Urologists win injunction against pod lab rule

Washington-An effort by the Centers for Medicare & Medicaid Services to prevent physicians from administering anatomic pathology diagnostic testing services performed in so-called "pod labs" has been temporarily stalled by a U.S. District Court judge in a case brought by Uropath, LLC and several urology groups.

Judge Rosemary M. Collyer, of the U.S. District Court for the District of Columbia, granted a preliminary injunction March 31 enjoining the enforcement of anti-markup provisions in the Medicare physician fee schedule rule published last November that applied to such services provided in a centralized building. At press time, several motions were pending, including a motion by CMS to dismiss the case.

The rule was challenged in Collyer's court by Uropath, LLC, a large provider of group practice-owned urologic pathology laboratories; Atlantic Urological Associates, P.A.; Sam Michaels, MD, a Uropath pathologist; Rebecca Page, a Uropath employee; Urology Care, Inc., Jefferson City, MO.; and Urology Centers of Alabama, P.C.

As a result of Collyer's ruling, physicians and other providers may continue billing for such services as they did prior to the November 2007 rule, until either a trial is held or the court takes further action.

While the final anti-markup rule was published in November 2007, in January 2008 CMS delayed the effective date for 1 year except for anatomic pathology diagnostic testing services furnished in a centralized building and for the technical component of purchased tests. The injunction does not apply to purchased technical components.

In its Jan. 3, 2008, Federal Register notice, CMS explained that the delay was needed because the definitions in the original rule "may not be entirely clear and could have unintended consequences," so additional time was needed for further study.

Rulemaking called arbitrary

Under the November 2007 rule, a practice may not charge more to Medicare for a service than the "net charge" to the practice by a lab, imaging center, or similar entity, which excludes space and equipment costs. The provision includes both the technical and professional components of diagnostic tests purchased from a separate entity or performed at a site other than the office of the billing physician, and billed by the physician or group ordering the test. The rule would have had widespread impact on many ancillary services provided by physicians, both in urology and in other specialties.

CMS acknowledged warnings by physician groups that patient access could be significantly disrupted due to their inability to render services in a cost-effective manner if medical office space being used in compliance with Stark self-referral rules should be subjected to the anti-markup provisions.

"Physician groups allege that, in situations in which they are subject to the anti-markup provisions and are limited to billing Medicare for the amount of the net charge imposed by the performing supplier, because they will not be able to realize a profit and will not be able to recoup their overhead costs, they will not be able to continue to provide diagnostic testing services to the same extent that they are currently providing such services," CMS said.

But in excluding anatomic pathology diagnostic testing arrangements in pod labs from its time extension, CMS said it was those arrangements that "precipitated our proposal for revision of the anti-markup provisions and remain our core concern." Thus, the agency imposed its rule with respect to anatomic pathology diagnostic testing services furnished in space that is utilized by a physician group practice as a "centralized building" and does not qualify as a "same building" under its rules.

However, in her ruling, Collyer said she issued her preliminary injunction because CMS had imposed its rule without notice or comment and that the rulemaking was "arbitrary and capricious." She said the plaintiffs had demonstrated irreparable harm.