District court upholds CMS ruling on pod labs

June 26, 2008

A federal court judge has upheld an effort by the Centers for Medicare & Medicaid Services to prevent physicians from administering anatomic pathology diagnostic testing services performed in “pod labs,” rejecting a challenge by Uropath, LLC and several urology groups.

A federal court judge has upheld an effort by the Centers for Medicare & Medicaid Services to prevent physicians from administering anatomic pathology diagnostic testing services performed in “pod labs,” rejecting a challenge by Uropath, LLC and several urology groups.

As reported in the June Urology Times (see, “Urologists win injunction against pod lab rule,” page 1), Judge Rosemary M. Collyer of the U.S. District Court for the District of Columbia had granted a temporary injunction enjoining enforcement of anti-markup provisions in the Medicare physician fee schedule rule that applied to such services when provided in a centralized facility. The injunction proved to be short-lived. On May 5, after Urology Times had gone to press, Collyer dismissed the suit for lack of jurisdiction and vacated the injunction.

On June 9, Collyer did issue a clarification to her earlier ruling, rejecting an effort by the U.S. Department of Health and Human Services to force repayment of Medicare fees collected for pod lab services provided between April 2 and May 5, 2008, when the injunction was in force. She said the decision was “a final, appealable order.” There was no word from the plaintiffs as to whether they would file an appeal.

Under the rule, a practice may not charge more to Medicare for a service than the “net charge” to the practice by a lab, imaging center, or similar entity, excluding space and equipment costs. That includes the technical and professional components of diagnostic tests purchased from a separate entity or performed at a site other than the office of the billing physician and billed by the physician or group ordering the test.