Henry Schein 2014 Annual Report Download - page 28

14
Failure to comply with these laws can result in substantial penalties and other liabilities. As a result of the
federal Health Information Technology for Economic and Clinical Health Act (“HITECH Act”), which was passed
in 2009, some of our businesses that were previously only indirectly subject to federal Health Insurance Portability
and Accountability Act of 1996 (“HIPAA”) privacy and security rules became directly subject to such rules
because such businesses serve as “business associates” of HIPAA covered entities, such as health care providers.
On January 17, 2013 the Office for Civil Rights of the Department of Health and Human Services released a final
rule implementing the HITECH Act and making certain other changes to HIPAA privacy and security
requirements. Compliance with the rule was required by September 23, 2013, and increases the requirements
applicable to some of our businesses.
In addition, federal initiatives, including in particular the HITECH Act, are providing a program of incentive
payments available to certain health care providers involving the adoption and use of certain electronic health care
records systems and processes. The HITECH initiative includes providing, among others, physicians and dentists,
with financial incentives, if they meaningfully use certified electronic health record technology (“EHR”) in
accordance with applicable requirements. With respect to recognizing “certified” EHR technology, CMS
regulations reference an older “2011 edition certified technology,” which is to be replaced by a newer “2014 edition
certified technology.” In addition, Medicare-eligible providers that fail to timely adopt certified EHR systems and
meet “meaningful use” requirements for those systems in accordance with regulatory requirements are to be subject
to cumulative Medicare reimbursement reductions, which reductions for eligible health professionals (including
physicians and dentists) began on January 1, 2015. This reduction is subject to a grant of a “hardship” exemption
by CMS, which generally permits providers to avoid Medicare reimbursement reductions where they can show that
demonstrating meaningful use of EHR would result in a significant hardship. Qualification for the incentive
payments requires the use of EHRs that have certain capabilities for meaningful use pursuant to standards adopted
by the Department of Health and Human Services. Initial (“Stage 1”) standards addressed criteria for periods
beginning in 2011. CMS has also issued a final rule with more demanding “Stage 2” criteria for periods beginning
in 2014 for eligible health professionals (including physicians and dentists).
Recognizing difficulties encountered by some providers in acquiring and implementing 2014 edition-certified
EHR technology, CMS published a final rule on September 4, 2014 that adds flexibility to the manner in which
physicians, dentists and others may demonstrate meaningful use of EHR by extending through the 2014 reporting
period the ability, in certain circumstances, to use 2011 edition-certified technology to attest to meaningful use,
rather than requiring the use of 2014 edition-certified technology. The rule also delays for one year implementation
of more rigorous “Stage 3” measures, and under this rule eligible health professionals (including physicians and
dentists) would begin Stage 3 in calendar year 2017. In addition, also in recognition of difficulties encountered by
some providers in acquiring and implementing 2014 edition-certified EHR technology, CMS has specifically
recognized that a hardship exemption may be granted, among other reasons, where the provider’ s failure to
demonstrate meaningful use was caused by its EHR vendor’ s failure to timely obtain 2014 certification for its EHR
technology, and extended the deadline for health care professionals to file hardship exemption applications from
July 1, 2014 to November 30, 2014. On January 29, 2015, CMS announced an intent to engage in further
rulemaking under the EHR incentive program to redress the Stage 2 reporting burden on providers. Among other
things, the new rule, expected in the Spring of 2015, will tie EHR reporting to a calendar year, modify other aspects
of the program and shorten the EHR reporting period in 2015 to 90 days. Certain of our businesses involve the
manufacture and sale of certified EHR systems and other products linked to incentive programs, and so must
maintain compliance with, and are affected by, these evolving governmental criteria.