Physician Sunshine Laws and Small Businesses
Does 42 U.S.C. 1320a-7h, known commonly as the “Physician Sunshine Laws-Open Payments” apply to a small business? Maybe. If Physician Sunshine Laws (Open Payments Laws) are applicable to your business, you may also be surprised how these laws can be applied to your company.
Some States have their own version of physician sunshine laws. In some cases, the State version may apply when the federal version does not.
Many Business Patent Law, PLLC’s clients are involved with the provision of medical devices, supplies, etc. For most Business Patent Law clients, the Physician Sunshine Laws apply to an “applicable manufacturer” that “provides payment or other transfer of value” to a “covered recipient.”
Who Administers Physician Sunshine Laws?
CMS.gov (Centers for Medicare & Medicaid Services) is the Federal Agency that Administers Physician Sunshine Laws (Open Payments). 42 U.S.C. 1320a-7h (b) sets forth penalties for failing to file a required report to CMS.gov.
Who Needs to Report to Under Physician Sunshine Laws?
Subchapter S Company Examples
Does a Subchapter S Company that Manufactures Surgical Sponges for Use in Operating Rooms and Gives Samples of the Surgical Sponges to Medical, Surgical and Dental Practices Need to Report to CMS.gov?
Yes, according to 42 U.S.C. 1320a-7h (e) which reads:
(2) Applicable manufacturer
The term “applicable manufacturer” means a manufacturer of a covered drug, device, biological, or medical supply which is operating in the United States, or in a territory, possession, or commonwealth of the United States.
(4) Covered device
The term “covered device” means any device for which payment is available under subchapter XVIII [Medicare] or a State plan under subchapter XIX or XXI [federal or state plans for medical assistance] (or a waiver of such a plan).
(6) Covered recipient
(A) In general…“covered recipient” means the following: (i) A physician [is a doctor of medicine or osteopathy, a dentist, a doctor of podiatric medicine, a doctor of optometry or a chiropractor – as defined by 42 U.S.C. 1395x (r).] or
(ii) A teaching hospital.
LLC Examples
Does a Limited Liability Company (LLC) Manufacturing and Selling Scalpels Need to Report to CMS.gov?
- If the LLC makes quid pro quo sales to dentists, physicians and hospitals? No. (There is no transfer of value or gift.)
- If the LLC supplies lunches for the surgical office and the employees? Yes. (The lunches were a transfer of value.)
Does an LLC (having one or more covered recipients holding a minority equity ownership interest) that manufactures radio frequency devices for treatment of the human body need to report equity ownership Interests to CMS.gov?
It depends.
- If a dentist owns 5% equity in the LLC? Yes.
- When the wife of a surgeon owns 10% equity in the LLC? Yes. ***
- If a pharmacist owns 5% equity in the LLC? No.
- When a physician’s assistant owns 5% equity in the LLC? No.
***42 U.S.C. 1320a-7h (a) reads:
(2) Physician ownership
In addition to the requirement under paragraph (1)(A), on March 31, 2013, and on the 90th day of each calendar year beginning thereafter, any applicable manufacturer or applicable group purchasing organization shall submit to the Secretary, in such electronic form as the Secretary shall require, the following information regarding any ownership or investment interest (other than an ownership or investment interest in a publicly traded security and mutual fund, as described in section 1395nn (c) of this title) held by a physician (or an immediate family member of such physician ([immediate family member] as defined for purposes of section 1395nn (a) of this title)) in the applicable manufacturer or applicable group purchasing organization during the preceding year:…
Determining what you need to do in these situations, and what you are legally required to do, can be difficult. If you have questions about your whether your company needs to file reports with CMS.gov, please contact Business Patent Law, PLLC and we will discuss possibilities for your business and intellectual properties.
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