The Internal Revenue Service (IRS) publicly released today an internal memorandum addressing certain tax-exemption implications of hospitals providing financial assistance to staff physicians to acquire and implement electronic health records technology. The memorandum provides significant, straightforward guidance concerning the question of whether a donation arrangement that satisfies the requirements of the October 2006 anti-kickback safe harbor and Stark regulatory exception allowing the provision of such financial assistance to referral sources (the HHS EHR regulations) will pose a threat to the tax-exempt status of a hospital donor.
This guidance should undoubtedly encourage tax-exempt hospitals that have been delaying their deployment of electronic health records to physicians to move forward with those much-needed initiatives.
The memorandum addresses only the deployment of health IT by an exempt hospital to its physicians. It does not address the effect of financial assistance on the exempt status of other types of organizations (e.g., regional health information organizations) that may engage in similar efforts.
McDermott will be distributing shortly a more in-depth analysis of this important guidance document. In the interim, the document can be found at http://www.irs.gov/.