CMS Issues New IDTF Compliance Standards

16 February 2007 Publication
Authors: Alan H. Einhorn Lawrence W. Vernaglia

Legal News Alert: Health Care

Effective January 1, 2007, Independent Diagnostic Testing Facilities (IDTFs) are subject to new regulatory requirements which are contained in the final Physician Fee Schedule Rule for 2007. In late January 2007, the Centers for Medicare & Medicaid Services (CMS) announced significant additional changes through a manual issuance to the rules governing the structure, ownership, and operation of IDTFs. These new IDTF requirements, which are contained in the Program Integrity Manual (Manual), go into effect on February 26, 2007. The new Manual provision added several important requirements for IDTFs beyond those adopted in the 2007 Rule. This e-Alert discusses four key issues raised by the Manual provision that will affect IDTF operations for both existing and new IDTF suppliers.

1. Sharing of Space. The Manual provision states that an IDTF "may not share space with another active Medicare supplier (note: physicians owning an IDTF and sharing space are exempt from this requirement)." This provision is not found in the regulations. There is some ambiguity about what an "active Medicare supplier" means. The term "supplier" is a term of art under the Medicare statute and includes IDTFs as well as physicians, ambulatory surgery centers, laboratories, and durable medical equipment suppliers. A supplier is distinguished from a Medicare provider, such as a hospitals, skilled nursing facilities, or home health agencies. The Manual provision is not precise about whether the prohibition on space sharing is intended to prohibit exclusive use, part-time arrangements where an IDTF may occupy a physical space on certain days of the week while another Medicare supplier occupies the same physical space on other days of the week. A reasonable interpretation would be that so long as the IDTF and the other Medicare supplier are not occupying the space at the same time, they are not "sharing space" as set forth in the Manual provision. Moreover, it would be reasonable to read the Manual language as applying to "suppliers" and not to "providers," such as hospitals. However, CMS has not, at this time, provided clarification on the scope of the sharing of space prohibition.

2. Sharing of Equipment. The new Manual provision also states that IDTFs "may not share equipment with any other IDTF or supplier." This provision is not contained in the regulation. While this language is very similar to the language prohibiting the sharing of space, the prohibition is not followed by the exclusion of physicians who own IDTFs. A reasonable and natural reading of the Manual would be to read the two provisions in conjunction. That is, it should be acceptable for a physician to own a piece of diagnostic equipment and use that equipment both in the physician’s private practice as well as in the physician’s IDTF. However, because the express exclusion of physician-owned IDTFs only follows the reference to shared space, there is ambiguity about this requirement. As noted, neither of the provisions on sharing of space and equipment are found in the new regulation, which leaves open questions for IDTF suppliers.

3. Liability Insurance. Both the new regulation as well as the Manual provision require IDTFs to acquire comprehensive liability insurance of at least $300,000 per location. The regulation states that the policy must be "carried by a non-relative owned company and list the serial numbers of any and all diagnostic equipment used by the IDTF…." There is no definition of a "non-relative owned company" and it is unclear whether CMS intended to prohibit a large organization that self-insures from complying with the insurance requirement through its self insurance programs. This would be an unreasonable policy if it required adequately self-insured entities to purchase commercial insurance policies.

4. Employees. The Manual requires that all non-physician personnel used by the IDTF who hold a necessary license or certificate must be either the owner of the IDTF supplier or a "full-time W-2 employee." This new requirement appears to prohibit the use of independent contractors to serve in a licensed technician capacity.

Other provisions of the regulation which went into effect on January 1, 2007 and are not modified by the Manual in any material way continue to merit the attention of the industry. These new requirements include:

  • The requirement that a supervising physician supervise no more than three IDTF sites.
  • The requirement that all IDTFs, even mobile facilities, maintain a "physical facility on an appropriate site." This effectively precludes the use of a Post Office Box or mailbox as the physical facility.
  • Requirements that mandate comprehensive testing and calibration of IDTF equipment.
  • The prohibition on direct solicitation of patients, including a prohibition on telephonic, computer, or in-person contacts. Notably, the preamble to the regulation makes clear that general marketing such as billboards will be acceptable.
  • The requirement that all patients referred for diagnostic testing must be referred by an attending physician who is providing consultation or treating the beneficiary for a specific medical problem, and who uses the test results in the management of the patient’s medical problem.

The new Manual provision imposes several significant and substantive requirements on IDTFs beyond those in the January 1, 2007 regulation. We have indications from officials within CMS that the agency will provide additional clarifications on these requirements within the next several weeks, in order to respond to concerns raised by the industry. In the meantime, all IDTF suppliers will need to examine, carefully, these requirements in light of their operations.

If you have any questions about the foregoing or need additional information, please contact the attorneys listed below or the lawyer in the firm who generally handles your legal matters:

Lawrence W. Vernaglia at 617.342.4079 or lvernaglia@foley.com

Janice A. Anderson at 312.832.4530 or janderson@foley.com

Lawrence C. Conn at 310.975.7728 or lconn@foley.com

Alan H. Einhorn at 617.342.4094 or aeinhorn@foley.com

Charles B. Oppenheim at 310.975.7790 or coppenheim@foley.com

Lena Robins at 202.295.4790 or lrobins@foley.com

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