Attention Pathologists and Clinical Laboratory Professionals: New ‘Sunshine Act’ Requirements Will Track and Publish Financial Relationships Providers Have with Healthcare Vendors

Jan 13, 2014 | Coding, Billing, and Collections, Compliance, Legal, and Malpractice, Laboratory News, Laboratory Operations, Laboratory Pathology, Managed Care Contracts & Payer Reimbursement

Some physicians fear disclosure of payments by drug and medical device companies could damage patient confidence and physician-patient relationships

Over the course of 2014, pathologists and medical laboratory managers will experience a different relationship with in vitro diagnostic (IVD) manufacturers and other lab industry vendors. That’s because a new federal law requires vendors to publicly disclose financial and other arrangements they have with providers.

That law is the Physician Payment Sunshine Act, and it became effective on August 21, 2013. The intent of this new law is to shed light on financial aspects of relationships between physicians and healthcare vendors.

Vendors Must Disclose All ‘Transfers of Value’ They Made to Providers

Vendors are now required to publicly disclose all payments—or “transfers of value”—to providers where the value is more than $10 or an aggregate amount of $100 annually. Manufacturers and providers, therefore, must report payments for speaking engagements, consulting fees, research grants, travel reimbursements, stock, and even small trinkets and meals during routine sales visits.

This includes medical device and medical equipment manufacturers, group purchasing organizations, pharmaceutical firms, software companies, physicians, and teaching hospitals, noted an article published in the New England Journal of Medicine (NEJM). The Sunshine Act also requires manufacturers and group purchasing organizations to report certain information regarding ownership or investment interests of physicians in their companies.

Data collected must be reported to the Centers for Medicare & Medicaid Services (CMS) and will be compiled into a database. The U.S. Department of Health and Human Services (HHS) is expected to publish the information on a public website for the first time in September 2014. HHS also will include this information in an annual report to Congress.

Study Revealed Extent of Physician-Vendor Financial Relationships

The NEJM article noted the extent of vendor-physician financial relationships by citing a 2007 study. This study revealed that 94% of U.S. physicians had an industry financial relationship. The study found that 83% of physicians received gifts and 28% received payments for professional services, such as consulting or research participation. Of physicians reporting industry relationships, 60% were involved in medical education and 40% in creating clinical practice guidelines.

By 2001, commercial vendors had also become the major source of research and development funding, accounting for 55% to 60% of the $100 billion annually spent on these activities. Additionally, commercial funding for continuing medical education (CME) has also increased, with the industry now paying for more than a third of all CME offerings.

Requirements of the Sunshine Act are particularly familiar to companies that have been sued by the federal government for allegedly making payments to physicians to encourage them to improperly market drugs for off-label uses or as kickbacks to get them to use specific devices. In settlements with the government to resolve the charges, these companies have signed corporate integrity agreements, noted a report in Modern Healthcare. Under these settlements, dozens of companies, including Eli Lilly and Co., Novartis, and Pfizer, disclosed their financial arrangements with physicians.

Will Disclosure of Payments Hurt Physician-Patient Relationships? 

Congress passed this law in 2010 as part of the Affordable Care Act (ACA) to thwart the influence of financial perks on physician choice of vendor products and healthcare costs. Research has indicated that disclosure of physician-vendor financial relationships may bring down healthcare costs.

Patients “might be less inclined to accept treatment recommendations from these physicians or even to receive care from them,” noted authors of the NEJM article. “Given the evidence that greater physician financial involvement with manufacturers is associated with higher utilization of expensive, brand-name products, such dynamics could reduce costs.”

Attorney David Hoffmeister, a Partner at the global law firm of Wilson Sonsini Goodrich & Rosati, agrees. In a Medsider interview, he suggested that smart, computer-savvy patients are likely to seek out this information.

Attorney David Hoffmeister is a partner in the law firm of Wilson Sonsi Goodrich & Rosati. When it comes to public reporting about vendor payments to physicians, he believes a significant number of computer-savvy patients will look for such information about their physicians’ financial relationships with commercial vendors and judge them accordingly. (Photo copyright Wilson Sonsi Goodrich & Rosati)

In light of the number of people seeking healthcare information on websites, such as WebMD, it is apparent “there are some folks who are going to be very interested in what type of remuneration their physicians receive from medical device companies,” said Hoffmeister. He noted that, if undergoing a hip replacement or knee replacement, for example, smart patients might look at the HHS website to determine whether or not their physicians have received significant remuneration from the manufacturers of those devices.

Will Transparency End Cozy Physician-Vendor Relationships?

Although HHS intends the website to inform the general public, Hoffmeister noted that the information may not be useful to anyone other than prosecutors or investigators.  The concern of physicians about disclosure was voiced at the American Medical Association’s (AMA) annual meeting in June. The greatest fear about the new law expressed by physicians was that it would cause patients to question their reasons for prescribing a certain drug if the HHS data links them to a drug company. In turn, that may ultimately affect the patient-physician relationship.

“Whether transparency will lead to fewer relationships is really the million-dollar question,” said Daniel Carla, M.D., Director of the Pew Charitable Trusts Prescription Project. “The kinds of relationships that may drop off may well be the most inappropriate relationships.” He suggested, however, that drug and device companies are expected to seek new ways to keep frustrated doctors from walking away from valued consulting and research relationships.

Daniel Carla, M.D., (pictured here) is Director of the Pew Charitable Trusts Prescription Project. He is unsure if disclosure will actually end or limit physician financial relationships with commercial vendors. He suggested that drug and device companies will find loop holes in the new law to retain valued research and consulting relationships. (Photo copyright of National Physicians Alliance.)

AMA Encourages Doctors to Take Advantage of Disclosure Review Period

Though the burden for collecting and reporting data falls on industry vendors, the AMA is encouraging doctors to review vendor disclosures and demand correction of inaccuracies. The law provides 45 days for physicians to review industry disclosures before submission to the CMS. The CMS will indicate the data is in dispute, but it’s up to vendors to make corrections, noted the Modern Healthcare report.

Some hospitals are educating their physicians about the potential impact of the Sunshine Act. The University of Arkansas for Medical Sciences in Little Rock, for instance, began strengthening its conflict-of-interest policy more than two years ago to address relationships between physicians and commercial interests.

Medical Laboratory Professionals Affected by ‘Sunshine Act’ Too

The law has already changed policies and practices of in vitro diagnostics (IVD) companies and other lab industry vendors. Because this law calls for tracking and public reporting of the various types of incentives and remuneration provided by IVD manufacturing and supply firms, every pathologist and medical laboratory professional should be aware of this law’s requirements. They will also want to follow guidelines established by their parent organizations or hospital institutions regarding vendor remuneration.

It is also important to know that the Advanced Medical Technology Association (AdvaMed) introduced stricter new ethics guidelines for its members in recent years. This combination of industry guidelines and federal legislation is why many IVD manufacturers, healthcare informatics companies, and other lab industry vendors have revised their policies for remunerating pathologists and clinical laboratory professionals for various technology development and evaluation services. It is also why lab industry vendors have changed the policies that govern how they provide sponsorships and grants in support of medical lab industry meetings and conferences.

—By Patricia Kirk

Related Information:

Already feeling the heat: Docs rethinking payments as Sunshine Act looms

The Sunshine Act — Effects on Physicians

Physician Payment Sunshine Act: Listing of Policy and Medicine Resources for Open Payments

Finally, Final Rule on the Physician Payments Sunshine Act under the Affordable Care Act (ACA) Released

AdvaMed Ethics Guidelines