College of American Pathologists




March 5, 2014
© 2014 College of American Pathologists
Special Report
In Victory for Pathology, President’s Budget for 2015 Recommends Exclusion of AP Services From the IOAS Exception

March 5, 2014—After many years of leading the charge against the self-referral of anatomic pathology (AP) services, the College of American Pathologists (CAP) is pleased that President Obama’s budget proposal for 2015, released March 4, for the first time recommends the exclusion of AP services from the “In-Office Ancillary Services” (IOAS) exception to the Stark Law. According to the US Office of Management and Budget (OMB), the estimated savings to the Medicare program for removing AP, advanced imaging, physical therapy, and radiation therapy will be $6.03 billion over the standard 10-year budget window.

“The CAP’s strategy has been to provide reliable data, share individual case studies, and provide the facts to educate policymakers about the unintended consequences of including AP services under the IOAS exception. In multiple meetings with White House domestic policy staff, the OMB, Congress, and the Centers for Medicare & Medicaid Services (CMS)—most recently its Office of the Actuary (OACT)—the CAP made the case that closing the loophole protecting physicians who refer AP services to laboratories in which they, or an immediate family member, own or have a financial interest will generate significant Medicare savings, reduce unnecessary utilization, and benefit patient care,” said CAP President Gene N. Herbek, MD, FCAP.

The IOAS exception was created to ensure patients could have easy access to a range of medical tests or services that inform diagnosis and treatment during the time of their physician visit such as strep and glucose testing, urinalyses and other clinical laboratory tests. It was never intended to include AP services, that involve a complex multi-step process and analysis of a tissue specimen procured as part of procedure to determine cancer or other diseases and conditions. The process can almost never be completed with results available at the time of the patient’s office visit.

The CAP will continue to advocate to lawmakers the need to close the IOAS exception loophole by removing AP services. The CAP’s advocacy efforts include:

  • Pushing for passing of the legislation, “Promoting Integrity in Medicare Act of 2013,” introduced by US Rep. Jackie Speier (D-CA), which would amend the Stark Law’s IOAS exception by removing anatomic pathology, physical therapy, advanced diagnostic imaging, and radiation oncology from the list of services that may be self-referred under the current exception.
  • In 2010, the CAP sponsored the first independent research focused solely on self-referral of anatomic pathology services published by Jean M. Mitchell, PhD, a leading health policy economist, in Health Affairs in 2012; the research was invaluable in educating lawmakers about the unintended consequences of the self-referral loophole. Using Medicare data, the study showed that self-referring urologists billed Medicare for 72% more prostate biopsy specimens compared to non-self-referring physicians, with no increase in cancer detection. Self-referring urologists had a 40% lower cancer detection rate than those who did not self-refer despite billing for nearly twice as many specimens. The research was also the subject of a separate report in CMS’, Medicare and Medicaid Research Review.
  • Participating in the Alliance for Integrity in Medicare, a broad coalition of medical specialty, laboratory, radiation oncology, physical therapy, and medical imaging groups committed to ending the practice of inappropriate physician self-referral.

Additionally, a series of Government Accountability Office (GAO) reports, requested by bipartisan leaders in Congress examining the rise of self-referrals, found increases in self-referrals for magnetic resonance imaging (MRI), computed tomography (CT) services, and AP services, and radiation therapy services ordered by physicians who self-refer, when compared to those physicians who do not. The GAO’s studies support the CAP’s research findings.

Another study by Dr. Mitchell, published in the New England Journal of Medicine (2013), found that patients of urologists who own equipment to provide an expensive type of radiation treatment called intensity modulated radiation therapy (IMRT) are more likely to undergo IMRT to treat prostate cancer, even when the benefit for patients over other treatment options is unclear at best.


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