The Physician Payments Sunshine Act was enacted in 2010 as part of the Patient Protection and Affordable Care Act1 and requires that pharmaceutical and medical device companies make publicly available reports to the government concerning payments to healthcare providers. The act is intended to bring transparency to the financial relationships that exist between industry and providers in order to deter relationships that are thought to create bias in medical decision-making to the detriment of patient welfare.
According to the Centers for Medicare & Medicaid Services (CMS), the Open Payments system “encourages transparency about these financial ties [between manufacturers and healthcare providers]; provides information on the nature and extent of the relationships, helps to identify relationships that can both lead to the development of beneficial new technologies and wasteful healthcare spending; [and] helps to prevent inappropriate influence on research, education, and clinical decision-making.”2 The Sunshine Act requires “applicable” manufacturers and group purchasing organizations (GPOs) that distribute “covered” products to report annually to CMS all “transfers of value” to physicians and teaching hospitals.3 Applicable manufacturers and GPOs must report direct monetary payments of more than $10 made to these healthcare providers and the provision of any items or services of value, such as gift cards, food, lodging, and/or equipment.3 Among other things, the Sunshine Act expressly covers payments of cash or “cash equivalents” (eg, gift cards), in-kind articles or services, stock transfers, consulting fees, honoraria, entertainment, food, travel, education, research, charitable contributions, royalties, licenses, ownership interests, and compensation for serving as faculty or as a speaker for medical education programs.3 Companies must also report any instance in which they have made cumulative payments of more than $100 per year, even if the individual payments do not meet the $10 threshold. Each reported payment must be designated as falling into one of a limited number of categories defined by the statute and implementing regulations such as consulting fees, travel and lodging expenses, research payments, royalty and license fees, and grants. The Sunshine Act also requires applicable manufacturers to report annually whether they have physician owners or investors.
How CMS Shares Reported INFO
CMS compiles the reported data and prepares the information for release on a publicly available and searchable website — the Open Payments Database.4 CMS publishes the data for each calendar year on June 30 of the following year. For example, data that were submitted for the 2017 calendar year were published on June 29, 2018. Healthcare providers have a 45-day period beginning in April during which they may review the information before the agency makes it publicly available in the database, and a dispute-resolution process is available if they disagree with a particular report. Manufacturers have 15 additional days beyond this 45-day period to alert officials to any disputed records. Providers may also dispute published reports up until the end of the calendar year in which the data is first published. Changes that drug or device companies make to the data (as a result of a dispute) will be seen publicly in the data refresh (usually occurring in January of the following year). Companies that violate the reporting requirements are subject to civil fines of up to $10,000 for each violation (capped annually at $150,000). Knowing violations are subject to civil fines of up to $100,000 for each incident (capped annually at $1 million). Note that once a company qualifies as an “applicable manufacturer,” all of its physician spending must be reported to CMS (including spending on physicians that is related to non-covered products). Healthcare providers who have received payments have no direct reporting obligation. Instead, the manufacturers making the payments bear the full reporting burden and face possible sanction for noncompliance.
Acceptance of Payments
Notwithstanding that healthcare providers have no reporting obligation themselves, the payment-reporting scheme potentially has significant implications of which they should be cognizant. First, payments that manufacturers make to providers can potentially form the basis for scrutiny by governmental entities such as the Office of Inspector General, the Department of Justice, and state attorney generals, as well as CMS itself, which enforces a number of fraud and abuse laws — most notably the Anti-Kickback Statute (AKS)5 and the federal False Claims Act (FCA).6 As has been previously discussed in a Legal Counsel column,7 the AKS is a federal statute that prohibits the solicitation or receipt of “remuneration” in exchange for referrals of federal healthcare program business.5 The term “remuneration” is defined broadly and includes essentially any tangible item or intangible benefit of value. Thus, the AKS prohibits the accepting of cash or non-cash benefits, including not only relatively obvious benefits such as recreational travel, tickets to entertainment events, bottles of wine, lunches or dinners that lack any educational component, or the provision of food to a provider’s office staff, but also things such as assistance with treating patients or helping with clerical or administrative work, payments for conducting research that has not actually been carried out or that is not part of a bona fide research program, speakers’ fees that exceed the fair market value of the service, and/or excessive free samples. The penalty for violations of the AKS can be as high as $50,000 per violation, plus three times the amount of the improper remuneration and potential prison terms. Providers who are guilty of AKS violations can also be excluded from participation