PACS can help reduce regulatory burdens

March 3, 2005

Radiology groups in growing numbers are entering into imaging joint ventures with hospitals. These are beneficial to both parties for many reasons, but all such joint ventures must address important strategic decisions. One is the choice of what Medicare enrollment status the joint venture will operate under. This choice is generally enrollment as an independent diagnostic testing facility (IDTF) versus radiology group practice. The latter is the better choice, in my view, but the requirements for onsite service by the radiologists can make qualifying for non-IDTF status difficult.

Radiology groups in growing numbers are entering into imaging joint ventures with hospitals. These are beneficial to both parties for many reasons, but all such joint ventures must address important strategic decisions. One is the choice of what Medicare enrollment status the joint venture will operate under. This choice is generally enrollment as an independent diagnostic testing facility (IDTF) versus radiology group practice. The latter is the better choice, in my view, but the requirements for onsite service by the radiologists can make qualifying for non-IDTF status difficult.

An agreement to reciprocally license radiology information system/PACS (RIS/PACS) capabilities can make non-IDTF status easier to achieve.

The IDTF is a regulatory creation that took effect in 1998. This designation was created by Medicare to clarify the structure and scope of diagnostic testing services provided by entities independent of a hospital or physician group. Any entity with IDTF designation, however, is subject to very specific regulatory requirements. Prior to enrollment, the local Medicare carrier conducts a site visit to the facility to verify that the entity meets these requirements;

The IDTF must have one or more supervising physicians who are responsible for the general supervision of the quality of testing performed, proper operation and calibration of the equipment used to perform the tests, and qualification of nonphysician personnel who operate the equipment. Unlike an IDTF, a radiology group practice is not required to designate a supervising physician in order to enroll in the Medicare program and provide diagnostic imaging services.

The supervising physician must be proficient in the performance and interpretation of each type of diagnostic procedure performed by the IDTF. The local Medicare carrier determines the criteria for demonstrating physician proficiency. In most localities, this means the Medicare carrier will not permit a nonradiologist or non-nuclear medicine physician to act as a supervising physician for the IDTF. A radiology group practice is not subject to the regulation's proficiency requirement.

Medicare will reimburse IDTFs only for the performance of diagnostic testing services and "[a]dditional services related to, or generally considered required for, performing a diagnostic test" if the additional services are performed by a qualified practitioner in accordance with all applicable coverage, payment, billing, and reassignment rules. A radiology group practice, in contrast, can be reimbursed for evaluation and management services, surgical services, or other physician services that are not related to or necessary for the performance of a diagnostic test.

CHOOSING NOT TO BE IDTF

Since enrolling as an IDTF brings no financial benefits over a radiology group practice, and an IDTF is required to comply with certain Medicare rules beyond those required for a radiology group practice, the question arises why an entity would voluntarily enroll as an IDTF. The answer is contained in the Medicare enrollment requirements. According to the Medicare Program Integrity Manual, any entity that primarily performs diagnostic testing and does so "independent of a physician office or hospital," must enroll as an IDTF in order to receive payment for its services.

The Medicare instructions also contain an important exception, however, which provides that a joint-ventured imaging center may elect to enroll as a Diagnostic Radiology Group Practice Clinic rather than an IDTF if it can demonstrate that it meets each of the following criteria:

- The entity is owned by radiologists, a hospital, or both. An imaging center jointly owned by a radiology group and a hospital would meet this requirement.

- The owning radiologist(s) and any employed or contracted radiologist(s) regularly perform physician services (e.g., test interpretations) at the location where the diagnostic tests are performed. The key to complying with this prong of the test is that the radiologists who are physically present at the joint-venture site perform the substantial majority of imaging center studies. Radiologists must regularly perform professional interpretations onsite at the imaging center. But nothing in the Medicare rules precludes the radiologist from also performing interpretations of studies performed at other locations, including the hospital, while onsite at the imaging center. Radiologists at the imaging center could perform reads for the hospital during downtime at the imaging center, and radiologists at the hospital can do the same with joint-venture-based images. The agreement described below facilitates that process.

- The billing patterns of the enrolled entity indicate that the entity is not primarily a testing facility and that it was organized to provide the professional services of radiologists (e.g., the enrolled entity should not be billing for a significant number of purchased interpretations, should rarely bill for only the technical component of a diagnostic test, and should bill for a substantial percentage of all interpretations of the diagnostic tests performed by the radiology group). To meet this requirement, the imaging facility would need to bill globally for both the professional and technical components of any diagnostic imaging services rendered for patients of the imaging entity. The joint venture would have to execute a professional services agreement with the radiology group whereby the radiologists agree to reassign to the center their rights to receive reimbursement. The joint venture, not the radiology group, would then bill globally under its own supplier number for all diagnostic tests performed for its patients.

- A substantial majority of the radiological interpretations are performed at the location where the diagnostic tests are performed. This is essentially identical to the requirement that the group's radiologists regularly perform physician services onsite at the imaging center.

RECIPROCAL LICENSING

Because there appears to be little if any benefit to enrolling the joint-ventured imaging center as an IDTF, the parties to the joint-venture should consider structuring operations of the center in a manner that would establish it as a radiology group practice. If radiologists can be onsite most of the time and perform interpretations of most of the joint venture's images onsite, IDTF status can generally be avoided.

Technology and creative contracting can facilitate this process. Radiologists can be scheduled to staff the imaging center in a manner to assure that most studies can be interpreted onsite. But to maximize the time of the radiologist, an agreement can allow offsite reads from the hospital while the radiologist is onsite at the joint-venture center, or vice versa. Under such an arrangement, the radiologists at the imaging center are authorized to receive electronically transmitted digital images from the hospital and access those digital images through the hospital's RIS/PACS.

To make this networking possible under the regulatory rules, the hospital, the joint venture, and the radiology group need to address the privacy and security issues associated with two unrelated entities sharing protected health information (PHI). They must agree that each would not use or disclose PHI and establish any safeguards to protect the privacy of PHI.

The agreement also clarifies that each party is not responsible for the maintenance, custody, supervision, or storage of any PHI of the other party, but only for PHI pertaining to its own patients.

By putting into place a reciprocal RIS/PACS license agreement, the joint venture can more easily meet the difficult radiologist onsite enrollment requirement, allowing it to avoid IDTF status. Using this approach, the joint venture can enroll as a radiology group practice, resulting in the same Medicare compensation. As a radiology practice, it can perform and be paid for various procedures not available to IDTFs and can avoid many burdensome regulatory issues.

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.