CMS Revises Anti-Markup Provisions in 2009 Final Physician Fee Schedule Rule

On November 19, 2008, the Centers for Medicare & Medicaid Services (CMS) published the Final Rule in the Federal Register, which revises the payment policies and rates for the Medicare Physician Fee Schedule (MPFS) for calendar year (CY) 2009.

As part of the Final Rule, CMS revises the anti-markup provisions.  Under the Final Rule, the anti-markup provisions will apply if a physician or other supplier bills for the technical component (TC) or professional component (PC) of a diagnostic test that was ordered by the physician or other supplier (or by a party related through common ownership or control) and the diagnostic test is performed by a physician who does not "share a practice" with the billing physician or other supplier. 

In the Final Rule, CMS adopts a hybrid approach to determining whether a physician "shares a practice" with the billing physician or other supplier. In doing so, CMS adopts "Alternative 1" and "Alternative 2" from the MPFS Proposed Rule for CY 2009 with modifications. In the Final Rule, CMS also indicates that arrangements should be first analyzed under Alternative 1 and, if the performing physician does not satisfy the requirements of Alternative 1, an analysis under Alternative 2 may be applied on a test-by-test basis to determine whether the anti-markup payment limitation applies.

Alternative 1 (Substantially All Test)

Under Alternative 1, a performing physician "shares a practice" with the billing physician or other supplier if he or she furnishes "substantially all" (i.e., at least 75 percent) of his or her professional services through such billing physician or other supplier. Further, the "substantially all" requirement will be satisfied if, at the time the billing physician or other supplier submits a claim for service furnished by the performing physician, the billing physician or other supplier has a reasonable belief that:

• for 12 months prior to and including the month in which the service was performed, the performing physician furnished substantially all of his or her professional services through the billing physician or other supplier; or

• the performing physician will furnish substantially all of his or her professional services through the billing physician or other supplier for the next 12 months (including the month in which the service is performed).

CMS believes that its Final Rule modifications to Alternative 1 should satisfy earlier concerns about locum tenens arrangements (and part-time and other on-call or similar arrangements).

Alternative 2 (Site of Service Test)

Under Alternative 2, a physician will be deemed to "share a practice" with the billing physician or other supplier with respect to the performance of the TC or PC of a diagnostic test if the physician is:

• an owner, employee or independent contractor of the billing physician or other supplier; and 

• the TC or PC is performed in the "office of the billing physician or other supplier."

In the Final Rule, the "office of the billing physician or other supplier" is described as any medical office space, regardless of the number of locations, in which the ordering physician or other ordering supplier regularly furnishes patient care, and includes space where the billing physician or other supplier furnishes diagnostic testing, if the space is located in the same building (as defined in 42 C.F.R. 411.351) in which the ordering physician or other ordering supplier regularly furnishes patient care.  For a billing physician or other supplier that is a physician organization, the "office of the billing physician or other supplier" is described as the space in which the ordering physician provides substantially the full range of patient care services that the ordering physician provides generally.

In the Final Rule, CMS:

• does not finalize a definition of "outside supplier;"
• does not create an exception for tests ordered by a physician in a physician organization with no physician owners who have a right to receive profit distributions;
• does not revise the definition of "net charge;" and
• does not make changes to the Stark in-office ancillary services exception, but indicates that it may propose rulemaking on the issue in the future.   

The Final Rule makes the finalized revisions of the anti-mark up provisions effective January 1, 2009.  According to the Final Rule, CMS anticipates that the finalized anti-markup provisions will result in savings to the Medicare program by reducing overutilization and anti-competitive business arrangements.  However, the Final Rule indicates that CMS is unable to gauge (with any certainty) the extent of such savings.