IRS Ruling Clears the Way for EHR Donations to Docs

The Internal Revenue Service recently issued a ruling that gives hospitals the go-ahead to donate health information technology and services to medical staff physicians without fear of jeopardizing their not-for-profit status.

The ruling came nine months after CMS and HHS' Office of Inspector General, or OIG, issued regulations that said hospitals, hospital systems and health plans could provide -- within certain parameters -- electronic health record, or EHR, software and services to medical staff physicians without violating federal anti-kickback and physician self-referral laws.

"We will not treat the benefits a hospital provides to its medical staff physicians as impermissible private benefit," said the May 11 IRS memo. (PDF file: 2 pages / 28 KB. More about PDFs.)

David C. Kibbe, M.D., senior advisor to AAFP's Center for Health Information Technology, or CHiT, lauded the IRS action, saying that, in spite of the Aug. 8, 2006, OIG and CMS safe harbor rulings, "a chill" was put on hospitals contemplating EHR donations because of uncertainty about impending IRS action.

"Everybody has been putting pressure on the IRS," to make a decision, said Kibbe. "For those (hospitals) who want to go forward, this clears the deck."

Kibbe stressed that to qualify under the safe harbor and IRS rulings, EHR products must be interoperable. "It's not about a single vendor -- it's about the idea that information has to be transferable between proprietary products and between different vendors' products," he said.

As for family physicians, they should proceed cautiously when offered software, hardware or e-prescribing software devices under the Stark and anti-kickback safe harbor, said Kibbe, reiterating how he and CHiT Director Steven Waldren, M.D., have counseled members on the topic since last August.

"I would say to any member who was exploring receiving donated EHRs that this (IRS ruling) really doesn't change anything," said Kibbe. Physicians need to know what systems they want to use, and they shouldn't bend to inappropriate hospital pressure to use a particular system, noted Kibbe. Otherwise, he added, members could "feel obligated to accept and implement an electronic health record system that was really not one of the leading systems for ambulatory care practices or for family medicine."

Kibbe's key message to physicians is this: "Here's an opportunity for you to acquire electronic health records or have some of the cost of this paid for, but you need to be active in your negotiation with the donor."

Family physicians should tell potential hospital donors not to restrict physicians' choices of EHR products, as long as a health IT product is good for the medical practice, good for the patients and good for the community, said Kibbe.