IRS rules hospitals may assist physicians with healthcare IT

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Not-for-profit hospitals may provide financial assistance to staff physicians to “acquire and implement software that is used predominantly for creating, maintaining, transmitting or receiving electronic health records (EHRs) for their patients,” according to a directive issued by the Internal Revenue Service (IRS) last week.

The provision of this IT assistance will not violate section 501(c)(3) of the Internal Revenue Code, the agency concluded in a two-page memo.

The IRS took nine months to respond to regulations issued by the Department of Health and Human Services (HHS) in August 2006 enabling hospitals to provide IT assistance to doctors without violating federal anti-kickback laws, Healthcare IT News reports. Few hospitals decided to offer the IT assistance because of concern about tax implications and the possibility that the assistance might be considered an impermissible private benefit by the IRS.

The IRS noted in the memo that “many hospitals plan to establish interoperable EHR systems to improve the effectiveness and efficiency of their medical care and to reduce medical errors,” and that “some believe that their medical staff need a financial incentive” to purchase and implement the software to connect with these systems.

Hospitals will be required to enter into Health IT Subsidy agreements with medical staff physicians for the provision of Health IT Items and Services at a discount, in compliance with HHS EHR regulations “on a continuing basis,” the memo says.

“The reason this [ruling] is so important is that hospital providers are the lowest-cost resource for getting IT in physicians' hands,” said Scott Wallace, president and CEO of the National Alliance for Health Information Technology, according to Healthcare IT News. “The incremental cost to extend a hospital's IT to physicians is relatively low, and doing so takes away a huge obstacle for small physicians who want to move to EHRs.”

“You never know what the [IRS] is going to do,” he added. “To get an absolute broad declaration that lines up perfectly with another agency's directive is rare.”

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