PET Education
Reimbursement: The Stark Law

THE STARK LAW AND DIAGNOSTIC IMAGING SERVICES

A variety of federal and state laws may apply to physician ownership of diagnostic imaging facilities and equipment in a freestanding facility or a physician's office, as well as to physician referrals to these facilities. Among these is the federal physician self-referral law, known as the Stark Law.

Overview. In summary, the Stark Law prohibits physicians from making referrals for a "designated health service," payable by Medicare or Medicaid, to any entity with which the physicians have a financial relationship. A financial relationship means either an ownership interest or a compensation arrangement. The law is wide-ranging. For example, a physician's own practice or group practice may be an entity to which referrals are prohibited. Penalties for violating the Stark Law include denial of payment for the service, civil monetary penalties, or even the possibility of being excluded from the Medicare or Medicaid programs.

"Designated Health Service." For purposes of the Stark Law, a "designated health service" is a service that falls within one of eleven categories of services (e.g., radiology or certain other imaging services, inpatient and outpatient hospital services). Both the performance of and interpretation of a CT or MR scan in a physician's office or freestanding facilities may be considered "designated health services" under the category of radiology or certain other imaging services and thus may be subject to the law.

Exceptions. There are a series of general exceptions to the ownership and compensation provisions of the Stark Law. For example, the Stark Law does not prohibit referrals for "in office ancillary services," which are those services furnished by the physicians themselves, another physician in the same group practice, or employees of the physician or of the physician's group practice, if certain requirements are met. A key determinant of this exception is whether a group of physicians may be considered to be members of a "group practice" for Stark Law purposes ? a determination that needs to be made with the assistance of counsel knowledgeable about the Stark Law.

Exception for Nuclear Medicine and Certain Radiology Services. Under the Stark Law, nuclear medicine services (including PET scans, but not CT scans or radiation therapy) are excluded from the definition of "radiology or certain other imaging services." Also excluded from the definition are all x-ray, fluoroscopy, and ultrasound services that are invasive procedures requiring the insertion of a needle, catheter, tube or probe. To illustrate, diagnostic angiography and endoscopy procedures are excluded from the designated health services category of "radiology or certain other imaging services," but a CT of the chest or MR of the brain are included in the category.

To the extent that referrals are limited to nuclear medicine or other excluded radiology or imaging services furnished in a freestanding facility or a physician's office, the referrals would not implicate the Stark Law. It is important to note, however, that if the entity were to provide and bill for a combination of services, with some of the services included and others excluded as a "designated health service," referral for such services would implicate the Stark Law.

Billing Medicare and Medicaid With Respect to the Stark Law. Billing practices of an entity can have a significant impact on determination of whether the Stark Law or any of the exceptions to the Stark Law apply. For example, if an entity is billing for both CT scans, as well as PET or other nuclear medicine services, the entity may be subject to the Stark Law provisions.

Additional Information About the Stark Law. Attached are frequently asked questions regarding the Stark Law, based on selected scenarios. Information presented herein is current as of February, 2003, and does not necessarily reflect any subsequent changes relating to the Stark Law or the regulations. To confirm the specifics of current law and regulations, we urge you to consult with counsel knowledgeable about the Stark Law.

FREQUENTLY ASKED QUESTIONS (FAQs)

Disclaimer: The information contained herein is offered as merely background information and does not constitute legal advice. It is the responsibility of each physician or physician group, and not GE Healthcare, to ensure that any arrangements are structured consistent with applicable laws, and that health care services are furnished by qualified personnel and billed appropriately.

Scenario: A non-radiologist physician or group practice seeks to purchase a CT scanner and have patients' scans performed using the purchased CT scanner. Note that the scenario is revised in FAQ #10 to address physician ownership of PET scanning facilities and equipment.

FAQ #1: What laws can affect this type of an arrangement?

Answer #1: There are a variety of federal and state laws that could affect this type of arrangement, including the federal physician self-referral law (known as the Stark Law), state self-referral laws, state certificate of need (CON) laws, federal and state anti-kickback laws, state licensure laws, and state medical malpractice laws. These FAQs only address issues raised by the Stark Law, which prohibits physicians from making referrals for a "designated health service" payable by Medicare or Medicaid to any entity with which the physicians have a financial relationship, unless an exception applies. A physician's own practice or group practice can be an entity to which referrals may be prohibited. Both the performance and the interpretation of a CT scan are considered "designated health services." Penalties for violating the Stark Law include a denial of payment for the service (or recoupment of payments already made), civil monetary penalties of $15,000 per claim, and the possibility of being excluded from Medicare and Medicaid.

