It was a small change with a big impact: On October 1, 2009, a provision of the 2009 Hospital Inpatient Prospective Payment System final rule amended how an entity is defined under the Stark self-referral law. Until then, a Stark entity had been defined as the person or organization that billed for a given service; the change expanded the definition to include the person or organization that performed the service as well.
Tom Greeson, JD, partner with Reed Smith LLP, Falls Church, Virginia, says, “They were basically filling a loophole. The change made it so that entity includes not only the entity that bills for the service, but also an entity, like a joint venture, that performs the service and then sells it to someone else.”
Greeson explains that the change probably was intended to affect cardiology joint ventures (which, until that point, had been able to profit from catheterization laboratories and other arrangements). “This change in the Stark rules wiped those out,” he says. The change is part of a larger trend toward eliminating practices’ ability to capitalize on ancillary services. “It plugged a loophole that permitted a lot of self-referral,” Greeson notes. Irrespective of the intentions behind it, however, the change also had consequences for interventional radiologists who hold ownership interest in imaging centers.
Joint Ventures
Prior to the change, Greeson says, an interventional radiologist with an ownership interest in a practice that was part of a joint venture could have referred a patient to the joint venture, as long as the joint venture leased or sold the purchased test to a hospital or back to one of the joint-venture partners. “Then the entity that purchased the test or leased the technical-component service could have billed for it,” he explains, “so the interventional radiologist would be making the referrals not to the joint venture, but to the hospital or radiology group, and that cleared up the Stark problem.”
When CMS updated the Stark regulations, it changed the definition of entity to include the entity performing the service, meaning that if all technical-component services were being provided by the joint venture, “then the interventional radiologist would be precluded from making referrals to it because it is performing the service,” Greeson says.
This is a potential problem, as many diagnostic-radiology groups have interventional-radiology practices, and many of those interventional radiologists might have taken ownership interests in a joint venture before the regulations kicked in to limit their ability to refer to it. “It creates a hardship for some radiology groups,” Greeson says. For this reason, if a radiology group with interventional radiologists is considering a joint venture with a hospital, the group should keep the change to the Stark regulations in mind, as it stands to affect practice income—particularly if a significant percentage of that income comes from procedures ordered by interventional radiologists.
For groups that are already part of joint ventures, there are still options, Greeson says. “You need to determine whether the interventional radiologist is the treating physician or whether the diagnostic test is being done pursuant to a consultation,” he notes. “If the interventional radiologist is not the treating physician, then Stark has said that is not a Stark referral, so in that instance, the interventional radiologist could do the test. If the interventional radiologist is merely providing a consultation for another physician who sends the report, none of these considerations come into play.”
The interventional radiologists could also change their practices so that they are no longer referring Medicare or Medicaid patients to the joint venture’s imaging center. Another option, Greeson says, is for the group’s diagnostic radiologists to invest in the joint venture without the interventional radiologists, although this option would require the interventional radiologists to give up ownership interest in the group practice (if the practice owns the imaging center).
The Larger Trend
The change to the Stark law might be burdensome to radiology groups in the short term, but Greeson observes that it is part of a larger trend that stands to benefit radiology in the long run. “A lot of these arrangements were created for the purpose of allowing self-referral,” he notes. “Whether one believes this was a good rule change or not, it promotes the bigger goal of curtailing self-referral.”
Greeson explains that the same in-office ancillary-services exception to the Stark law that permits physician self-referral has also provided some radiology groups with a loophole through which they, too, can profit. For instance, “If the radiology group has its own imaging center and the interventional radiologists are practicing clinically and ordering tests, they can do so from their radiology group practice and have the tests qualify for the exception—because they’re acting like treating physicians,” he says. “If the in-office ancillary-services exception is removed, the interventional radiologist would no longer be able to make that referral.”
Although such a change would cause the same kind of short-term pain as the change to the Stark law in October 2009, Greeson says that overall, the change would be a positive development for radiology. “I would say that while this has caused some changes with respect to the referral patterns for interventional radiologists, philosophically, it was a good move,” he says. “If you poll diagnostic radiologists, they’ll tell you that they’re in favor of the outright elimination of the in-office ancillary-services exception, even if it does sometimes benefit them.”
As lawmakers continue to target the causes of inflated health-care costs, Greeson says, what’s good for the goose will be good for the gander in terms of physician self-referral—and that’s not a bad thing. “Policymakers have to balance where there’s an overall net positive impact or an overall net negative impact. There’s a recognition that self-referral is increasing utilization and the cost of health care, and it’s time to take it on,” he says.
Cat Vasko is editor of ImagingBiz.com and associate editor of Radiology Business Journal. 