Court dismisses challenge to CMS rule designed to thwart "pod" labs.

On May 5, a federal court in Washington dismissed a lawsuit that several urology groups and other plaintiffs had filed in an attempt to overturn HHS rules aimed at eliminating so-called "pod" lab arrangements.

The challenged rules prohibit any markup of the professional and technical component of anatomic pathology services provided in a "centralized building" that does not qualify as the "same building" under the in-office ancillary services exception to the Stark physician self-referral law. The physician groups sued the Government, claiming the regulation prevented them from billing for the amount allowed under the Medicare physician fee schedule and required them to bill at a loss. The plaintiffs also contended that CMS failed to follow required rulemaking procedures and acted contrary to the Stark exception.

U.S. District Judge Rosemary Collyer initially issued a preliminary injunction on March 31, preventing the Government from enforcing the anti-markup rule pending further briefing and arguments. Less than five weeks later, however, she tossed the case out, finding that the plaintiffs were required to exhaust administrative remedies before filing suit.

by AMT Legal Counsel

Michael N. McCarty

Brickfield, Burchette, Ritts & Stone, P.C.