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The Sunshine Act, Continued: How to Enhance Compliance

By: Vahan Minassian, Compliance Implementation Services

Editor’s Note: The first half of this article appeared in the May 2014 issue of ORTHOKNOW. View it here.

Key Strategies for Enhancing Compliance

I. Assumptions/Methodology Document and Pre-Submission Checklist

In its Final Rule comments, The Centers for Medicare and Medicaid Services (CMS) recognized that certain manufacturers may need flexibility regarding the ways that certain data is collected and reported, e.g., defining nature of payment categories, value, etc.34 As a result, specific business decisions need to be made in order to standardize the process across each individual organization. CMS allows reporting companies to submit additional documentation, along with their required data reports in compliance with Open Payments (Sunshine Act), explaining the reasonable assumptions and determinations made and methodologies used when capturing, tracking and disclosing required information. Importantly, the assumptions documents will not be made available to the public.35 CMS has stated that, while these materials are not intended for prosecution, other government agencies may request access as part of audits or investigations. As such, the decision to submit these materials, and the substance within, should be reviewed in coordination with a company’s legal representative.

Regardless of whether these materials are ultimately submitted, creating a comprehensive assumptions and methodology document is extremely useful for designing and improving a company’s Open Payments reporting program. By addressing in detail the underlying logic and analysis for each key decision point regarding data capture and reporting, Applicable Manufacturers will often uncover areas for improvement or enhancement in their Open Payments process.

For instance, companies that did not submit data for the first Open Payments deadline, or are part of a complex corporate structure, may realize that their initial analysis of business model (e.g., do we provide “integral support,” “hold title,” etc.) and product portfolio (which of our products are “Covered”?) was not sufficiently detailed, or substantively incorrect, to support their “we are/aren’t an Applicable Manufacturer” assumption. Similarly, a comprehensive assumptions document will typically require an Applicable Manufacturer to record critical standard definitions for topics such as transfers “Related to a Covered Product,” and value of goods and services including non-exempt “loaner” equipment. Moreover, a comprehensive assumptions document will typically require Applicable Manufacturers to list all identified reportable transfers of value with their appropriate Open Payments “nature of payment” categories, as well as provide defensible logic for exempt transfers of value (e.g., indirect transfers in which the Applicable Manufacturer is “unaware” of the Healthcare Professional or HCP’s identity).

With the right analysis, design and oversight, an Open Payments program will not only prevent government penalties, but also foster opportunities to enhance corporate compliance and business as a whole.

Also of value is that the assumptions document may be used as a management tool to ensure a sound reporting process prior to submitting data. Open Payments requires that an Applicable Manufacturer attest to the accuracy of data reported and, implicitly, data determined to be exempt from reporting. Thus, it is critical that the designated report attester have visibility into the decision making process and methodologies supporting the capture, tracking and reporting of required data. Applicable Manufacturers can incorporate checklists within the assumptions document to verify that each key decision point has undergone the proper analysis by relevant departments (e.g., “covered product” determinations will typically require analysis from regulatory).

II. Open Payments Data Monitoring and Trending

Aside from submitting to CMS to avoid penalties, Applicable Manufacturers have the opportunity to use their collected data, as well as data submitted by others in the industry, to provide valuable additional insights to the company. Applicable Manufacturers can use the wealth of enriched customer and transactional information to identify and analyze key performance indicators regarding (i) the operational effectiveness of their Open Payments program, (ii) compliance with certain relevant state and Federal laws and (iii) promotional and non-promotional activity effectiveness and adherence to company processes.

For instance, Applicable Manufacturers are able to monitor transactions governed by the AdvaMed Code of Ethics on Interactions with Healthcare Professionals, as well as those occurring in states with compliance obligations, meal limitations or gift bans (e.g., MA, VT, CA, NV). Furthermore, Applicable Manufacturers may use such data to review HCP consultant payments to ensure proper adherence to company policy and contractual language, e.g., payment of fair market value, travel and expense limitations, etc. Additionally, Applicable Manufacturers may use HCP identifier data (i.e., HCP specialty) to “red flag” potential off-label interactions. Enriched transactional data regarding educational and research grants may bring opportunities for meaningful analysis of funding for health care institutions and associations.

