The Sunshine Act — What Every Physician Needs to Know

The open payment program database, which the Centers for Medicare and Medicaid Services (CMS) released in September 2014, made available to the public information about payments made to physicians and teaching hospitals by manufacturers of federally covered drugs, devices, biologics, or medical supplies. Physician ownership or investment interests in manufacturer or group purchasing organizations were also included in the database.

In making this information available, the CMS complied with Section 6002 (Transparency Reports and Reporting of Physician Ownership or Investment Interests) of the Affordable Care Act, while adding another layer to its National Physician Transparency Program.

The Sunshine Act

The Physician Payments Sunshine Act (42 U.S.C. & 1320a-7b) requires manufacturers of drugs, medical devices, biologics, and medical supplies and group purchasing organizations (GPOs) to report to the CMS services payments made and investment interests given to physicians and teaching hospitals.

The Sunshine Act (SA) was enacted by the Obama administration as part of the Patient Protection and Affordable Care Act (PPACA) with a goal of promoting transparency in the relationship to the monetary connections made by medical device manufacturers and pharmaceutical companies to physicians and teaching hospitals.

The SA decrees that physicians, teaching hospitals, and GPOs must account for any financial or investment relationships (42 C.F.*R. & 403.902). Manufacturers and GPOs are mandated to report any ownership or investment benefits in those companies held by physicians or their immediate family members as stated in the Stark Law (42 USC & 1320a – 7h(a)(2).* These mandated reporting requirements are intended to provide a policy goal of preventing inappropriate financial influence on education, research, and patient clinical decision making.

Who Is Affected?

All physicians, excluding resident physicians, who are not contractual employees of the manufacturers must report payments. Teaching hospitals that receive financial compensation for medical education programs must report the pecuniary amounts. Teaching hospitals are those that receive payment for Medicare direct medical education, indirect medical education, inpatient prospective payment system, or psychiatric hospitals programs (42 CFR & 403.902).

In 2018, the number of healthcare providers impacted by the SA was expanded to include physician assistants (PAs), nurse practitioners (NPs), clinical nurse specialists, nurse anesthetists (NAs), and certified clinical nurse midwives. The transfer of monetary value from manufactures and GPOs to this expanded group of clinical providers will be reportable to CMS starting in calendar year 2020.

Thus, all teaching hospitals and physician group practices must review and comprehend how the expansion of impacted clinical practitioners will affect their relationship with manufacturers and GPOs. This understanding will mandate due diligence by the organizations to ensure comprehensive and accurate information is reported on all covered beneficiaries of payments.

Reportable Transactions

Transfer of monetary value, referred to as “payments,” falls into several classifications. It is essential physicians and healthcare providers cited under the expanded categories understand the transactions that are considered payments and report to CMS within the defined time regulations.

Broadly, the major categories of payments that are reportable under the SA include consulting fees, travel and lodging, food and beverages, honoraria, research, and current or prospective ownership or investment interests. This listing is not all-inclusive; the “nature of payments” (42 USC & 403.904 (e) (2)) provides a complete listing.

Consulting Fees. Consulting fees are the monies paid to the consultant by the manufacturer or GPO. The consulting fees paid to the physician or other covered categories are reportable under the SA. The following examples help illustrate the concept:

• A payment made by a manufacturer to a physician for designing a research protocol.

• A payment made by a manufacturer to a physician to use a new product and to opine on the product.

• A payment made by a manufacturer to a clinic whereby a specific physician is requested for a consultative opinion.

Travel and Lodging. Travel expenses are the costs associated with traveling for the purpose of conducting business-related activities. Lodging expenses include costs associated with traveling away from residence or place of business to engage in trade or serve as an employee. Physicians who are provided payment for travel and lodging must report the payment; it is often reported in conjunction with the food and beverage reimbursements (42 CFR & 403.904(e) (1).

