, but the timing and extent of any such relief cannot be assured at this time. Other key provision in the proposed rule include the following:…

Continue Reading CMS Publishes Proposed MPFS Rule for 2015

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…