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    Urologist group wins right to challenge Stark regulation

    Appeals court decision may spur more challenges to provisions of Stark law

    Joseph Jenkins
    Washington—The Council for Urological Interests (CUI), an organization of physician-owned joint ventures that provide urologic laser equipment and services to hospitals, will now have its challenge of regulations stemming from the Stark law heard in court—despite objections from the Centers for Medicare & Medicaid Services.

    In early March, CMS decided not to contest a December 2011 federal Court of Appeals ruling that gives CUI the right to challenge in U.S. District Court regulations issued in 2008 by CMS. Those rules, which took effect Oct. 1, 2009, prohibit urologists with a financial interest in a joint venture from referring patients to that entity for laser services, even if the services are provided under arrangement with the hospital whereby the hospital billed CMS for the services and then paid a fee to the joint venture providing the service.

    The regulation, issued under the Stark anti-self-referral law, also prohibits per-procedure, or "per-click," leases with physician-owned equipment suppliers, a common practice in the industry, according to Joseph Jenkins, MD, JD, chairman and executive director of CUI, who hailed the decision issued Dec. 23 by the three-judge panel in Washington.

    "Basically, the U.S. Court of Appeals said we have a right to have our day in court, and that CMS was trying to absolutely eviscerate the rule of law," Dr. Jenkins told Urology Times.

    Decision could lead to more Stark challenges

    The decision by the appeals court, and the failure of CMS to request reconsideration, means that CUI's suit seeking to overturn the regulation will be heard in U.S. District Court in Washington on its merits. It could open the door to additional challenges to provisions of the Stark law, according to Thomas L. Mills, JD, managing partner and chair of the health care practice at Winston & Strawn, LLP, which represents CUI in the case.

    "This allows the industry to show that their regulations are not presumptively OK," Mills said. "There are so many regulations under Stark that it is like shooting a hummingbird with a nuclear missile."

    CUI's suit contends that the regulations exceeded CMS's statutory authority and were contrary to the intent of Congress, clearly stated in legislative reports.

    However, the U.S. District Court dismissed the case, agreeing with CMS that CUI was first required to go through "administrative review" required by the Medicare Act. In overturning that ruling, the appeals court said the administrative appeals process effectively precluded CUI from having access to judicial remedy.

    "The jurisdictional channeling issue that has been used by the government to prevent people from challenging them in court has been overcome," declared Dr. Jenkins. "We set a precedent and we will have our day in court. That has been decided, and that forces accountability on CMS. They can no longer just claim, 'We get to make the rules, and you're out of here.' " (Jurisdictional channeling refers to the administrative review process that CMS said had to be followed.)

    The appeals court also agreed with CUI's contention that it was unfair to prevent non-physician-owned entities from providing such high-tech laser services, but not those owned by physicians.

    Wrote Judge David S. Tatel in the opinion unanimously approved by the three-judge panel: "The 2008 regulations redefine the status of urologist-owned joint ventures... in such a way that the joint ventures can no longer either receive referrals from their urologist-owners or bill for services furnished pursuant to such referrals. The regulations also bar physician-owned ventures from charging per procedure, while imposing no similar bar on the non-physician-owned ventures with which Council members compete."

    Tatel pointed out that more than 75% of patients who undergo urologic laser surgery are insured by Medicare, so the regulations' impact on urologist-owned joint ventures is both direct and substantial, contrary to the government's position.

    Tatel also said the fact the Medicare law requires providers to take the extra step of presenting their claim to the agency for initial determination is not sufficient "to justify precluding them from obtaining judicial review of regulations that directly and substantially affect them."

    Proxy argument rejected by court

    He also turned aside CMS's contention that CUI could use a proxy—the hospitals—to seek redress in court. CUI contended that the hospitals have no interest in taking up the case for physician-owned joint ventures.

    "We see nothing in the case law requiring us to disregard factors that speak to a potential proxy's willingness and ability to pursue the plaintiff's claim," Tatel wrote. "In cases where the only entities able to invoke Medicare Act review are highly unlikely to do so, their unwillingness to pursue a Medicare Act claim poses a serious 'practical roadblock' to judicial review."

    Tatel noted CUI's assertion that the regulations allowed "hospitals to purchase expensive laser equipment from urologist joint ventures at 'fire-sale prices,' while hospitals choosing not to acquire their own equipment could simply contract with non-urologist-owned ventures instead, thus suffering no material financial harm."

    "Every future urology-owned venture was in jeopardy" because of the regulation, said Dr. Jenkins. "If CMS could make this stand, there would be nothing that urologists could do about it because they couldn't go through the administrative process and they couldn't go to court. They would be at the mercy of the hospitals. If CMS had won, our case would never have been heard on the merits. Fundamentally, it was very important for CMS to be held accountable."

    Dr. Jenkins is optimistic that CUI can prevail when the case eventually is decided.

    "I think we have a good case and a good chance to win," he said. "We think fundamentally that it protects urology-owned ventures. We will see if we can reverse 3 years of regulation."

    Bob Gatty
    Bob Gatty, a former congressional aide, covers news from Washington for Urology Times.


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