In the July 3, 2014, issue of the Federal Register, The Centers for Medicare & Medicaid Services (CMS) published the proposed calendar year 2015 Medicare physician fee schedule update (the Proposed Rule).  The Proposed Rule includes certain proposed changes to the “Sunshine” provisions of the Patient Protection and Affordable Care Act (the Sunshine Regulations), which implement what is known as the Open Payments program mandated by Section 6002 of the Affordable Care Act. 

Regulatory Background

The Open Payments program requires certain prescription drug, biologic, medical device and medical supply manufacturers (Applicable Manufacturers) and group purchasing organizations (Applicable GPOs) to annually report to CMS certain physician and/or teaching hospital payments and physician ownership interests.  Applicable Manufactures and Applicable GPOs were required to begin data collection under the Open Payments program beginning August 1, 2013, and to finish uploading data for the first stub reporting year (i.e., August 1–December 31, 2013) by June 30, 2014.

The Sunshine Regulations provide for a number of exclusions from the reporting obligations.  Of note, payments or other transfers of value made by an Applicable Manufacturer to a physician or teaching hospital (Covered Recipient) or physician owner/investor, or by an Applicable GPO to a physician owner/investor, for speaking at a continuing medical education (CME) program need not be reported if the following conditions are met:

1. the CME program meets the accreditation or certification standards of one of the following:  (i) the Accreditation Council for Continuing Medical Education; (ii) the American Academy of Family Physicians; (iii) the American Dental Association’s Continuing Education Recognition Program; (iv) the American Medical Association; or (v) the American Osteopathic Association;

2. the Applicable Manufacturer or Applicable GPO does not pay the speaker directly; and

3. the Applicable Manufacturer or Applicable GPO does not select the speaker or provide the third party, such as the CME vendor, with a distinct, identifiable set of individuals to be considered as speakers for the CME program.  42 C.F.R. § 403.904(g).

Likewise, an indirect payment or other transfer of value is excluded from the reporting requirement where the Applicable Manufacturer or Applicable GPO is “unaware of” (i.e., does not know) the identity of the Covered Recipient and/or physician owner/investor during the reporting year or by the end of the second quarter of the following reporting year.  42 C.F.R. § 403.904(i).  An indirect payment or other transfer of value is defined as one made “through a third party, where the applicable manufacturer (or applicable group purchasing organization) requires, instructs, directs, or otherwise causes the third party to provide the payment or transfer of value, in whole or in part, to a covered recipient(s) (or a physician owner or investor)” (emphasis added).  The Sunshine Regulations define “know” as “actual knowledge” or acting “in deliberate ignorance” or “reckless disregard” of the truth or falsity of the information, and “[r]equires no proof of a specific intent to defraud.”  42 C.F.R. § 403.902.

Proposed Amendments

CMS explains in the Proposed Rule that, since the release of the Sunshine Regulations, many stakeholders have expressed concerns with the exclusion for accredited or certified CME speaker payments.  Some, for example, have argued that events meeting the standards of other accrediting organizations in addition to those enumerated in Section 403.904(g) should also qualify for the exclusion; others argue that the exclusion should be removed in its entirety to enhance consistency in reporting of payments made to speakers at all CME events.  CMS explained in the Proposed Rule that its “apparent endorsement or support to organizations sponsoring continuing education events was an unintended consequence of the final rule.” 

In proposing to remove the exclusion in Section 403.904(g), CMS explains that the exclusion “is redundant with the exclusion [for indirect payments or transfers of value] in §403.904(i)(1).”  Accordingly, CMS proposes that, “[w]here an applicable manufacturer or applicable GPO provides funding to a continuing education provider, but does not either select or pay the covered recipient speaker directly, or provide the continuing education provider with a distinct, identifiable set of covered recipients to be considered as speakers for the continuing education program, CMS will consider those payments to be excluded from reporting” as an indirect payment or other transfer of value.  CMS posits that the proposed approach aligns with preamble guidance in the Sunshine Regulations that provides that when an Applicable Manufacturer provides “full discretion” to the CME provider “over the CME programming,” the payment or other transfer of value is not considered a reportable indirect payment or other transfer of value.

As alternatives to its proposal, on which CMS also solicits comments, CMS considered expanding the list of organizations in Section 403.904(g)(1)(i) by name, or expanding the organizations in Section 403.904(g)(1)(i) by articulating qualifying accreditation or certification standards.

In addition to the proposal to remove the exclusion for accredited or certified CME speaker payments, CMS proposes the following other modifications to the Sunshine Regulations:

• Removing the definition of “covered device” (stating that it is duplicative with the definition of “covered drug, device, biological or medical supply”);

• Revising § 403.904(c)(8) to require reporting of the marketed name of all covered and non-covered drugs, devices, biologicals or medical supplies related to the payment or other transfer of value (explaining that the Sunshine Regulations currently provide an option as to whether to report the marketed name for related devices and medical supplies); and

• Revising § 403.904(d) to require the reporting of stock, stock option or any other ownership interest as distinct categories in order to provide more detail and to “increase the ease of data aggregation within the system ... ”

Implications

While at first glance the proposal to remove the exclusion for accredited or certified CME speaker payments would appear to result in more stringent reporting obligations, CMS’ proposal should not, in practice, cause a significant increase in reports for such payments due to the continuing availability of the exclusion for certain indirect payments or other transfers of value.  The proposal may also provide a clearer path for exclusion for CME programs accredited or certified by an organization not currently expressly named in Section 403.904(g)(1)(i) of the Sunshine Regulations. 

CMS, however, may be prompted by stakeholders for additional clarity regarding its position as to why such payments would be considered to qualify for the indirect payment exclusion, particularly where the Applicable Manufacturer likely will become aware of the physician speaker’s identity “during the reporting year or by the end of the second quarter of the following reporting year.”  The exclusion for indirect payments or other transfers of value set forth in Section 403.904(i)(1) is one that is the subject of much analysis as Applicable Manufacturers and Applicable GPOs have begun data collection under the Open Payments program.  Insofar as CMS continues to refine the reporting requirements under the Sunshine Regulations, the topic of indirect payments and other transfers of value is a likely candidate for additional guidance and amendment.

Stakeholders are encouraged to submit comments on the Proposed Rule, which are due by September 2, 2014.