Section 6002 of the Affordable Care Act, also known as the Physician Payment Sunshine Act (“Sunshine Act”), requires that applicable manufacturers of drugs, devices, biologicals, or medial supplies covered under Medicare, Medicaid or CHIP to report annually to the Secretary certain payments or other transfers of value to physicians and teaching hospitals. Manufacturers and group purchasing organizations (“GPOs”) are also required to disclose any ownership or investment interests in such entities held by physicians or their immediate family members, as well as any information on any payments or other transfers of value provided to the physicians. The Sunshine Act required manufacturers and GPOs to begin collecting information on January 1, 2012, which would be reported March 31, 2013.
On December 19, 2011, the Centers for Medicare & Medicaid Services (“CMS”) published the proposed rule for the Sunshine Act (“Proposed Rule”). The Proposed Rule first delayed the start date for the collection of data by manufacturers and GPOs until after the publication of the final rule. CMS stated that they are considering a 90 day period to comply with the Sunshine Act following the publication of the final rule, however, they are seeking comment on the amount of time manufacturers and GPOs will actually need in order to begin complying with the data collection requirements.
The Proposed Rule defines many of the terms contained in the Sunshine Act. The Sunshine Act defines a covered recipient as a physician or teaching hospital. Under the Proposed rule, the term physician has the same meaning as section 1861(r) of the Social Security Act and would include doctors of medicine and osteopathy, dentists, podiatrists, optometrists, and licensed chiropractors. CMS proposed a definition for teaching hospital that would include any institution that receives IME payments, direct GME payments or psychiatric hospital IME payments during the most recent year for which information is available.
Under the Proposed Rule, a manufacturer will be subject to the reporting requirements if it sells or distributes at least one covered drug, device, biological or medical supply. A “covered drug, device, biological or medical supply” is defined to include any drug, biological product, device or medical supply for which payment is available under Medicare, Medicaid or CHIP. The Proposed Rule includes those drugs, devices, biological or medical supplies included in a composite payment rate, as well as those reimbursed separately. CMS proposed to exclude over-the-counter drugs and limit covered devices and medical supplies to those that require premarket approval or notification to the Food and Drug Administration. However, under the Proposed Rule, a manufacturer must report on all payments or other transfers of value given to a covered recipient, even if not in connection with a covered product.
Under the Sunshine Act, manufacturers and GPOs may be subject to civil monetary penalties of $1,000 to $10,000 for each payment or ownership/investment interest not reported, subject to a maximum penalty of $150,000 for each annual submission. In addition, if the failure to submit was a “knowing failure,” the manufacturer or GPO may be subject to a penalty of at least $10,000, but no more than $100,000 for each payment or investment/ownership interest not reported, subject to a maximum penalty of $1,000,000 for each annual submission.
While the Sunshine Act and the Proposed Rule do not include a record keeping requirement for physicians or teaching hospitals, physicians and teaching hospitals should review and correct data reported by manufacturers and GPOs as necessary. The review will impose a burden on teaching hospitals. In the Proposed Rule, CMS estimated that teaching hospitals will spend an average of ten hours per year reviewing submitted data, ranging from three hours for small teaching hospitals to sixty hours for teaching hospitals that have lengthy disputes.
The comment period for the Proposed Rule is open until February 17, 2012 and teaching hospitals and physicians should be aware of any updates in the implementation of the mandatory reporting obligations under the Sunshine Act.
This article was originally published in the February 2012 issue of Atlanta Hospital News.