Food and Beverages. Payment and transfer of monetary value related to food and beverages are subject to explicit rules (42 CFR & 403.904 (g)). For example, a manufacturer supplies food/drink to a physician group. The individual’s financial reporting responsibility is calculated by dividing the entire cost by the number of individuals participating in the food serving. If a manufacturer offers a buffet meal with drinks and coffee, the conference attendants do not need to report it.

Honoraria. Honoraria are defined as payments given to a professional person for services for which fees are not legally or traditionally required, such as speaking engagements that include promotional speaking on behalf of a manufacturer. Honoraria payments must be reported.

Research. Research is considered the systematic investigation into the study of materials and sources in order to establish facts and reach new conclusions. A payment or transfer of monetary value in connection with research activities is subject to reporting rules. Reported research payments must include a list of drugs, biological devices, or medical devices evaluated in the research study, as well as the total amount of the research payment as outlined in a written agreement, research protocol, or both (42 CFR & 403.904 (f)).

Ownership/Investment. Physicians or other included healthcare providers under the SA must report current or prospective ownership or investment interests. For example, a physician believes a new drug in development will be transformational and asks the drug company to be an investor and allow the physician to eventually own a percentage of the drug company. This investment and ownership interest must be reported. This also applies to a physician’s family members.

Exceptions to Reporting Payments

The following are exceptions to reporting payments:

• Manufacturers and GPOs do not need to report transfers of value of $107.91 each but must report transfers of $107.91 in the aggregate within the calendar year. These threshold payments are tied to the consumer price index (42 USC & 1320a-7h (e) (01)(B)(i)).

• Product samples that are not intended to be sold do not need to be reported.

• Educational materials that directly benefit patients do not need to be reported.

• Discounts, including rebates and in-kind items used for the provision of charity care, are exceptions as well (42 USC & 1320a-7h (e) (01)(B)(ii)-9xii)).

Acting Within the Reporting And Dispute Periods

Manufacturers and GPOs must complete their reporting by the 90th day of the following calendar year, which is March 31 (March 30 in a leap year). On April 1, the review and dispute process begins and lasts 45 days until May 15.

During this 45-day period, physicians and teaching hospitals may use the CMS online National Physicians Payment Transparency Program (Open Payment System) to formally dispute any information they believe is inaccurate. If the physicians or teaching institutions do not lodge a formal grievance in the 45-day period and the dispute is not resolved within 15 days, the information will be published on June 30 as originally reported and will be made available to the general public without indicating that the physician or teaching institution believes the information is inaccurate.

If the physicians or teaching institutions create a formal grievance within the 45-day period, the information will be published on June 30 as originally reported and made available to the general public with an indication that the physician or teaching institution believes the information is mistaken.

The singular way the information will be published correctly is if the dispute is resolved in the 15-day period and the manufacturer or GPO corrects the submission. Physicians and teaching hospitals can file a dispute with CMS but cannot report any corrections to the reported information.

How to Make a Formal Complaint

To make a formal complaint, physicians and teaching hospitals must be registered on the OPS. Reporters, regulators, patients, hospital systems, and other employers have increasingly used the OPS to research physician relationships with manufacturers and GPOs. Therefore, physicians who fail to verify the accuracy of the information submitted by manufacturers and GPOs and formally dispute any incorrect information may be subject to unintended personal and professional consequences.

Pragmatic Processes for Physicians and Teaching Hospitals

Physicians and teaching hospitals must register with CMS Enterprise Identity Management (EIDM) system to request access to the Open Payment System, then complete the registration process. Any account inactive for 180 days may be locked.

Physicians and teaching hospitals must have a surveillance system in place to track all payments or transfer of monetary value to ensure the accuracy of reported data in the Open Payments System. In the case of inaccurate data, physicians and teaching hospitals must submit a dispute to CMS within the 45-day review and dispute period, or no later than December 31 of the year reported, negotiate the dispute, make clear any errors, and ensure they are corrected by resubmitting a report to CMS.

It is also mandatory that physician groups and teaching hospitals prepare for the expansion of covered recipients under the SA that become effective in 2021. Educational programs must be developed for PAs, NPs, certified NAs, and certified midwives.