Why the Stark Law loophole must go

When President Obama released his 2014 budget last week, one item, in particular, caught the attention of the radiology community: a proposal to close much of the Stark Law loophole.

The Stark Law prevents self-referrals to facilities for a number of health services--including imaging--for Medicare patients if the referring physician has a financial interest in the facility. But, an in-office ancillary services (IOAS) exception to the law allows physicians to refer to themselves or other physicians in a group practice if the equipment is located in their own offices.

Now, the president wants to remove diagnostic imaging, radiation therapy and physical therapy from this exception, although practices that meet certain accountability standards still could remain exempt.

The Stark Law loophole has long been a thorn in the side of radiologists. Radiology groups have been trying to close it for years and with good reason; the costs associated with the policy are exorbitant.

Over the past several years, research has shown that self referral has grown, resulting in increasing imaging utilization--much of which may be unnecessary. Radiologists such as David Levin, M.D., a harsh critic of self referral, have argued that if physicians refer patients to radiologists, there is no financial incentive involved, minimizing the chances inappropriate imaging.

On the other hand, physicians who have their own imaging equipment and refer to themselves make more money. It's a clear conflict of interest, and the danger is that it leads to unnecessary imaging and inflated health costs.

The president seems to agree. In fact, he's put a number on what he believes the Stark Law loophole costs: the administration calculates that closing the loophole will save $6.1 billion over the next 10 years.

In today's political climate, there's no chance that the 2014 budget will end up looking anything like what the president proposed last week. We also know that Congress has been unenthusiastic in the past about efforts to close the loophole.

Of course, if the administration is serious about closing the loophole, it can do so. Cindy Moran, assistant executive director for government relations and health policy for the American College of Radiology points out that U.S. Department of Health & Human Services Secretary Kathleen Sebelius has the legal authority to close ancillary services exceptions.

The bottom line, though, is that the evidence demonstrates that the IOAS loophole has been a huge policy failure, siphoning off funds that certainly could be better used to enhance patient care. Let's hope this is the beginning of its end. - Mike  @FierceHealthIT

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