Urology Groups Challenge Revised Anti-Markup Rule

On January 24, 2008, a laboratory management company and 3 physician urology groups filed a Complaint for Declaratory and Injunctive Relief (Complaint) in the U.S. District Court for the District of Columbia.

The Complaint seeks to enjoin the Department of Health and Human Services and Centers for Medicare & Medicaid Services (CMS) from applying the revised anti-markup provisions to anatomic pathology diagnostic testing services furnished in a "centralized building" that is not the "same building" under the Stark law definitions. The Complaint also seeks an order that would delay the application of the revised anti-markup provisions to anatomic pathology diagnostic testing services until January 1, 2009.

In the Medicare Physician Fee Schedule Final Rule for 2008 (MPFS Final Rule), CMS revised the anti-markup provisions of 42 C.F.R. 414.50 to provide that, if a physician/physician group bills for the technical component (TC) or professional component (PC) of a diagnostic test ordered by the physician and the test is performed at a site other than the "office of the billing physician or other supplier," the payment for the TC or PC may not exceed the lowest 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.

The MPFS Final Rule defines "office of the billing physician or other supplier" as the medical office space where the physician or other supplier regularly furnishes patient care.  With respect to a physician organization, the MPFS Final Rule defines "office of the billing physician or other supplier" as the space in which the physician organization provides substantially the full range of patient care services that the physician organization provides generally.

However, after publishing the MPFS Final Rule, CMS reported that the definition of "office of the billing physician or supplier" may not be entirely clear and that it may have unintended consequences.  Therefore, CMS published a Final Rule in the Federal Register on January 3, 2008 delaying the applicability of the anti-markup provisions until January 1, 2009. However, CMS did not apply the delay to anatomic pathology diagnostic testing services furnished in a "centralized building" that is not the "same building." 

According to the Complaint, the revised anti-markup provisions will prohibit the plaintiffs from billing for the MPFS amount and require that the plaintiffs bill at an actual loss.  Among other things, the plaintiffs also assert that the Final Rule (effectuating the delay) contravenes the notice and comment requirements of the Administrative Procedure Act and that the revised anti-markup provisions are contrary to the Stark law and contrary to and without authority under the MPFS statute.  For more information see Atlantic Urological Associates, P.A. et al. v. Leavitt, Case No. 1:08-cv-00141-RMC.