Stark Law presents opportunity

Lets first identify what the Stark Law is and then briefly discuss the opportunities it creates

Physician Self-Referral Regulations commonly referred to as the Stark Law:

Section 1877 of the Social Security Act (42 U.S.C. 1395nn) prohibits physicians from referring Medicare patients for certain designated health services (DHS) to an entity with which the physician or a member of the physician's immediate family has a financial relationship unless an exception applies. It also prohibits an entity from presenting or causing to be presented a bill or claim to anyone for DHS furnished as a result of a prohibited referral.
In addition, section 1903(s) (42 U.S.C. 1396b) of the Social Security Act extends this referral prohibition to the Medicaid program.
The physician self-referral law can be found in section 1877 of the Social Security Act (42 U.S.C. 1395nn). The regulations are located in Title 42 of the Code of Federal Regulations §411.350 – §411.389.

As this pertains to the MRI industry, the regulatory issues create opportunities for consolidation of the practices that are inhibited through the Stark Law regulations. Changes specifically applied by the recent Health Act enacted by the Obama Administration are as follows:

Change to Stark In-Office Ancillary Services Exception

The recent Change to Stark In-Office Ancillary Services Exception

The recent health care reform legislation included one somewhat significant change to the Stark In-Office Ancillary Services Exception.  As you will recall, this exception permits the referral source physicians who are members of a physician group practice to refer a patient for imaging services (or other Designated Health Services - DHS) to be provided within the group practice without violating Stark.  This exception is basically what permits physician group practices to own and operate and receive compensation for imaging services and other DHS provided within their group practice.

Effective immediately upon the legislation being signed by Obama (March 23, 2010), a physician within a group practice referring his/her patient for MRI, CT or PET to be provided within the group practice must provide the patient, at the time of the referral, written notice that the patient may obtain these imaging services from a supplier other than the group practice.  The written notice must provide the patient with a list of such alternative suppliers in the area where the patient resides. 

At the present time, this new requirement only applies to DHS in the form of MRI, CT and PET.  And it only applies to physician group practices composed of physician referral sources."

More competition and less totally self directed practices. Next level of clear opportunity is in the under-served identified rural areas.

Diagnostic imaging providers should consider the following when applying the new definition of DHS entity:

• Unlike referring physicians (e.g., cardiologists), radiologists will generally be permitted to have an ownership in such under arrangements joint ventures because they typically are not considered referring physicians under Stark. Thus, under the above CT under arrangements example, if the CT service provider is owned by non-radiologists, then the arrangement will not be viable under the Final Rule if the physician owners refer to the hospital for CT services.  By contrast, however, if the entity were owned by radiologists, this arrangement could remain in effect in compliance with Stark.
• In practice, the only available ownership exception (for referring physicians) that will protect an under arrangements service provider is the rural provider exception. Therefore, unless substantially all of the patients reside in a rural area, under arrangements service agreements with referring physicians will be prohibited.
• Although an arrangement limited solely to discrete components of the service (e.g., equipment, supplies, non-physician personnel), by itself, will not rise to the level of �performing� the service, it is not clear, whether an entity that performs some, but not substantially all, of the clinical aspects of the service (e.g., turnkey management service provider) will be considered to be performing DHS.  

 The initiation of service provisions for MRI's in rural areas is a wide open uncontested field at this point in time. An innovative solution that provides cost effective MRI services with a turnkey approach will both positively impact the market place and help physicians better serve their patients. This professional approach will enable physicians to create alternative stream of revenue while also providing increased wellness and preventive care in their practices.