New Stark Regulations Spell Out Self-Referral Exceptions

On March 26, 2004, the Centers for Medicare and Medicaid Services (CMS) published the first version of the final Stark II regulations, called Phase II, which provides clarifications on compensation issues regarding physician referrals to facilities in which they have a financial interest. The Phase II regulations explain exceptions to the Stark rule and redefine key terminology.

The exceptions to the compensation requirements allow physicians to self-refer to facilities despite personal service agreements, space and equipment rentals, and employment and recruitment deals if specific criteria are met. The new regulations require that contracts and payments between parties be set in writing in advance, and that the payment must reflect fair market value and be separate from the volume or value of referrals. If the exact dollar amount for payments cannot be figured out before medical services are rendered, the new regulations allow percentage-based payments and per-unitof-service deals to qualify for the Stark exception if a formula for calculating compensation is agreed upon by all parties in advance and the services are personally performed by the physician.

“The rules that are now contained in both Phase I and Phase II of the regulations are so precise that one should assume that unless an arrangement is expressly covered, it is not permissible,” says Douglas M. Mancino, JD, partner at McDermott, Will & Emery in Los Angeles. “These rules are so prescriptive, especially in the preambles, that unless you are comfortable that an arrangement is covered, including how its interpreted by the preamble, you must be very cautious in proceeding with the arrangement.”

The Phase II regulation clarifies definitions of terms used in the Phase I rule. Referrals that fell under the Phase I Stark rule included requests by a radiologist for diagnostic radiology services, and requests by a radiation oncologist for radiation therapy, only when the request came from a consultation requested by another physician, and the tests or service is furnished by or under the supervision of a radiologist or radiation oncologist. The Phase II rule allows supervision to be provided by another pathologist, radiologist, or radiation oncologist in the same group practice.

In the Phase II regulations, CMS expands the definition of “radiology and certain other imaging services” for necessary radiology procedures performed during a nonradiological medical procedure. The exception now includes radiology procedures performed immediately after a nonradiological medical procedure to ensure proper placement of items during the medical procedure. CMS also added five bone density tests to the list of CPT/HCPCS codes for radiology services.

Other topics covered in the Phase II regulations include professional courtesy, bona fide charitable donations, retention payments in underserved areas, community-wide health information systems, and grace periods for temporary noncompliance.

“Many of these exceptions are under the discretionary authority that was granted to CMS, and are very welcome changes,” says Mancino. “CMS declined to adopt some recommendations for additional exceptions on the basis that it very narrowly construes its authority to make exceptions where there is any risk for increasing improper referrals.”

CMS will accept comments on the Phase II regulations until June 24, 2004, after which it will publish the Phase II regulations as a final rule, addressing questions and concerns from the first version. The requirements of the final Phase II regulations will go into effect on July 26, 2004.

“I think we’ll see more narrowly focused comments because they’ve addressed the bigger picture in this Phase II rule, and while there may be some fine tuning, I do not expect any dramatic or material changes,” says Mancino.

Study Suggests Need for Shorter Intervals Between Mammograms

Contrary to the widely accepted notion that yearly mammograms are sufficient to detect breast cancer, a new study that appears in the April 12, 2004, online issue of Cancer shows that it may be advisable for women carrying specific genes that accelerate breast cancer development to undergo more frequent mammography.

Researchers at Columbia-Presbyterian Medical Center, New York, found that women who carry the BRCA1 and BRCA2 genes are often at advanced stages of breast cancer before they visit their physician for an annual screening. Their study involved 13 women, aged 32 to 59, with the BRCA1 and BRCA2 genes. When examined in between their annual mammograms, six of the women had developed breast cancer, and four had already developed relatively advanced cancers that had spread to their lymph nodes. The average time that elapsed since the women’s last annual screening was approximately 5 months.

RADPEER Offers Clinical QA Approach

To meet the demands of the American Board of Medical Specialties’ maintenance of competency (the level of safety and skill expected from physicians), the American College of Radiology (ACR) conducted a study to assess the success of a peer-review system that would help standardize the image-analysis process among radiologists, and therefore help maintain high skill and competence levels when treating patients. The results of the study, which was conducted in 2002, were published in the January 2004 issue of the Journal of the American College of Radiology.