in federal healthcare programs. The FCA is a separate federal statute that, among other things, penalizes healthcare providers who knowingly submit false records or statements to the government in order to get a claim paid.6A provider found liable under the FCA faces penalties of at least $5,000 (but not more than $11,000) for each false claim and treble the amount of the government’s damages.6 Although the AKS and the FCA are separate statutory provisions, since 2010, violations of the AKS can also violate the FCA. Specifically, when a claim includes items and services resulting from a violation of the AKS, it is deemed to be a false or fraudulent claim for purposes of the FCA. In recent years, there have been substantial fines and, in some instances, prison sentences in AKS cases involving companies that improperly rewarded physicians for the referral of business (including the prescribing or administering of particular products) by paying doctors to serve as authors and speakers at conferences,8 “sponsoring” continuing medical education classes conducted by the doctors,9 entering into sham contracts for medical directorships or other similar personal service arrangements, or paying for expensive meals for physicians and their spouses (and listing fictitious attendees at the meals to reduce the per-attendee cost of the meal).10 The AKS and FCA are important considerations for Sunshine Act compliance because the “transfers of value” that are reportable under the act (including cash, gift cards, in-kind items and services, consulting fees, stock transfers, charitable contributions, and/or anything else of value3) are violations of the AKS if they can be shown to have been made in return for referring business, including arranging or recommending the purchase of a product (such as a drug, device, or biological product that is reimbursable by Medicare or Medicaid). Because the Open Payments Database assembles and makes readily available information about the provision of such transfers of value to physicians and teaching hospitals, it may be expected that the government will scrutinize the information in the database for signals of problematic payments. These considerations suggest that doctors may wish to be cautious about accepting too many consulting or speaking fees, or other payments, even if legitimate, because of the real risk of attracting the attention of regulators. Second, Sunshine Act compliance by manufacturers could potentially be used in private whistleblower “qui tam” lawsuits brought under the FCA and the AKS. Because the Sunshine Act allows private individuals (ie, “relators”) to comb the Open Payments Database for information about transfers of value from manufacturers to physicians or teaching hospitals, it potentially increases providers’ exposure to private FCA litigation based on violations of the AKS.5 Fortunately, the potential for spurious suits based entirely on information in the database is substantially mitigated by a provision in the FCA that precludes a qui tam action based on information that has been publicly disclosed in, among other things, administrative or other governmental reports.11 For this reason, a person bringing a qui tam suit based in part on publicly disclosed information from the Open Payments Database will have to prove, in order to avoid dismissal of his or her case, that he or she had independent knowledge of the wrongdoing that “materially adds to” the publicly disclosed information.11
Nevertheless, where a potential FCA relator already possesses information suggesting wrongdoing (as may be expected to be the case with former employees of a manufacturer, hospital, or medical provider), it is possible that the Open Payments data may provide useful information without triggering a dismissal of his or her qui tam suit pursuant to the “public disclosure bar.”
Naomi J.L. Halpern and James R. Ravitz are attorneys with Arent Fox LLP, a law firm based in Washington, D.C.
1. Public law 111-148; 111th congress. Congress.gov. 2010. Accessed online: www.congress.gov/111/plaws/publ148/PLAW-111publ148.pdf
2. Open payments data in context. CMS. 2016. Accessed online: www.cms.gov/openpayments/about/open-payments-data-in-context.html
3. U.S. code 42 1320a-7h - Transparency reports and reporting of physician ownership or investment interests. Legal Information Institute. 2018. Accessed online: www.law.cornell.edu/uscode/text/42/1320a-7h
4. Open payments data. CMS. 2018. Accessed online: https://openpaymentsdata.cms.gov/
5. U.S. code 42 1320a–7b - Criminal penalties for acts involving federal health care programs. Legal Information Institute. 2018. Accessed online: www.law.cornell.edu/uscode/text/42/1320a-7b
6. U.S. code 31 3729 - False claims. Legal Information Institute. 2018. Accessed online: www.law.cornell.edu/uscode/text/31/3729
7. Ravitz JR, Halpern NJL, Hold-Weiss R. Wound care practitioners must pay attention to fraud & abuse laws. TWC. 2017;11(3):34-5.
8. RI doctor admits to healthcare fraud, accepting kickbacks for prescribing highly addictive version of fentanyl. U.S. Department of Justice. 2017. Accessed online: www.justice.gov/usao-ri/pr/ri-doctor-admits-healthcare-fraud-accepting-kickbacks-prescribing-highly-addictive
9. Kos pharmaceuticals to pay more than $41 million to resolve kickback and off-label promotion allegations. Department of Justice. 2010. Accessed online: www.justice.gov/opa/pr/kos-pharmaceuticals-pay-more-41-million-resolve-kickback-and-label-promotion-allegations
10. Abiomed, inc. agrees to pay $3.1 million to resolve kickback allegations. Department of Justice. 2018. Accessed online: www.justice.gov/usao-ma/pr/abiomed-inc-agrees-pay-31-million-resolve-kickback-allegations
11. U.S. code 31 3730 - Civil actions for false claims. Legal Information Institute. 2018. Accessed online: https://www.law.cornell.edu/uscode/text/31/3730