The Department of Health and Human Services’ Office of Inspector General (“OIG”) recently released OIG Advisory Opinion No. 15-15, in which the OIG determined that an arrangement involving an acute care hospital (“Hospital”), radiology practice and family medicine clinic (“Clinic”) would not generate prohibited remuneration under section 1129B(b) of the Social Security Act, the Federal anti-kickback statute (“AKS”).
Under the arrangement, the Clinic refers patients and certain diagnostic tests to the Hospital, and thus the Clinic’s physicians are referral sources for the Hospital. The radiology practice contracts with the Hospital to supervise radiology services and provide professional interpretations of all radiologic imaging taken at the Hospital, and members of the radiology practice can influence referrals to the Hospital. The Clinic includes technologists who provide radiologic imaging services for the Clinic’s patients, and the Clinic transmits the resulting images to the radiology practice to interpret the images and is thus a referral source for the radiology practice. The radiology practice’s radiologists interpret the images and dictate reports, but send the dictated reports to the Hospital and the Hospital’s employees transcribe the reports on behalf of the radiologists, who send the final reports back to the Clinic. The radiology practice pays the Hospital a “flat rate per line of transcription” fee that is fair market value for the service, and the Clinic pays no portion of any transcription cost. The Clinic bills third-party payors, including Medicare and Medicaid, for the technical component, and the radiology practice bills these payors for the professional component of the radiology services. The OIG also noted that the Hospital is located in a sparsely populated region, the Clinic is in a rural community in that region, and that the radiology practice is the only radiology practice within a 100-mile radius of the Clinic or Hospital.
Crucial to the OIG’s finding, the Centers for Medicare & Medicaid Services’ (“CMS”) Medicare Claims Processing Manual provides that with regards to the professional component of a radiology service, the interpretation of the diagnostic procedure includes a written report. Further, CMS advised the OIG that transcription costs are considered indirect expenses under the methodology establishing resource-based practice expense relative value units (RVUs), meaning that such costs are not separately identified but are included in both the professional and technical components for each service. As such, CMS’ position is that when the technical component and professional component are provided and billed by different entities, the two providers may determine who will pay for transcription costs.