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OIG Issues Report on Provider Relationships and MR Services  
  Health Law Perspectives
December 1, 2008

The Department of Health and Human Services, Office of Inspector General (OIG), recently released a report regarding “Provider Relationships and the Use of Magnetic Resonance (MR) Under the Medicare Physician Fee Schedule” (the Report).  As the title suggests, the Report analyzed Medicare MR claims data to ascertain, among other things, whether there were indications that physicians were more likely to order MR services when such services were what the OIG defined as “connected services.”  For purposes of the Report, “connected services” were any services in which the physician or the physician’s group was connected through a common medical practice or other business relationship (i.e., financial relationship) (each a “Connected Relationship”) to one or more of the parties involved in providing the technical component of the service ordered.  Significantly, some of the statistical data reviewed by the OIG tended to suggest that a physician’s Connected Relationships had an influence on whether or not a physician would order MR services.  In addition, the OIG noted that the number of parties involved in providing and billing for MR services reduces the transparency of MR transactions (i.e., makes it more difficult to understand the interplay of the financial relationships, including common ownership interests and compensation arrangements, and other transactions, between the parties).  In conclusion, the OIG explained that this lack of transparency “warrants continued attention to ensure that services are reasonable, necessary and compliant with Medicare statutes and regulations.”

The most significant OIG findings were (i) high utilization levels of a small group of physicians that order MR accounted for a disproportionate amount of Medicare claims, and (ii) a higher proportion of the high utilizing physicians had Connected Relationships with the entity or entities that were involved in performing the MR services than did the lower utilizing physicians.  Specifically, the OIG noted that a mere 5% of “High User” doctors accounted for 40% of the MR charges billed to Medicare.  Further, the data indicated that High User doctors were more likely than the other doctors in the study to have a Connected Relationship with the provider of the test.  Out of all the services billed to Medicare where the ordering doctor had a Connected Relationship with the provider of the MR service, 55% were ordered by High User doctors.  In comparison, of all the services billed to Medicare where there was no Connected Relationship with the provider of the MR services, only 33% were ordered by High User doctors.  Thus, the empirical data seemed to indicate that  a physician’s Connected Relationships may influence the physician’s ordering patterns and utilization rates for MR services.

Although the Report did not announce any change in the OIG’s position, or recommend any new statutes or regulations to address the issues identified, it indicates that utilization patterns of diagnostic services continues to be a matter of concern for the OIG.  The Report compliments the efforts of the Center for Medicare & Medicaid Services (“CMS”) to rein in costs related to ancillary services, including MR services.  These developments include the following:

  • In final provisions in the 2008 Physician Fee Schedule, CMS broadened the application of the Medicare “anti-markup” provisions that prohibit physicians from profiting from diagnostic tests unless certain requirements are met.
  • In the 2008 Physician Fee Schedule, CMS cited a number of concerns regarding the in-office ancillary services exception, under the Stark law, which exception permits a physician to self-refer ancillary services to their own practices, and solicited comments regarding changes that should be made to that exception.
  • In the 2009 Physician Fee Schedule, CMS proposed to require physicians or physician groups that perform diagnostic tests to substantially comply with the Independent Diagnostic Testing Facility (“IDTF”) regulations, including the requirement that the practice would be subject to survey by Medicare and restrictions on sharing space and equipment with another provider.

The Report may lead to further proposals to restrict the ability of physicians to make referrals to entities in which they have financial interests, so providers involved in the ordering, provision, billing, leasing and operation of MR and other diagnostic services and equipment should be prepared for more changes in the future.

For further information, please contact David Henninger or David Hatch, in our Los Angeles office at 310. 551.8111, or Stephen Phillips in our San Francisco office at 415. 875.8500, or Stephen Treadgold in our San Diego office at 619.744.7300.

For media inquiries, please contact Barrett McBride at 916.456.5855.