The 2008 Physician Fee Schedule finalized Medicare’s revised anti-markup rule, which limits the amount providers can bill for diagnostic tests and sets forth definitions that conflict with definitions under the Stark Law. The full text of the rule can be found at 42 CFR 414.50 and at http:// www.cms.hhs.gov/physicianfeesched/downloads/CMS-1385-FC.pdf.
At first blush, the rule appears clear cut. However, it has broad and serious implications for physicians who provide and bill for diagnostic tests. Physicians and suppliers will need to carefully scrutinize their diagnostic testing arrangements to ensure compliance. The top nine implications of the new rules are enumerated below:
- The anti-markup rule applies to both the technical components (TC) and professional components (PC) of diagnostic tests. (The former rule applied only to technical components.)
- Application of the rule does not turn on whether the provider is an employee or independent contractor, or full-time or part-time but, rather, on whether the provider is the referring physician or supplier and billing physician or supplier.
- The anti-markup rule applies to the technical and professional component of a diagnostic test that is ordered by a billing physician or other supplier if the TC or PC is purchased OR if the TC or PC is performed at a site other than the office of the billing physician (i.e., a “centralized building” under the Stark Law’s In Office Ancillary Services Exception).
- Arrangements that are legal under the Stark Law and/or the anti-kickback statute may still be restricted by the anti-markup rule.
- The “office of the billing physician or other supplier” requirement of the anti-markup rule is more restrictive than the Stark Law’s “centralized building” or “same building” definitions. Therefore, many Stark Law In Office Ancillary Services Exception arrangements must apply the anti-markup rule and will be prevented from making any profit from diagnostic tests unless their arrangement is modified.
- The anti-markup rule likely applies to ALL diagnostic tests not just designated health services diagnostic tests. Tests, such as heart catheterizations, sleep studies, PET scans, etc., that were not previously regulated may be affected by the new anti-markup rule depending on the arrangement.
- Physician providers that must comply with the anti-markup rule cannot profit from providing the test and, in most cases, cannot even recoup their overhead expenses because “net charge” cannot include the cost of testing space or equipment.
- The Stark Law’s on-site interpretation rule will not apply if a physician or supplier bills Medicare for the TC or PC in accordance with the anti-markup rule. Translation: If a physician or supplier foregoes all profit and expense recoupment, they will not have to abide by the on-site requirement.
- Independent diagnostic testing facilities (IDTFs) qualify as a “supplier” under the new rules and must monitor billing where the IDTF (or a common owner) generates the referral.
As the foregoing suggests, careful examination of the new anti-markup rule and current billing and operating procedures is necessary to ensure Medicare compliance and proper reimbursement.