CMS Proposes New Disclosure Requirement for Certain Radiology Services

The Centers for Medicare and Medicaid Services (“CMS”) has proposed revisions to the existing federal physician self-referral law (“Stark Law”) regulations to implement provisions enacted as part of the Patient Protection and Affordable Care Act of 2010 (“Affordable Care Act”).  The proposals appear in two separate rulemakings:  (1) the CY 2011 Medicare Physician Fee Schedule Proposed Rule (“MPFS Proposed Rule”), published on July 13, 2010, and (2) the CY 2011 Hospital Outpatient Prospective Payment System Proposed Rule, published on August 3, 2010.  The proposed regulations, when finalized, will take effect on January 1, 2011. 

By way of background, the Stark Law prohibits a physician from making a referral for designated health services to an entity with which the physician has a financial relationship, unless an exception applies.  For example, where a group practice owns or operates an MRI, the Stark Law prohibits a physician member from making a referral to the group practice for the performance of an MRI unless an exception is met.  The exception most commonly relied upon by physicians in this scenario is the “in-office ancillary services” exception.  The exception generally requires that the services be furnished by the group practice in the same building in which the physician furnishes services (or in a centralized location), and be billed by the physician or the group practice.

Section 6003 of the Affordable Care Act makes a change to the “in-office ancillary services” exception to the Stark Law that impacts physician practices providing certain radiology services in their offices.  In short, the change requires physicians making a referral for MRI, CT and PET, or certain other radiology services in their offices, to inform a patient, in writing, at the time of the referral, that such services can be provided elsewhere. The Affordable Care Act further requires a referring physician to provide the patient with a written list of suppliers who furnish such services in the area in which the patient resides.

To comply with this new statutory disclosure requirement mandated by the Affordable Care Act, in the MPFS Proposed Rule, CMS issued proposed regulations regarding these changes.  The MPFS Proposed Rule adds a new paragraph to the existing “in-office ancillary services” exception to the Stark Law.  As proposed, physicians making in-office self-referrals for MRI, CT and PET services must:

• provide the patient with a written notice at the time of the referral that the patient may receive the same services from a supplier other than the self-referring physician;
• include in the notice at least ten other suppliers within a 25 mile radius of the physician’s office that can provide the referred service;
• include the name, address, telephone number, and distance from the referring physician’s office for each alternative supplier listed;
• retain a record of the disclosure notification, signed by the patient, as part of the patient’s medical record; and
• provide a notice that is written in a manner that is reasonably understood by all patients.

 In such cases where there are fewer than ten suppliers within the radius, CMS is proposing that the physician list all suppliers.  If there are no qualifying suppliers within the radius, the physician is not required to provide a list, but must still disclose to the patient that the services may be provided by another supplier and document the disclosure.

Further, CMS proposed that only “suppliers” be included on the written list, including “a physician or other practitioner, a facility, or other entity (other than a provider of services).”   The list is not required or permitted to include “providers of services” such as hospitals and critical access hospitals, among other facilities.  

It is estimated that the final rule will be issued on or about November 1, 2010.  Since the Stark Law is a strict liability statute, even a technical or de minimus violation can result in substantial potential liability, including significant civil monetary penalties.  Thus, physicians who provide in-office PET, CT, and/or MRI services should take steps immediately to implement the required patient disclosures prior to the January 1, 2011 effective date.