States Join Federal Government in Heightened Scrutiny of Self-Referral

Complying with federal Stark laws may seem straightforward for most imaging center operators, but compliance with Stark does not translate into compliance with other state and federal anti-kickback laws.

Federal investigators are looking at a chain of medical imaging centers in Florida that is suspected of three types of fraud: upcoding, billing for medically unnecessary services, and billing for services rendered or ordered by others with whom there was a financial relationship not protected under the federal Stark II law. The recent publicity of the case may have other centers scrambling to rectify problems, according to two attorneys specializing in health care.

“It is one of those situations where the government discovers a situation, either through its own resources or more commonly through a whistleblower, and they will act aggressively,” says Norton L. Travis, a founding partner of the law firm Garfunkel, Wild and Travis PC, Great Neck, NY. “[This case] has certainly received a great deal of notoriety. I suspect it will wake up prosecutors in other regions to consider whether these kinds of arrangements are lawful.”

Douglas Mancino, JD, of McDermott, Will and Emery, Los Angeles, agrees there could be an increase in resources to monitor compliance with the law, on both a state and federal level.

Following the news of the Florida investigation, the Louisiana State Board of Medical Examiners released a statement regarding its position on self-referral in June, emphasizing that if a provider is caught in violation of Stark laws, it could face disciplinary action by the board.

Travis says a state medical board releasing such a statement is “pretty unusual, but it may be a more formal affirmation of what already exists.”

“I would be surprised if somebody would lose their license,” Mancino says, adding that state boards that do investigate and find unethical behavior may follow their own procedures.

The Stark law, a provision of the Omnibus Budget Reconciliation Act of 1989, governs self-referral from physicians in a position to order diagnostic and other ancillary services and is intended to prevent them from gaining an economic benefit from those services. There are exceptions to this law, Travis says. The most common is the in-office ancillary services exception, allowing members of a physician group to refer patients for designated health services to facilities owned or operated by the group practice.

In order to use that exception, a physician or group must meet certain criteria: the equipment to be used must be located in the same building as the referring physician’s office; and the test must be done by a member of the same group or the referring physician, or be overseen by the referring physician.

Investigators in the Florida case are looking into allegations of the radiology center being leased to referring physicians in order to meet the above Stark requirements.

In December 2004, the Office of Inspector General (OIG) released an advisory dealing with contractual joint ventures. In it, Travis says, “even if you meet the Stark bill’s technical requirements, that does not mean you do not have a potential problem under the federal anti-kickback laws. Some arrangements, even though Stark compliant, implicate anti-kickback problems because the form of the kickback is giving up a revenue stream that you already had to someone where there is no real joint venture.

“Ever since that OIG advisory, I would say that, at least in our experience, these kinds of lease arrangements are being looked at much more carefully,” he says. “These arrangements are fewer and far between as opposed to prior to issuance of that advisory.”

It Is Elemental Brain Science, My Dear Watson

Radiologists really are in a league of their own.

A study published in the September 2005 issue of Radiology shows that when looking at radiologic images, radiologists experienced enhancement in the neuronal activation of the brain. Nonradiologists, on the other hand, did not have an equivalent experience. The subjects were shown radiologic and control images, half of which were manipulated. Subjects had to indicate which of the images was original or manipulated while an event-related MR imaging machine was used to assess neuronal activity.

Authors Sven Haller, MD, MSc, and Ernst W. Radue, MD, found that radiologists showed peak activation in the bilateral, left-dominant, more posterior superior and inferior parietal lobule. Nonradiologists showed peak activation in the right-dominant, more anterior superior and inferior parietal lobule, and postcentral gyrus.

Because the left hemisphere of the brain is more involved in mental rotation of more complex stimuli, and the superior and inferior parietal lobule has been associated with attention and spatial working memory, the authors theorize that experienced radiologists tend to create a mental picture of a presented image, readily using spatial working memory, which allows them to mentally rotate images.

CMS Proposal Would Reduce Payment for Contiguous Body Part Imaging

The Centers for Medicare and Medicaid Services (CMS) is proposing to change the Medicare physician fee schedule, hospital outpatient prospective payment system, and ambulatory payment categories beginning January 1, 2006, using a recommendation from the Medicare Payment Advisory Commission.

The proposal, published in the August 8 issue of the Federal Register, seeks to reduce the technical component payment for multiple imaging services done on contiguous body parts. CMS says it will pay 100% for the highest value procedure, and 50% for any following procedure. The reduction will affect 11 fields, including ultrasound, CT, CTA, MRI, and MRA. The change does not affect the professional component payment.

“What they are saying is that you are not doubling your expenses for that second procedure, but 50% is an arbitrary number,” says Christie James, MS, billing manager for radiology at the Massachusetts General Physician’s Organization. “We do not agree with that.”

James says each of the procedures should be evaluated individually to determine the relative value unit (RVU) so physicians can be paid fairly for the work they are doing.

“The proposed reduction is based on the assumption that there are economies of scale in the technical component when procedures in the same family are performed in the same session,” the American College of Radiology, Reston, Va, said in a statement. “The ACR does not agree with these assumptions and will provide extensive comments to CMS addressing its concerns.”

