On October 30, 2008, the Centers for Medicare & Medicaid Services ("CMS") put on display the final Medicare Physician Fee Schedule (the "MPFS Rule") for calendar year 2009. The MPFS Rule is expected to be published in the Federal Register on November 19, 2008. The comment period for those subject areas that CMS solicits comments closes on January 18, 2009, except that the comment period for the proposed Stark Law exception for incentive payment and shared savings programs will remain open until February 17, 2009.

Among other things, the MPFS Rule introduces a new regimen for the application of the anti-markup provisions as they relate to diagnostic services, other than clinical laboratory services, which will become effective on January 1, 2009. The MPFS Rule also addresses the application of independent diagnostic testing facilities ("IDTF") quality standards for imaging services furnished in physician offices. We draw our readers’ attention to the following highlights:

Anti-Markup Provisions

  • The MPFS Rule applies both to the technical and professional components ("TC" and "PC," respectively) of diagnostic tests, other than independent clinical lab tests. The MPFS Rule applies to both for-profit and non-profit (e.g., faculty practice plans) physician organizations.
  • Under the MPFS Rule, when the anti-markup provisions apply, the billing physician or physician organization must charge the lowest of the following: (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."
  • With respect to the TC, the anti-markup provisions will not apply under two alternative circumstances.
    • First, the provisions will not apply if the TC is supervised by a physician who performs "substantially all" of his or her professional services for the billing physician, physician organization or supplier. Borrowing from the federal physician self-referral (Stark) law, CMS defines the term "substantially all" as at least 75 percent of the physician's patient care services. CMS explains that it reduced the threshold from 100 percent to 75 percent so as to not prohibit bona fide locum tenens arrangements or preclude practitioners from providing part-time services to other providers. However, by setting the threshold at 75 percent, CMS may effectively preclude many efficient part-time arrangements between physician organizations and radiologists or pathologists because the radiologists and pathologists may no longer be able to offer their services to more than one physician organization without triggering application of the anti-markup provisions.
    • Second, the provisions will not apply if the TC is conducted and supervised in the "same building" as the medical office where the ordering physician (i.e., the physician who ordered/requested the diagnostic test or services in the first instance) performs substantially the full range of patient care services that he or she generally furnishes.
  • With respect to the PC, the anti-markup provisions will not apply to a claim for service reassigned to the billing physician (or physician organization) under two similar circumstances. (We note that performing physicians who directly bill the Medicare program for their services do not implicate the anti-markup provisions.)
    • First, the provisions will not apply if the PC is performed by a physician (e.g., a pathologist or radiologist) who (a) is an employee or independent contractor of the billing physician, physician organization or supplier, and (b) performs "substantially all" (at least 75 percent) of his or her professional medical services for the billing physician, physician organization or supplier; or
    • Second, the provisions will not apply if the PC is performed by an employee or independent contractor who performs the PC in the "same building" in which the ordering physician performs substantially the full range of patient care services that he or she generally furnishes.
  • Thus, a physician group with multiple offices that furnishes diagnostic tests (either TC, PC or both) to its Medicare patients will not be able to mark-up its charges for those services unless it can satisfy one of the alternatives discussed above. CMS notes that it is offering physicians these alternative means to provide added flexibility in avoiding application of the anti-markup provisions and, in its view, to minimize disruption to non-problematic arrangements.
  • For those who have sufficient volume to utilize at least 75 percent of the supervising physician's patient care time, site of service will not matter for the TC: the TC can be provided in any of the practice group's offices. For those who do not have sufficient volume to satisfy the 75 percent test, however, site of service will affect reimbursement, requiring that the TC be performed in the same building where the ordering physician practices medicine on a regular basis if the anti-markup provisions are not to apply. This may prove challenging with diagnostic equipment that cannot be moved from office to office or located in each of the practice's offices.
  • Similarly, for those multi-office practices that do not have sufficient volume to utilize at least 75 percent of the patient care services of the relevant physician (e.g., pathologist, radiologist), the PC must be performed in the same building where the ordering physician practices medicine on a regular basis. This also may prove challenging, requiring the performing physician (e.g., pathologist, radiologist) to travel from office to office.
  • Importantly, CMS notes that an ordering physician may have more than one office where he or she furnishes the full range of patient care services that he or she generally furnishes.

IDTF Standards

In the proposed Medicare Physician Fee Schedule Rule, issued on July 7, 2008, CMS proposed to extend many of the quality and performance standards that apply to IDTFs to physician practices that furnish imaging services. Among other things, this would have (1) precluded physician practices from sharing the imaging space and equipment with others, and (2) required that the imaging services be furnished under the supervision of a board certified radiologist. CMS did not adopt this proposal as part of the MPFS Rule, but will revisit the issue in the future.

Stark Law Considerations

CMS did not finalize its proposed exception to the Stark law for incentive payment and shared savings programs, but instead requested additional comments on how such an exception should be tailored. The comment period will remain open for 90 days after publication of the MPFS Rule in the Federal Register. CMS notes that it did not receive through the initial public comment process sufficient information or consensus among commenters regarding possible modifications to the proposal to allow it to finalize the exception at this time. CMS identifies several areas on which it seeks additional comment so that it may be better positioned to finalize an exception in an upcoming rulemaking.

In addition, CMS conformed the language of the Stark regulations to the statutory requirements of the Medicare Improvements for Patients and Providers Act of 2008. Specifically, CMS revised the definition of "designated health services" by adding the word "outpatient" before the phrase "speech-language pathology services," and made conforming changes to the definition of "physical therapy, occupational therapy, and speech-language pathology services" and included a definition of "outpatient speech-language pathology services."