CMS has delayed for one year, the effective date of most of the changes to the "anti-markup rule." The 2008 Physician Fee Schedule final rule ("Final Rule") posted to the CMS website on November 1, 2007, and discussed in the November 15, 2007, issue of the Health Law Update significantly expanded the anti-markup provision of the Medicare regulations. The original rule prohibited the markup on the technical component of a diagnostic test performed by outside suppliers when billed to Medicare by a different entity. The Final Rule, which was to take effect January 1, 2008, extended the anti-markup prohibition to both the technical and the professional components of diagnostic tests ordered by a billing physician that are purchased from an outside supplier or performed someplace other than in the office of the billing physician.

While the Stark Law allows physicians to refer patients for diagnostic services, and bill for those services, including in certain circumstances where services are furnished off-site or in a different part of the same building as the physician's office, the anti-markup provision limited the payment for services furnished outside a billing physician's office to the lowest of (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. In other words, according to the Final Rule, if a physician performed the technical component of a diagnostic test in his or her own office but sent the films via courier or teleradiology to an outside radiologist, the physician could not mark up the professional component but is limited to claiming only an amount for the service that is equal to or less than the net charge to the billing physician. The physician could still make the referral, and bill for the services, but without making any profit.

In the hours before the New Year's long weekend on Friday, December 28, 2007, CMS issued a final rule delaying until January 1, 2009, the applicability of the anti-markup provision as revised. Citing "informal comments from various stakeholders" and concern over disrupting patient access, CMS determined it would study the issues further. In particular, doctors alleged that the application of the Final Rule was unclear regarding which types of space arrangements meet the definition of the "office of the billing physician or other supplier" and CMS has promised guidance clarifying this issue.

However, CMS is not delaying the applicability of the anti-markup provision with respect to anatomic pathology diagnostic testing services furnished in space used by a physician group practice as a "centralized building" for purposes of complying with Stark and which does not qualify as a "same building" under the Stark regulations, the so-called "pod labs." The anti-markup prohibition with respect to the technical component of purchased diagnostic tests, which has been in effect for some time, also remains in effect.