MedPac considers recommending amendments to the Stark in-office ancillary services exception that could have a significant impact on where Medicare patients receive imaging, lab tests, radiation therapy and outpatient rehab services, and may reduce the size of the market for medical equipment used to furnish these services in physician offices.
In response to a dramatic increase in the volume and cost of radiation therapy, outpatient rehabilitation services, diagnostic imaging and laboratory tests furnished to Medicare patients in referring physicians’ offices, the Medicare Patient Advisory Commission (MedPac), which advises Congress on Medicare payment issues, is considering a menu of changes to the Stark Law’s in-office ancillary services exception (In-Office Exception) and certain physician payment reforms. While MedPac is only authorized to recommend, rather than make, changes, its recommendations typically receive serious consideration from Congress and the Centers for Medicare & Medicaid Services (CMS) and often become law. If Congress or CMS were to adopt the more far-reaching changes to the In-Office Exception under consideration, it could have a significant impact on whether Medicare patients receive imaging, laboratory tests, radiation therapy and outpatient rehabilitation services (Outpatient Rehab), which includes physical therapy, occupational therapy and speech-language pathology services, from hospitals, physician groups or free-standing providers. In addition, for manufacturers, the changes could reduce the size of the market for MRI, CT and PET imaging equipment and linear accelerators and other radiation therapy equipment by making it illegal, less profitable and/or more difficult for physician groups to use the equipment to provide services to Medicare patients (and to other patients subject to state “mini Stark Laws”).
The following section briefly summarizes the Stark Law’s self-referral prohibition and the In-Office Exception. Section II discusses the amendments to the In-Office Exception and payment reforms under consideration by MedPac for self-referral of radiation therapy and Outpatient Rehab. Section III analyzes the reforms being considered to address the self-referral of diagnostic services, including imaging and laboratory tests. Section IV summarizes the next steps for MedPac’s exploration of the In-Office Exception.
I. In-Office Exception
Unless an exception applies, the Stark Law prohibits a physician from referring a patient for Medicare-covered diagnostic imaging, laboratory tests, radiation therapy services and supplies, Outpatient Rehab and other “designated health services” (DHS) to a physician group or other entity with which the physician has an ownership or compensation relationship. The Stark Law also prohibits the physician group or other DHS provider from billing Medicare for DHS provided pursuant to a prohibited referral.
The In-Office Exception allows owners and employees of a medical practice that qualifies as a “group practice” under the Stark Law to refer Medicare patients within the group for DHS consistent with the Stark Law. The group practice requirements are intended to assure that the medical practice is clinically, financially and operationally integrated and not merely a loose affiliation of physicians for purposes of sharing profits from referrals. Among its requirements are that 75 percent of the patient care services of the practice be provided by owners or employees of the group, and that each owner or employee referring Medicare patients to the group for DHS provides at least 75 percent of his/her patient care services through the group. The group practice definition also prohibits a group from compensating its members in any manner that directly takes into account the volume or value of their referrals of Medicare patients for DHS to the group.
If the group satisfies the group practice requirements, its physicians’ in-group Medicare patient referrals for DHS must satisfy the performance/supervision, location and billing tests of the In-Office Exception. The performance/supervision test requires the DHS to be furnished personally by one of the following individuals: the referring physician; a physician who is a member of the same group practice as the referring physician; or an individual who is supervised by the referring physician or another physician in the group practice. The location test generally requires DHS to be provided either in the same location where the group provides medical services or a centralized location owned or leased on a 24/7 basis for the provision of DHS. The billing test requires the DHS to be billed by the group practice or the physician performing or supervising the service.
II. Radiation Therapy and Outpatient Rehab
During its January and March 2010 meetings, MedPac considered the three options discussed below for addressing its perception that the financial incentives of the fee-for-service payment system under the Medicare Physician Fee Schedule (MPFS) (i.e., more services mean more fees) are causing over-utilization of radiation therapy by multi-specialty groups and Outpatient Rehab by both multi-specialty and single-specialty groups. MedPac noted Medicare paid $104 million to multi-specialty physician groups for radiation therapy in 2008, which is an 84 percent increase from 2003, although multi-specialty groups’ share of overall Medicare radiation therapy spending remained at 5 percent.
Medicare payments for Outpatient Rehab to physician groups, therapists and other Outpatient Rehab suppliers paid under the MPFS increased from $1.4 billion to $2.2 billion in the same five-year period. Data on the portion of the increase attributable to physician practices that employ therapists is not available.
Total Exclusion from In-Office Exception
The most draconian option is to exclude radiation therapy and Outpatient Rehab from the In-Office Exception. The result would be that a physician in a multi-specialty group practice could not refer a patient to another physician or a therapist in the practice for radiation therapy or Outpatient Rehab. For example, a medical oncologist in an integrated oncology practice could not refer a patient for radiation therapy to a radiation oncologist in the same practice. Likewise, an orthopedic surgeon could not refer a surgery patient to a physical therapist employed by the practice for physical therapy following surgery. This option would be an advantage to single-specialty radiation oncology practices, hospitals and other Outpatient Rehab and radiation therapy providers by eliminating competition from multi-specialty group practices.
