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New Bill Proposes to Eliminate Stark Law Exception for Certain In-Office Ancillary Services

Written by Theresa Carnegie and Karen Lovitch

Representative Jackie Speier (D-Calif) has introduced a bill (HR 2914) that would eliminate advanced diagnostic imaging, anatomic pathology, radiation therapy, and physical therapy services from the Stark Law’s in-office ancillary services exception (IOASE).  The stated goal of the Promoting Integrity in Medicare Act of 2013 (PIMA) is to cut unnecessary Medicare spending, reduce overutilization of complex services, and narrow the IOASE to better reflect congressional intent.

PIMA creates a new definition under the Stark Law for “specified non-ancillary services” and excludes such services from protection under the IOASE.  A specified non-ancillary service is defined as a service that is “not usually provided and completed during an office visit to a physician’s office in which the service is determined to be necessary” and includes:

  • Anatomic pathology services, including the technical or professional component of the following:
  • Surgical pathology (cytopathology, hematology, blood banking, pathology consultation and clinical laboratory interpretation services),
  • Radiation therapy services
  • Advanced diagnostic imaging studies, including diagnostic MRI, computed tomography, and nuclear medicine
  • Physical therapy services

In addition to excluding these complex services from the IOASE, PIMA also increases the civil monetary penalties (CMPs) applicable to referrals for specified non-ancillary services and creates new compliance review procedures involving HHS and the OIG.  The CMP for improper claims relating to specified non-ancillary services is $25,000 ($15,000 for all other improper claims) and the CMP for specified non-ancillary service circumvention schemes is $150,000 ($100,000 for all other circumvention schemes). The legislation requires that HHS and the OIG review compliance with PIMA’s new prohibition and specifically target types of entities that the Secretary determines represent a high risk of noncompliance.  PIMA suggests that HHS and OIG review such entities through prepayment reviews, claims audits, focused medical reviews, and computer algorithms designed to identify billing and payment abnormalities.

Finally, the bill clarifies that:

  • the legislation does not affect the Stark Law exceptions for rural providers,
  • physician groups participating in ACOs in the Medicare Shared Savings Program can continue to provide integrated services, and
  • physician practices billing for the technical component or professional component of a specified non-ancillary service are subject to the Stark Law’s restrictions even if billing in compliance with Medicare's anti-markup rule.

PIMA comes in the wake of three recent GAO reports that have found an increase in utilization of advanced imaging services, anatomic pathology services, and prostate cancer treatments where providers self-refer.  Spier’s office reports that a fourth GAO report on self-referral in physical therapy services is expected later this year.

The bill has broad-based support from a number of health care industry trade associations and coalitions, including the Alliance for Integrity in Medicare (AIM), which is composed of the American Clinical Laboratory Association (ACLA), the American College of Radiology, the American Physical Therapy Association, the American Society for Clinical Pathology, the American Society for Radiation Oncology, Association for Quality Imaging, the College of American Pathologists, and Radiology Business Management Association.  As noted in a recent post, the ACLA, in particular, has taken a strong stance against abusive self-referral arrangements and has advocated for many years for CMS to close the loopholes that have allowed these arrangements to proliferate.  Given that CMS has repeatedly failed to heed the call – even after Dr. Jean Mitchell’s April 2012 study  identified a link between self-referrals by urologists and increased utilization – advocates like ACLA wisely chose to look to Congress instead for relief.  CMS has disappointed many in the laboratory industry with its apparent efforts to hinder abusive self-referral arrangements by imposing reimbursement cuts applicable to all laboratories providing pathology services – even independent laboratories that do not (and cannot) order biopsies.   Although HR 2914 has the support of many well-known organizations, its success remains to be seen given that Republicans in Congress typically take a hands-off approach when it comes to fixing the Stark Law.

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Karen S. Lovitch

Chair, Health Law Practice & Co-Chair, Health Care Enforcement Defense Practice

Karen advises industry clients on regulatory, transactional, operational, and enforcement matters. She has deep experience handling FCA investigations and qui tam litigation for laboratories and diagnostics companies.
Theresa advises clients on all aspects of the pharmaceutical supply chain, including counseling industry stakeholders on a range of business, legal, transactional, and compliance matters. She provides clients with strategic counseling and creative business modeling that considers legal restrictions and regulatory risk in light of innovation and business goals.