Letter-Trafficking and Self-Referral in Massachusetts

As in many states, Massachusetts policy makers are examining the impact that ambulatory surgical centers and medical diagnostic imaging services, particularly physician owned, are having on the health care delivery system. Last year, the Massachusetts Legislature created a special study commission to examine these health services and their impact on access and the cost of health care. Part of the commission’s work focused on the issue of over-utilization of imaging services. The commission issued its report on June 30, 2007. The commission consisted of legislators, state health officials, and representatives of hospitals, insurers, ambulatory surgical centers, and physicians, including a representative of the Massachusetts Radiological Society. In its review of diagnostic imaging services, the commission focused on those services that are defined by the Department of Public Health (DPH) as “New Technology” or “Innovative Services”. Those services include magnetic resonance imaging (MRI), positron emission tomography (PET), and linear accelerators (radiation therapy). Pursuant to state regulations, such services require a determination of need (DON). A unique feature to our regulatory climate, which adds confusion to the regulatory process governing “New Technology”, is that prior to 1991, physicians were generally exempt from DON requirements under a so-called physician practice exemption and could acquire “New Technology” by simply providing notice to DPH. No review or approval by DPH was required. In 1991, the Legislature, viewing the physician exemption as a loophole to the DON law, closed the physician exemption as to New Technology, and requires a DON for all providers. However, the legislature “grandfathered” equipment that was acquired, pursuant to the physician exemption, prior to the effective date of the law. Those physician practices that filed notices to acquire New Technology prior to the effective date of the law were issued a “Physician Letter of Exemption” from the DON requirement. A number of physician practices took advantage of the time period between the passage of the law and its effective date to file Letters of Exemption. DPH issued 24 exemption letters for MRI, 14 letters for linear accelerators (radiation therapy), and 16 for PET. Under current law the Physician Exemption Letters are transferable, and, in its report to the legislature, the commission reports that individual letters have been purchased by physicians for more than $300,000. Because DPH has not been granting DONs for New Technology, (other than allowing hospitals and clinics with DON-approved MRIs that meet certain volume requirements to acquire additional MRIs), the exemption letters have become something akin to taxi medallions; transferable among physician practices, subject only to the price vagaries of the health care marketplace. In examining New Technology, the commission spent a good deal of time looking at MRI services and exploring the issue of over utilization with particular concern about inappropriate self-referral of patients by physicians, particularly among those who have acquired a Physician Letter of Exemption. While the commission found that no data has been developed about the experience in Massachusetts, it did note that national studies and studies from other states “consistently show that physicians who are not radiologists operating their own imaging equipment with the opportunity for self-referral have substantially higher utilization than physicians who refer patients to radiologists”. [1] On the issue of self-referral, the commission focused on the so called “In-Office Ancillary Services Exception to the Stark regulations,” which in certain defined situations allows for physician referral of patients to an MRI owned by the physician or his/her practice. The commission noted allegations of abuse to the in-office exception, such as “per-click” leases; ie, the referring physician leases MRI equipment and the services of an MRI center for the provision of services to his/her patients. The commission reported that there is evidence of such leasing in Massachusetts. Commission Recommendations While the commission examined the current regulatory status of New Technology in Massachusetts and explored the issue of inappropriate self-referral, it did not recommend specific legislation. Rather, it issued recommendations that lay out principles and direction for future legislation and possible regulatory changes. Of significance, the commission did not recommend any change to the current DPH regulatory policy of requiring a DON for all MRI, PET, and radiation therapy services. For the foreseeable future at least, we can expect that those modalities will undergo controlled growth pursuant to state regulations and oversight as to the need for services. The commission did address the need to control and regulate the Physician Letters of Exemption. The commission recommends that DPH establish a registry of Physician Letters of Exemption to determine who currently owns them and whether the letters have been implemented. The recommendation calls for all letters to be implemented by January 1, 2009, at which time the rights conferred by unimplemented letters will sunset. Once registered, the letter should be considered nontransferable. The commission recommends that MRI, PET, and CT (CT is not considered a New Technology and is not subject to DON) services in Massachusetts meet current medical standards. The commission recommends that the Department of Public Health draft regulations that will provide for the credentialing of those who calibrate and maintain such equipment. In addition, it calls on the Board of Registration in Medicine to draft regulations to credential the physicians eligible to read and interpret images for those modalities. With respect to the issue of inappropriate self-referral, the commission recommends that the Legislature address the issue with respect to state payers (Medicaid, the group insurance program for state, county and municipal employees, and Commonwealth Care, the new Massachusetts health insurance program for the uninsured). According to the commission, the best way to do this is to “piggyback” the provisions of the federal anti- kickback and Stark laws and regulations, including all exceptions and safe harbors, in state law. The commission made note of the so-called Stark III proposed regulations that are now under consideration by CMS and expressed concern that there could be further delays in implementing the regulations. The commission advised the legislature not to wait for CMS, and expressed the view “that the potential problem of improper leasing arrangements should be immediately addressed by the state”.[2] Summary What does the future of high technology imaging look like in Massachusetts? New Technology will continue to be regulated by the DON program. Unfettered growth of MRIs, PET, and radiation therapy services should not occur. Massachusetts may develop a regulatory system that would credential facilities that provide New Technology imaging services and the physicians who read and interpret such services. To the extent the Massachusetts legislature piggybacks the federal anti-kickback and Stark laws in Massachusetts law, enforcement by state regulators should be consistent with Federal regulations. What remains to be seen is whether the legislature will act to define and address “improper leasing arrangements” beyond what may be defined by the federal government. The commission has issued its report. The Question now is whether the Legislature and state regulators will act on it.