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Beware of precertifying procedures for referrers


A special feature on utilization management programs in the October issue of Diagnostic Imaging included discussion of one of the principal tools employed to tamp down overuse of diagnostic imaging services: preauthorization programs. I commented in that story about how I regularly hear from my clients that referring physicians demand "assistance" from the imaging provider in obtaining preauthorization from health plans.

A special feature on utilization management programs in the October issue of Diagnostic Imaging included discussion of one of the principal tools employed to tamp down overuse of diagnostic imaging services: preauthorization programs. I commented in that story about how I regularly hear from my clients that referring physicians demand "assistance" from the imaging provider in obtaining preauthorization from health plans.

Evidently, imaging providers sometimes cave in to those demands and do provide preauthorization assistance at no cost to referring physicians. Such assistance can range from giving the referring physician information necessary to obtain the preauthorization to actually contacting the utilization management company directly through the imaging center personnel to obtain the necessary approval.

By providing free preauthorization services to referring physicians, radiologists and their imaging centers court potential termination from health plans for failing to comply with their utilization programs, as do the referring physicians. Such action can also place both the imaging providers and the referring physicians at risk for governmental scrutiny for fraud and abuse.

The federal antikickback statute authorizes the government to impose criminal penalties on any person or entity who, knowingly and willfully, offers or pays any remuneration in an attempt to induce someone to refer patients for items or services that can be reimbursed under Medicare, Medicaid, or other federal healthcare programs. The term remuneration has been broadly defined by both the federal government and the courts to mean essentially anything that has value, including free services such as preauthorization.

In fact, the Office of Inspector General for the U.S. Department of Health and Human Services has repeatedly taken the position that providing a referral source with free services may equate to remuneration provided in violation of the antikickback statute. In a Special Fraud Alert published in 1994, the OIG addressed the issue of whether a clinical laboratory would be providing prohibited remuneration to a referral source if it placed a phlebotomist in a physician's office to draw and prepare samples for the lab.

The OIG observed in the alert that "[w]hile the mere placement of a laboratory employee in the physician's office would not necessarily serve as an inducement prohibited by the antikickback statute, the statute is implicated when the phlebotomist performs additional tasks that are normally the responsibility of the physician's office staff. These tasks can include taking vital signs or other nursing functions, testing for the physician's office laboratory, or performing clerical services."

Similarly, in a 2005 update to its Compliance Program Guidance for Hospitals, the OIG reminded hospitals and their medical staff members that "[a]rrangements under which hospitals (i) provide physicians with items or services for free or less than fair market value, (ii) relieve the physicians of financial obligations they would otherwise incur, or (iii) inflate compensation paid to physicians for items or services pose significant risk [under the antikickback statute]."

The "arrangements" the OIG is referring to are compensation agreements that can include, among other things, the provision of "billing, nursing, or other staff services." The OIG cautioned hospitals that "[a]lthough many compensation arrangements are legitimate business arrangements, compensation arrangements may violate the antikickback statute if one purpose of the arrangement is to compensate physicians for past or future referrals."

It is becoming increasing common for commercial payers to require by contract that referring physicians seek preauthorization for advanced imaging services they order, such as MR, CT, or PET. Payers actually vest the preauthorization responsibility with referring doctors to deter overutilization of services. The question that must be asked: What purpose is served when an imaging center relieves a referring physician of obtaining payer preauthorization? When that burden is relieved for private payers, there is a suspicion that a referring physician will steer all orders for diagnostic imaging services, including Medicare patients, to the imaging provider offering the preauthorization assistance.

In October, the OIG issued Advisory Opinion 06-16 regarding a proposal by a durable medical equipment (DME) manufacturer to provide its customers with reimbursement consulting services that would include reviewing claims for reimbursement, helping the customer appeal denied claims, and helping assess and document the medical necessity of products for particular patients. The OIG concluded that this type of assistance was valuable to a manufacturer's customers because it spared them costs they would otherwise incur to operate their business.

In the comments by the OIG in the opinion quoted below, if you substitute "referring physicians" for "DME suppliers" and "imaging centers" for "manufacturers," the potential applicability of the opinion to the provision of free preauthorization services becomes apparent:

"The Proposed Arrangement would give DME suppliers an incentive to steer patients to Requestor's products, even if products from other manufacturers were less expensive or more appropriate. Finally, the Proposed Arrangement poses a substantial risk of unfair competition, because Requestor's provision of remuneration would encourage DME suppliers to purchase DME from Requestor to the potential detriment of competitor DME manufacturers that do not provide similar unlawful benefits to their customers."

The OIG concluded that the reimbursement consulting services could conceivably be a form of remuneration or kickback for which the OIG could impose sanctions.

Various OIG statements indicate that the antikickback statute can be violated by providing free services to a physician that the physician would otherwise have to bear the costs of providing. It must be repeated that the antikickback statute would be breached if even one purpose of providing those free services is to induce the physician to generate referrals of patients using Medicare, Medicaid, or any other federal healthcare program.

Because payers also require the referring physician to obtain authorization, federal fraud and abuse enforcement authorities could view the act of providing a physician practice with preauthorization services at no charge as offering the physician something of value, or remuneration. Relieving them of this obligation reduces costs referring physicians would otherwise incur, not to mention the time and hassle associated with obtaining payer approval. In short, the nexus between the free services and patient referrals, including federal healthcare program beneficiaries, causes the antikickback statute to be implicated.


Arguing that the free services do not relate to federal healthcare program patients is not a defense. All that is required to implicate the statute is an offer to the physician of something of value; an imaging services supplier would not be protected from potential liability under the federal antikickback statute merely by restricting the scope of preauthorization services to non-Medicare, non-Medicaid patients. These free services could still be considered something of value to a referring physician, and, if the imaging provider receives referrals of federal healthcare program patients from that physician, the arrangement could easily be characterized by the government as a form of remuneration intended to induce those referrals.

Unfortunately, the pressures to accede to demands for "assistance" may continue until someone in the industry is publicly and visibly sanctioned. It is my fervent hope that private payers and utilization management companies will respond to the growing pressures imaging providers face by communicating in no uncertain terms that preauthorization assistance is not acceptable. If jawboning by the payers is not enough, they should take action against those who won't play by the rules.

In the meantime, radiology groups and other imaging providers-as well as referring physicians-must seriously consider the risk of antikickback enforcement action should they engage in the provision and/or receipt of free preauthorization assistance. My bottom line advice is, Just say NO!

Mr. Greeson is a partner in the healthcare group of Reed Smith LLP in Falls Church, VA. He can be reached at 703/641-4242 or tgreeson@reedsmith.com

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