Physicians playing defense under the Stark Act: 20 things to know about the 21st Century Oncology self-referral investigation

Last week, The Wall Street Journal published an article detailing the government investigation of national radiation-oncology practice 21st Century Oncology, which focuses on the ordering of in-house tests with profitable Medicare reimbursements.

The article and the accompanying investigation are a few of a stream of government, media and false claims cases and articles which seem to focus on physicians as the culprits in medicine. While 21st Century's case may or may not provide a lesson in good practices, it highlights a growing perception of physicians as bad actors, putting many on the defensive.

Here are 21 things to know about the 21st Century Oncology situation.

1. 21st Century offers cancer treatment and radiation therapy in 275 locations across 16 states. It also includes a pathology lab in Fort Myers, Fla., which 21st Century Oncology started in 2009.

2. The Office of the Inspector General subpoenaed 21st Century Oncology Holdings in February for records of patients on which the company's urologists performed a particular bladder cancer test: florescent in-situ hybridization, or FISH, according to 21st Century Oncology Holdings' Securities and Exchange Commission filings. The government agency's aim in subpoenaing the records was to determine whether bladder cancer tests performed since 2007 were medically necessary, according to the WSJ report.

3. The Stark Law prohibits referrals by physicians to entities with which the physicians have a financial relationship. The law also includes several exceptions, which were based on various principles. For example, a core exception under the Stark Act allows group practices to provide lab, imaging and other services in their practice offices, the concept being that if the group was actually providing the services, it would be less likely to overorder them, and profit from them. In contrast, a practice shouldn't profit from referrals to outside labs.

4. According to the WSJ, as technologically advanced diagnostic tests have become more common, the government hasn't updated the interpretation of the in-office ancillary services exception. This has arguably led to much greater use of the exception than initially intended; rather than being used by a small practice to make testing more convenient for patients, it is now used by large practices and business entities, which feel very different than the traditional group practice.

5. 21st Century Oncology is currently cooperating with the government investigation, as it believes it acted according to the law. The company has recently been one of the subjects of a 2014 OIG report investigating laboratory Medicare billing.

6. Practice executives, according to the WSJ, allegedly encouraged company urologists to perform the tests, promising them revenue as a result, according to the WSJ. The paper obtained emails from 21st Century Oncology executive Michael Tompkins to the company's urology practice manager to this effect.

7. The company orders FISH tests for its patients, according to its CMO, because catching bladder cancer early saves lives. 21st Century Oncology's 95 urologists receive a portion of the profits from the bladder tests, according to the report. According to a practice spokesperson paraphrased in the WSJ, urologist bonuses are linked to the pathology lab's overall test revenue and thus are not based on individual referrals. This is intended to be a policy compliant with the Stark Law exception; the referring physician shares in profits as a whole but not based on his or her own referrals.

8. Medicare billing records released after a legal effort from the WSJ show 21st Century Oncology pathologists billed Medicare more for the FISH test than any other pathologist or lab in the United States in 2012.

9. The company's senior pathologist, Richard D. Fernandez, MD, said the reimbursement level of the test in comparison to similar, less profitable tests, may have been a factor in the high volume of FISH test orders, according to the report.

10. 21st Century Oncology had $646 million in revenue in 2013, 55 percent of which was from Medicare.

11. There are arguments that the value of the FISH test is debatable. It may have a higher rate of false positives, but it is also useful for detecting aggressive bladder cancer.

12. In 2009, Medicare paid between $700 and $1,000 dollars for a FISH test and just $84 dollars for an older test used for the same purpose to facilities in 21st Century Oncology's region, according to the WSJ report.

13. During 2009, the practice's orders of FISH tests increased from 202 tests in May to 942 in October.

14. Of the $7.8 million in Medicare payments the practice's senior pathologist received in
2010, $5 million was for the FISH tests.

15. The two pathologists who now head the practice's Fort Myers lab performed the test 12,180 times in 2012, collecting $4.13 million, which is 21 percent of what Medicare paid for the 379 pathologists performing that test nationwide that year.

16. An OIG report released this past summer on high laboratory Medicare billings showed 21st Century Oncology's average Medicare reimbursement per ordering physician in 2010 was 24 times the average of all nonindependent labs, at $107,700.

17. Also in 2010, the practice's average reimbursement per Medicare patient was 16 times the average of all nonindependent labs, at $1,193.

18. The practice also had a higher percentage of claims for beneficiaries more than 150 miles away, a higher percentage of duplicate lab tests and a high percentage of claims with patient identification numbers that had been "compromised," according to the report.

19. Dr. Mantz, CMO, told the WSJ the billings may seem unusual but are due to the population the practice serves: Elderly patients who are wintering in Florida.

20. The College of American Pathologists, which arguably wants to protect pathology revenue for its own members, has advocated for narrowing the in office ancillary services
exception. According to government estimates, this could save Medicare $6 billion over 10 years. When the issue came up last year, eight radiation-oncology groups, including 21st Century Oncology sent a letter to Senate leadership in defense of the exception. The company has a political action committee, which has spent $440,000 over the past three election cycles. Co-founder and chairman Daniel Dosoretz and his family have made nearly $200,000 in political donations since 2009, according to the WSJ.

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