On December 28, 2007, the Centers for Medicare & Medicaid Services ("CMS") posted a final rule delaying until January 1, 2009 the effective date of nearly all of its recent revisions to the anti-markup provisions in 42 C.F.R. § 414.50 . The only revisions not delayed by this final rule are the anti-markup rule's application to 1) the technical component of purchased diagnostic tests, and 2) anatomic pathology diagnostic testing services furnished in space that is used by a physician group practice as a "centralized building" and does not qualify as a "same building", both as defined in the Stark law. 42 C.F.R. §§ 411.351 and 411.355. CMS declined to delay the effect on anatomic pathology diagnostic testing services because the growth of so-called "pod lab" arrangements was the issue that prompted its revisions to the anti-markup rule and remains its core concern.
CMS issued sweeping amendments to the anti-mark-up rule as a part of the CY 2008 Physician Fee Schedule Final Rule. 72 Fed. Reg. 66222 (Nov. 27, 2007) (the "Revised Anti-Markup Rule"). The Revised Anti-Markup Rule prohibits a mark-up on the technical and professional components of diagnostic tests (other than clinical diagnostic laboratory tests paid under §1833(a)(2)(D) of the Social Security Act, which are subject to special billing rules) except when the diagnostic tests are performed in the "office of the billing physician or other supplier", which CMS defines as "space in which the physician organization provides substantially the full range of patient care services that the physician organization provides generally." If the anti-markup rule applies, the payment to the billing physician or other supplier for the technical or professional component is limited to the lowest of the following amounts: 1) the performing supplier's net charge to the billing physician or other supplier; 2) the billing physician or other supplier's actual charge; or 3) the fee schedule amount for the test that would be allowed if the performing supplier billed directly.
Soon after CMS published the Revised Anti-Markup Rule, industry participants raised concerns that the rule was subject to varying interpretations that would have dramatically disparate results. For example, one possible interpretation of the Revised Anti-Markup Rule would prevent physician practices from marking up charges for technical component services over the cost of a technician's services to the practice for services provided in space meeting the Stark law "centralized building" requirements. Under this interpretation, physician practices would be unable to recover any other costs, including costs for space and other overhead inherent in providing the testing services. If that interpretation ultimately prevails, many physician group practices that have invested in "centralized buildings" will be unable to cover even their basic costs of providing diagnostic tests in those buildings. Whether this result will ultimately occur remains unclear, in part, because CMS' unofficial comments to date have varied regarding whether it intends this result.
These and other significant changes would have been effective January 1, 2008 if CMS had not issued the final rule delaying their effect. However, CMS has opted to study the issues further until January 1, 2009. In particular, CMS cited concerns that the definition of "office of the billing physician or other supplier may not be entirely clear and could have unintended consequences". Fortunately, this one year reprieve will delay the impact of some aspects of the Revised Anti-Markup Rule for many physician practices. Nevertheless, as far as those portions of the Revised Anti-Markup Rule that have not been delayed, several key issues remain unclear. For example, its application to the technical component of purchased diagnostic tests was not delayed, but CMS failed to clearly define key terms such as "outside supplier" and "purchased diagnostic test." One key issue of concern is that CMS has not clarified whether tests performed in physician offices by independent contractor technicians are "purchased" from an "outside supplier". As a result, confusion remains about how to comply with even the modest part of the Revised Anti-Markup Rule that became effective January 1, 2008.
Some time during the next year, CMS plans to issue guidance clarifying the meaning of "office of the billing physician or other supplier" or propose additional rulemaking, or both. Hopefully, CMS will take that opportunity to clarify other key terms and issues as well.