PeCOS

Physician Payment Sunshine Provision (“Sunshine Provision”) of the Patient Protection and Affordable Care Act (PPACA)

What is it?

The Sunshine Provision was passed into law in March 2010 in an effort to provide greater transparency into manufacturers’ expenditures as they relate to healthcare professionals. Among the many new regulations it imposes, the Sunshine Provision requires DJO to track, consolidate and report transfers of value to the Centers for Medicare and Medicaid Services (CMS) for all physicians licensed in the US and US teaching hospitals.

The total expenditures by manufacturers’ on healthcare professionals (HCPs) including but not limited to physicians and academic healthcare organizations (HCOs) is what constitutes Aggregate Spend. The Aggregate Spend process requires the tracking, consolidating and reporting of DJO’s expenditures on HCP consulting services and honoraria, royalties, training, and associated meals and travel, as well as HCO grants and donations.

What is the Purpose of the Sunshine Provision?

“Sunshine is the best disinfectant,” Justice Brandeis

U.S. Senators Chuck Grassley (R-IA) and Herb Kohl (D-WI), the authors of the Sunshine legislation, have been strong advocates and urging the passage of Sunshine legislation since it was first introduced in 2007. They believe that the new requirements will give patients the opportunity to understand financial relationships between their physician (or teaching hospital) and pharmaceutical or medical device companies and the magnitude of that relationship. Grassley and Kohl believe that this is imperative information for the public due to the reliance of patients on their doctors’ advice and to help insure that pharmaceutical and medical device companies are not influencing the practice of medicine through monetary means to physicians and teaching hospitals but rather through true innovations in medicine.

Why is the Sunshine Provision is Applicable to DJO?

The Sunshine Provision applies to all “Applicable Manufacturers,” which are companies operating in the U.S. involved in the distribution of any drug, device, biologic, or medical supply that is covered by Medicare, Medicaid, or a State Children’s Health Insurance Plan (SCHIP).

What is DJO Required to Do?

Under the provision, DJO is required to track, consolidate and report all transfers of value, in cash (e.g., a payment for consulting services) or in-kind (e.g., a meal), to physicians and teaching hospitals1 that are at least $10 in a single occurrence or are equal to or exceed $100 aggregate in a single calendar year2. Due to the $100 aggregate requirement, there is no de minims value for DJO’s tracking purposes. The provision of some samples and loaner devices will be reported.

1 The federal provision requires reporting on physicians and teaching hospitals. However, current state legislation in Massachusetts and Vermont have a much broader definition of the recipients on which DJO must report.
2  Some exceptions may apply.

What Information Will be Reported?

As the legislation is currently written, DJO is required to provide the following information at minimum for each payment or other transfer of value:

  • Recipient Name
  • Recipient Address
  • Specialty
  • Recipient National Provider Identifier (NPI)
  • Dollar Value
  • Payment or In-Kind Item
  • Category of Spend (from government list)
  • Destination for Travel Items
  • Product Associated with Interaction
  • The date on which the value transfer took place

What is the Impact?

DJO will be collecting, consolidating and reporting all transfers of value made by DJO and / or its agents to CMS as required by the Sunshine Provision. Data tracking begins January 1, 2012 with the first annual report due to CMS in March 2013. According to the Sunshine Provision, CMS will make this data publically available on their website 90 days after the reporting deadline and the information will be searchable by the manufacturer name and recipient name. DJO does not know nor can we address any implications these reports may have on the entities or indiviudals reported to the government, tax or otherwise. 

Are Payments or Other Transfers of Value to Physician’s Office Staff Reportable?

We are not yet sure. DJO, along with all other affected manufacturers, are awaiting further clarification on this and other questions from CMS. According to the legislation CMS was to publish these rules by October 1, 2011 but has not yet done so.

Are State Laws Preempted by the Federal Law?

States can no longer require manufacturers to disclose those allowable expenditures and permitted gifts which must also be reported to the federal government under the Sunshine Provision.  However, the federal law is narrower than the Vermont and Massachusetts laws in several ways.  For example, only physicians and teaching hospitals are covered recipients under the federal law.  Therefore, manufacturers must take care to make all non-preempted disclosures regarding allowable expenditures and permitted gifts.

Vermont and Massachusetts have already enacted bans on the provision of certain items or contributions and require DJO to disclose certain spending on health care professionals.  DJO is in compliance with these state laws. 

Can DJO Choose Not to Report?

No. DJO must report in accordance with federal and state laws. Manufacturers who fail to meet federal and state reporting requirements may be subjected to fines and penalties, among other corrective actions.

What are the Potential Penalties?

Federal Penalties for each transfer of value not reported:

  • Unknowingly:  Up to $10,000 for each non-reported payment not to exceed $150,000 per report.
  • Knowingly:  Up to $100,000 for each non-reported payment not to exceed $1M per report.

Massachusetts Penalties: up to $5,000 for each transaction, occurance or event*. This may include non-reported tranfers of value along with violations of the ban (e.g., meals provided outside of the clinical setting).

Vermont Penalties: the VT attorney general may bring action for injunctive relief, costs, and attorney’s fees and may impose a civil penalty up to $10,000 per violation*.

*Each unlawful failure to disclose consitutes a spearate violation.