Jason Caron, Esq

On November 2, 2010, the Centers for Medicare and Medicaid Services (CMS) issued its prerelease of the final 2011 Physician Fee Schedule (the “Rule”). Significantly, among its revisions are the regulations implementing Section 6003 of the Patient Protection and Affordable Care Act (PPACA) concerning the physician self-referral provisions of Section 1877 of the Social Security Act, commonly known as the “Stark Law.” Specifically, the Rule sets forth the disclosure requirement for certain imaging services provided under the umbrella of the In-Office Ancillary Services Exception to the Stark Law.

In sum, many physician practices that also provide positron emission tomography (PET), CT, and MRI will need to disclose, in writing, to patients that they can receive the same services from other providers. This new disclosure requirement took effect on January 1, 2011—1 year later than the potentially retroactive effective date of January 1, 2010, specified in PPACA.

Background on the Stark Law

The Stark Law prohibits payment of Medicare or Medicaid claims submitted by a physician (or on that physician’s behalf) if: (1) the physician has made a patient “referral,” as defined by the Stark Law and CMS’s regulations; (2) the patient referral was made to an entity for the purpose of furnishing a “Designated Health Service” (DHS), including many imaging services; (3) the physician or a member of the physician’s immediate family has a financial interest in the entity to which the patient has been referred; and (4) the financial relationship does not comply with one of the exceptions set out in the Stark Law (eg, the In-Office Ancillary Services Exception).

Jason Christ, Esq

Penalties under the Stark Law are very severe and include: (1) the denial of payment and an obligation to refund payments made as a result of a tainted patient referral; (2) civil monetary penalties of up to $15,000 for each service that a person knows or should know violates the Stark Law; (3) civil monetary penalties of up to $100,000 for schemes to circumvent the Stark Law; (4) possible exclusion from the Medicare and Medicaid programs; (5) the imposition of up to three times the amount for each item wrongfully claimed; and/or (6) potential liability under the Federal False Claims Act.

The In-Office Ancillary Services Exception

The In-Office Ancillary Services Exception to the Stark Law is widely used by the imaging services industry and permits a physician in a solo or group practice to order and provide certain DHS, which includes imaging, provided that certain specific practice, location, and billing requirements are met.

To fit within the In-Office Ancillary Services Exception prior to January 1, 2011, Designated Health Services must be: (1) furnished by the referring physician, a member of his group, or an individual who is supervised by a physician in the group; (2) furnished to patients in a central building that functions to house the medical group’s ancillary services (centralized building test) or in the same building where referring physicians provide their services (same building test); and (3) billed by one of the following: (i) the physician providing or supervising DHS, (ii) the group practice in which the physician providing DHS is a member (or the group practice if the supervising physician is a physician in the group practice)

Jason Caron, Esq, and Jason Christ, Esq, are Associates in the Health Care and Life Sciences Practice with EpsteinBeckerGreen in the Washington, DC, office. For information about EpsteinBeckerGreen, a national law firm, visit www.ebglaw.com.