Articles on Compliance Strategies

CMS Reins in Radiology Spending With Stark Extension and Pay Cuts to MDs, Hospitals

Reprinted from the August 8, 2005, issue of REPORT ON MEDICARE COMPLIANCE, the nation's leading source of news and strategic information on false claims, overpayments, compliance programs, billing errors and other Medicare compliance issues.

The crackdown on radiology that's been foreshadowed for months hit like a hurricane during the past two weeks, as CMS moved to get control of runaway Medicare spending.

CMS is quashing physician self-referral to nuclear imaging and positron emission tomography (PET) scans. In the proposed 2006 physician fee schedule regulation, CMS added two cutting-edge radiology services to the list of designated health services (DHS) that trigger the Stark self-referral ban. That means entities can't bill Medicare for PET scans and nuclear imaging if they were performed on patients referred by physicians who have a financial relationship with the entity. "We believe our proposal to include nuclear medicine as a DHS is consistent with the intent of the Congress to prevent overutilization of health care services covered by Medicare and to prohibit physicians from selecting treatment modalities based on financial incentives," CMS says in the rule.

Physicians tied up in PET scan and nuclear medicine ventures will have to unwind the deals or restructure them, perhaps with equipment leasing arrangements, lawyers say.

Equipment leasing has come under fire in some quarters, but lawyers say it's legally sound.

In the same regulation, CMS cut fee-schedule payments for imaging performed in physician offices and freestanding radiology centers. When two different radiology services are performed on the same patient on the same date of service, Medicare proposes to pay 100% of the technical fee for the first test (e.g., an MRI of the abdomen), but only 50% of the technical fee for the second test (the MRI of the abdomen may prompt the doctor to order an MRI of the pelvis). However, Medicare will continue to pay full price for the professional reading of both images. "The loss of revenue could be enormous," says San Antonio attorney Jed Morrison, who is with the law firm of Jackson Walker LLP. "To combat the projected loss in income, some radiology providers may attempt to not accept referrals for multiple same-day procedures on Medicare patients. They may try to require the patient to return the next day. This reduces access to care for Medicare patients, and results in less efficient utilization of services."

'Groundswell' of Imaging Coverage Changes

These two major developments came a week after CMS restructured the way it pays hospitals for imaging under the proposed 2006 outpatient prospective payment system (OPPS). It would limit payments for some diagnostic imaging when it's performed with other similar diagnostic imaging in the same session on the same patient.

"There is a huge groundswell of coverage changes for imaging services generally," says Morrison. "Congress and CMS are recognizing a huge increase in expenditures for imaging over the past decade. They will make it increasingly difficult for physician group practices to own and operate imaging services in their own practices, and they will apply a higher standard of care to all imaging providers, including radiology groups."

CMS took heed of warnings and recommendations in recent reports from the Medicare Payment Advisory Commission (MedPAC), which advises Congress on Medicare issues. In a March report, MedPAC said that between 1999 and 2003, Medicare spending on nuclear medicine increased 85%. Overall spending on imaging rose 45%, while other physician services increased 22%. That means Medicare spent $9.3 billion on imaging under the physician fee schedule in 2003, up from $5.7 billion in 1999, MedPAC said. The report also cited serious concerns about variations in quality and coding.

Perhaps because PET scans — and nuclear medicine in general — are relatively recent phenomena, they were not included in the list of DHS that trigger the Stark law. This meant physicians were permitted to refer their patients to entities that provide nuclear medicine and PET scans — and simultaneously have an ownership or compensation relationship with those entities.

Morrison says it was an anomaly that nuclear medicine and PET scans were not included in the definition of radiology services, which is one of the DHS, and there was a sense among physicians that the Stark reprieve would someday end. Some physicians who invested in PET scans/nuclear medicine ventures knew the Stark ban was around the corner and structured their deals to comply even before they had to, he says. For example, some cardiologists bought nuclear cameras and operated them through their practices, in their suite, and with their staffs in compliance with the Stark in-office exception — even though they didn't need to be. "Now that Stark applies, they don't have to do anything differently" he says.

