The In-office Ancillary-services Exception: Time to Ground the Skyrocket?

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Some battles are destined to be fought over and over again. The fight to eliminate the IOASE is one such skirmish; it refuses to go away, after more than a decade of debate. Both sides are firmly entrenched, but the battle has been joined, in no small measure, by the federal government. The salvo from President Obama begins on page 40 of the 244-page 2014 budget: The Medicare Payment Advisory Commission “cautions that physician self-referral of ancillary services leads to a higher volume when combined with fee-for-service payments, a finding consistent with [Government Accountability Office (GAO)] . . . analysis. The budget encourages more appropriate use of ancillary services by only allowing providers who meet certain accountability standards to self-refer radiation therapy, therapy services, and advanced imaging services.”¹ According to the Office of Management and Budget, eliminating the exception could save $6.1 billion over the course of a decade.1 The president’s budget expands Stark laws to include not only diagnostic imaging, but also radiation oncology, clinical-laboratory services, and physical therapy—which (together) make up the $6.1 billion figure. Cynthia Moran, the ACR’s assistant executive director for Government Relations, Economics and Health Policy, says, “It did not include anatomic pathology, but that could be next. The more services they look at, the bigger the net becomes.” Likewise, the more services included in the calculation, the greater the savings. When the Congressional Budget Office carved out diagnostic imaging by itself, total savings tallied $1.8 billion over 10 years. Whichever way the services are parsed, the reality is that countless provisions in presidential budgets never see the light of day. Moran believes that the time finally is right, however, for the IOASE to end. “From the late 1990s to 2010, utilization of diagnostic imaging services went up like a skyrocket,” Moran says. “You saw a huge proliferation of in-office use by orthopedists, neurologists, urologists, and a whole slew of specialties—probably most in orthopedics and cardiology. So many studies show increasing volume in self-referral. You could attribute the increase in utilization to ownership.” Political Kryptonite The ACR has been trying to end the IOASE for the past 15 years, essentially sticking to the argument that utilization increases are at least partially driven by financial conflicts of interest. Despite the consistent lobbying, self-referral is “divisive political kryptonite,” Moran says, for a variety of reasons. “It is very difficult to tell physicians who make a significant financial commitment for their practices that they can’t offer that service,” she says. “There are many physician specialties in which income has been significantly improved due to the specialists’ ability to offer imaging services in their offices. For one specialty to point to other specialties and say that it can’t do something is always an uphill battle. Congress is loath to get in the middle of these battles. They call them turf battles for a reason.” For years, it has largely been “diagnostic radiology against the rest of the world, on self-referral,” Moran says, but she believes that the renewed interest in Stark self-referral laws is driven by other specialties that agree with the ACR position. “It’s only been in the past few years, but the radiation-oncology world is extremely concerned about the impact of self-referral and the delivery of therapeutic-radiation services,” she says. “Pathologists are very concerned, along with clinical laboratories and physical-therapy providers. It adds up to a broader cacophony about the concerns of inappropriate utilization due to self-referral.” According to Moran, the origins of the cacophony can be traced back to an ACR initiative from about two years ago. ACR officials requested that Congress ask the GAO to look into the effects of self-referral policy on Medicare reimbursement and utilization of Medicare services. Rep Pete Stark (D–CA)—at the time, the ranking member of the House Ways and Means Committee—made the formal request, along with Rep Henry Waxman (D–CA) of the Energy and Commerce Committee. When the study was finally published, it specifically zeroed in on diagnostic imaging. “I think the reason the administration finally decided to look at this was because the GAO came out with its investigation and attributed over $1 billion in savings just to the diagnostic-imaging component,” Moran says. Stiff Opposition Organizations that include the AAOS have weighed in with position papers contending that physician ownership of ancillary services makes possible better physician oversight of the quality of care being delivered; improved care coordination among providers, through shared knowledge of patient and case information; greater patient adherence to treatment plans, by eliminating scheduling delays, prolonged waits, and the need to travel to other offices (which is critically important for orthopedic patients—especially the elderly—with mobility problems); and an integrated-care model that combines health-care providers of various fields to promote a team-based approach to musculoskeletal-care delivery. No fewer than 23 diverse medical organizations (including the AAOS) sent a letter² to Waxman and Rep Fred Upton (R–MI) in late April 2013. In addition to asking specifically for preservation of the IOASE, the organizations openly question the rationale and projected cost savings for ending the exception. They write that no quantifiable analysis exists supporting the administration’s estimate that ending the IOASE would result in the predicted cost savings. Instead, they state, care would be shifted to more expensive settings, raising