Time to Unwind, and Other Effects of the 2009 MPFS

by Lewis Lefko, JD, MPH
Posted: November 15, 2008

Few federal rules for billing and leasing of diagnostic testing equipment and technicians by mobile testing companies will require the restructuring or unwinding of many imaging arrangements prior to the end of 2008. In its payment policies under the Medicare Physician Fee Schedule (MPFS) for calendar year (CY) 2009, published November 19, 2008¹, CMS issued changes to the reassignment rules related to diagnostic tests, known as the Anti-Markup provisions. The Medicare law requires CMS to impose a payment limitation on diagnostic tests where the physician performing or supervising the test does not share a practice with the physician or other supplier that bills for the test. The Anti-Markup prohibition applies to all diagnostic tests except tests paid for under the Medicare clinical laboratory test fee schedule. CMS also issued rules requiring Medicare enrollment and billing by mobile diagnostic testing services while deferring rules requiring physicians furnishing diagnostic tests to enroll as independent diagnostic testing facilities (IDTFs). CMS states the rules are aimed at eliminating abusive arrangements and curbing overutilization caused by the ordering of unnecessary tests.

The Anti-Markup payment limitation has long applied to technical components (TC) of diagnostic tests that physicians purchase from outside suppliers, such as imaging centers. In its CY 2008 MPFS rule, CMS amended the Anti-Markup provisions to apply to the TC of diagnostic tests ordered by the billing physician or other supplier when the TC is either outright purchased or when the TC is not performed in the “office of the billing physician or other supplier”. Such office space was defined as where the billing physician or other supplier regularly furnishes patient care, and for a group practice as where the group provides substantially the full range of patient care services that the group provides generally. The Anti-Markup payment limitation was also imposed on the professional component (PC) of diagnostic tests ordered by the billing physician or other supplier if the PC is outright purchased or if the PC is not performed in the office of the billing physician or other supplier. The Anti-Markup provisions for the TC or PC of a diagnostic test apply only when the billing physician or other supplier has ordered the TC. CMS issued a notice delaying the CY 2008 requirements until implementation on January 1, 2009.

The Anti-Markup payment limitation, when applied, means the Medicare payment (less deductibles and coinsurance) for the TC or PC of the diagnostic test may not exceed the lowest of the following amounts:

The performing supplier’s net charge to the billing physician/supplier;
The billing physician’s/supplier’s actual charge; or
The MPFS amount for the test that would be allowed if the performing physician or supplier billed directly.

CY 2009 Anti-Markup Changes

With a few modifications, CMS has adopted both alternatives from its proposed CY 2009 MPFS payment policies for determining whether the performing/supervising physician “shares a practice” with the billing physician or other supplier. Beginning in CY 2009, diagnostic testing arrangements will not be subject to the Anti-Markup payment limitation when:

The performing physician (the physician who performs or supervises the TC or performs the PC, or both) performs substantially all (at least 75%) of his professional services for the billing physician or other supplier. This requirement is satisfied if, at the time the claim is billed for the performing physician’s services, the billing physician or other supplier has a reasonable belief that, for the twelve months either preceding or following the month in which the services were performed, the performing physician furnished (or will furnish) substantially all of his professional services through the billing physician or other supplier. This type of arrangement, referred to as “Alternative 1” in the CY 2009 rules, is called the “substantially all professional services” approach; or
If the performing physician does not meet the “substantially all professional services” requirement, on a test-by-test analysis the performing physician, who must be an owner, employee, or independent contractor of the billing physician or other supplier, performs the TCs or PCs in the office of the billing physician or other supplier. This alternative, referred to as “Alternative 2” in CY 2009 rules, is called the “site of service” approach.

Both approaches are based on whether a performing/supervising physician “shares a practice” with the billing physician or other supplier as is required by the Medicare statute. Many arrangements involving independent contractor performing physicians, eg, radiologists, will not meet the “substantially all professional services” requirement because such physicians may be working for other physicians, imaging centers, or the performing physician’s own group. Billing physicians, imaging centers, and other suppliers that cannot satisfy the “substantially all” requirement must comply with the “site of service” test to avoid the Anti-Markup payment limitation.

Shared Diagnostic Testing Services

Most diagnostic testing sharing arrangements by physicians in medical office buildings will not be able to satisfy the “substantially all” requirement. Diagnostic testing services performed or interpreted in space leased by two or more medical groups that is located in the same building as the space in which the billing physician or other supplier regularly furnishes patient care will not be subject to the Anti-Markup payment limitation if they satisfy the “site of service” test. The diagnostic testing facility must be shared under exclusive block-time leases. The testing facility physician who performs or supervises the performance of the test by a technician, and/or performs the PC, reassigns his right to bill for the TC and/or PC to the ordering physician or group. The testing facility physician must be an employee, independent contractor, or owner of the billing physician group, or other supplier. If these requirements are met, both the TC and PC are performed in the “office of the billing physician or other supplier” even if the diagnostic testing takes place on a different floor from where the billing physician sees patients. The level of supervision rules affecting diagnostic testing remains unchanged.