The Stark Law (42 U.S.C. ? 1395nn) is implemented by the Centers for Medicare and Medicaid Services (CMS). Implementing regulations are at 42 C.F.R. ?? 411.350 - 411.389. CMS proposed changes to its implementing regulations in a January 9, 1998 proposed rule, and has finalized some of those proposals in a January 4, 2001 final rule (66 Fed. Reg. 856), most of which became effective January 4, 2002. Other proposals will be addressed in a final rule to be issued at a later date. The forthcoming final rule could include changes that would affect the responses to these FAQs and thus readers should monitor the status of the final rule. Despite the delayed effective date of the provisions in the recent rule and the pendency of another final rule, the statutory requirements remain, with the recent rule providing the most useful guidance as to CMS's implementation of the statutory requirements.

FAQ #2: If a non-radiologist physician (or a group practice that does not include a radiologist) were to install a CT scanner in the office, could his/her (their) patients receive a CT scan from that machine?

Answer #2: If a physician (or a group practice) purchases the scanner, employs the technician(s) performing the scans, and the physician (or a member of the group practice or an independent contractor physician to the group) supervises the furnishing of the test and interprets the result, billing Medicare or Medicaid for the scan by the physician (or group practice) is likely to be permissible under the federal Stark Law. Although the arrangement would involve the referral of designated health services by a physician to an entity with whom the physician has a financial relationship, if structured in this way, the arrangement could satisfy the Stark Law "in-office ancillary services" exception. Satisfaction of this exception depends, in part, upon the CT scanner being purchased by a solo practitioner or by physicians that are members of the same "group practice." Whether a group of physicians may be considered to be members of a group practice for Stark Law purposes is a fact-specific question that should be assessed with the assistance of counsel knowledgeable about the Stark Law.

Similarly, competent counsel (see FAQ #11) should be consulted as to whether this arrangement would be permissible under applicable state self-referral laws. Finally, the purchase of a scanner may or may not be subject to state CON laws.

FAQ #3: Assuming a positive response to FAQ #2, would the physician or group practice be considered to be double billing for referring their own patients to the office for CT scans?

Answer #3: No. The physician or group practice could bill for an office visit and any other services furnished prior to the referral of the patient for a CT scan. In addition, a claim would be submitted for the professional and technical components of the scan by the entity furnishing the service, regardless of whether it is the same entity that furnished the office visit. Thus, the physician or group practice would bill once for each of the discrete services provided.

FAQ #4: Assuming a positive response to FAQ #2, would the referring physician be permitted to read his/her own scans? Is there a specific requirement related to working with a radiologist?

Answer #4: A physician or another member of his/her group practice would be permitted to read the scans. Again, this answer assumes that, with respect to a group of physicians, the physicians are all members of the same group practice, as that term is defined by the Stark Law.

The Stark Law does not require the involvement of a radiologist. Of course, any physician interpreting the scans would be subject to state licensure and medical malpractice laws.

FAQ #5: Who controls how much the office is getting reimbursed?

Answer #5: The payment amount is dictated by the program or payer that provides health insurance coverage for the patient. When the services are furnished to a Medicare patient, the Medicare physician fee schedule would determine the payment amount. For Medicaid patients, the state Medicaid program would determine the payment amount, as would a private health insurance plan when the patient is covered by private health insurance.

FAQ #6: How does the office go about setting up its reimbursement?

Answer #6: To fit within the Stark Law exception for "in-office ancillary services," billing must be done by either (i) the physician performing or supervising the service(s); (ii) the group practice of which the performing or supervising physician is a member, using the billing number assigned to the group practice; (iii) the group practice, where the supervising physician is an independent contractor with an arrangement with the group practice to provide services to its patients, using the billing number assigned to the group practice; or (iv) an entity that is wholly owned by the physician or the group practice, using the billing number assigned to the group practice.

FAQ #7: Are there specific ownership requirements that need to be considered for a clinic with multiple physicians?

Answer #7: As noted in the response to FAQ #2, it is important that when multiple physicians are involved, they would be considered to be in the same group practice as defined in the Stark Law. The fact that there is a clinic with multiple physicians does not necessarily mean that the physicians are part of a group practice. Again, whether the physicians are in a group practice is a fact-specific question that should be assessed with the assistance of counsel knowledgeable about the arrangement and the Stark Law.

FAQ #8: Can a physician partner with another physician located in the same building to purchase a CT scanner, with each physician referring patients to the purchased CT scanner?

Answer #8: Possibly, under carefully constructed arrangements. As stated in the 2001 final rule, "[s]hared facilities in the same building are permitted to the extent they comply with the supervision, location, and billing requirements of the in-office ancillary services exception." 66 Fed. Reg. at 888. Physicians in different practices desiring to purchase a scanner jointly should seek counsel from an individual or entity that is knowledgeable about the federal Stark Law (see FAQ #11) to ensure that these requirements are satisfied. Similarly, outside assistance should be sought when considering arrangements in which a physician or a group practice purchases a scanner and plans to lease the scanner to a physician in another practice or to another group practice located in the same building. Finally, counsel should be sought to determine whether a shared facilities arrangement would be consistent with applicable state self-referral laws.

