Wall Street Journal Article Highlights Increased Scrutiny on In-Office Ancillary Services But Incorrectly Calls This a Loophole

Over the years, there have been attempts to limit the “in-office ancillary services” exception to the physician self-referral law (the “Stark Law”). We have addressed a number of these attempts on our blog (see, for example, Imaging Self-Referrals Could Raise Costs, Hurt Patients, GAO Report Says and Congressional Bill Introduced to Close the In-Office Ancillary Services Exception under the Stark Law). By way of brief background, the Stark Law prohibits a physician from referring Medicare (or other government health plan) patients for certain healthcare services in which the physician has a financial interest. However, in general, the “in-office ancillary services exception” exempts services that are: (1) furnished by a referring physician or member of the same group practice; (2) furnished in a building where the referring physician or group practice furnishes other non-designated health services or in a building used by the group practice for the provision of clinical laboratory services or centralized provision of the group’s designated health services; and (3) billed by the physician performing or supervising the services, by the group practice, or by an entity wholly owned by the physician or group practice.

The topic of whether the government should limit this exception to the Stark Law has reached the mainstream media in an article published yesterday in the Wall Street Journal. However, the article contains a number of inaccuracies about the “in-office ancillary services” exception. The article addresses an ongoing investigation by the Office of Inspector General (“OIG”) of certain services rendered by a national chain of oncology practices. Although the OIG investigation relates to the medically necessity of services rendered – not a Stark Law violation – a considerable portion of the article criticizes the use of the “in-office ancillary services” exception. It is also important to note that the matter is an investigation only with no proven wrongdoing.

Specifically, the article mischaracterizes the exception as a “loophole” used to exploit the Stark Law. To the contrary, the exception is a lawful, statutory mechanism with hundreds of pages of regulatory commentary supporting, debating, and limiting its use. It is designed to enhance the efficiency of patient care, and it allows for integrated care delivery within a practice. It is not limited to “simple, routine procedures,” which the article incorrectly states was the intention behind the exception. Rather, it may be used for more complex procedures and tests as long as all of the requirements of the exception are met. In fact, the author of the article admits that the government has not challenged the interpretation that the exception applies to more complex procedures and tests.

In summary, the article does not offer any new or groundbreaking information on the Stark Law or the “in-office ancillary services” exception. The use of the exception is appropriate when all of its requirements are met. However, the article highlights: (i) the increased scrutiny being placed on the medical necessity of high-value services with a high rate of utilization; and (ii) the increased media and regulatory scrutiny of, and attacks on, the “in-office ancillary services” exception. Therefore, even if the referral is compliant with the Stark Law or one of its exceptions, providers should take care to increase documentation practices to assist in supporting medical necessity of services rendered. In those instances where providers are relying upon the “in-office ancillary services” exception, it is appropriate to confer with healthcare legal counsel to ensure that, in practice, the group meets the “group practice” definition, complies with the “in-office ancillary services” exception, and is otherwise compliant with the Stark Law.

For more information about this topic, please contact Adrienne Dresevic, Esq., Carey Kalmowitz, Esq., or Clinton Mikel, Esq., at (248) 996-8510.

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