Heightened Scrutiny of Self-Referring Physician Imaging Practices

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By Adrienne Dresevic, Esq., Clinton Mikel, Esq., and Carey F. Kalmowitz, Esq.

November 2012—Two recent government publications evidence heightened federal scrutiny of self-referring physician-imaging practices and Part B imaging services. Radiology practices should be aware of this newly released guidance.

GAO Report on Self-Referral of MRI/CT Imaging Services

On October 31, 2012, the United States Government Accountability Office (GAO) released a study detailing the results of a six-year analysis they had conducted regarding self-referral practices of physicians and group practices that own/lease/operate MRI and CT services. Self-referrals for MRI/CT services are often excepted from the reach of the Federal Stark Law through the “In-Office Ancillary Services Exception”. Note that the “In-Office Ancillary Services Exception” was amended by the Patient Protection and Affordable Care Act (PPACA) in a manner that made it more burdensome for non-radiologist physicians to utilize the exception for self-referring advanced imaging services. Importantly for radiology practices, in making its findings, which are primarily negative for physicians who utilize the “In-Office Ancillary Services Exception” to self-refer for MRI/CT services, the GAO specifically states that they DID NOT evaluate the usage of MRI or CT services referred by radiologists or other providers that primarily practice in an independent diagnostic testing facilities, because they have limited ability to self-refer services.

The GAO found that between 2004 and 2010, the utilization/number of self-referred and non-self-referred MRI and CT imaging services both increased. The non-self-referred services increased over this period by 12%. The self-referred services, however, increased by more than 80%, with a corresponding increase in expenditures. Further, the GAO’s analysis shows that providers’ referrals of MRI and CT services substantially increased the year after they began to self-refer, and that self-referring practitioners utilized imaging services at approximately twice the rate as providers who did not self-refer. The GAO attributes the difference in referral practices to financial incentives for self-referring providers.

The GAO also notes that, in addition to direct costs associated with increased usage of MRI/CT services, there may be additional indirect costs associated with the increased usage. In particular, the GAO believes that increased usage of imaging services may reveal abnormalities that have no clinical relevance or result in unnecessary surgeries. The GAO strongly implies that it believes that the increase in MRI/CT services was unnecessary.

The GAO sent draft versions of its report to CMS/HHS for comment and discussion. The GAO makes three recommendations, two of which CMS preliminarily disagreed with:

  1. The GAO would like CMS to insert a self-referral flag on its Medicare Part B claims form and require providers to indicate whether the advanced imaging services for which a provider bills Medicare are self-referred or not. HHS/CMS did not concur with this recommendation;
  2. The GAO would like CMS to implement a payment reduction for self-referred advanced imaging services. HHS/CMS did not concur with this recommendation; and
  3. The GAO would like CMS to implement an approach or mechanism to ensure the appropriateness/medical necessity of advanced imaging services referred by self-referring providers. HHS/CMS concurred with this recommendation, stating that it would further evaluate options for implementing it.

The GAO, at some length, details its disagreement with CMS, and lays out a case for why CMS should implement all three recommendations. The GAO is now sending copies of its finalized report to the Secretary of HHS, interested congressional committees, and others.

OIG FY 2013 Work Plan

On October 2, 2012, the Department of Health and Human Services Office of Inspector General (OIG) released its Fiscal Year 2013 Work Plan detailing what areas it will focus on in the coming year as it continues to police the healthcare system for fraud and abuse. Though the Work Plan covers the entire spectrum of healthcare providers, it does highlight specific areas of concern for physicians in general, and radiologists specifically. In particular, amongst others, the OIG flags the following issues as areas on which it will focus its scrutiny:


Part B Imaging Services: Payments for Practice Expenses

The OIG will continue to scrutinize Medicare payments for Part B imaging services to ensure payments to providers reflect the expenses incurred and that utilization rates reflect industry practices. In particular, for specific imaging services, OIG will focus on the practice expense components of the Medicare physician fee schedule, including the equipment utilization rate of select imaging services.

Diagnostic Radiology: Medical Necessity of High Cost Tests

The OIG will continue to scrutinize payments for diagnostic tests to ensure that they are “reasonable and necessary”. Additionally, OIG will examine the extent to which the same diagnostic tests are ordered for a beneficiary by primary care physicians and physician specialists for the same treatment.

Program Integrity: Improper Use of Commercial Mailboxes

OIG is concerned that Medicare Part B providers and suppliers are using commercial mailboxes to evade requirements regarding the physical location of a practice. In FY 2013, OIG plans to scrutinize 2011 enrollment data to determine the extent to which the practice location addresses of Medicare Part B providers and suppliers were actually commercial mailbox addresses, rather than an address of a physical practice location.

Physicians and Other Suppliers: Noncompliance with Assignment Rules and Excessive Billing of Beneficiaries

To participate in Medicare, physicians must accept payment on “assignment” for all items and services furnished to the beneficiary. Physicians can then request direct payment for Part B services furnished but must accept Medicare-allowed amount as the full charge for the services or items provided. In FY 2013, OIG will continue to scrutinize the extent to which providers comply with assignment rules and determine whether and to what extent beneficiaries are inappropriately billed in excess of amounts allowed by Medicare.


The OIG’s Fiscal Year 2013 Work Plan can be accessed at: https://oig.hhs.gov/reports-and-publications/archives/workplan/2013/Work-Plan-2013.pdf. The GAO’s report can be accessed at: http://www.gao.gov/assets/650/648988.pdf.

Radiology practices should stay alert for further legal developments in the areas flagged by the GAO and the OIG.

Adrienne Dresevic, Esq. graduated Magna Cum Laude from Wayne State University Law School. Practicing healthcare law, she concentrates in Stark and fraud/abuse, representing various diagnostic imaging providers, eg, IDTFs, mobile leasing entities, and radiology and multi-specialty group practices.

Clinton Mikel, Esq. graduated from the University of Michigan Law School. Practicing healthcare law, he concentrates in Stark, fraud/abuse, telehealth/telemedicine, compliance, and the corporate and financial aspects of healthcare practice.

Carey F. Kalmowitz, Esq. graduated from NYU Law School. Practicing healthcare law, he concentrates on corporate and financial aspects, eg, structuring physician group practice transactions; diagnostic imaging and ancillary services, IDTFs, provider acquisitions, CON, compliance, and Stark and fraud/abuse.

The authors are members of The Health Law Partners, P.C. and may be reached at (248) 996-8510 or (212) 734-0128, or at www.thehlp.com.

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