For the study, the ACR created RADPEER, a group of radiologists who served as a patient safety task force by evaluating maintenance of competency, and practice-based learning and improvement, through peer-review. RADPEER radiologists stated that a successful peer review program must be accurate, facile, nonpunitive, national, uniform in structure and functional across practices, and able to be integrated into a facility’s quality assurance program. This idea resulted from RADPEER’s notion that every time a new imaging study is interpreted with an older study for comparison, a peer review of the older study is occurring, therefore, if there were a standardized method to evaluate the accuracy of the images, there would be less discrepancy in interpretation, resulting in optimal patient treatment; a high quality of protocols and services would be assured.

Twenty facilities agreed to participate, of which 14 actually submitted data. RADPEER radiologists only considered patients who had prior images of the same areas that needed to be reviewed again. A four-point scale was used to interpret the original diagnoses:

  • “concurrence” equaled rating 1
  • “difficult diagnosis not ordinarily expected to be made” equaled rating 2
  • finding that a rediagnosis should be made most of the time equaled rating 3
  • “misinterpretation of findings or a requirement of rediagnosis every time” equaled rating 4

The RADPEER team reviewed the original interpretations of the patient images and gave each a rating on a card. All cards pertaining to images that received either a 3 or 4 rating were mailed to the ACR for tabulation.

RADPEER radiologists looked at images on all types of modalities, including plain film, ultrasound, computed tomography, and interventional radiology. All comparisons of the ratings were made relative to images from the same facility to address the issue that substantial disagreements and misinterpretation rates existed across facilities. During the year that the data was collected, 20,286 cases were submitted by more than 250 radiologists.

The results of the study showed that 1.7% of the CT cases reviewed received a 3 or 4 rating and 5.49% received a 2 rating, which were the highest percentages of misinterpretation and difficult-case disagreement and the farthest from the overall averages of 0.8% and 2.9% within a specific modality. For MRI cases, 1.19% received a 3 or 4 rating, and 4.93% received a 2. Within the plain film modality (the largest modality with 9,899 cases), 0.65% of cases received a rating of 3 or 4. The results also showed that the size of a facility had no significant impact on the disagreement rate.

Overall average misinterpretation rate for all radiologists (rating of 3 or 4) was 0.8%, and the average disagreement (rating 2) was 2.9%. The paper included a sample feedback report that provided statistics for each radiologist in all participating facilities.

Researchers felt that the pilot study of RADPEER was successful, however, they noted existing problems that make implementing this type of system as a standard part of radiologists’ reporting protocol. The study stated that noncompliance with the RADPEER program was a substantial problem, and that a shortage of radiologists and decreased payments per service were reasons why radiologists were deterred from using processes that increase their workload or accrue even minimal costs.

Though researchers stated that the RADPEER experiment results should not be taken as an industry standard, they assessed that it begins to address the need for radiologists to adopt a protocol standard throughout the field.

An Alarming Trend: Radioactive Patients

Cancer patients who have been injected with radioisotopes and patients who have undergone thallium stress tests are setting off radiation-sensing devices used by the federal government to hunt down radioactive “dirty bombs,” according to a story appearing in the April 21 issue of The Wall Street Journal. Instead of leading federal investigators to terrorists, the devices are frequently leading investigators to smoke detectors, trucks carrying radioactive pharmaceuticals, radioactive kitty litter (from cats being treated for cancer), and, in increasing numbers, patients who have been treated with medical isotopes. According to the story, approximately 16 million radioactive diagnostic-imaging procedures are performed each year, and one out of every 1,500 Americans is stopped by authorities for emitting radiation due to a medical procedure.

In December, medical licensees that regulate the isotopes received notices strongly suggesting that physicians give patients written evidence that they received such medical treatments to protect patients from unwarranted suspicion.

HIPAA: Compliance Rates One Year Later

April 14, 2004 marked the 1-year anniversary of the implementation of the Health Insurance Portability and Accountability Act (HIPAA) final privacy rule. To gauge its success and assess the status of HIPAA-compliant procedures throughout the health care industry, the American Health Information Management Association (AHIMA) conducted a survey of hospitals and health systems about their experience in achieving HIPAA compliance. Results were published in a report called “The State of HIPAA Privacy and Security Compliance.”

