Utilization rules should target self-referral

March 1, 2006

It is no surprise that the Centers for Medicare and Medicaid Services would recommend to the U.S. Congress that steps be taken to reduce Medicare spending for diagnostic imaging services. Data collected by the Medicare Payment Advisory Commission (MedPAC), the Blue Cross/Blue Shield Association, and others clearly demonstrate that utilization and costs of imaging services have increased dramatically. But the cuts imposed by the Deficit Reduction Act, and by CMS in its rulemaking, are far off target-right diagnosis, wrong treatment.

It is no surprise that the Centers for Medicare and Medicaid Services would recommend to the U.S. Congress that steps be taken to reduce Medicare spending for diagnostic imaging services. Data collected by the Medicare Payment Advisory Commission (MedPAC), the Blue Cross/Blue Shield Association, and others clearly demonstrate that utilization and costs of imaging services have increased dramatically. But the cuts imposed by the Deficit Reduction Act, and by CMS in its rulemaking, are far off target-right diagnosis, wrong treatment.

In consultation with CMS, Congress effectively scrapped the Resource-Based Relative Value Scale methodology for diagnostic imaging services, reducing the technical component value of nonhospital imaging services to the lesser of either the Medicare physician fee schedule or the ambulatory payment classification. The same is true for the multiple imaging procedure cuts. This is an arbitrary, misdirected approach to curtailing utilization.

The real culprit in climbing costs is self-referral of imaging studies and the need for CMS to address the conflict of interest created by referring physicians' investments in imaging equipment to which they refer patients. The CMS arsenal contains tools that could be imposed without an across-the-board technical component reduction.

IN-OFFICE EXCEPTION

When CMS amended its rules to make nuclear medicine a designated health service under the Stark rule, effective next year, the agency noted the phenomenal increase in the utilization of diagnostic imaging. CMS cited with approval peer-reviewed studies that demonstrated that total billing for imaging services decreased dramatically when steps were taken to prohibit nonradiologist specialists from billing for imaging services. Unfortunately, the decision made by CMS to make nuclear medicine subject to the Stark anti-referral rules did nothing to contain the principal source of the increased utilization of nuclear medicine services-namely, self-referral. Because nuclear medicine and all other designated health services can be performed in referring physicians' offices under the in-office ancillary service exception, growth in utilization of in-office imaging services will continue unabated despite the change in the rules.

The only way to contain self-referral is to address the in-office exception. Since it is politically and practically unrealistic to expect an outright repeal of the in-office exception, CMS should consider affirmative steps to address the unwanted performance of in-office imaging services.

ORDERING TEST RULES

Medicare regulations at 42 C.F.R. 410.32 state that a diagnostic test performed in the nonhospital setting is considered reasonable and necessary if ordered by the treating physician. If a treating physician orders a diagnostic test that is performed and billed by his or her own group practice, Medicare must pay for the service, provided the medical group supplies the right diagnostic code on the 1500 claim form. CMS needs to rethink the ability of physician groups to order diagnostic tests to be performed in their own practice free of any oversight. For imaging services such as MR, CT, and PET, CMS should consider taking the lead from private payers. CMS could contract with utilization management companies, as many large private payers are doing, to require preauthorization of self-referred in-office MR, CT, and PET studies before they can be performed and paid for under the Medicare program. Precertification would be targeted only to those group practices of physicians that rely on the in-office exception. The infrastructure is in place for such utilization review. CMS should move quickly in this direction or at least conduct demonstration projects that would measure the effect such an action could have on the unrestricted growth of self-referred in-office imaging studies.

QUALITY STANDARDS

Medicare beneficiaries can expect to receive high-quality imaging services in almost all settings, save one. Radiology services performed in hospitals, radiologists' offices, radiology/hospital joint ventures, and independent diagnostic testing facilities (IDTFs) are provided under the overall direction and control of board-certified radiologists. Those who receive services in these settings are assured of high-quality imaging.

The glaring outlier in terms of quality is the physician office that is owned and operated by nonradiologists. If CMS took the regulatory step of requiring physician offices that make use of in-office ancillary radiology services to comply with the same quality requirements as IDTFs, many providers who perform unnecessary and poor quality imaging studies on their own patients could be prohibited from doing so.

In fact, CMS should do a better job in enforcing its own IDTF enrollment requirements. CMS has advised its carriers that physician groups which perform diagnostic tests on their own patients must enroll as IDTFs if the tests on patients are not interpreted where the patients are treated. Many nonradiology practices contract for offsite interpretations by radiologists. If CMS insisted that carriers observe its enrollment instructions, these physician offices should be complying with the same quality requirements as IDTFs.

ONSITE INTERPRETATION

When CMS published its new contractual arrangement reassignment rules, it reminded physician group practices that a physician who is engaged by the group as an independent contractor must provide their professional services, such as image interpretations, in the practice's facilities. This onsite requirement is necessary for that group practice to refer and bill for designated health services for Medicare patients when the professional component is provided by an independent contractor physician. While a number of group practices are trying to comply with this Stark requirement, too many groups believe the rule is obscure and will never be enforced. These groups want to bill globally and profit from the interpretation, even when the interpretation is not provided onsite. CMS should correct this misunderstanding. Only through enforcement will the reality of the need to fully comply with the Stark rules be understood.

END IMPROPER ARRANGEMENTS

Physician groups can lawfully contract with radiologists for second opinions, or overread services, to review studies the physicians have previously read and for which they have been paid by Medicare. But it is common for a physician group to bill for the technical and professional components of a radiology service, even when their physicians did not fully interpret the study. In these situations, the physician group does little more than note an impression of the study in the patient's medical record and, instead, contracts for overread services from radiologists. The actual interpretation relied upon for treatment of the patient is that of the radiologist, but the claim submitted is in the name and PIN of a physician group member who did not interpret the study.

Neither reassignment of benefits nor any effort to comply with the Stark requirements for onsite interpretations by an independent contractor has taken place. A variation of such overread arrangements is also being discussed in connection with coronary CT angiography interpretations when cardiologists want to bill for the professional interpretation of the studies, even though they have read only a portion of them. Radiologists are asked to perform an overread-actually a primary read-of the noncardiac portion of the study. CMS should take steps to rid the program of these potentially false claims by enforcing the certification statements on the 1500 claim form that the billing physician rendered the services being submitted for payment.

LEASE AGREEMENTS

The excellent reporting of the Wall Street Journal has put the spotlight on the abusive arrangements whereby referring physicians lease imaging services, bill for them, and profit from the referrals. When the agency advised in its Stark II, Phase I rule making that the "set in advance" requirements of the space, equipment, and personal services exceptions to Stark can be met by per-unit arrangements, the agency opened the floodgates to lease arrangements.

Although the Office of Inspector General has made clear its aversion to these arrangements, those that do not strictly follow the anti-kickback safe harbors are not necessarily unlawful. If CMS reversed its position on what is required for a lease payment to be set in advance and instead required aggregate payments and specific time intervals, these lease arrangements would largely go away. This simple modification of the rule would take away a major source of profit through self-referral.

ROOT CAUSE: SELF-REFERRAL

It is time for CMS to look hard at the root cause of increased costs and utilization of imaging services. The abuse lies in self-referral and the financial motives that prompt self-referral practices to proliferate. For Congress and CMS to attempt to treat this abuse by applying its surgery to all suppliers of nonhospital imaging services could result, unfortunately, in the withdrawal of high-quality imaging providers from the market and loss of access to these quality services. CMS has the tools in its arsenal to cure this problem by targeting the real culprit without causing unnecessary harm.

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.