Why an Advanced Imaging Notice Could Save You Millions

Clinics that provide MRI, CT, or PET scans and health systems that employ physicians and would consider compensating a physician in part for work done “incident to” the physician’s work need to be aware of a quirk in the Stark Law. 

The 2011 Medicare physician fee schedule implemented a provision in the Patient Protection and Affordable Care Act (PPACA) that added a new requirement to the “in-office ancillary exception” to Stark. Under it, you must provide a notice to patients who receive advanced imaging, defined as MRI, CT and PET. Because the requirement only applies to those advanced imaging modalities, you do not need to use it for other imaging, such as plain film X-ray or ultrasound.

Under the provision, when a physician notifies patients that they will receive a scan, he or she must provide the patient with a written list of at least five other suppliers within 25 miles of “the physician’s office location” who provide the type of imaging needed by the patient – and inform the patients that they are free to obtain the scan from any location they choose. If there are fewer than five suppliers in the area, the list must include all of the suppliers. If there are no other suppliers, no notice is required. 

Note that the rule only requires notice of “suppliers.” This is a technical Medicare term referring to physician offices and Independent Diagnostic Testing Facilities (IDTFs). The rule does not require the notice to list hospitals, though it is permissible to include them. The notice must include the name, address, and phone number of each supplier. 

Since the notice must be provided at the time of the referral, posting a notice on the wall or providing notice to every patient at registration does not satisfy the requirement. The notice must be given in writing, so when you notify a patient of the need for a scan by phone, you must mail or email the notice. There is not any obligation to obtain the patient’s signature. The rule also does not limit what you may say in the notice. For example, you may include a statement that you are not endorsing any of the other facilities, and you may notify patients that it is possible that their insurance may not cover scans at the listed suppliers.

So, what does this mean? If the clinic is in an urban area and owned by physicians who treat Medicare patients and order and provide MRI, CT, or PET, it almost certainly relies upon the in-office ancillary exception, meaning it must provide the notice. In rural areas, there may be some situations in which a physician does not rely on the in-office ancillary exception, but many rural practices do rely on the in-office exception. A physician practice will want to be sure to provide the notice.  

Why should hospital-employed physicians care? Many hospitals have ignored this provision because if the physicians do not own the hospital, they do not need to rely upon the in-office ancillary exception. But the in-office ancillary exception offers some unique benefits, such as permitting physicians to be compensated for services “incident to” their services. 

Under other Stark exceptions, physicians are only allowed to receive credit for work they personally perform. The in-office exception allows physicians to be compensated for work done by non-physician practitioners incident to the physician’s work (note that the Centers for Medicare & Medicaid Services (CMS) does not believe that diagnostic tests are “incident to” a physician’s work, so its stance is that physicians can never receive credit for lab or imaging). The bottom line is that the in-office exception is broader than any other Stark exception and therefore lowers the risk that you face a Stark investigation. Therefore, many nonprofits may wish to carefully consider whether they want to provide the notice despite the challenges associated with doing so. I don’t hear much talk about the benefit of this notice in the health law world. 

I think a lot of health lawyers haven’t really thought about it. If you are in a health system, I would encourage you to be sure that your general counsel is aware of this issue. 


David M. Glaser, Esq.

David M. Glaser is a shareholder in Fredrikson & Byron's Health Law Group. David assists clinics, hospitals, and other health care entities negotiate the maze of healthcare regulations, providing advice about risk management, reimbursement, and business planning issues. He has considerable experience in healthcare regulation and litigation, including compliance, criminal and civil fraud investigations, and reimbursement disputes. David's goal is to explain the government's enforcement position, and to analyze whether this position is supported by the law or represents government overreaching. David is a member of the RACmonitor editorial board and is a popular guest on Monitor Mondays.

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