2009 Physician Fee Schedule Rule Addresses Anti-Markup, Stark, IDTF, And Other Issues

On October 30, 2008, the Centers for Medicare & Medicaid

Services (CMS) put on display a copy of its 2009 Final Physician

Fee Schedule Rule for Calendar Year 2009 (Final Rule), which is

scheduled for publication in the Federal Register on November 19,

  1. In addition to adjustments in the amounts to be paid under

    it, the Final Rule addresses significant Medicare payment policy

    changes in a number of areas. These include, but are not limited

    to, the Anti-Markup rule applicable to diagnostic tests;

    independent diagnostic testing facilities (IDTF); the Stark Law;

    the enrollment rules applicable to physicians and non-physician

    practitioners; end-stage renal disease (ESRD) payment policies;

    incentives for electronic prescribing; the calculation of physician

    practice expense; and the beneficiary signature rule for ambulance

    services. The following summarizes some of the most significant

    parts of the Final Rule.

    The Anti-Markup Rule for Diagnostic Tests

    Perhaps the most closely watched regulatory change resolved in

    the Final Rule relates to the so-called Anti-Markup rule applicable

    to certain diagnostic tests. Historically, Medicare has limited

    payments to physicians and other suppliers for "purchased

    diagnostic tests" (other than clinical laboratory tests) if

    the physician purchased the technical component (TC) from an

    outside vendor. This was known as the "purchased diagnostic

    test rule" and limited the amount the purchasing physician

    could charge Medicare for such tests to the physician's

    acquisition cost. In addition, the agency placed limitations on

    when a physician or other supplier could purchase the professional

    interpretation of such tests (PC) under the "purchased

    interpretation rule."

    In the 2008 Physician Fee Schedule Final Rule (2008 Rule), CMS

    amended these rules to impose revised Anti-Markup restrictions on

    both the TC and the PC of purchased tests or interpretations, and

    placed new challenging limitations on which TCs and PCs could be

    billed to Medicare at the full-fee schedule amounts, without

    reduction to the "net charge" to the physician. CMS then

    postponed the effective date of these changes until January 1, 2009

    and indicated it would consider changes.

    In the 2009 Final Rule, CMS made changes that moved away from

    the concern regarding whether a test was "purchased" from

    an "outside supplier" entirely. Instead, CMS is offering

    two alternatives for complying with the new Anti-Markup rule that

    focus on the underlying principle that there is no anti-markup

    prohibition if the performing or supervising physician "shares

    a practice" with the ordering physician.

    Under the new Anti-Markup rule, CMS permits two alternative

    approaches to demonstrate practice sharing, thereby permitting

    a physician or other supplier to bill Medicare for the TC or PC of

    a diagnostic test without the limitations of the Anti-Markup

    restrictions. The Anti-Markup restrictions will not apply

    if physician/supplier can meet either of the following two

    alternatives:

    Alternative 1: The "substantially all" test. The

    physician supervising the TC or performing the PC performs

    "substantially all" (at least 75 percent) of his or her

    professional services for the billing physician or other

    supplier.

    OR

    Alternative 2: The "site of service" test. The TC or

    PC is performed by an employee or independent contractor physician

    in the same building where the office of the billing (ordering)

    physician or other supplier is located.

    Alternative 1, the substantially all test, permits the

    supervising or interpreting physician to engage in some part-time

    outside work without sacrificing the ability to perform off-site

    services for his or her main physician group. The 75-percent

    standard may be inconvenient for some arrangements, but does track

    the Stark regulation's "group practice" definition.

    If a physician cannot meet the 75-percent substantially all test,

    the physician's services may still meet Alternative 2, the site

    of service test. CMS also clarified that locum tenens physicians

    may substitute for a physician who meets Alternative 1 and provide

    services to the permanent physician's group without triggering

    the Anti-Markup restrictions.

    Alternative 2, the site of service test, permits billing without

    Anti-Markup restrictions if the TC or PC is conducted and

    supervised or performed in the "same building" in which

    the "office of the billing physician or other supplier"

    is located. Moreover, the ordering physician may have multiple

    offices, thus permitting compliance if the TC or PC is furnished in

    any of those offices, so long as the ordering physician regularly

    furnishes patient care in that location.

    If neither alternative can be met, then the billing physician or

    other supplier must bill Medicare the lowest of:

    The performing supplier's net charge to the billing

    physician or other supplier

    The billing physician or other supplier's actual

    charge

    The Medicare fee schedule amount

    Despite industry objections, CMS refused to modify its

    definition of the net charge limitation as originally set forth in

    the 2009 Physician Fee Schedule Proposed Rule (Proposed Rule). In

    the case of the purchase of a test or interpretation for a fixed

    fee, the net charge is easy to calculate. Greater challenges arise

    in those cases where the TC or PC is performed by a component of

    the group practice or compensation is otherwise based on the actual

    costs of the performing physician. In these latter cases, the net

    charge is likely limited to the salary and benefits paid

    ? and other overhead costs for the space or the equipment

    may not be included.

    The revised Anti-Markup rule will go into effect on January 1,

  2. Physician Self-Referral (Stark Law)

    CMS has decided to delay finalizing its incentive payment and

    shared saving programs exception to the Stark Law as proposed in

    the Proposed Rule. CMS concluded it had not received sufficient

    information or agreement through the public comment process to

    allow it to finalize the exception. CMS is reopening the public

    comment process for an additional 90 days following publication of

    the Final Rule in the Federal Register. In doing so, CMS hopes to

    obtain public comments providing specific details and practical

    examples enabling CMS to craft one or more exceptions to the Stark

    Law that will encourage the development of beneficial programs and

    ensure transparency, accountability, quality of care, and the

    prevention of disguised payments for referrals.

    Additionally, CMS revised the definition of designated health

    services (DHS) in 42 C.F.R.§ 411.351 of the Stark regulations

    by adding the word "outpatient" before the phrase

    "speech-language pathology services" in order to conform

    with Section 143 of The Medicare Improvements for Patients and

    Providers Act of 2008 (MIPPA). MIPPA had previously amended the

    Stark Law to specify that, effective July 1, 2009, "outpatient

    speech-language pathology services" are DHS. CMS also has

    added a definition of outpatient speech-language pathology services

    to 42 C.F.R....

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