Small practices in the spotlight for financial relationships


With all the new regulations and business models facing the healthcare industry, small practices should pay special attention to two new rules regarding financial relationships between physicians and corporations.

The first rule concerns the disclosure of financial conflicts of interest (FCOI) for healthcare organizations that receive federal research funding. While most small physician practices do not directly receive federal research funding, many practices collaborate with larger academic health systems to perform clinical trials of drugs or medical devices. In these cases, practices must comply with the conflict-of-interest policies of the larger organization. Beginning in August 2012, institutional recipients of federal funding had to start following a new set of rules that regulates how they manage and report on FCOI disclosures.

The second rule that will impact physician practices is the Physician Payment Sunshine Act (PPSA), which will go into effect in April 2013. Even practices conducting no research activity may face greater public scrutiny in light of the act. The PPSA requires all drug companies to report to the Centers for Medicare & Medicaid Services (CMS) payments or other transfers of value of $10 or more to physicians. This can include lunches provided to staff, educational conferences attended, even pens and notepads provided if the cost exceeds the $10 limit. Once collected, CMS will post the physician and financial information online. Practices must be ready for questions from patients -- and local media outlets -- about any compensation or other “payments” they receive.

Disclosure rules tightened
In August 2012, a new compliance regimen went into effect for FCOI disclosure. The regulations are an update of a 1995 FCOI rule published by the Public Health Service and the National Institutes of Health. The new rules redefine a Significant Financial Interest (SFI) as any remuneration or equity interest in a company that exceeds $5,000 over a rolling 12-month period. These interests have to be reported if they are related to the institutional responsibilities of the investigator, regardless of whether they are related to specific Public Health Service funds. SFI’s can be related to an investigator, his or her spouse or dependent children.

This could impact a practice, for example, that assists an academic health system with clinical trials. Research institutions that are diligent with their disclosure processes understand they can suffer penalties if their clinical subcontractors are found with undisclosed FCOI. As a result, research institutions should require participating practices to participate fully in the institution’s COI management process.

Even for practices not participating in research, implementing an FCOI policy is a prudent strategy -- especially for those that may consider aligning with larger organizations. Having the appropriate policies in place demonstrates that a practice is well organized and ethically managed. Furthermore, tracking FCOI does not mean having to sift through stacks and stacks of paper. Automated software applications are available to help resource-limited practices collect, track, manage and document financial disclosures as they relate to specific corporate relationships.

Preparing for “Sunshine”
Physician financial relationships with drug companies and medical device manufacturers will soon be wide open to public scrutiny. Under the PPSA, all manufacturers of drugs, devices, biological or medical supplies who accept funds from CMS will have to report to CMS any payments -- or “transfers of value” -- of $10 or more that they make to physicians. The information then will be made available on a searchable website. (Exceptions to the rule include product samples and educational materials that directly benefit patients, according to the American Medical Association.)

While there may be nothing inappropriate about accepting fees from drug companies for consulting or speaking engagements, the publically posted payments will likely draw the attention of local newspapers and media outlets. Practice leaders must be prepared for public -- and patient -- questions about their relationship with pharmaceutical companies. 

Instituting a workplace policy about compensation from drug companies is advisable. Whether the policy happens to be lenient or strict, all practice employees should understand and follow it, and disclose payments as the policy dictates.

Tracking these disclosures internally could also help practices spot errors in CMS’s Sunshine Act database before it is made public. Practices will have 45 days after CMS provides them an annual report of all the payments to dispute errors and make corrections.

Ignorance of healthcare regulations that affect small practices is no protection from monetary penalties or public relations embarrassments. The good news, however, is that shielding practices from FCOI problems is not difficult. It starts with learning about -- and cooperating with -- partner institutions’ conflict of interest policies and procedures, and by not being caught off-guard by public scrutiny of existing financial relationships. By instituting a disclosure policy and using automated disclosure management tools, practices can maintain compliance, preserve a good public image and strengthen patient relationships.

William Sacks has more than 30 years of experience in healthcare management as a consultant, medical practice manager and faculty practice plan director. He is the co-founder and vice president of Health Care Compliance Strategies, a provider of online compliance training and tracking solutions to healthcare facilities.