AHIMA received 1,192 survey responses, of which 23% felt their facility was fully compliant with HIPAA, and 68% felt their facilities are currently 85% to 99% compliant.

According to the survey, the four most noted challenges facilities faced with compliance were accounting for release of protected health information (39%), obtaining protected health information from other providers (33%), access and release of information to relatives or significant others (32%), and business associate requirements (25%). Although it ranked as the number one challenge, when questioned how often an accounting for release request was encountered, 72% of respondents reported that they have not received any requests for an accounting for release of protected health information.

Fewer than 45% of the responding facilities confirmed having a full-time employee dedicated to HIPAA-related duties. Most stated that privacy responsibilities fell upon the director or manager of health information management professionals. The majority of respondents, however, reported having both a security task force (82%) and a designated security officer (80%); 57% said security is enforced by information systems or information technology personnel.

The report also showed that new software and systems resources were needed in more than half of the facilities surveyed to carry out HIPAA-related functions, such as accounting for disclosures (55%), privacy notice acknowledgement tracking (32%), admissions/registration (31%), and patient accounting/billing/collections/ claims (31%). Eight percent of respondents stated their facility had a budget of more than $100,000, while 34% of respondents indicated that their facility had no budget for acquiring any needed technology.

Fifty-one percent of respondents indicated that accounting for the release of protected health information was the biggest problem within the HIPAA rule, and respondents felt this aspect of the rule was the major issue that needed to be modified by the federal government. Other areas seen as issues to be modified included businesses associate requirements (20%), and access and release of information to relatives or significant others (18%).

Through the questioning process, AHIMA found that several practices and business were discovering existing errors while trying to implement HIPAA regulations. Internal errors centered around the lack of standardized processes for releasing information and public access to personal health information.

Overall, based on the survey results, AHIMA noted that the status of HIPAA compliancy was positive after 1 year of implementation, even though some issues were still being addressed.

Estimated Changes in Payment per Service for Radiologists: 1992 to 1999

Are radiologists working harder to stay in place? According to data generated by the American College of Radiology and published in Radiology, the answer is yes. Christopher Hogan, PhD and Jonathan H. Sunshine, PhD, evaluated financial ratios in diagnostic radiology practices and trends in ratios and payments based on 449 responses to a survey mailed in 1999. Payment collections declined dramatically, with gross collections rate dropping from 71% to 55%, suggesting that radiologists are collecting roughly half of all billed charges. The average payment for a radiology service decreased about 4% in dollar terms, but a whopping 19% in inflation-adjusted terms.The authors attributed 40% of the decline in collections to changes in insurer behavior, including partial payment, nonpayment, claims denial, and requiring increasing levels of documentation. The remainder was attributed to reductions in insurer’s allowed amounts or fee schedules. Why have not radiologists felt the precipitous decline? The authors speculated that radiologist income has been bolstered by another trend supported by previously published data indicating that workloads during the same period increased an average of 28%.

Reprinted with permission: Hogan C, Sunshine JH. Financial ratios in diagnostic radiology practices: variability and trends. Radiology . 2004;230:740-782.

