Contribution: Imaging self-referrals must now include alternate providers

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CT perfusion of Peri-Infarct Ischemia.
Image source: Journal of the American College of Cardiology

By Jason Caron, Esq. and Jason Christ, Esq.
As of the first of the year, many physician practices that provide PET, CT and MRI must now disclose in writing to patients that they can receive the same services from other providers. If they fail to do so, they could face stiff penalties.

The new disclosure requirement is part of the final 2011 Physician Fee Schedule (PFS) rule issued by the Centers for Medicare & Medicaid Services (CMS). The change in question concerns the physician self-referral provisions of Section 1877 of the Social Security Act, commonly known as the Stark Law.

Background on the Stark Law
The Stark Law prohibits payment of Medicare or Medicaid claims submitted by a physician (or on that physician's behalf) if the physician has made a patient referral, as defined by the Stark Law and CMS' regulations; the physician or a member of the physician's immediate family has a financial interest in the entity to which the patient has been referred; and the financial relationship does not comply with one of the exceptions set out in the Stark Law (e.g., the In-Office Ancillary Services Exception).

Penalties under the Stark Law are very severe and include the following:

  • The denial of payment and an obligation to refund payments made as a result of a tainted patient referral;
  • Civil monetary penalties of up to $15,000 for each service that a person knows or should know violates the Stark Law;
  • Civil monetary penalties of up to $100,000 for schemes to circumvent the Stark Law;
  • Possible exclusion from the Medicare and Medicaid programs;
  • The imposition of up to three times the amount for each item wrongfully claimed; and/or
  • Potential liability under the Federal False Claims Act.

The In-Office Ancillary Services Exception
The In-Office Ancillary Services Exception to the Stark Law is widely used by the imaging services industry and permits a physician in a solo or group practice to order and provide certain designated health services, which include imaging, provided that certain specific practice, location and billing requirements are met.

To fit within the in-office ancillary exception, designated health services must be:

  • Furnished by the referring physician, a member of his group, or an individual who is supervised by a physician in the group;
  • Furnished to patients in a central building that functions to house the medical group's ancillary services (centralized building test) or in the same building where referring physicians provide their services (same building test); and
  • Billed by one of the following: the physician providing or supervising the designated health services; the group practice in which the physician providing designated health services is a member (or the group practice if the supervising physician is a physician in the group practice); an entity that is wholly owned by the performing or supervising physician or group practice; or a billing company functioning solely as an agent of the performing or supervising physician or by the physician's group practice.

Practices that use the in-office ancillary exception now will be required to:

  • Inform the patient in writing that the patient may obtain certain imaging services from a person other than the referring physician or his or her group practice; and
  • Include a list of "suppliers" who provide the service being referred.

The Patient Protection & Affordable Care Act (PPACA) requires this disclosure for MRI, CT and PET, but PPACA also gave CMS the discretion to extend the disclosure obligation to any other designated health services determined appropriate.

The patient disclosure must include the name, address and telephone number of at least five other suppliers that provide the services for which the individual is being referred and which are located within a 25-mile radius of the referring physician's office location "at the time of the referral" (unless less than five suppliers are within the 25-mile radius, in which case all suppliers in the radius should be listed). If there are no other suppliers that provide the services for which the individual is being referred than the "provision of the written list" is not required. However, the general notification is still required.

Despite CMS' broad authority under PPACA, the agency is thus far only requiring the disclosure obligation for referrals for MRI, CT, and PET