02.08.08 - The Centers for Medicare and Medicaid Services (CMS) has announced a one-year delay of its amendments to the “anti-markup” rule for certain diagnostic services furnished in certain locations until January 1, 2009.
Background
In the 2008 Medicare Physician Fee Schedule (72 Fed. Reg. 66222, November 27, 2007), CMS revised the longstanding anti-markup rule which has prohibited a markup in the payments for the technical component (TC) of certain diagnostic tests when performed by outside suppliers and billed to Medicare by another entity or provider. The revised anti-markup rule prohibits a mark-up in the payment of both the technical component (TC) and the professional component (PC) of diagnostic tests ordered and billed by the physician or other supplier (other than clinical laboratory tests which have special billing rules) if the diagnostic tests are performed outside the “office of the billing physician or other supplier” or if the diagnostic tests are purchased from an outside supplier.
If the amended rule applies, payment to the billing physician or other supplier for both the TC and PC components of a diagnostic test may not exceed the lower of the following amounts:
• The performing supplier’s net charge to the billing physician or other supplier;
• The billing physician or other supplier’s actual charge; or,
• The fee schedule amount for the test that would be allowed if the performing supplier billed directly.
CMS explains that the basis for this rule change is the ongoing concern that certain financial arrangements between physician practices and outside suppliers of diagnostic testing are potential areas for fraud and abuse.
However, impact of the rule change is that physician groups subject to the anti-markup rule would not be able to realize a profit under the new restrictions; would not be able to recoup their overhead costs; and, very likely would not be able to continue providing diagnostic testing services at the current level causing further disruption in patient access to these services. Further, the published changes generated a great deal of confusion among stakeholders regarding application of the rule to a wide variety of space arrangements.
The Delay
The anti-markup rule amendments would have gone into effect on January 1, 2008. However, CMS acknowledged that the definition of “office of the billing physician or other supplier” may not be entirely clear and could have unintended consequences. Accordingly, CMS issued a delay of the anti-markup rule amendments until January 1, 2009 so that it can study the issue further (73 Fed. Reg. 404, January 3, 2008).
There are two exceptions to the delay. CMS declined to delay the amended rule’s application to the technical component (TC) of a purchased diagnostic test, explaining that this is already a long-standing rule. CMS also declined to delay the amended rule’s application to anatomic pathology diagnostic testing services performed in a “centralized building” and the location does not meet the definition of “same building,” as both are defined in the Stark regulations. CMS explains that anatomic pathology diagnostic testing arrangements remain a “core concern” precipitating these rule revisions.
Conclusion
The good news is that physician practice groups have largely obtained a reprieve from the anti-markup rule amendments. The not-so-good news is that compliance with the current anti-markup rule continues to be a challenge due to unclear definitions on key terms, such as “outside supplier” and “purchased diagnostic test.”
Over the coming year, we can expect CMS to issue clarifying guidance on the amended anti-markup rule, including definitions of key terms, or to propose additional rulemaking, or both.
NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.
If you have any questions, please contact Cathy A. Sloane, JD, MSN, RN, CCS-P of Krugliak, Wilkins, Griffiths & Dougherty Co., L.P.A. at 330-497-0700.