United States: CMS Issues Final Rule on Changes to Stark In-Office Ancillary Services Exception

Last Updated: December 2 2010
Article by R. Brent Rawlings, Thomas J. Stallings and David Wolff

Section 6003 of the Patient Protection and Affordable Care Act, Public Law 111-148 (H.R. 3590) (PPACA) made a change to the "in-office ancillary services" exception of the physician self-referral or "Stark" law that impacts physician practices providing certain radiology services in their offices. Specifically, the change requires physicians referring patients for magnetic resonance imaging (MRI), positron emission tomography (PET), or computed tomography (CT) to disclose to those patients that such services can be provided elsewhere, and to include a list of alternative providers.

On June 13, 2010, the Centers for Medicare and Medicaid Services (CMS) published a proposed rule regarding implementation of the new law. We discussed the proposed rule in a previous article. On Nov. 29, 2010, CMS published a final rule regarding implementation of the new law, which accepted the proposed rule, with some modification. This article summarizes the requirements of the final rule, which becomes effective Jan. 1, 2011.

The new regulations, which will be included at 42 C.F.R. § 355(b), will require certain physicians making referrals for MRI, PET and CT to be performed in the referring physicians' offices on or after Jan. 1, 2011, to do the following:

  1. Provide a written disclosure of alternative suppliers to the patient at the time of referral. The disclosure should be written in a manner sufficient to be reasonably understood by all patients. The disclosure must be presented to the patient each time the patient is given a referral for MRI, PET or CT, not just for initial services. Subsequent referrals can be made by phone, but the written disclosure must still be provided and adequately documented. CMS stated in its response to comments that in these circumstances, mailing or e-mailing the disclosure to the patient would be acceptable where verbal notification has also occurred.
  2. Include in the disclosure a list of five alternative suppliers of the imaging service being referred that are located within a 25-mile radius of the physician's office. The list must include the names, addresses and phone numbers for the suppliers. This differs from the proposed rule, which would have required a list of 10 alternative suppliers. Also, unlike under the proposed rule, the disclosure need not specify the distance from the physician's office for each of the suppliers listed. The only requirement is that the supplier be within the 25-mile radius, which can be determined by any reasonable method. The list must include the requisite number of suppliers. The term suppliers, which under the statutory definition includes entities such as physicians, group practices, and freestanding imaging centers, is opposed to the term "providers," which under the statutory definition includes entities such as hospitals, critical access hospitals, skilled nursing facilities, and rehabilitation hospitals. Hospitals and other providers can be included in the list, but will not be counted for purposes of meeting the requisite number of suppliers. CMS acknowledged concerns that physicians could draft a list that includes suppliers located mostly at the edges of the 25-mile radius, thereby increasing the chances that the patient will choose to receive imaging services from the referring physician, but declined to specify any one method for creating the list, so long as the requisite number of suppliers is included in the disclosure. CMS does indicate in its response to comments that the list of suppliers should be reviewed annually for accuracy and updated at that time, if necessary.
  3. Maintain some documentation that the disclosure was given to the patient at the time of referral. CMS did not adopt the requirement in the proposed rule that the physician obtain the patient's signature on the disclosure and retain a copy in the patient's medical records, although this is one method of demonstrating compliance with the regulation. CMS suggests in its response to comments that, as a matter of prudent business practices, physicians should be able to document or otherwise establish that they have complied with the disclosure requirement, and provides as an example documenting in the patient chart that the disclosure was given to the patient.

The disclosure requirement only applies where there is a referral for purposes of Stark, and the physician making the referral is relying upon the in-office ancillary services exception for purposes of making that referral. Furthermore, the disclosure requirement is only triggered where a physician is making a referral for MRI, PET or CT services.

Where there is no "referral" for purposes of Stark, the disclosure requirement does not apply. For example, the disclosure requirement does not apply where a radiation oncologist is requesting radiation therapy or ancillary services necessary for, and integral to, the provision of radiation therapy (because for purposes of Stark, this is not a "referral").

For those instances where the disclosure requirement does apply, it will be necessary for physicians to strictly comply, since a failure to do so could result in a failure to meet the in-office ancillary services exception. Failure to meet the exception would mean that the referral would be prohibited by Stark, and that any payment made for the services referred must be repaid. This could also expose the physician to monetary penalties for violation of Stark and potential liability under the False Claims Act.

If you have questions about compliance with the new disclosure requirement or the Stark Law in general, please contact one of the authors.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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