FAQ #9: If a group practice owns a surgical center nearby its offices (e.g., across the street), can the practice purchase a CT scanner and place the scanner in that facility?

Answer #9: According to the Stark Law, to comply with the "in-office ancillary services exception," the CT scan services would have to be furnished in (a) a building in which the physician or a member of the group practice furnishes physician services unrelated to the furnishing of designated health services; or (b) a building used by a group practice for the centralized furnishing of the group's designated health services. (In addition to radiology services, "designated health services" include, for example, clinical laboratory services, radiation therapy services and supplies, durable medical equipment and supplies, and outpatient prescription drugs.) Thus, the statute permits a group practice to locate ancillary services off-site from the office under certain circumstances. In implementing the statute, CMS recently indicated that when a group practice has ancillary service facilities off-site from the office, such facilities must be used exclusively by the group practice on a full-time basis. Ultimately, satisfaction of the site requirement for the in-office ancillary services exception is a fact-specific determination. Accordingly, counsel should be sought in structuring an arrangement to satisfy the site requirement of the in-office ancillary services exception to the Stark Law.

FAQ #10: Changing the scenario slightly, can oncologist group practices jointly own PET scanning facilities/equipment with no group owning more than 40% of the facilities/equipment?

Answer #10: Similar to FAQ #8, this arrangement would create a financial relationship between the investing group practices and the joint venture. A significant difference, however, is that nuclear medicine services (including PET scans) are not "designated health services" under the Stark Law, 66 Fed. Reg. at 930, whereas the services involved in FAQ #8, CT scans, are covered by the Stark Law. Therefore, to the extent that the only referrals the investing group practices would make to the joint venture would be for PET scans or other services that are not designated health services, the referrals would not implicate the Stark Law.

However, if the joint venture also were to provide and bill for services that are designated health services, such as CT scans, referrals for such services by an investing group practice would implicate the Stark Law. In those circumstances, similar to FAQ #8, a key issue raised is whether group practices can share facilities and have their designated health service referrals to a shared facility satisfy the in-office ancillary services exception. According to the 2001 final rule, "shared facilities in the same building are permitted to the extent they comply with the supervision, location and billing requirements of the in-office ancillary services exception." 66 Fed. Reg. at 888. Thus, oncologist group practices can jointly own PET scan facilities that also furnish designated health services so long as these facilities are located in the same building the group practice members furnish physician services and provided that each group practice supervises and bills for the designated health services in accordance with all of the other requirements of the in-office ancillary services exception. Satisfaction of these requirements is a fact-specific determination and competent counsel (see FAQ #11) should be sought to ensure that the arrangement is structured to satisfy that Stark Law exception. (Note: the responses to FAQs #1 - #9 are relevant to this scenario as well.)

Regardless of whether the arrangement implicates the Stark Law, it will have to be structured to comply with the federal anti-kickback law. The 40% ownership threshold mentioned in the question can be part of a federal anti-kickback law analysis. Limiting ownership interests for joint venturers to less than 40%, while perhaps intended to allow the arrangement to qualify for an anti-kickback law safe harbor for investment interests, probably will not accomplish this goal. This safe harbor cannot be satisfied when, as is likely in this scenario, more than 40% of the PET scan facility gross revenues would come from referrals generated by the investors, or more than 40% of the investors in the facility would be in a position to make referrals to the joint venture. Although failure to satisfy the requirements of a safe harbor does not mean that the arrangement is illegal, counsel familiar with the anti-kickback law should be consulted so that the arrangement can be structured to comply with that law.

FAQ #11: What resources are available for guidance on the issues raised by a physician (or group practice) purchase of a CT scan for use by his or her (their) patients?

Answer #11: With respect to compliance of such an arrangement with the Stark Law, guidance may be obtained from counsel or consultants with experience concerning the Stark Law and from physicians or physician group associations that have an understanding of the Stark Law, such as the Medical Group Management Association (www.mgma.com) and the American Medical Group Association (www.amga.org). There is also an advisory opinion process through which CMS explains how the Stark Law would apply to specific factual circumstances. Information on the Stark Law advisory opinion process and issued opinions can be accessed through CMS's website, at "www.cms.hhs.gov/physicians/aop/default.asp."



Information presented herein is current as of February, 2003, and does not necessarily reflect any subsequent changes relating to the Stark Law or the regulations. To confirm the specifics of current law and regulations, you should consult with counsel knowledgeable about the Stark Law.