Industry News

Siemens Medical Solutions , Malvern, Pa, has received 510(k) clearance for the Somatom Sensation 64″ and Somatom Sensation Open”. The Somatom Sensation 64 provides 64-slice submillimeter imaging per rotation and a gantry rotation time of 0.37 seconds; the Somatom Sensation Open is a 16-slice CT system. Additionally, Siemens entered into an agreement with HipGraphics Inc , Towson, Md, to further develop the InSpace 3D medical imaging software. InSight Health Services Corp , Lake Forest, Calif, received a Bronze California Team Excellence Award (CTEA) and two honorable mentions from the California Council for Excellence in its 2003 competition. The CTEA program recognizes corporate teams that provide innovative solutions and process improvements for their companies. Varian Medical Systems Inc , Palo Alto Calif, has acquired the assets of OpTx , Denver, a privately held supplier of software for medical oncology practices, for $18 million& The Society for Computer Applications in Radiology (SCAR) has launched the SCAR Expert Hotline, a new online resource at hotline is a question and answer resource, where searching and viewing are free, but nonmembers are required to pay a fee for posting questions. Barco , Belgium, recently expanded its North American BarcoView facility in Duluth, Ga, into an 88,000-square-foot facility. In addition, the company has extended the availability of its DuraLight® long lifetime backlight technology for its LCD monitors to include a ClearBase version in addition to BlueBase. Sectra , Linköping, Sweden, has received the 2004 Frost & Sullivan Medical Imaging Company of the Year award&The Greater Omaha Chamber of Commerce, Omaha, Neb, and KPMG LLP, a member of KPMG International, Sweden, named Cassling Diagnostic Imaging , the second-fastestgrowing-company in Omaha in 2004; Cassling was ranked 23rd in 2003& SourceOne Healthcare Technologies Inc , Mentor, Ohio, acquired C X-Ray , Paramount, Calif, expanding SourceOne’s coverage in Southern California and Nevada& Voxar , Edinburgh, Scotland, has been granted a US patent for displaying image data using automatic presets (Active Presets), present in Voxar’s flagship product, Voxar 3D. Summit Partners , Boston, announced a $25 million investment in NightHawk Radiology Holdings Inc , Coeur d’Alene, Idaho, a provider of off-hour, overnight teleradiology services& General Electric Co , Fairfield, Conn, has been ordered into antitrust mediation by the Tenth Circuit Court of Appeals in the lawsuit brought by Medical Supply Chain Inc , Blue Springs, Mo, which challenges current restrictions in entering the hospital supply market. MedAssets HSCA, St Louis, in conjunction with its affiliate Radiology Partners Inc ,Tampa, Fla, and 3d Health Inc , Chicago, have signed an agreement to launch 3dSTAT”, a comprehensive, patient satisfaction, benchmarking database for imaging centers in the United States. McKesson , San Francisco, was ranked the number-one PACS vendor in the February 2004 Market Intelligence report conducted by MD Buyline Inc , Dallas. McKesson was honored for system performance, installation/implementation, applications training, service and support, and product flexibility. The American Society of Radiologic Technologists and Philips Medical Systems , Andover, Mass, will partner to provide radiologic technologists access to the Philips Online Learning Center at . The center provides more than 100 online continuing education products. Philips also worked with ImTek Inc , Knoxville,Tenn, to include single photon emission computed tomography (SPECT) in ImTek’s MicroCAT” laboratory animal x-ray CT product line. The enhanced MicroCAT platform, distributed by Philips, can be configured for x-ray CT, SPECT, or dual-modality imaging. Planar Systems Inc , Beaverton,Ore, has launched Fat to Flat, a trade-in program to encourage health care facilities to upgrade from cathode-ray tube (CRT) diagnostic imaging monitors to Planar’s Dome” CX line. From April 19, 2004, to July 16, 2004, hospitals can trade in 2-megapixel or higher gray-scale analog display controllers to receive special incentive pricing on dual sets of Dome C3 3-megapixel and Dome C5i 5-megapixel gray-scale flat-panel displays.


Sir William Castell

In a major reorganization of GE Medical Systems, Milwaukee, the company announced that Sir William Castell , former chief executive of Amersham plc, United Kingdom, will serve as president and CEO of GE Healthcare, London, the new $14 billion business resulting from GE Medical Systems’ acquisition of Amersham. Joe Hogan , former president and CEO of GE Medical Systems, will be president and CEO of GE Healthcare Technologies, an $11 billion division of GE Healthcare that includes GE’s medical imaging and information technologies. Peter Loescher , former chief operating officer of Amersham, will be named a GE officer and will manage the newly created $3 billion GE Healthcare Bio-Sciences business, which will consist of the former Amersham operating units. Approximately 42,000 employees will be part of GE Healthcare, which is the first GE business to have its headquarters overseas. The Amersham acquisition is intended to expand GE’s presence in imaging, diagnostic pharmaceuticals, and drug discovery. During a recent teleconference, Hogan explained that the vision for the new GE Healthcare business is to provide “personalized health care” to patients and health care providers by enhancing the ability to predict and diagnose disease… Robert J. White has been named CEO and senior vice president of SourceOne Healthcare Technologies, Mentor, Ohio. White is responsible for managing the day-to-day business of the company in the areas of manufacturing and operations, service, sales, marketing, and customer care…Agfa-Gevaert, Mortsel, Belgium, announced that John Glass has resigned from the Board of Management, while three new general managers have joined the company: Philippe Houssiau for the HealthCare business group, Eddy Rottie for the Consumer Imaging group, and Stefaan Vanhooren for the Graphic Systems group… John Macko has joined Dunlee,Aurora, Ill, as product marketing manager. He is responsible for implementing product marketing programs for core and third-party businesses.

