Panel builds case for new self-referral limits

April 1, 2005

Self-referral is this year's hot radiology issue, and proposals by the Medicare Payment Advisory Commission addressing self-referral of imaging services will intensify and focus that debate. MedPAC, a panel that advises Congress on issues affecting the Medicare program, is making its recommendations at a time when Medicare watchdogs, payers, and other policy makers are taking note of the increased cost of diagnostic radiology services.

Self-referral is this year's hot radiology issue, and proposals by the Medicare Payment Advisory Commission addressing self-referral of imaging services will intensify and focus that debate. MedPAC, a panel that advises Congress on issues affecting the Medicare program, is making its recommendations at a time when Medicare watchdogs, payers, and other policy makers are taking note of the increased cost of diagnostic radiology services.

Much of this increase has been driven by self-referred imaging studies performed in physician group practice offices. Although self-referral in a physician's office is generally permitted, its pervasiveness has led the American College of Radiology to a call for a review.

The federal Stark Law and corresponding regulations prohibit a physician who has a direct or indirect financial interest (or who has an immediate family member with such a financial interest) from referring patients to a facility that provides certain health services that are reimbursable by Medicare. These include x-ray, ultrasound, MRI, CT, radiation therapy, and most other radiology services. As a result, Stark generally prohibits a physician from self-referring Medicare patients for radiology services to his or her own practice unless the service is covered by an exception. The one most commonly used by nonradiologist physicians such as orthopedists and cardiologists to self-refer for radiology services is called the in-office ancillary services exception.

Since orthopedists, cardiologists, and other nonradiology practices generally rely on the in-office ancillary services exception to protect referrals made to their own practices for radiology services, its possible repeal has generated much discussion. Those specialties have organized to oppose any effort by the ACR or others to weaken this exception. But other means are available to address the issue, and the MedPAC recommendations could play a large role in the upcoming debate over what, if anything, to do about self-referral.

MedPAC has been exploring strategies used by private insurance plans to manage the use and ensure the quality of imaging services, and it has examined the feasibility of fee-for-service Medicare to implement these approaches. MedPAC's six recommendations pertaining to imaging services were announced in January.

First, the panel recommends that Congress direct Health and Human Services, the federal agency that oversees Medicare, to use Medicare claims data to measure fee-for-service physician resource use. HHS would share the results with physicians on a confidential basis to show them how they compare with peer benchmarks or clinical guidelines. The goal of this provision is to encourage physicians who order more tests than the average to reconsider their practice patterns.

Second, MedPAC recommends that HHS improve Medicare coding edits that detect unbundled diagnostic imaging services and reduce the technical component payment for multiple imaging services performed on contiguous body parts. MedPAC contends that better coding edits would help Medicare pay more accurately for imaging services, thereby helping to control rapid spending growth and increases in beneficiary copayments. MedPAC cites private insurers' experience with such edits, which have reduced imaging spending by about 5% in some commercial plans.

Third, MedPAC recommends legislation allowing HHS to set standards for all providers who bill Medicare for performing diagnostic imaging services. HHS would select private organizations to administer the standards. MedPAC contends that such national standards should improve the quality of imaging services, thereby increasing diagnostic accuracy and reducing the need for repeat tests, although they have been unable to quantify associated savings.

Debate at the MedPAC meeting addressed whether the standards should cover the imaging equipment, nonphysician staff, image quality, supervising physicians, and patient safety. MedPAC decided against recommending individual components of the standards. Nevertheless, this recommendation represents an unusual attempt to involve the federal government in establishing standards for individual practitioners, a task that traditionally has been left to certifying or licensing boards. MedPAC believes the recommendation is justified in this case due to rising imaging utilization.

DESIGNATED PHYSICIAN IMAGER

The fourth set of MedPAC recommendations, for standards for those providers who perform or interpret imaging services, is aligned closely with a proposal from the ACR: the designated physician imager initiative. These quality recommendations, if enacted by Congress, would primarily affect imaging services performed in physician offices, one of the main sources of the increase in imaging utilization. Quality measures are already in place in acute-care hospitals, where credentialing largely assures the qualifications of those performing and interpreting imaging studies. Similarly, the qualifications of personnel in independent diagnostic testing facilities are set in Medicare rules.

MedPAC recommends that Congress direct HHS to set standards for physicians who bill Medicare for interpreting diagnostic imaging studies. Again, HHS would select private organizations to administer the standards. Variations in the quality of physician interpretations of imaging reports have been documented, and inaccurate interpretations or incomplete reports could lead to improper treatment, according to the MedPAC staff. Moreover, MedPAC seeks to apply these standards to physicians who use teleradiology to interpret imaging studies performed in a different location. MedPAC stripped from its recommendation more prescriptive language that would have required the interpreting physician standard to be based on the training, education, and experience required to properly interpret studies.

The fifth imaging recommendation addresses the Stark physician self-referral statute. MedPAC has voted to recommend that HHS include nuclear medicine and PET procedures under the Stark ban on self-referrals. Physicians would be prohibited from owning nuclear medicine facilities to which they refer patients, although they still could provide these services in their own offices under the in-office ancillary services exception. According to the MedPAC staff, physician investment in facilities that provide nuclear medicine services is associated with higher use. This recommendation is consistent with the HHS notice that it would propose amending Stark rule definitions of "radiology and certain other imaging services" and "radiation therapy services and supplies" to include diagnostic and therapeutic nuclear medicine services and supplies.

Finally, MedPAC recommends that HHS expand the definition of physician ownership under the Stark Law to include interest in an entity that derives a substantial portion of its revenue from a provider of designated health services. Physicians would be precluded from owning companies whose primary purpose is to provide services to facilities that are covered by the Stark prohibitions on self-referral. The MedPAC staff warned, however, that "if HHS closes off this type of financial arrangement, new ones will emerge that create similar incentives." They suggested that a long-term solution would involve determining the presence of "mispricing" for imaging services. If enacted, this action would affect many leasing company arrangements, in which referring physicians may not have a financial interest in an imaging center to which they refer patients but do have ownership in an entity that leases equipment and provides services to diagnostic imaging centers.

In other policy areas, MedPAC voted to recommend a 2.7% increase in Medicare physician payments in 2006 and an elimination of the sustainable growth rate formula, which has constrained the growth of the annual update to the Medicare physician fee schedule. These recommendations, and particularly those relating to imaging services, will be watched closely by those who represent the interests of radiologists.

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.