Practice Economics

Sunshine Rule Requires Physicians to Report Gifts from Drug, Medical Device Companies


What this has done is impose additional administrative requirements that now take time away from our seeing patients or doing clinical activity.

—Joshua Lenchus, DO, RPh, FACP, SFHM

Hospitalist leaders are taking a wait-and-see approach to the Physician Payment Sunshine Act, which requires reporting of payments and gifts from drug and medical device companies. But as wary as many are after publication of the Final Rule 1 in February, SHM and other groups already have claimed at least one victory in tweaking the new rules.

The Sunshine Rule, as it’s known, was included in the Affordable Care Act of 2010. The rule, created by the Centers for Medicaid & Medicare Services (CMS), requires manufacturers to publicly report gifts, payments, or other transfers of value to physicians from pharmaceutical and medical device manufacturers worth more than $10 (see “Dos and Don’ts,” below).1

One major change to the law sought by SHM and others was tied to the reporting of indirect payments to speakers at accredited continuing medical education (CME) classes or courses. The proposed rule required reporting of those payments even if a particular industry group did not select the speakers or pay them. SHM and three dozen other societies lobbied CMS to change the rule.2 The final rule says indirect payments don’t have to be reported if the CME program meets widely accepted accreditation standards and the industry participant is neither directly paid nor selected by the vendor.

CME Coalition, a Washington, D.C.-based advocacy group, said in a statement the caveat recognizes that CMS “is sending a strong message to commercial supporters: Underwriting accredited continuing education programs for health-care providers is to be applauded, not restricted.”

SHM Public Policy Committee member Joshua Lenchus, DO, RPh, FACP, SFHM, said the initial rule was too restrictive and could have reduced physician participation in important CME activities. He said the Accreditation Council for Continuing Medical Education (ACCME) and other industry groups already govern the ethical issue of accepting direct payments that could imply bias to patients.

“I’m not so sure we needed the Sunshine Act as part of the ACA at all because these same things were in effect from the ACCME and other CME accrediting organizations,” said Dr. Lenchus, a Team Hospitalist member and president of the medical staff at Jackson Health System in Miami. “What this has done is impose additional administrative requirements that now take time away from our seeing patients or doing clinical activity.”

Those costs will add up quickly, according to figures from the Federal Register, Dr. Lenchus said. CMS projects the administrative costs of reviewing reports at $1.9 million for teaching hospital staff—the category Dr. Lenchus says is most applicable to hospitalists.

Dr. Lenchus says there was discussion within the Public Policy Committee about how much information needed to be publicly reported in relation to CME. Some members “wanted nothing recorded” and “some people wanted everything recorded.”

“The rule that has been implemented strikes a nice balance between the two,” he said.

Transparent Process

Industry groups and group purchasing organizations (GPOs) currently are working to put in place systems and procedures to begin collecting the data in August. Data will be collected through the end of 2013 and must be reported to CMS by March 31, 2014. CMS will then unveil a public website showcasing the information by Sept. 30, 2014.

Public Policy Committee member Jack Percelay, MD, MPH, FAAP, SFHM, said some hospitalists might feel they are “being picked on again” by having to report the added information. He instead looks at the intended push toward added transparency as “a set of obligations we have as physicians.”

“We have tremendous discretion about how health-care dollars are spent and with that comes a fiduciary responsibility, both to the patient and to the public,” he said. “This does not seem terribly burdensome to me. If I was getting nickel and dimed for every piece of candy I took through the exhibit hall during a meeting, that would be ridiculous. I’m happy to do this in a reasoned way.”

Dr. Percelay noted that the Sunshine Rule does not prevent industry payments to physicians or groups, but simply requires the public reporting and display of the remuneration. In that vein, he likened it to ethical rules that govern those who hold elected office.

“Someone should be able to Google and see that I’ve [received] funds from market research,” he said. “It’s not much different from politicians. It’s then up to the public and the media to do their due diligence.”

Dr. Lenchus said the public database has the potential to be misinterpreted by a public unfamiliar with how health care works. In particular, patients might not be able to discern the differences between the value of lunches, the payments for being on advisory boards, and industry-funded research.

“I really fear the public will look at this website, see there is any financial inducement to any physician, and erroneously conclude that any prescription of that company’s medication means that person is getting a kickback,” he says. “And we know that’s absolutely false.”

Richard Quinn is a freelance writer in New Jersey.

Dos and Don’ts

The Physician Payment Sunshine Act defines what must be reported by pharmaceutical companies, device makers, and other manufacturers, as well as group purchasing organizations (GPOs). It also sets penalties for noncompliance. The rule’s highlights include:

  • Transfers of value of less than $10 do not have to be reported, unless the cumulative transfers total $100 or more in a calendar year.
  • Manufacturers do not have to collect data on or report on buffet meals, individual snacks, or drinks they provide to physicians at meetings where it would be difficult to determine who partook of the offering. However, meals provided for which the participants can be easily identified must be reported.
  • CMS will fine those who fail to submit the required information $1,000 to $10,000 for each violation. Maximum fines can total $150,000 in a calendar year.
  • Knowingly failing to submit required information is subject to fines of $10,000 to $100,000. Those fines are capped at an annual total of $1 million.

—Richard Quinn


  1. Centers for Medicare & Medicaid Services. Medicare, Medicaid, Children’s Health Insurance Programs; transparency reports and reporting of physician ownership or investment interests. Federal Register website. Available at: Accessed March 24, 2013.
  2. Council of Medical Specialty Societies. Letter to CMS. SHM website. Available at: and_Regulatory_Agencies&Template=/CM/ContentDisplay.cfm&ContentID=30674. Accessed March 24, 2013.

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