Revelations From the First Round of Sunshine Act Reporting

At the end of June, the Centers for Medicare & Medicaid Services (CMS) closed out Phase 2 of the Open Payments reporting process. It marked the close of the first complete data submission pursuant to the U.S. federal Sunshine law (now known as Open Payments), one of the broadest transparency requirements imposed on the drug, device, medical supply and biologics industries to date.

A survey conducted on the industry’s experience in preparing the Open Payments report revealed it is struggling to understand and meet the detailed requirements. Looking back through the significant year one efforts, the industry can concentrate on system, process, data and people changes to ensure subsequent year reports will involve a less arduous process.

The survey of applicable manufacturers revealed that most expected their Phase 1 and Phase 2 spend totals to differ. The discrepancies can likely be linked to the significant effort these companies needed to expend to verify transactional and healthcare provider data. Complicating these efforts, in many instances, are grey areas in the law that left them struggling to understand the bare minimum requirements. Confusion swirled primarily around how to determine if healthcare organizations (HCO) qualified as a part of the CMS list of “Teaching Hospitals;” whether to report on Continuing Medical Education (CME) attendee meals; and when to select various delayed publication options.

Data Issues To Be Aware Of

To address the data issues, many manufacturers invested in new processes, services and system upgrades. Verification of healthcare professional (HCP) data represents a key priority due to the risks involved in assigning spend to the wrong HCP (irritating HCPs to say the least) and using outdated HCP data (resulting in report rejection by CMS). Key reasons for inaccurate HCP data:

  • Selection between HCPs with similar or common names and the unavoidable, but common, change of the HCP’s business address and/or state license.
  • Transactional data accuracy also represents a key area of focus. Reporting of amounts less than the actual amounts raises the risk of seeming to hide spend.
  • Reporting spend over the actual amount may cause some ire from the recipient—compounded by the fact that manufacturers must attest to CMS that their data is timely, accurate and complete.

Improving Your Data Collection Process

In approaching these HCP data demographic issues, manufacturers looked to new providers and enhancements to their systems. Commonly, these third-party services provide “mastered” HCP data. This mastered data takes the onus of consistently verifying HCP data off of the manufacturer. Additional efficiencies can be created when manufacturers create direct links between these data sources and company spend capture systems such as Travel & Expense (T&E) and Customer Relationship Management (CRM) systems.

When sales reps or other employees enter HCP data, they no longer need to type in the HCP’s name (which significantly raises the risk of human error), but can search for the HCP from the master files. These upgrades can be complex and involve change management, but they significantly decrease the risk of human error in entering data—and the time and effort involved adding this data manually.

To address transactional data issues, many manufacturers are investigating process revisions, and purchasing or upgrading their systems. That’s not to mention adding human capital. System changes are generally related to a manufacturer’s financial, T&E and grant management systems—each of which are put in place not necessarily for spend reporting, but instead are consistently leveraged for such purpose because of the transactional spend data they hold. Some of the improvements being made include:

  • Manufacturers revised their accounts payable payment and coding processes to ensure that reportable spend types, such as contracts with HCPs, can be easily identified and extracted. Purchasing and/or upgrading a manufacturer’s T&E systems enables them to account for spend provided to each HCP for any reimbursable expenses incurred by an employee.
  • Manufacturers also revised grants management systems to confirm tracking of all the elements of a grant, enabling them to exclude reporting on certain payments, as provided in the current provisions of the regulation.
  • Process changes have also helped enhance accurate transactional reporting. These changes include:
    • Contractually requiring third parties to document spend they provide to HCPs.
    • Contractually requiring third parties to publish the data back to the manufacturer on a scheduled basis.

When companies cannot easily and systematically capture spend to HCPs and HCOs, they begin to lean heavily on administrative staff to manually track this miscellaneous spend.

Notwithstanding these improvements, manufacturers cannot consider this as a process that can be accomplished by a wave of the hand. System glitches and process failures remain risks. These improvements cannot replace strong auditing and monitoring processes that ensure manufacturers attest to and submit an accurate and complete report. In fact, many clients use this as an opportunity to renew and expand existing auditing and monitoring plans.

What Gray Areas Still Remain

Despite a lengthy final regulation implementing the federal Sunshine law and several series of FAQs from CMS, a number of grey areas remain in applying the reporting requirements to everyday business in the industry.

For example, certain minimal payments/transfers of value provided at “large-scale” events do not need to be reported. However, no further guidance has been provided as to what constitutes a “large-scale” event. Manufacturers frequently sponsor CME events and other conferences during which attendees receive meals. Without further clarification, these manufacturers must continue to struggle with where to draw the line between large and non-large conferences.

Additional areas of confusion surround identification of “Teaching Hospitals” and the valuation of reprints. For this first year, manufacturers mainly could either consult external counsel for an opinion—or simply make a reasonable, judgment call. Moving ahead to this second year of reporting, the industry hopes that CMS will provide further clarifications to these common issues. If additional clarification is not forthcoming, manufacturers should look to remain consistent with their first year assumptions.

Preparing For Year Two Reporting

Reporting processes can be significantly improved to ensure that year two reporting runs more efficiently and smoothly than  this past year’ process. Now that year one reports have been completed, companies should determine what improvements can be made and then focus on buy-in and resourcing. They can then start applying lessons learned as soon as possible to ensure improvements in capturing transactional and demographic data during the rest of 2014. Ultimately, these will impact reporting in 2015. So now is the time to weave all the lessons learned into every aspects of your company’s aggregate spend solution—and smooth the path for the next submission.

  • Alice Dong

    Alice Dong, Esq. is a Manager at Polaris, focused on conducting federal, state and EMEA aggregate spend assessments, state-level aggregate spend reporting and general compliance risk assessments for pharmaceutical, device and biologics manufacturers.

  • Ben Carmel

    Ben Carmel is Managing Director of the Polaris San Francisco office. He is the Firm’s subject matter expert for global transparency and HCP/O engagement solutions. He is responsible for providing strategic offering direction, leading offering enhancements and supporting engagements from sales through delivery.


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