In a ruling that many pathologists are sure to applaud, a group of urologists recently lost their bid to overturn regulations that prohibit inappropriate physician self-referral and “per-click” leases. The District of Columbia on May 24 rejected an appeal brought by the Council for Urological Interests (CUI) challenging a 2008 regulatory change that characterized urologists’ arrangement with hospitals as impermissible, whereas under prior interpretation by the Centers for Medicare and Medicaid Services (CMS), such arrangements were allowed under compensation exceptions. Under the Stark law, physicians may not refer Medicare patients to entities “furnishing” designated health services (DHS) with which they have a financial relationship unless an exception applies. A financial relationship may be either an ownership interest or a compensation arrangement. In the past, under these arrangements, Medicare would pay the hospital a technical fee for nonprofessional personnel, space, and equipment, and the hospital would in turn pay the urologist’s company for the personnel and equipment (per-click fee), notes the Pathology Blawg (www.pathologyblawg.com
). Since the urologist’s company was not billing Medicare directly, the joint ventures were technically permitted under the Stark law. In 2008 CMS changed its regulations to not allow joint ventures to provide services for patients referred to it by urologist owners even if the joint venture was not billing Medicare directly. The new regulations also prohibited per-click payment to hospitals if the patient was referred to a joint venture by one of its owners. CUI filed a motion with the U.S. District Court in D.C. to prevent the Department of Health and Human Services (HHS) from enforcing the 2008 regulations. HHS then filed a countermotion saying that it felt per-click arrangements were susceptible to abuse. In its ruling, the court said it believed CMS was entitled to take prophylactic regulatory action without waiting for “extensive evidence of program or patient abuse.” According to Thomas Crane, an attorney with Mintz Levin (Washington, D.C.), the court was sufficiently satisfied with the small number of comments to the 2008 regulations that pointed to abuse with per-service leases to uphold CMS’s rulemaking. “Without question, prior to the enactment of the Stark law, there were abusive joint ventures, primarily with laboratories, the Congress chose to stop,” writes Crane in a recent health law alert. “At the same time, there was a long history of physician-owned service, primarily where the physician-owners provided clinical services, which were free of abuse, that Congress chose to permit under the Stark law [under earlier interpretations]. “Few would argue that CMS had some evidence that some providers were taking advantage of these Phase I decisions to allow these physician-owned services to flourish in ways not intended—particularly with imaging services,” Crane continues. “In deciding how to address these problems, CMS had options to take a more surgical approach, for example to continue to permit physician-owned under-arrangement services where physician owners performed clinical services, thereby relying on what has come to be known as the ‘extension of practice’ exception.” The argument, notes Crane, may come down to how CMS defines the term furnishing
when it comes to DHS. He believes that CUI has several arguments to appeal in the hopes of finding a court that would be willing to overturn the 2008 regulations.