Other Effects and Changes

The “substantially all professional services” requirement relieves many concerns about locum tenens, part-time, and on-call arrangements by allowing a performing physician to furnish up to 25% of his professional services through other arrangements, without disqualifying himself from “sharing a practice” with his primary medical practice. With respect to locum tenens situations only, whether an arrangement satisfies the “substantially all professional services” requirement depends on whether the performing physician (for whom the locum tenens physician is substituting) meets the “substantially all” requirement.
A billing physician or other supplier may have more than one “office of the billing physician or other supplier” and such office is defined as space in which the ordering physician or other ordering supplier regularly furnishes care. The “office of a billing physician or other supplier” includes space where the billing physician or other supplier furnishes diagnostic testing if the space is located in the “same building” as the space in which the ordering physician or other ordering supplier regularly furnishes patient care. The “same building” requirement references the Stark rule definition from the in-office ancillary services exception.
CMS eliminated using “purchased tests” and “purchased interpretations” as separate bases for imposing the Anti-Markup payment limitation.
No changes were made to Stark’s in-office ancillary services exception.
CMS is deferring its proposals that would have required physician offices providing diagnostic testing services to enroll as IDTFs and comply with most IDTF performance standards. The deferral results from the provision in the Medicare Improvement for Patients and Productivity Act of 2008 requiring establishment of an accreditation process for those entities furnishing advanced diagnostic testing procedures, such as MRI, CT, PET and nuclear medicine, but specifically excluding x-ray, ultrasound, and fluoroscopy.
CMS is requiring that all mobile entities furnishing diagnostic testing services must enroll in Medicare as an IDTF. CMS is requiring mobile testing entities to bill directly for services they furnish, except for services furnished “under arrangement” to hospital inpatients and outpatients. CMS defines “mobile diagnostic testing services” as services whether furnished in a mobile or fixed setting, such as entities that lease equipment and provide technicians who conduct diagnostic tests in the offices of the billing physician or group. These requirements will adversely affect leases of equipment and technicians by mobile diagnostic testing companies to physician offices as the physicians may no longer bill as the provider of the services.
CMS rejected excepting from the Anti-Markup provisions any arrangement that complies with the physician self-referral (Stark) rules.
CMS rejected defining the “office of the billing physician or other supplier” as including diagnostic testing space that is in a separate (centralized) building from where the ordering physician sees patients, the “campus” where the arrangement takes place, or a mobile van.
A diagnostic test is one ordered by the billing physician or other supplier or ordered by a party related to such physician or other supplier through common ownership or control, eg, the physician’s group medical practice.
The performance of the TC includes both the conducting of the TC as well as the supervising of the TC.

CMS Rationale

Under the “substantially all professional services” requirement, the performing or supervising physician shares a practice with the billing physician or other supplier. CMS addressed its concerns regarding potential overutilization and abusive billing by requiring a physician to furnish at least 75% of his professional services through a billing physician or other supplier. CMS believes the “substantially all” requirement provides flexibility for the performing physician to work for other groups, hospitals, or other health care entities. According to CMS, the “site of services” approach reduces the potential for overutilization of diagnostic tests through arrangements involving billing physicians or other suppliers and performing physicians who have little or no connection to the billing physicians or other suppliers, other than to serve as a point of referral to generate profits. CMS is permitting sharing arrangements in the same building because it believes such arrangements promote efficiency and have sufficient nexus with the billing entity without raising the overutilization and other concerns involving centralized diagnostic testing facilities.

Effective Date

The changes to the Anti-Markup and mobile diagnostic testing services provisions are effective January 1, 2009 and will require the restructuring or unwinding of many imaging and other diagnostic testing arrangements. Further, by January 1, 2009, existing fixed-base IDTFs must have also restructured or unwound sharing arrangements with physicians or other Medicare-enrolled individuals and organizations. This sharing prohibition, implemented on January 1, 2008, for newly-enrolled IDTFs pursuant to the CY 2008 MPFS, provides that a fixed-base IDTF may not share a practice location with another Medicare-enrolled individual or organization. Block leasing or subleasing IDTF operations or practice locations and sharing of diagnostic testing equipment in the initial diagnostic test are already prohibited arrangements between existing or newly-enrolled IDTFs and another Medicare-enrolled individual or organization. These sharing prohibitions were effective January 1, 2008 under CY 2008 MPFS. Together, these diagnostic testing rules may substantially achieve CMS’ goal of significantly limiting the ability of ordering physicians to profit from diagnostic tests performed on their patients by radiology, pathology, and cardiology groups, imaging centers, and diagnostic testing equipment/personnel, leasing companies.

Reference

1 The Medicare Program: Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2009 was put on display on the CMS website, http://www.cms.hhs.gov, and the Federal Register on October 30, 2008 for publication in the Federal Register on November 19, 2008.