On November 19, 2008 the Centers for Medicare & Medicaid Services (CMS) published the final 2009 Medicare Physician Fee Schedule, which included significant revisions to the anti-markup rule and the regulations related to independent diagnostic testing facilities (IDTFs).

The Anti-Markup Rule

The final rule prohibits an ordering physician or other supplier (the billing entity) from billing more than the lesser of three amounts for the technical component (TC) or professional component (PC) of diagnostic tests (except certain diagnostic laboratory tests) if those tests are supervised (the TC) or performed (the PC) by a physician who does not "share a practice" with the billing entity.

If the anti-markup rule applies, the billing entity may bill no more than the lowest of the (i) performing supplier or physician's net charge to the billing entity; (ii) the billing entity's actual charge; or (iii) the fee schedule amount allowed if the performing physician billed for the test directly.

CMS discarded the prior "purchased test" concept in favor of the new "shares a practice" analysis. A billing entity "shares a practice" with a physician who supervises the TC or performs the PC if the physician (i) furnishes at least 75 percent of his or her total professional services through the billing entity (based on a 12-month trailing or forward-looking analysis) or (ii) is an owner, employee or independent contractor of the billing entity and supervises the TC or performs the PC in the office of the billing entity. The office of the billing entity is any medical office space, regardless of the number of locations, in which the ordering physician regularly furnishes patient care. If a billing entity regularly furnishes patient care in a location, the office includes the entirety of the same building of that location (as defined in 42 C.F.R. § 411.351). If the billing entity is a group practice, the office includes any space in which the ordering physician as an individual provides substantially the full range of that physician's patient care services. Shared or leased-space arrangements for diagnostic tests are in the office of the billing entity if the arrangement otherwise satisfies one of the two standards for "sharing a practice."

Among other matters, the final rule will affect the common arrangement in which a group practice maintains a central testing location in a building separate from its office practice locations and does not maintain a full-time relationship with a physician who supervises or interprets the tests performed there. A group in this situation could comply with the rule by engaging the supervising/performing physician to provide at least 75 percent of his or her professional services for the group. If that is not an option, the group could continue to bill commercial payors for the TC and PC, permit the performing physician to bill the PC to Medicare and apply the anti-markup rule to the TC for Medicare beneficiaries.

On the other hand, certain shared space arrangements will avoid application of the anti-markup rule. If unaffiliated practitioners or groups have an arrangement to share space for a diagnostic testing facility located within the same building in which the ordering physicians practice, that arrangement will comply with the anti-markup rule and they may bill the fee schedule amount for the TC and PC of diagnostic tests ordered and performed in that building.

Independent Diagnostic Testing Facilities (IDTFs)

With respect to IDTFs, the final rule requires an entity to enroll as an IDTF for any diagnostic imaging services that it furnishes (regardless of whether the service is in a mobile or fixed base location) to a Medicare beneficiary and to bill for those services (unless the services are part of a hospital service provided under arrangements).

The new IDTF rule applies to all entities that furnish mobile diagnostic testing to Medicare beneficiaries. CMS made clear in the preamble to the new IDTF rule that an entity that leases equipment and provides technologists who conduct diagnostic tests in the office of a physician or physician organization is deemed to "furnish diagnostic imaging services" and, therefore, must enroll as an IDTF and bill for those services.

This rule will require a modification of existing arrangements in which entities provide diagnostic equipment and technologists for use in physicians' offices at a fixed fee and for which the physicians or their groups bill Medicare globally (or at least for the TC of the diagnostic test). As of January 1, 2009 an entity that provides equipment and technologists in this arrangement must enroll as an IDTF and bill for diagnostic imaging services provided to Medicare beneficiaries in the physicians' offices, regardless of who supervises the imaging service.

CMS previously proposed to apply the IDTF requirement to all diagnostic testing services furnished in physicians' offices. CMS deferred implementation of that proposal and is continuing to review public comments regarding it.

The new regulations go into effect January 1, 2009.