costs to CMS and to Medicare enrollees. Eugene Sherman, MD, FACC, is chair of the Advocacy Steering Committee for the ACC, one of the 23 organizations that signed the letter. At least in the case of cardiology, Sherman says, the exception does not apply to the majority of physicians in 2013. Even if it did, he says, there would be no need to do away with the exception. Sherman explains that six years ago, about 70% of cardiologists were in situations in which they needed the in-office exception as part of their practice structures. Today, he says, it’s the opposite. “We’re concerned as to why this administration does not understand what’s going on in the real world,” Sherman says. “In the most recent Medicare utilization numbers ... utilization for cardiovascular imaging continues to drop. The things the ACC has put in place—appropriateness criteria and tools to help physicians in ordering these tests properly—have shown great benefit in reducing utilization. There is nothing nefarious going on in the private-practice setting.” He continues, “Eliminating the in-office exception is costly and interferes with the timeliness and appropriateness of care, and it does not alter imaging patterns or utilization. There have been no studies that show that. Many of us think looking at it the other way may actually be worse, in terms of utilization.” In Sherman’s eyes, the benefits of patient convenience can’t be overlooked in the in-office debate. As an example, he cites a physician in a small community outside of Everett, Washington. “His town has 30,000, but he serves an area of 150,000,” Sherman explains. “Many of his patients drive one to two hours to see him. I am sure he does many of his imaging studies on the day of their visit. That’s how you serve communities like that. Big-city radiologists do not understand what we, as cardiologists, do.” Moran counters, “Over the past 10 years, we’ve rarely seen advanced imaging studies done on patients in the same day that they are seeing physicians in an office visit. There is nothing ancillary about a diagnostic-imaging study, and there have been numerous studies showing that the convenience argument is null and void.” The Utilization–Ownership Link Vijay M. Rao, MD, FACR, is David C. Levin professor and chair of the department of radiology at Jefferson Medical College and Jefferson University Hospitals (Philadelphia, Pennsylvania). She says that cardiology is in a somewhat different situation than other specialties are, but she explains that reduced utilization in cardiology has come as a direct result of specific conditions. “After the DRA went into effect, lots of those cardiology practices came into the hospital because reimbursements were substantially cut,” she says. Beyond cardiology, Rao says, utilization in the Medicare population has gone up across the entire spectrum of medical specialties. “The GAO said that providers who began self-referring in 2009, referred to as switchers, increased MRI and CT referrals by 67% in 2010, compared with 2008,” she says. “How do we explain that? The answer is that they have ownership of the equipment, and that’s where the financial interest is.” More than 300 articles show, she adds, “that physicians who do their own imaging, via self-referral, utilize imaging services at a much higher rate, compared with physicians who do not self-refer.” According to Rao, a 2011 meta-analysis³ showed that the frequency of imaging ordered by physicians who self-refer was nearly 2.5 times higher than that of physicians who do not self-refer for imaging services. “It’s a fact,” she says. “These are not just anecdotes. This is not perception. There are absolutely rigorous data to prove this, over and over.” Are all of these self-referrals valid and clinically appropriate? For Rao, the answer is an unequivocal no. “A lot of the imaging growth in the self-referral arena is inappropriate,” she says, “and it is for financial gain.” Reading the Tea Leaves Sherman can’t predict the likelihood of an end to the IOASE, but he is adamant that its elimination would be a disservice to patients—and no help in the battle to increase savings. “If you eliminate the exception for the 30% or so of cardiologists who are still in a private-practice setting, in many communities, you will create great hardships,” he says. “You may even find physicians migrating away from those communities because this is an important part of the service that they offer, in the financial base for their practices.” Rao admits that she is not very optimistic that the IOASE will be eliminated, citing very strong lobbyists among the opposition groups. She predicts, instead, that all existing facilities will be grandfathered in and that rules might be a bit more restrictive, going forward—along the lines of prohibiting individual physicians from putting in new CT or MRI systems. Ultimately, Moran would like to see the DHHS secretary take on the self-referral exception administratively and take diagnostic-imaging exceptions off the table. “The secretary has the authority to do this via regulation and rulemaking,” she says. “The bottom line is that patients must be assured that the diagnostic-imaging studies that have been ordered are based on their medical conditions—and that there is absolutely no potential conflict of interest as to why those studies were ordered.” She continues, “We would argue that even the taint of potential financial conflict of interest jeopardizes the validity of a lot of services. Radiology has been on the receiving end of numerous reductions by Congress and the administration due to the perception that diagnostic-imaging utilization is inappropriate. Congress or the administration should address the issue head-on and close up the Stark laws to exclude this kind of possible abuse.” Greg Thompson is a contributing writer for Radiology Business Journal.