Exclusion unless Clinical Integration
Another option is to prohibit self-referral for Outpatient Rehab or radiation therapy unless the group practice meets new, more demanding clinical integration requirements. MedPac would need to undertake further analysis to define the clinical integration requirements. Ariel Winter, a MedPac analyst, indicated, for example, that each physician in the group could be required to provide a substantial share (e.g., 75 percent) of his/her services through the group. The substantial share requirement would be similar to the existing Stark group practice requirement that all owners and employees of the group making DHS referrals provide 75 percent of their patient care services through the group practice, except that it would also apply to independent contractor physicians hired to supervise DHS. Thus, for example, a urology practice could not engage a radiation oncologist on a part-time basis to provide or supervise the provision of radiation therapy to prostate cancer patients.
If the group bills for Outpatient Rehab under a supervising physician’s billing number on an “incident to” basis, the supervising physician would need to furnish 75 percent of his/her services through the group under Mr. Winter’s example. However, it is unclear how much this would affect utilization of Outpatient Rehab since Medicare (and most states laws) already permit physical, occupational and speech therapists employed by a physician group and enrolled in Medicare as a therapist in private practice to provide Outpatient Rehab services without physician supervision. Most groups enroll their employed therapists as therapists in private practice to avoid the direct supervision requirement of the incident to coverage rule. Perhaps the 75 percent test would be applied to both the physicians and the therapists furnishing the Outpatient Rehab.
The payment accuracy option is a proposal to make adjustments to payment rates to assure that rates are equitable and accurately reflect the costs of providing the services.
III. Diagnostic Imaging and Laboratory Tests
MedPac is considering the following options to address studies indicating that physicians who own their own laboratories and imaging equipment on average order more diagnostic imaging and laboratory tests than other physicians.
Exclusion from In-Office Exception
MedPac is considering a recommendation that an imaging or lab test be excluded from the In-Office Exception unless it is usually provided on the same day as an office visit or does not require advance scheduling and preparation by the patient. Under the first variation of this option, CMS would need to identify which tests are usually provided on the same day and, thus, would be permissible under the In-Office Exception. For example, Mr. Winter noted at the January MedPac meeting that, based on Medicare data, plain x-rays are furnished on the same day as an office visit over 50 percent of the time while nuclear medicine and MRI procedures are furnished on the same day only 8 percent of the time.
Exclusion unless Clinical Integration
Another option is to prohibit self-referral for lab tests and imaging under the In-Office Exception unless the group practice meets new, more demanding clinical integration requirements. The proposal raises the same issues and implementation challenges as were discussed above for the clinical integration approach to radiation therapy and Outpatient Rehab.
Reduction of Payment Rates for Self-Referred Tests
MedPac could recommend that CMS reduce payment rates under the MPFS for self-referred tests. This proposal responds to studies by MedPac and the Office of the Inspector General of the U.S. Department of Health and Human Services indicating that patients of physicians owning their own laboratories and imaging services receive significantly more tests on average. If this option is chosen, it would be necessary to determine the size of the payment reduction and whether it would apply to all diagnostic tests or only a subset such as advanced imaging or other high-cost tests that are not typically performed on the same day as an office visit.
Payment Policy Changes
MedPac is also considering addressing self-referral for diagnostic tests through payment policy changes and efforts to assure that Medicare payments accurately reflect costs. At its January and March meetings, MedPac discussed the option of bundling reimbursement for imaging or laboratory tests with reimbursement for other items and services that are part of an episode of care. For example, reimbursement for a patient visit for a knee injury and an x-ray of the knee could be a single payment.
Preauthorization Requirement for High Utilizers
At the March MedPac meeting, one commissioner suggested that the Medicare administrative contractors (MACs) could flag physicians who are high utilizers of advanced diagnostic imaging, certain expensive lab tests or other DHS and require them to obtain preauthorization from the MACs for such tests. Theoretically, this approach would identify outlier physicians who appear to be ordering medically unnecessary diagnostic tests without burdening physicians who appear to be following practice norms. This approach could also be applied to radiation therapy and Outpatient Rehab.
IV. Next Steps
MedPac is expected to issue a report in June fine-tuning its ongoing analysis of the menu of options for addressing perceived overutilization of radiation therapy, Outpatient Rehab, lab tests and diagnostic imaging by physician groups, but without a recommendation to adopt any particular approach. A subsequent MedPac report later in the year may include a specific recommendation that Congress or CMS adopt a particular approach in order to rein in Medicare spending. This timing makes it unlikely that Congress or CMS would implement any recommendation, if either so desired, prior to 2012 at the earliest. Based on the public discussions at recent MedPac meetings, it appears that the MedPac commissioners may be leaning toward an incremental approach to this issue out of a desire to balance patient convenience and the benefits of integrated care with the goals of preventing over-utilization and skewed clinical decision-making.