1992 brings significant regulation for physician office laboratories.
The Stark Amendment, which was passed by Congress in 1989, became effective January 1, 1992. This law pre-cludes physicians from making Medicare referrals to entities that provide clinical laboratory services with which the physicians (or members of their immediate family) have a "financial relationship." A "financial relationship" is defined in the statute to include an ownership or an investment interest in an entity that provides clinical laboratory services, or a compensation arrangement between the physician and such an entity. Violations are punishable by civil monetary penalties of up to $15,000 for each service billed to the Medicare program in violation of the statute and up to $100,000 for engaging in activities designed to circumvent the statute.
While the Stark Amendment became effective on January 1, 1992, final regulations have not yet been issued. On March 11, 1992, the Secretary of the Department of Health and Human Services (HHS) published proposed regulations implementing the law. The regulations basically follow the language of the statute and provide clarification of certain issues. However, a number of key issues are still left unresolved. The public has until May 11, 1992, to submit comments on these proposed regulations.
A significant statutory exception to this general prohibition against physician self-referral exempts "in-office ancillary services" from the reach of the statute. This exception is intended to allow certain POLs to continue to service patients referred by the laboratories' physician-owners. However, the exception is narrowly drawn, and only certain POLs can expect to qualify. For the "in-office ancillary services" exception to apply, the laboratory services must be personally furnished by the referring physician, a physician who is a member of the same group practice as the referring physician, or employees of the physician or group practice. In addition, these services must be furnished in a building where the referring physician or another physician who is a member of the same group practice provides services other than clinical laboratory services or a building where the group practice centrally furnishes the group's clinical laboratory services, as long as the referring physician is a member of the group. The ancillary services also must be billed by either a physician who is performing or supervising the services, the group practice of which the referring physician is a member, or an entity wholly owned by the physician or his group practice.
According to the regulations, the exception would not extend to a laboratory that is shared by several physicians who are independent practitioners and who are not members of a group. Moreover, the requirement that the services be billed by the POL also calls into question whether POLs can provide clinical laboratory services "under arrangement" to hospitals, for which Medicare requires the hospital to bill for the services. The extent to which POLs can obtain the services of consultants in performing laboratory testing and still qualify under the regulation that the tests be furnished by the physicians' employees is also a matter of debate.
POLs operated by group practices also must meet a specific statutory definition of group practice. To qualify as a group practice, the group practice physicians must belong to a legally organized entity, such as a partnership or professional corporation. In addition, each physician member must provide substantially the full range of services he or she routinely provides through the group practice, thus precluding the formation of group practices merely to own laboratories. The services must also be furnished through joint use of shared office space, facilities, equipment, and personnel. The statute further requires that substantially all of the services of the physician members must be provided through the group, that such services must be billed in the name of the group, and that the amounts received must be treated as receipts of the group.
A major controversy exists over the statute's substantiality requirement. Originally, draft proposed regulations would have required each physician in the group to devote more than 50 percent of his or her practice to the group. This would have severely limited the ability of physician groups to hire part-time physicians. The proposed regulations provide instead that the term "substantially all" will be met, in the aggregate, if the group practice as a whole devotes at least 85 percent of its practice time to patients of the group. The HHS Secretary believes that this allows a physician the flexibility to be an active member of a physician group and still engage in patient care activities outside of the group. However, the definition still leaves open to question the qualification for the statutory exception of group practices in which a number of member physicians are also members of other group practices.
The proposed regulations do clarify the status of certain other arrangements that were uncertain under the statute. Included in the proposed regulation is an expanded definition of financial relationship that covers indirect financial relationships. Physicians are considered to have an indirect financial relationship with a laboratory if they have an ownership interest in an entity that in turn has an ownership interest in the laboratory entity. Thus, for example, a physician does not escape the reach of the law simply by having his or her P.C. own the laboratory.
The proposed regulations also state that financial relationships entered into in order to comply with the statute, such as buy-outs over time, will not be exempt from the statute if that relationship does not meet one of the exceptions to the rule. For instance, if a physician-owned laboratory was sold to a third party before January 1, 1992, the effective date of the referral prohibition, and the sale provides for installment payments to be made to the physicians for several years, unless one of the exceptions to the statute applies to this arrangement, the self-referral prohibition would apply.
Clinical Laboratory Improvement Amendments
For those POLs surviving the Stark amendment onslaught, the next hurdle is CLIA. CLIA expands the scope of regulation of clinical laboratories by requiring all clinical laboratories to comply with certification requirements, regardless of the type of laboratory and regardless of whether the laboratory receives federal funds. Thus, for the first time, all POLs will be required to obtain certification.
The long-awaited regulations implementing CLIA were finally released on February 28, 1992. The CLIA regulations set standards designed to improve quality in all laboratory testing and include specifications for quality control, quality assurance, patient test management, personnel, and proficiency testing. The regulations have been published in several parts--Lab Standards and Complexity Model, Certification and User Fees, and Enforcement Procedures. Regulations regarding the deeming of accrediting bodies and exemption of state licensure programs are yet to be finalized. The regulations were issued in final form, but with an opportunity for the public to comment as to the laboratory standards and certification and user fees sections until April 28, 1992. The regulations regarding laboratory standards and enforcement procedures will become effective September 1, 1992. Regulations for certification and user fees became effective March 30, 1992. Inspection and certification procedures, including collection of fees, are expected to begin in April of 1992.
The quality standards regulations are based on the complexity of the tests performed instead of the location, size, or type of laboratory. There are three levels of testing complexity defined in the regulations: waived procedures, moderate-complexity testing, and high-complexity testing. If tests performed in a POL are limited to a few simple tests that are listed as waived procedures, the laboratory standards of CLIA do not have to be met and the laboratory need only obtain a "Certificate of Waiver" to show that the POL is exempt from CLIA. Waived procedures are limited to dipstick or tablet urinalysis (nonautomated), fecal occult blood, ovulation and urine pregnancy tests using visual color comparisons, erythrocyte sedimentation rate, hemoglobin (copper sulfate method), spun hematocrit, and blood glucose using certain devices cleared by the FDA specifically for home use.
It is expected that most testing performed in POLs will be categorized as moderate complexity under the regulations. In order to perform tests of moderate complexity, the regulations list specific requirements for proficiency testing, patient test management, quality control, quality assurance, personnel, and inspections.
The major differences between the standards applicable to high- and moderate-complexity testing concern quality control and personnel standards. POLs that perform high-complexity testing must comply with the quality control requirements by the effective date of the regulations, September 1, 1992, while some quality control standards for moderate-complexity tests are being implemented in stages. Because the testing in the high-complexity category is more complicated, personnel standards are more rigorous. Even though the same personnel are required for both moderate- and high-complexity testing, i.e., a laboratory director, a technical supervisor, a clinical consultant, and testing personnel, personnel for high-complexity testing are subject to training and experience requirements that are higher and more specialized according to the kinds of tests performed. In addition, the presence of a qualified general supervisor is required for high-complexity testing.
To determine whether a test is considered to be of moderate or high complexity, a preliminary listing of several thousand test systems, assays, and examinations in both the moderate- and high-complexity categories was published the same day as the regulations. The list only categorizes approximately half of the tests that ultimately must be classified under CLIA. The Health Care Financing Administration expects to complete the categorization list by August 1992 before the effective date of the law, with periodic updates thereafter.
While the Stark Amendment and CLIA regulations impose regulatory hurdles for physicians, owners of physician office laboratories should still be able to structure their laboratory operations to meet the new regulatory requirements.
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|Title Annotation:||Health Law|
|Date:||May 1, 1992|
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