ALS Member Update: May 23, 2002

ALS Presents Oral Arguments in Legal Action Against HHS before Judge Henry Kennedy in Federal District Court - May 17, 2002

As you know, the American Lithotripsy Society ("ALS") and the Urology Society of America ("USA") filed a lawsuit last August against the Department of Health and Human Services ("HHS") seeking to stop implementation of certain portions of the phase I final Stark II regulations. Those regulations took effect on January 4, 2002. Specifically, ALS and USA argued that Congress did not intend that: (1) lithotripsy be included as a designated health service under Stark II, and (2) HHS had exceeded its authority in its definition of fair market value under Stark II. Earlier this year, ALS and USA moved for entry of a judgment in their favor. The government filed a competing motion for summary judgment.

On Friday, May 17, Judge Henry Kennedy heard oral argument on the motions. Tom Mills of Winston & Strawn argued the motion for ALS/USA. Using large exhibit boards to illustrate our position, we laid out for the judge the regulatory trap that has been set by the Centers for Medicare and Medicaid Services ("CMS") by requiring that lithotripsy be performed under arrangement with a hospital. We explained that in the normal course, a provider furnishes services to a Medicare/Medicaid beneficiary and is reimbursed by CMS. By contrast, lithotripsy only may be reimbursed to a hospital even though most lithotriptors are owned by physicians or physician-owned entities and the hospital have little involvement with the procedure.

We explained that the new Stark II rules create the final part of the regulatory trap. Under these rules, in order for urologists to be able to refer patients to the hospital for lithotripsy or any other reason, the financial arrangement for the lithotripter must fit within a Stark II exception. All available exceptions require that the compensation paid lithotripsy centers must not exceed what CMS defines as "fair market value." CMS has decided that fair market value means what non-physician-owned entities would charge rather than looking at the value that the hospital on the one hand and the lithotripsy entity on the other add to the arrangement.

We stressed the unfairness of the limitation on fair market value applying not only to fees received from Medicare but also to fees received from private payors. This is particularly unfair given how little hospitals typically contribute to the procedure. We likened the hospitals to the trolls in the fairy tale "Three Billy Goats Gruff" who did not build the bridge and did not own the bridge but collected a toll each time someone crossed the bridge.

We then briefly outlined the history of the Stark II statute and how two of the chief architects of the legislation expressly stated that lithotripsy was not supposed to included in the scope of the statute. We explained how physician ownership of lithotriptors has benefited the public and how, contrary to other medical expenses, lithotripsy costs have decreased in the past 15 years. We further argued that CMS did not properly consider the economic impact that the Stark II regulations would have on lithotripsy entities (which are small businesses) as required by the federal Regulatory Flexibility Act.

The judge was attentive but asked no questions. He did ask several questions of the government lawyer. The government lawyer was forced to concede that no study has shown overutilization of lithotripsy resulting from physician ownership of lithotriptors. She also had to admit that the term "inpatient and outpatient hospital services" was not defined by Congress in Stark or in any earlier statute. She nevertheless insisted that CMS had the right to include lithotripsy in the scope of Stark II and the right to regulate the compensation paid lithotripsy providers.

While we were encouraged by the judge's questioning and body language, we cannot attach too much significance to them. At the end of the hearing, the judge said he would take the matter under advisement. Though we expect a ruling in the next eight weeks, we may not hear for several months. Please revisit the ALS website [] to learn of any breaking developments in this situation in the coming weeks and months.


While the ALS will continue to monitor this critical issue and pursue clarification of Stark regulations through its lawsuit against the government, WE DESPERATELY NEED YOUR FINANCIAL SUPPORT NOW to be certain that your interests are protected. Scarce resources are available to take on this important issue.

Everyone in the lithotripsy industry, individuals and sites, owe their current success to ALS's efforts to support them in the past. Yet the ALS's ability to impact the future can only happen if contributions are made to the Society's Lithotripsy Education and Awareness Fund [LEAF] today! For those who have contributed to LEAF in the past, ALS says "Thank you for recognizing the importance of your support, but please keep giving." For those who have not given, we can only ask "Why?" and suggest that unless your support is forthcoming, your future financial prospects will be dismal and deserved. Whether it is $1000 from every Urologist who has made money from a lithotripsy venture or $50,000 from every site or something in between, now is the time to step forward to support your Society in its efforts on your behalf!

Please send your contributions to:

C/0 Wesley E. Harrington, CAE
Executive Director
305 Second Avenue, Suite 200
Waltham, Massachusetts 02451
Telephone: 781-895-9098
Fax: 781-895-9088

[Please make your checks payable to "ALS-LEAF" or
"ALS Lithotripsy Education and Awareness Fund"

Back to Governmental Affairs

Visit us again to receive up-to-the-minute reports on major issues such as the Health Care Finance Administration's (HCFA) proposed implementation of the Stark II (Physician Ownership) regulations and HCFA's proposed rates for lithotripsy performed in/out patient and ambulatory surgical center settings.

For additional information contact, Wesley E. Harrington, CAE, Executive Director of ALS at:
American Lithotripsy Society, 305 Second Avenue, Suite 200
Waltham, Massachusetts 02451
Telephone: (781) 895-9098
Fax: (781) 895-9088


American Lithotripsy Society
305 Second Avenue, Suite 200
Waltham, Massachusetts 02451
Telephone: (781) 895-9098
Fax: (781) 895-9088

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