Presented at SIR, 29th Annual Scientific Meeting of the Society of Interventional Radiology, Phoenix, March 25-30

The recent SIR meeting featured a day-long symposium entitled “Outpatient IR:Time to Roll.” The consensus of all presenters was that the regulatory and reimbursement climates favor using the physician office model as opposed to an ambulatory surgical center model for non-hospital-based outpatient interventional services. The following report was based on presentations from that symposium.

Outpatient IR:What,Where, and Why? Robert Min, MD, urged all those interested in offering outpatient interventional services to first answer three basic uestions: What services will you provide, where will you set up office space, and why are you doing this? Services to consider include patient consultations, both before and after the service is performed; diagnostic imaging, including MR, CT, and ultrasound; and the type of interventional procedures you want to perform. In determining whether you will be hospital based or freestanding, Min noted that although the former would be quicker, there is better opportunity to maximize the efficiency of the layout in a freestanding site, and layout will have a big impact on profitability.And while a freestanding site would be more expensive initially, Min said that longterm costs as well as costs to patients would be lower. Min speculated that a large part of why an interventional radiologist would want an outpatient business is to gain “better control of the patient care process,” by going out and capturing some patients. “I firmly believe a lot of freestanding facilities are ultimately easier to market,” he said. Other advantages of the freestanding model include: more pleasant atmosphere; easier access; greater staff accountability; and the potential for lower turnover.

Outpatient Safety Issues and Equipment. Keen attention to patient safety is a prerequisite of establishing an outpatient interventional site, and Curtis Bakal, MD, provided an overview of the issues that pertain to safety in a freestanding site. The two primary components of outpatient safety are: local regulations, including state and city health codes; and what is best for the patient. Bakal strongly urged all of those present to base safety protocols on those used in the hospital, as they are far more exacting than regulations devised for office-based medicine. “Many states have no regulations for office patient safety,” noted Bakal. “A private office is different than operating as an ambulatory surgical center, and mandatory regulations will depend on how you classify yourself. In New York State, surgery performed in a private office is not subject to regulation. Restaurants and hot dog vendors are more regulated than office practices in New York State.” Medical safety standards and processes should address all potential sources of risk to the patient, including but not limited to: allergies to contrast and medications; patient risk factors; procedural risk; freestanding setting/lack of backup electricity; anesthesia; and equipment, such as MR scanners and their magnetic fields. It is important to equip the office for all foreseeable events and to develop a written protocol for a transfer agreement with a hospital. Egress and ingress for stretchers and wheelchairs must be ensured. Additional measures include the development of: a policies and procedures manual, including sections on radiation safety, necessary laboratory testing for each procedure, IV injection, conscious sedation (port standard from hospital to center); and infection Control Policies and Procedures, including a policy for the disposal of sharps and other medical waste.

Marketing Outpatient Interventions. The success of a freestanding outpatient imaging center revolves on its ability to attract patients, and marketing can play a key role, according to Diane Schnitzler, RPh. If services offered will include those for which consumers self-refer, such as venous ablation and uterine artery embolization, the program should include consumer as well as referring physician components. Tactics to reach referrers, such as letters, personal visits, and grand rounds, are well known to radiologists. Consumer advertising is less well understood, but can be very effective, Schnitzler said.A minimum consumer program should include a web site presence, a Yellow Pages listing, and phone coverage in the office. The society has developed a series of new advertisements as well as broadcast footage for consumer advertising. Schnitzler offered some budget examples of advertising media, including: $1,500 for a half-page full color in a city magazine; $250 for a community newspaper; $500 for a mall kiosk; and $1,500 a month for two radio spots a day during morning and afternoon drive time. Schnitzler urged attendees to track where business comes from, and suggested using these helpful techniques:

  • Send a letter to all referrers, including the primary care physician of all self-referred patients
  • Schedule lunch and learn sessions with referrers
  • Establish relationships with dermatologists: they do schlerotherapy, you do vein work
  • Rent a booth at local health fairs

Cheryl Proval