Finally, Applicable Manufacturers may wish to monitor payments made through third-party vendors to verify that such payments were made in compliance with regulatory guidance and contractual terms. Third-party vendor data monitoring is also essential for ensuring accuracy and completeness of required data; consistent errors in third-party vendor data may indicate that enhanced reporting templates and/or validation systems are necessary.

III. Enhanced Compliance Processes Governing Interactions with HCPs

With the disclosure of detailed transactional data pursuant to Open Payments, government enforcement agencies will have unprecedented insight into industry interactions with HCPs. CMS has not stated how the data will be used for investigation or targeting, but there are presumably several “nature of payment” categories that enforcement agencies will be closely monitoring as potential for unlawful inducement per the Anti-Kickback Statute—namely, gifts and entertainment, travel/lodging and HCP consulting relationships. As such, Applicable Manufacturers must ensure that compliance controls governing these areas (but preferably, all “nature of payment” categories) demonstrate alignment with regulatory and industry guidance, where applicable, in the event of government investigation or audit. Applicable Manufacturer policies related to gifts, entertainment, travel and lodging should align with parameters outlined by the AdvaMed Code.

Applicable Manufacturers should also be able to demonstrate the legitimacy of their HCP consulting relationships. This includes a formal process for documenting (i) a business need for HCP consultant services, (ii) the selected HCP consultant qualifications align with business need, (iii) the HCP consultant is paid at fair market value and (iv) HCP consultant actually performed the services requested. With regard to physician owned distributors or PODs, such companies should ensure that all agreements with physician-owners align with the Anti-Kickback Safe Harbor regarding investment interests, and otherwise refrain from using the offer of investment opportunities or increased distributions as an inducement or reward for referrals.

IV. Enhanced Dispute Resolution Process with HCP Customers

Physician disputes regarding published Open Payments data will be an ongoing issue for Applicable Manufacturers. CMS has provided a secure website for physicians to assess reported transactions prior to publication; however, any disputes arising from viewing may still be made public if not resolved within a 60-day review period. As such, many Applicable Manufacturers are seeking to enhance their HCP dispute resolution processes in order to mitigate any negative regulatory or business impacts.

Companies may wish to independently allow HCPs to review associated transactions prior to the review period provided by CMS to ensure that any potential disputes are fully-resolved well before regulatory deadlines. Applicable Manufacturers offering pre-submission reviews may want to limit the scope of HCPs permitted to review pre-submitted data, due to a high volume of transactions or other factors. In the long term, companies may be able to track trends related to physician dispute data for the purposes of improving their dispute process, public relations or reporting process generally.


As evidenced above, Open Payments reporting systems and processes must be thoughtfully crafted, well informed and responsive to a variety of internal and external pressures, e.g., changes in guidance, evolution of business practices, customer feedback, government enforcement focus, etc. An effective data reporting program should be closely monitored and improved as needed to ensure proper compliance with Open Payments substantive requirements.

Moreover, available data from effective reporting programs should also provide Applicable Manufacturers with opportunities to proactively detect and prevent other potential violations of state and Federal law, as well as key business and operational insights into certain promotional and non-promotional activities.

In short, with the right analysis, design and oversight, an Open Payments program will not only prevent government penalties, but also foster opportunities to enhance corporate compliance and business as a whole.


34. Final Rule 9474, 9481.

35. Id. at § 403.908(f)

Vahan Minassian, Manager, Compliance & Ethics at Compliance Implementation Services, is a licensed attorney with experience advising pharmaceutical and medical device manufacturers on legal and operational issues related to the Physician Payment Sunshine Act and state aggregate spend laws, lobbying disclosure laws, the Anti-Kickback Statute, the False Claims Act, off-label promotion, the Foreign Corrupt Practices Act and the U.K. Anti-Bribery Act of 2010. Mr. Minassian can be reached at vahanminassian@cis-partners.com.

Compliance Implementation Services (CIS)