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CMS attempts to rein in "Pod" Labs through economic disincentives.

The clinical laboratory and pathology communities have strongly opposed so-called "pod" lab arrangements ever since they gained prominence during the past decade. "Pod" or "condo" labs are designed to take advantage of the in-office ancillary service exception to the Stark self-referral ban, thereby providing the referring physician with opportunities for increased revenues.

While these arrangements can take many different forms, CMS has said the typical pod lab involves an entity leasing space in a medical building and then subdividing the space into separate cubicles or pods, each of which is equipped with microscopes and other laboratory equipment. Each pod is then subleased to a physician group practice, which may be located miles away from the pod laboratory. A histotechnologist, frequently hired by the pod organizer, performs the technical component of the laboratory service, and a pathologist, who is also recruited by the pod organizer, performs the professional component and supervises the histotech. There is usually a cluster of cubicles or pods at a single address, and each separate cubicle or pod is subleased to a different group practice. To satisfy the Stark self-referral law and avoid Medicare's direct-billing rules, the pathologist and the histotech have to move from pod to pod as they perform their services, serving as the employee or agent of the practice group that leases the specific pod.

CMS has recognized that "allowing physician group practices ... to purchase or otherwise contract for the provision of diagnostic tests and then to realize a profit when billing Medicare may lead to patient and program abuse in the form of overutilization of services and result in higher costs to the Medicare Program." Nevertheless, devising ways to prevent these arrangements has proven difficult, both legally and practically. Peter Kazon, Esq., counsel to ACLA, told the G-2 Compliance Report: "Pods represent a 'perfect storm' under Medicare regulations, because they bring together anti-kickback, self-referral, reassignment, and billing issues all in one entity. Thus, the lawfulness of any particular arrangement requires a review of numerous complex rules and requirements."

Rather than ban pod labs outright, CMS has proposed reimbursement reforms designed to eliminate the profitability of these arrangements. In its physician fee schedule proposal for 2008, CMS would expand the rules applicable to purchased diagnostic tests so that the anti-markup provisions apply to both the professional and technical components (PC and TC) billed by a physician or medical group, but performed by someone other than a full-time employee. If adopted, this and other proposed changes to the current purchased-test and Stark self-referral rules would virtually eliminate any incentive to utilize pod lab arrangements.

Organized pathology and ACLA have endorsed the proposed regulatory policy changes.

by AMT Legal Counsel

Michael N. McCarty

Brickfield, Burchette, Ritts & Stone, P.C.
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Title Annotation:government news; Centers for Medicare & Medicaid Services
Author:McCarty, Michael N.
Publication:AMT Events
Geographic Code:1USA
Date:Sep 1, 2007
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