Shaw Farley, public relations manager for ACR, says they will not comment further until the official comment period in September.

If this proposal passes, providers will take a significant economic hit. Not only would Medicare and Medicaid adopt the payment schedule, but insurance companies likely would adopt the same policy.

“As soon as CMS gets the go-ahead to do it, and it is approved by Congress, then Blue Shield is going to do it as of January 1,” James says. “Radiology is like a cash cow for the hospitals, so all insurance companies are looking at this now because the volume or the utilization for radiology has skyrocketed.”

As for an actual number for loss of dollars, James says her hospital is working on getting that together.

If this proposal does pass, the effect on the business of radiology “would be catastrophic,” she says, “because other payors would follow. Everybody follows what Medicare is doing, and it would be a significant blow to anyone who owns the technical component of the radiology service. That would include stand-alone imaging centers and hospitals.”


In the August issue of Decisions in Axis Imaging News, we published a technology review item regarding the Siemens ARTISTE system. It should be noted that the ARTISTE system is currently under development, requires Food and Drug Administration 510(k) clearance, and is currently not available for commercial distribution. We regret the error.

Industry News

The Food and Drug Administration has written a letter warning Hitachi Medical Systems America, Twinsburg, Ohio, about failing to report injuries and repairs made to its MRI machines. In 2004, Hitachi ordered repairs for its Altaire MRI, and issued updated software for all Altaire/Airis MRI systems…Siemens Medical Solutions, Malvern, Pa, has been granted FDA clearance for its ARCADIS Avantic mobile C-arm system…Pinnacle Asset Management, Bloomington, Ind, has invested between $200,000 and $400,000 into Bloomington-based Morris Innovative Research, a medical device company that is developing an arterial closure device for patients being treated for coronary or vascular disease…The American College of Radiology, Reston, Va, has launched its new Medical Excellence in Diagnostic Imaging Campaign (MEDIC) Web site (, which provides up-to-date information, government reports, peer-reviewed studies regarding radiology, the steps it is taking to save taxpayers money in Medicare costs, and improving patient care through quality standards for advanced medical imaging…Medtronic Inc, Minneapolis, has been approved by European regulators to sell its drug-coated stent, Endeavor… Eastman Kodak Company, Rochester, NY, and Novadaq Technologies Inc, Toronto, have finalized an agreement where Kodak will be the sole US service provider for Novadaq’s SPY™ Intra-operative Imaging System used in heart bypass surgery…McKesson, San Francisco, has honored Concord Hospital, Concord, NH, with one of its McKesson VIP Awards for outstanding vision, innovation, and performance in health care IT. Concord Hospital implemented the Horizon Medical Imaging™ PACS in conjunction with the HorizonWP® Physician Portal to provide more than 300 community physicians with Web access to images…Royal Philips Electronics, Andover, Mass, and RaySearch Laboratories AB, Stockholm, are working together to develop advanced image guided and adaptive radiation therapy solutions. …The US Patent Office has issued an official notice of allowance to BSD Medical Corp, Salt Lake City, for a patent for a disposable device that will enable the simultaneous use of brachytherapy and microwave hyperthermia therapy with BSD’s existing systems…Siemens Medical Solutions, Malvern, Pa, donated $1.5 million to the Damon Runyon Cancer Research Foundation to help address the shortage of physicians performing translational research…Quest International Inc, Irvine, Calif, has signed a reseller agreement with Sony Electronics, Park Ridge, NJ, to provide customers nationwide with Sony medical products.


Lennard D. Greenbaum, MD

Lennard D. Greenbaum, MD, has been named 2005-2007 president of the American Institute of Ultrasound in Medicine, Laurel, Md…The American Healthcare Radiology Administrators (AHRA), Sudbury, Mass, along with GE Healthcare, Waukesha, Wis, announced the recipients of several awards during its annual meeting in San Antonio in August. Bobbi Miller, radiology administrative director at Toledo Hospital, Toledo, Ohio, received the 2005 AHRA Gold Award. Recipients of the 2005 Award of Excellence include: Carla J. Antley, director of radiology and ancillary services at Kelsey-Seybold Clinic, Houston; Gerry Durney, administrative director of radiology at Lenox Hill Hospital, New York; Cheryl Poretti, radiology technical supervisor at Sutter Gould Medical Foundation, Modesto, Calif; Audrey Seals, diagnostic imaging manager at MD Anderson Cancer Center, Houston; and Terrie Sue Stinson, Columbia, Tenn. Also announced at the annual meeting were the AHRA Education Foundation Royce and Paula Osborne Scholarship winners: Tina Murray, Illinois; Rose Marie Nadolinski, New York; and Craig Freeman, Iowa…Radlink Inc, Torrance, Calif, has named a new management team: Thomas T. Hacking, chairman and chief executive officer; and Glenn Crosse, vice chairman of technology. They join Richard Gerlach, co-founder, chief scientist, and Radlink president, and Douglas Gerlach, director of special projects…Kip Hallman has been appointed executive vice president and chief strategy officer for InSight Health Services Holdings Corp, Lake Forest, Calif.