• CMS Issues Proposed Rule on Changes to Stark In-Office Ancillary Services Exception
  • August 25, 2010 | Authors: R. Brent Rawlings; Thomas J. Stallings
  • Law Firm: McGuireWoods LLP - Richmond Office
  • Section 6003 of the Patient Protection and Affordable Care Act, Public Law 111-148 (H.R. 3590) (PPACA) makes a change to the “in-office ancillary services” exception to the Stark physician self-referral law that impacts physician practices providing certain radiology services in their offices. In short, the change requires physicians making a referral for magnetic resonance imaging (MRI), positron emission tomography (PET), and computed tomography (CT), or certain other radiology services in their offices, to make a disclosure to the patient that such services can be provided elsewhere and to include a list of alternative providers.

    At the time PPACA was passed, there were questions as to how the new disclosure requirement would be implemented, including whether the law was self-effectuating or whether the Centers for Medicare and Medicaid Services (CMS) would need to first promulgate regulations to make it effective. On June 13, 2010, however, CMS published a proposed rule that included answers to many questions about how CMS thinks the law is to be implemented. 75 Fed. Reg. 40140-2. This article briefly summarizes the proposed rule.

    Background

    The Stark physician self-referral law, 42 U.S.C. 1395nn (Stark), prohibits a physician from making a referral for designated health services to an entity with which the physician has a financial relationship, unless an exception is met. For example, where a group practice owns or operates an MRI scanner for the purposes of providing images to patients of the practice, Stark prohibits a physician member from making a referral to the group practice for the performance of an MRI scan, unless an exception is met.

    The exception most commonly relied upon by physicians in this scenario is the in-office ancillary services exception, which is set forth at 42 U.S.C. 1395nn(b)(2). The exception generally requires that the services be furnished by the group practice in the same building in which the physician furnishes services (or in a centralized location), and be billed by the physician or group practice.

    Section 6003 of PPACA requires the Secretary of Health and Human Services (Secretary) to include an additional requirement in the in-office ancillary services exception that, for any referral for MRI, PET, CT, or other radiology services identified by the Secretary, the referring physician must:

    • Inform the patient in writing at the time of the referral that the patient may obtain the services elsewhere; and
    • Include a written list of other providers who furnish the services in the area where the patient resides.

    The proposed rule implements the new disclosure requirement by adding a new section to the text of the in-office ancillary services exception regulation at 42 C.F.R. § 411.355(b)(7). The elements of the new disclosure requirement as proposed by CMS are described in further detail below.

    January 2011 Effective Date

    CMS proposes that the effective date of the new disclosure requirement be Jan. 1, 2011. It was previously unclear to many observers and industry experts whether Section 6003 of PPACA was self-effectuating, and many were concerned that the new disclosure requirement had become effective on March 23, 2010, when PPACA became law, without any further guidance from CMS. However, CMS expressed its determination in the proposed rule that the provisions are not self-effectuating, and would not become effective until after CMS promulgates a final regulation.

    Only MRI, CT and PET Services Trigger the Requirement for the Time Being

    PPACA requires that the disclosure requirement apply to MRI, CT and PET, and grants the Secretary the authority to expand the disclosure requirement to "other radiology services" that are designated health services under Stark. However, CMS indicates in the proposed rule that it is not inclined to expand the disclosure requirement at this time.

    General Disclosure Requirements

    CMS is proposing that the disclosure: (1) must indicate to the patient that the MRI, CT or PET services being referred may be obtained by a supplier other than the referring physician or his or her group practice; (2) must include a list of such other suppliers who provide the services being referred, as well as each supplier's address, phone number, and distance from the referring physician; (3) must be given to, and signed by, the patient at the time of referral; and (4) should be written in a manner sufficient to be reasonably understood by all patients. CMS proposes that this would apply to all in-office MRI, CT and PET referrals with no exception for referrals made on an emergency or time-sensitive basis.

    List of Other Suppliers

    CMS is proposing that the list of alternative sources of MRI, CT or PET services being referred include no fewer than 10 other "suppliers" located within a 25-mile radius of the physician's office location at the time of the referral. The term “suppliers,” which under the statutory definition includes entities such as physicians, group practices, and freestanding imaging centers, is opposed to the term “providers,” which under the statutory definition includes entities such as hospitals, critical access hospitals, skilled nursing facilities, and rehabilitation hospitals.

    CMS has proposed that no providers would be permitted to be included on the list. CMS indicates that where there are fewer than 10 other suppliers within the 25-mile radius, it would be sufficient to simply list all suppliers that exist within the 25-mile radius. Under circumstances where there are no other suppliers within the 25-mile radius, CMS proposes that the referring physician would not have to provide a list, but must still disclose to the patient that he or she may receive the imaging services from another supplier.

    Documentation Requirements

    CMS proposes to require referring physicians to maintain a record of the patient's signature on the disclosure notification, and to include such disclosure notification in the patient's medical record.

    Conclusion

    The proposed rule answers many questions regarding how the new disclosure requirement will be implemented, but raises a number of issues for physicians to sort out in administering and complying with the new law. For example, how will physicians identify available suppliers within the 25-mile radius? How will they determine what types of imaging services those suppliers offer? CMS is accepting comments on the proposed rule through Aug. 24, 2010.