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The Sunshine Act: Are You Ready?

January 2014
By Cassia Ysaguirre, J.D., Strasburger & Price, LLP

On February 1, 2013, the Centers for Medicare and Medicaid Services (“CMS”) issued the much anticipated final rule (“Final Rule”) implementing the Physician Payment Sunshine Act (“Sunshine Act”). Enacted as part of the Affordable Care Act in 2009, the Sunshine Act requires two different types of reporting to CMS.

First, certain manufacturers1, of drugs, devices, biologicals, or medical supplies covered by Medicare, Medicaid, or CHIP must submit annual reports of certain payments or transfers of value provided to physicians and teaching hospitals. Second, manufacturers and group purchasing organizations (including physician-owned distributorships) (together “GPOs/PODs”) must submit annual reports of physician ownership or investment interests held by manufacturers and GPOs/PODs.

When reporting physician payments, manufacturers must provide several items of information including:

  • physician name, address, state license number(s), and NPI;
  • date and amount of payment;
  • form of payment;
  • nature of payment (e.g., consulting/speaking fee, honoraria, gift, etc.); and
  • names of related covered drugs, devices, biologicals, or medical supplies.

When reporting physician ownership interests, manufacturers and GPOs/PODs must provide some of the same information as well as:

  • the dollar amount invested in the entity by each physician or immediate family member; and
  • the value and terms of each ownership or investment interest.

These are not exhaustive lists, but demonstrate the types of information that CMS and the public will now be able to track.

Under the Final Rule, manufacturers must start collecting data on August 1, 2013, and submit their first annual reports to CMS by March 31, 2014. CMS has the authority to impose penalties of up to $10,000 for each item not reported timely, accurately, or completely, up to a per annual report cap of $150,000. Financial penalties are not the only risks faced by manufacturers, physicians, and teaching hospitals under the Sunshine Act.

CMS will publish most of the reported information on a searchable public website by September 30, 2014. As a result, manufacturers, physicians, and teaching hospitals will be subject to increased scrutiny not only from patients, but also from enforcement authorities who will be able to mine the reported data for compliance purposes. Furthermore, CMS has made clear that complying with the Sunshine Act does not exempt reporting entities from other potential liability associated with payments or other transfers of value or with physician ownership or investment interest, including potential liability under the federal Anti-Kickback Statute or False Claims Act. Manufacturers, physicians, and teaching hospitals must ensure that they make all payments or transfers of value in full compliance with the Sunshine Act, Anti-Kickback Statute, False Claims Act, and other applicable federal and state healthcare laws. Physicians would also be wise to register through the CMS website so they can review the reported data prior to its publication and dispute any payments or items of value incorrectly attributed to them.