2008 Physician Fee Schedule Regulations Include Anti-IDTF Rule Changes

The final rule, effective January 1, 2008, narrows the Stark Law in-office ancillary services exception in a manner that will disrupt a number of medical group practices' diagnostic imaging and pathology arrangements.

The Centers for Medicare and Medicaid Services (CMS) have issued the final 2008 Medicare physician fee schedule (MPFS) rule, which will be published in the Federal Register on November 27, 2007. In our

July 2007 White Paper regarding the proposed version of the MPFS rule, we focused on certain sections of the proposed rule other than the technical payment calculation issues (not addressed here). In particular, we noted that CMS was using this MPFS rulemaking as a vehicle for revisions to the Stark Law regulations, certain rules regarding reassignment and purchased services, and requirements applicable to independent diagnostic testing facilities (IDTFs). The status of these provisions under the final rule is discussed below.

Stark Law Proposals and Other Physician Self-Referral Proposals

In the final rule, CMS has decided not to finalize the proposed Stark Law revisions, except for the proposed anti-markup rule, which, as discussed below, has significant Stark Law ramifications. With respect to the MPFS Stark Law proposals, CMS stated:

given the number of physician self-referral proposals, the significance of the provisions both individually and in concert with each other, and the volume of public comments, we do not believe it is prudent to finalize any of the proposals in this rule (except for the proposal for anti-markup provisions for diagnostic tests, as discussed below in this section). Although we are not finalizing the proposed revisions to the other physician self-referral regulations in this final rule with comment period, we are confident that we have sufficient information, both from the commenters and our independent research, to finalize revisions to the physician self-referral regulations without the need for new proposals and additional public comment.

CMS has indicated that it does indeed intend to address all of the Stark Law topics covered in the proposed MPFS rule. Moreover, note that the Stark Law proposals in the MPFS rule are distinct from the Stark Law Phase III final rule, which was published in September 2007 and will be effective December 4, 2007 (except for application of the "stand in the shoes" rule to certain academic medical centers and integrated tax-exempt systems, which has been extended to December 4, 2008). The Phase III rule was summarized in our White Paper entitled

CMS Publishes Phase III Stark Law Rule."

Big Changes to Diagnostic Anti-Markup Rule Undercut In-Office Exception

The final 2008 MPFS (effective January 1, 2008) expands substantially the scope of the long-standing prohibition on a physician practice marking up to the Medicare program the cost of a purchased diagnostic test ordered by the physician practice. In so doing, CMS effectively narrows the Stark in-office ancillary services exception in a manner that will disrupt a number of medical group practices' diagnostic imaging and pathology arrangements. Further, in combination with CMS's new prohibition on an IDTF sharing its facility with another Medicare supplier or provider, these amendments effectively prohibit most physician practices and imaging centers from sharing a diagnostic imaging facility, regardless of whether the sharing is accomplished through a shared expense, part-time block lease or other method.

Specific Changes

First, CMS extends the anti-markup rule to the professional component (interpretation) of the diagnostic test. Second, CMS defines a purchased diagnostic test or interpretation as a test or interpretation purchased from an "outside supplier," i.e., someone who is not an employee (full-time or part-time)...