CMS Proposes Important New Updates to the Sunshine Act’s Open Payments Program

Physician-Owned
Distributors (PODs)

• First, CMS’s proposed new definition of POD is found solely in the regulatory language at the end of the Proposed Rule.^[4] Under the agency’s proposal, a physician-owned distributorship is:
  
  
  • An entity that meets the definition of “applicable manufacturer” or “applicable GPO”;
    
    AND
    
    
  • Meets at least one of the following:
    
    
    • Has a minimum of 5% direct or indirect ownership or investment interests held by a physician or a physician’s immediate family member (calculated as 5% of the total dollar value of all ownership in the entity as of December 31 of the preceding calendar year — or the latest date ownership was held);
      
      OR
      
      
    • A physician or a physician’s immediate family member receives compensation from the manufacturer or GPO in the form of a commission, return on investment, profit sharing, profit distribution or other remuneration directly or indirectly derived from the sale or distribution of devices by the manufacturer or GPO in which the physician or physician’s immediate family has ownership.
      
      
      • This latter part of the definition, if read broadly, could implicate some privately-held medical device manufacturers^[5] and may require self-identification as a POD “whether or not the physician has a controlling interest in the reporting entity.” For instance, CMS continues, this could be “a silent partner whose only role is to provide capital and is not involved in the company’s operations would still meet requirements for reporting.” See 86 Fed. Reg. at 39335-36. 

• The agency adds:
  
  
  
  • If a company under common ownership with a POD reports on a consolidated report, the company must only register as a POD if it meets the 5% ownership test across all entities in the report.
    
    
  • It does not matter if the physician has a controlling interest in the reporting entity. If the entity meets the 5% reporting test, the entity must identify as a POD.
    
    
  • Indirect ownership interests must also be reported.
    
    
  • CMS makes clear that entities that meet the definition of POD must self-identify as such when they register and when they file reports.

• CMS proposes to add a mandatory “context field” for teaching hospital-related disclosures, requiring disclosure of additional information to better identify the payment, such as check or electronic wire numbers and hospital department.^[6]

CMS notes that teaching hospitals have complained that the Open Payments disclosures do not contain sufficient information to identify and verify the reported payments or transfers of value. Teaching hospitals indicated that they must dispute the payment in order to obtain sufficient additional documentation to verify the payment. Accordingly, CMS is requiring the addition of contextual information for each teaching hospital-related disclosure. 

• CMS proposes to eliminate the ability for applicable manufacturers and GPOs to delay payments disclosed as “General Payments.”^[7]

CMS noted that many research-related payments are being disclosed as “General” and then flagged for delayed publication. But, CMS cannot identify the related research program or clinical study, because this information is not required for the General Payment report. CMS proposes, therefore, to eliminate the ability to delay General Payments from publication and only permit publication delay of payments disclosed as “Research Payments.”

CMS takes care to note that reporting entities may be hesitant to include payments in connection with a specific research study, because these payments may not be outlined in the research agreement. CMS cites the example of paying for an airline ticket for a physician to conduct research. The agency clarifies that current requirements would require that these types of payments — even if not directly outlined in the research agreement – are disclosed as research payments.

• CMS proposes clearer limits on reporting of short-term equipment loans.^[8]

• CMS proposes to remove the “Ownership” nature of payment category.^[9]

• No Report Deletions: CMS proposes to limit entities’ ability to delete previously disclosed payments.^[10]

CMS notes a lack of existing controls around entities’ ability to delete previously disclosed payment records in the Open Payments system. Accordingly, CMS proposes to prohibit entities from removing, deleting, or otherwise altering records in the Open Payments system unless (a) an error in the information is discovered or (b) the record is otherwise believed to meet existing exceptions for reporting that were previously unknown.

• Annual Recertification: CMS proposes to allow non-reporting entities to submit annual recertifications.^[11]

CMS notes that many non-reporting entities want to be able to recertify regularly to the agency that they do not have any payments or transfers of value to report. But, recertification was previously only available to entities with reportable payments. Accordingly, CMS proposes to allow non-reporting entities to recertify annually on a voluntary basis.

• Updated Contact Information: CMS proposes to require companies that have not had reportable payments within the past two years to keep contact information updated in Open Payments.^[12]