Federal Judge Dismisses Lawsuit Against Anti-Markup Rule

A federal judge has dismissed a lawsuit filed against the U.S. Department of Health and Human Services (HHS) that sought to invalidate the Department’s recent anti-markup rule on anatomic pathology services. After ruling that Uropath and its clinical director lacked standing to be parties to the lawsuit, U.S. District Court Judge Rosemary M. Collyer ruled that the physician Plaintiffs must channel their objections . . . through the administrative process before coming to court.” Accordingly, the case was dismissed for lack of jurisdiction. ASCP President Lee Hilborne, MD, MPH, FASCP, DLM(ASCP)CM praised the judge’s ruling, calling it a “victory for ASCP members and for patients.”

In addition, the judge also vacated the Preliminary Injunction (Click here for ASCP’s ePolicy story on the preliminary injunction). The judge’s ruling effectively removes the legal barriers that suspended application of the Anti-Markup rule to anatomic pathology services.

Securing the Anti-Markup rule was one of ASCP’s top advocacy priorities, and it came as a result of thousands of letters written by ASCP members to the Centers for Medicare Services and Congress as part of ASCP’s Stop Pod Labs Now campaign.

As the judge wrote in her opinion, “the Anti-Markup Rule, intended to be effective for services rendered after January 1, 2008, limited Medicare payment for diagnostic testing services provided in a “centralized building” that does not qualify as a “same building” under the physician self referral exception in the Stark Law” The rule deters clinicians, such as gastroenterologists, dermatologists and urologists, from utilizing “pod labs” to markup the cost of anatomic pathology services. (See below for Judge Collyer’s description of pod labs)

The Anti-Markup rule, outlined in Judge Collyer’s opinion, states that “payment for anatomic pathology diagnostic testing services performed at a ‘site other than the office of the billing physician or other supplier’ is to be limited to the lesser of: (1) the performing supplier’s net charge to the billing physician or other supplier; (2) the billing physician or other supplier’s actual charge; or (3) the fee schedule amount for the test that would be allowed if the performing supplier billed directly.”

In the end, Judge Collyer ruled that the Court lacked jurisdiction to hear the Plaintiffs’ claims. Judge Collyer wrote that “Congress expressly has precluded federal question jurisdiction…over claims ‘arising under’ the Medicare Act.” “The Plaintiffs must first channel their claims” through HHS “before they can file them in district court,” Judge Collyer said. Accordingly, the Court did not decide the validity of the rule, but determined that it was premature to consider the question.

To retrieve a copy of Judge Collyer’s opinion, click here.

What is a Pod Lab?

Judge Collyer’s opinion described “pod labs” as a laboratory constituting “a centralized collection of numerous small laboratories that are housed in adjacent cubicles (the ‘pods’) in a building subdivided and leased to several unrelated medical practices. Each cubicle contains the necessary medical equipment for performing the relevant lab work. The equipment in each pod is separately owned by each physician group practice that refers specimens to the centralized location. A single pathologist and staff then rotate among the various pods, performing pathology services while in each pod on the patient specimen referred by the physician group that owns the medical equipment.”