The Department of Health and Human Services (“HHS”) is once again targeting the In-Office Ancillary Services Exception (“IOASE”) to the federal Stark Law, in an attempt to produce cost savings in the U.S. healthcare system. The IOASE provides a limited exception to the Stark Law that allows physicians to refer patients to receive specified ancillary services in the physicians’ own offices. Such permitted services currently include certain diagnostic imaging, radiation therapy and supplies, clinical laboratory services, outpatient prescription drugs, and physical, occupation and speech therapy. In order to qualify for the Stark Law exception, the services must be furnished in accordance with strict guidelines related to, inter alia, billing, group practice organization and ownership, office hours, and the identity of the individuals actually providing the services.

Lawmakers and administration officials have long attempted to impose further restrictions on the use of the IOASE. Most recently, HHS indicated its desire to limit the IOASE through its Fiscal Year 2016 proposed budget.   Arguing that some ancillary services are “rarely furnished on the same day as the related physician office visit” and that the IOASE has caused “overutilization and rapid growth” of these services, HHS has proposed tightening the list of services covered by the IOASE to eliminate permitted self-referrals for therapy services, advanced imaging, radiation therapy and anatomic pathology services unless they are offered at “clinically integrated” practices that demonstrate cost containment. The budget proposal claims that this change will save six billion dollars over ten years.

While the current political climate in Washington leaves the fate of HHS’s proposed budget far from certain, physicians must once again be on the alert for increased limitations on their ability to provide in-office ancillary services.