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A closer look at Stark law exceptions

HIM Connection, December 6, 2004

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Perhaps the most important Stark law exception is the in-office ancillary services exception. This exception allows physicians to self-refer for a variety of designated health services (DHS), if they meet several conditions.

At its core, the in-office ancillary services permits self-referrals within a physician practice, where the referred service is performed

• by the referring physician himself or herself
• by another physician member of the referring physician's group practice
• by some other person (such as a technologist) who acts under the direct supervision of the referring physician or another member of the group practice

Since physicians rarely provide DHS, like the technical component of radiology or ultrasound services directly, it is the last prong of the in-office ancillary service test that is the most important in the practice.

CMS's interpretation of the key term "direct supervision" changed as a consequence of the Stark II, Part I regulations, which redefined the term direct supervision to mean the level of supervision required by Medicare payment rules. Under those rules, many diagnostic services are assigned one of three levels of supervision that the Medicare program expects to be provided in connection with the delivery of the service. The three levels are "personal," "direct," and "general."

General supervision does not require that the supervising physician be in the office suite where the service is provided. The supervising physician may be in a different location, so long as he or she is readily available to give advice and direction if the need arises. Direct supervision has the same meaning as the traditional definition under Stark-the physician must be readily available to give advice and direction, and be present in the office suite where the service was provided during the time that the service was rendered. Personal supervision, the highest level of supervision, requires the supervising physician actually be present in the room where the service is provided.

For many areas of diagnostic services, the adoption of this new interpretation of the supervision standards for in-office ancillary services has had a profound effect on the ability of physicians and physician groups to provide ancillary services covered by the Stark law. Many services only require general supervision under Medicare payment rules, like basic vascular ultrasound services, and now physicians are able to provide ancillary services to compete with hospitals.

Important to note are the location restrictions imposed under Stark. Services meeting this exception must conform to one of the following two location requirements:

1. They must be performed in the same building as the one in which the practice provides a full range of its services (meaning the same mailing address).
2. They must be provided in a "centralized location" devoted to the provision of DHS, but only if the practice operates the centralized location on a full-time basis.

The location requirements are intended to ensure that DHS protected by the in-office ancillary services exception are truly an integral part of the practice's operations.

This excerpt is adapted from the book Compliance Troubleshooter: Tackling the Top 10 Compliance Challeneges.

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