Revised Anti-markup Rule: CMS Gets Creative

Twitter icon
Facebook icon
LinkedIn icon
e-mail icon
Google icon
On November 19, 2008, CMS issued the Medicare Physician Fee Schedule (MPFS) for calendar year 2009. Consistent with the CMS trend of introducing substantive regulatory changes in payment rules, the MPFS Rule contained a number of significant revisions, including the closely watched anti-markup provisions applicable to diagnostic services other than clinical diagnostic laboratory tests (the anti-markup rule). In the 2008 MPFS final rule, CMS finalized significant revisions to the anti-markup rule, including extending the rule to purchased interpretations. CMS, however, subsequently delayed the effective date for the majority of diagnostic services in response to numerous requests for clarification by affected physicians and suppliers (anatomical pathology labs were still subject to the final rule as promulgated). The effective date of the revised anti-markup rule is January 1, 2009.
image
Jennifer (Beech) Lohse, Esq
The anti-markup payment limitation has been in effect for many years, but it was difficult, at times, to determine when the physician who ordered and billed for the services (the billing physician) had actually purchased a test. In the proposed rule for the 2009 MPFS, CMS attempted to provide clarification and proposed a number of alternatives for determining whether the payment limitation of anti-markup rule would apply to the technical component and/or the professional component of diagnostic services. CMS had moved away from the concept of purchased tests, purchased interpretations, and outside suppliers for the purposes of the anti-markup rule, and instead concentrated on the relationship between the physician who was performing the services and the billing physician. The final 2009 MPFS Rule borrowed from each of the proposed alternatives to create a hybrid analysis to determine if the performing physicians and suppliers “share a practice” with the billing physician, and avoid implicating the anti-markup rule. The payment limitation in the revised anti-markup rule applies when the same physician (or physician’s group) ordering a diagnostic tests wants to bill the Medicare program for the professional and/or technical components of diagnostic services rendered by another physician or supplier with whom he or she does not share a practice. For the technical component, the performing physician is the physician who actually supervises the test, in accordance with the supervision levels assigned by the MPFS for the diagnostic test (general, direct, or personal supervision). For the professional component, the performing physician is the physician who provides the interpretation of the diagnostic test. If the arrangement between the billing physician and the performing physician cannot satisfy either test, then the performing physician will not be deemed to share a practice with the billing physician, and the technical component and/or the professional component will be subject to the payment limitation of the anti-markup rule. The payment limitation is the lower of the actual charge of the performing physician to the billing physician, the MPFS amount for the performing physician’s services if he or she had billed directly, or the net charge for the performing physician’s service. Despite seeking comments on the definition of net charge, CMS elected not to modify the 2008 MPFS final rule’s definition. Therefore, the net charge must be calculated without taking into account certain overhead costs, such as equipment or space; essentially, it only covers the costs of the salary and benefits of the performing physician. CMS directs that arrangements between the billing physician and the performing physician must first be analyzed under the substantially all test. If the performing physician does not meet the substantially all test, then an analysis should move to the site-of-services test. Under either test, the technical component and the professional component should be analyzed separately to determine whether the anti-markup rule applies to either. In addition, if the performing physician bills the Medicare program directly for his or her services, then no anti-markup analysis is necessary. Substantially All Test Where the performing physician performs substantially all of his or her professional services for the billing physician or the physician’s group, then none of the services by the performing physician will be subject to the payment limitation of the anti-markup rule. Consistent with the Stark rules for a group practice, CMS defines substantially all to be at least 75% of the total professional services provided by physician, whether or not the physician works on a full-time or part-time basis. CMS determined that if a performing physician meets the substantially all test, there is sufficient nexus with the billing physician to justify not applying the payment limitation, regardless of where the services are actually rendered. Performing physicians must have met the substantially all test within the previous 12 months or must expect, in good faith, to meet the test within the subsequent 12 months. CMS clarified that locum-tenens physicians may step into the shoes of a performing physician who meets the substantially all test without triggering the anti-markup rule. Site-of-service Test Reminiscent of the 2007 final MPFS rule, the site-of-service test requires that the technical component be conducted and supervised in, and the professional component performed in, the office of the billing physician, by an employee or independent-contractor physician, to avoid implicating the anti-markup rule. The location of the performing physician is the primary measure of this test. The office of the billing physician is the space in which the billing physician regularly furnishes patient care (or, if in a physician organization, the space in which the billing physician performs substantially the full range of patient care services that the billing physician provides generally), which includes space within the same building, as defined in the in-office ancillary exception to the Stark rule. The same-building definition specifically excludes services performed in centralized buildings, mobile vans, trailers, and other vehicles in the parking lot of the building. Avoiding the payment limitation of the revised anti-markup rule may be difficult for some nonradiology physicians and for physician groups that routinely contract with a radiologist to provide interpretations of the diagnostic imaging services (the professional component). Generally, most physician groups do not produce enough volume on their own equipment to justify hiring a radiologist. Instead, they contract with the radiologist as an independent contractor. Unless the radiologist provides at least 75% of his or her professional services for the billing physician, then the radiologist must be on-site in the office of the billing physician in order for the billing physician to mark up the interpretation. Therefore, any interpretations provided off-site by an independent-contractor radiologist who does not provide at least 75% of his or her professional services for the billing physician will always implicate the payment limitation of the anti-markup rule. The radiologists, however, may bill the Medicare program directly, and will not be subject to any payment limitation. Avoiding the payment limitation of the anti-markup rule for the technical component may be easier for most non-radiologist physicians and physician groups, since supervision of the technical component does not require the supervising physician to be within the same suite (or even the same building) if he or she is only providing general level of supervision. For example, the billing physician may order the imaging study and then supervise a general-supervision–level procedure from across town (or a physician who provides substantially all of his or her services for the billing physician or the physician group can supervise) without implicating the rule, since where the study is performed is irrelevant if the substantially all test is met. If contrast or sedation is required, then the performing physician supervising the test must be present in the suite (in most jurisdictions—check with your local fiscal intermediary/Medicare administrative contractor) to meet the personal-supervision requirement. This may complicate the analysis, since the supervising physician must be in the space in which the billing physician regularly furnishes patient care if he or she does not meet the substantially all test. If the diagnostic testing facility is not part of the office of the billing physician, then the test must be supervised by a physician who meets the substantially all test to avoid the payment limitation of the anti-markup rule. The revised anti-markup rule provides greater flexibly than the 2008 MPFS rule. With the complexity of many diagnostic-service arrangements, however, many groups may need to revise and unwind current agreements by January 1, 2009, or subject themselves to the payment limitations of the anti-markup rule.