Revised Anti-markup Rule: CMS Gets Creative

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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.

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