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CMS Takes a Step Back on Recently Published Guidance on the New IDTF Quality Standards

Feb.22.2007

In a surprise move, and without explanation, CMS rescinded recently released interpretive guidance on the new supplier standards for Independent Diagnostic Treatment Facilities (“IDTFs”) which went into effect on January 1, 2007. In a brief, three-sentence notice published on February 19, 2007, CMS rescinded Transmittal 187, which it had issued less than a month earlier on January 26, 2007. The interpretive guidance contained in Transmittal 187 was the subject of much controversy and debate within the industry, primarily due to its apparent prohibition of many commonly-entered into arrangements between IDTFs and other health care providers and suppliers. CMS's rescission of the guidance brought about a collective sigh of relief among those most closely affected by it.

The catalyst for Transmittal 187 was CMS' previous implementation of fourteen (14) additional supplier standards for IDTFs in the 2007 Medicare Physician Fee Schedule Final Rule. The standards, a response to a 2006 OIG report that CMS may have overpaid certain IDTFs by as much as $71.5 million in 2001, went into effect on January 1, 2007 and require all new or re-enrolling IDTFs to certify in the Medicare enrollment application that the IDTF currently meets and will continue to meet the additional standards. The additional standards require IDTFs to, among other things, comply with all applicable state and federal licensure laws and regulatory requirements, maintain a physical facility on an appropriate site, and have all testing equipment available at the physical site.

In an effort to clarify the scope and applicability of these new standards, CMS sought to include the standards, along with the now-rescinded interpretive guidance, in the Program Integrity Manual via Transmittal 187. With the ink barely dry on the January 26 th Transmittal, CMS was inundated with complaints and inquiries from the industry, and the legal trade association e-distribution lists were abuzz with debate over the impact of the clarifications on existing IDTF relationships.

Of particular interest – and concern – was the guidance provided with regard to the “maintain a physical facility on an appropriate site” standard. In clarifying the particulars of this standard, CMS proclaimed that IDTFs “may not share space with another active Medicare supplier,” although CMS noted that physician-owned IDTFs were exempt from this requirement. Because IDTFs routinely engage in arrangements that involve sharing space and/or equipment with other suppliers, i.e. block lease or per-click arrangements, this sent counsel for existing IDTF suppliers and health care providers scurrying for further clarification. Some contended that the restriction only applied to concurrent use arrangements, leaving the traditional block lease arrangements unscathed. Others were not so sure the guidance could be read in such a limited manner.

As a result of this, as well as other uncertainties regarding the presumably well-intended guidance, the CMS deluge of inquiries began. Rather than address every inquiry head on, CMS apparently chose instead to simply rescind the January 27 th Transmittal in its entirety. This rescission has no impact, however, on the standards themselves; the 14 additional standards for IDTFs set forth in the 2007 Medicare Physician Fee Schedule remain in effect as of January 1, 2007. It remains to be seen when or if CMS will once again seek to clarify precisely what it will take to comply with the new standards, although many anticipate an attempt by CMS to re-introduce the interpretive guidance through a more formal rulemaking process.

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For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.

Kathleen M. Stratton
Senior Counsel – Washington, D.C.
Phone: 202.624.2723
Email: kstratton@crowell.com