Some Physicians Left in Lurch

But other physicians are now left in the lurch just because they legally engaged in self-referrals for PET scans and nuclear medicine. These physicians participated in joint ventures for pricey PET scan machines and referred their patients there because Stark didn't prohibit it. Now what happens to their investment? CMS is sensitive to their dilemma and is soliciting feedback on how to ease the transition. "CMS acknowledged that they're changing the rules in the middle of the game," says Morrison. "They are contemplating this will be a big problem, and are open to comments on how to minimize the effect of adding PET scans and nuclear medicine to the list of designated health services."

Morrison notes that some physicians may send comments that urge CMS to grandfather certain existing PET scan and nuclear medicine arrangements even though they involve self-referral. It would be straightforward because CMS uses CPT codes to spell out which DHS trigger the ban, and could simply permit certain existing providers to bill for PET scan and nuclear medicine CPT codes. "I don't think CMS will go that far, but it raises that possibility in the new rule," he says. Second choice: Ask CMS to delay for another year the effective date of the Stark ban's extension to PET scans and nuclear medicine. That gives physicians another year to unwind or restructure those deals.

But under current law, there is a perfectly sound, legal way for physicians to keep their hands in the designated health services pot. It's called equipment leasing, and it's relatively popular, Morrison says. Equipment leasing in its most basic form involves physicians jointly owning equipment and leasing it to a third-party provider, such as a hospital or a radiology group. A more aggressive form involves physicians setting up shop in the same building as an equipment leasing company, using the equipment themselves and billing for it directly under their own practice — all of which allows them to qualify for Stark exceptions, Morrison says.

But equipment leasing is a bit controversial, and the government frowns on it. An MRI center that's involved in an equipment-leasing deal is now under investigation in Florida, according to The Wall Street Journal. But Morrison says a structurally sound equipment leasing deal is commonplace and acceptable.

Hospitals Also Feel Imaging Pinch

CMS took hospitals by surprise by revamping payments for multiple diagnostic imaging procedures, and hospitals anticipate this will deprive them of revenue. Until now, hospitals billing for diagnostic imaging procedures under OPPS get full APC payments for every service on a claim, no matter how many procedures are performed using a single imaging modality and regardless of whether contiguous areas of the body are studied during the same session, says Jim Georgoulakis, Ph.D., a consultant to CMS on APCs.

CMS has a longstanding policy under OPPS of cutting reimbursement for multiple surgical procedures performed on the same patient in the same operative session, he says. Full payment is made for the procedure with the highest APC payment rate, and each subsequent procedure is paid at 50% of its respective payment rate. "CMS believes that a similar policy for payment of diagnostic imaging services would be more appropriate than the current policy because it would lead to more appropriate payment for multiple imaging procedures of contiguous body areas that are performed during the same session," Georgoulakis says.

As a result, CMS flagged 11 "families" of imaging procedures. "By using this family concept, CMS noted that beginning with the beneficiary's arrival in the outpatient department, costs are incurred only once for registering the patient, taking the patient to the procedure room, and positioning the patient," he says. So CMS is proposing to cut payment for subsequent procedures within the families, which would result in more accurate payments in terms of hospital resources expended for multiple imaging procedures performed in the same session. The cut for now would be 50% for subsequent procedures performed in the same session.

"However, CMS is intending to apply the multiple imaging procedure reduction only to individual services described by codes within one family, not across families. Reductions would apply when more than one procedure within the family is performed in the same session," he says. "The proposal includes making full payment for the procedure with the highest APC payment rate, and payment at 50% of the applicable APC payment rate for every additional procedure when performed in the same session."

Hospitals are unsure exactly how this will affect them. Hospital officials say they will have to determine exactly how much money they will lose on specific imaging services (e.g., magnetic resonance angiographies) before they submit comments to CMS. If hospitals anticipate taking a big enough loss that they will have to shut down a service, they will send those data to CMS because shuttering services means a loss of access to beneficiaries. But CMS wants data, one hospital official says.

"If it turns out this is a bad idea because it will make access very difficult — and their concern is overutilization — CMS may want to look at a National Coverage Decision instead to control utilization," she says.

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