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
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
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
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
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
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.