Maintaining a Steady Aim at a Moving Target

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An overview of recent regulatory changes affecting diagnostic imaging

Although the Bush administration may ultimately be viewed by history as the zenith of the conservative philosophy of less regulation, such laissez-faire treatment has not extended to the diagnostic imaging segment of the health care industry. Since the passage of the DRA, CMS has issued a barrage of proposed and final regulations affecting suppliers of diagnostic imaging services. As if a new wave of proposed and final regulations every six months were not bad enough, CMS has unduly complicated the process through a series of sweeping regulatory changes, false starts, and alternative approaches, while ignoring or reversing many of its own long-standing positions.

A neutral observer of this process could easily reach two conclusions: First, CMS desperately wants to reign in the utilization of diagnostic imaging services so as to manage its spending on such services better; second, CMS lacks a comprehensive strategy to achieve its goal. In fact, at times, it seems that CMS is just throwing regulatory restrictions against the wall to see what will stick.

Unfortunately, CMS’ approach is creating havoc in the diagnostic imaging segment of the health care industry. The uncertainty resulting from such an approach has made strategic planning, capital equipment budgeting, access to capital, and evaluation of strategic opportunities extremely difficult for most diagnostic imaging suppliers.

CMS’ approach has also resulted in considerable confusion among diagnostic imaging suppliers as to their current regulatory obligations and what, exactly, they can and cannot do with respect to their imaging operations. Given the current enforcement environment generally (and with respect to diagnostic imaging suppliers specifically), such confusion needlessly exposes diagnostic imaging suppliers to considerable risks, including false-claims exposure, loss of Medicare billing privileges, and inappropriate referral relationships.

Recent Regulatory Changes

In the final Medicare Physician Fee Schedule (MPFS) update for fiscal year (FY) 2008 and phase III of the final Stark regulations, CMS made the following regulatory changes affecting diagnostic imaging suppliers, which are currently in effect.

New IDTF Supplier Standards.—In the FY 2008 update, CMS continued to expand the supplier standards applicable to IDTFs. The following new standards, which went into effect on January 1, 2008, most directly affect diagnostic imaging suppliers.

IDTFs Are Now Prohibited From Sharing Space or Equipment and From Subleasing Operations.—Most IDTFs are now prohibited from sharing space, sharing diagnostic-testing equipment, or subleasing their operations to another person or entity enrolled in the Medicare program. CMS, however, recognizes two exceptions to this general prohibition; they are for mobile IDTFs and for IDTFs that are colocated within a hospital.

Further, for those IDTFs that shared space with another Medicare-enrolled entity or individual as of the date of the final FY 2008 update, CMS delayed—until January 1, 2009—the effective date of the prohibition on space sharing. CMS, however, made it clear that such a delay did not have an impact on the effective date of the prohibitions on sharing diagnostic-testing equipment and subleasing operations. The impact of these regulatory changes is that IDTFs, unlike physician practices furnishing imaging services, can no longer enter into block-lease arrangements to share equipment and overhead expenses.

Effective Date of Initial Enrollment.—The effective date of initial IDTF enrollment is now the later of either the filing date of the 855B (so long as the 855B is subsequently approved by the contractor) or the date that the IDTF commences furnishing services at its practice location. CMS takes the position that so long as the applicant responds in a timely manner to requests for additional information, the application will relate back to the date of the original submission; however, if the 855B is rejected or denied, the filing date would be the date that the applicant submits a new 855B (assuming that the new 855B is complete at the time of filing). This approach can be a problem because Medicare contractors more readily reject 855B applications today than in the past.

Clarification of Existing IDTF Supplier Standards.—In the FY 2008 update, CMS also continued to refine the supplier standards applicable to IDTFs. Many