11/19/2008

Final 2009 Medicare Physician Fee Schedule: Anti-Markup Rule Finalized, Physician Practices Get Reprieve from IDTF Standards, Further Study of Gainsharing, and Significant Changes to Physician Enrollment Process

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The Centers for Medicare and Medicaid Services (“CMS”) recently released the unofficial final 2009 Medicare physician fee schedule rule. The final rule addresses several significant regulatory proposals contained in the proposed 2009 Medicare physician fee schedule rule issued earlier this year [July 2008 newsletter ], including the following:

CMS has finalized the diagnostic test anti-markup rule by adopting a flexible approach in which physicians or other suppliers can avoid application of the anti-markup rule by complying with either of two alternative approaches offered by CMS in the proposed rule. Compliance with the new rule is required on January 1, 2009.
Physician practices and other suppliers furnishing diagnostic testing services will not be required to enroll as independent diagnostic testing facilities (“IDTF”) and meet IDTF performance standards as threatened in the proposed rule.
Prior proposals with respect to protection of pay for performance and gainsharing arrangements were deferred in order to allow CMS to seek further comments.
CMS has implemented several changes to the enrollment rules for physicians and nonphysician practitioners, including a change that will significantly limit the ability of physicians and nonphysician practitioners to bill retroactively for periods prior to enrollment.

An executive summary of significant regulatory components of the final rule is set forth below, followed by a more detailed discussion of the anti-markup rule. The official final rule will be published the Federal Register on November 19, 2008.

Executive Summary

Anti-Markup Rule
In its final 2009 Medicare physician fee schedule rule, CMS adopts a clearer and more flexible approach to the anti-markup rule than the one previously proposed. However, compliance with the revised rule is required on January 1, 2009. Accordingly, affected organizations must quickly review their existing arrangements to assure compliance by the end of this year.

Here is a summary of the key points of the final anti-markup rule:

The rule applies to both physicians AND other suppliers who bill Medicare for an applicable diagnostic test.
The rule applies to a diagnostic test (other than certain clinical diagnostic laboratory tests) only if the test is (i) either performed or supervised by a physician, and (ii) the billing physician or other supplier also ordered the test.
The rule applies to both the technical AND professional components of applicable diagnostic tests.
The rule does not apply if the performing physician (that is, the physician performing the professional component or supervising the technical component) "shares a practice" with billing supplier (that is, the physician or other supplier who orders and bills Medicare for the test). There are two tests to determine whether the performing physician "shares a practice" with the billing supplier. The anti-markup rule applies only if the arrangement fails both tests.
The first test is whether the performing physician furnishes substantially all (at least 75%) of his or her professional services through the billing supplier.
The second test is whether both (i) the performing physician is an owner, employee or independent contractor of the billing supplier, and (ii) the applicable component(s) of the test are performed in the office of the billing supplier. Billing suppliers should apply the second test on a diagnostic service-by-diagnostic services basis if the arrangement does not pass the first test.
If the anti-markup rule applies (i.e., if the arrangement involves an applicable diagnostic service and fails both of the above tests), the billing supplier must charge Medicare the LOWER of (i) the performing physician's net charge, (ii) the billing supplier's actual charge, or (iii) the fee schedule amount for the test that would be allowed if the performing physician billed Medicare directly. Accordingly, if the rule applies, the billing supplier cannot recoup its billing and other overhead costs.

Major “take away” for physician organizations that offer ancillary services in remote locations:

If no physician in the organization practices medicine at the location where the test is conducted, the organization likely will not be able to avoid the application of the anti-markup rule to the technical component of the service unless the supervising physician performs 75% of his or her services through the organization. The application of the anti-markup rule to the TC of the test will, as a practical matter, cause the organization to incur a loss on the test.

A more detailed discussion of the final anti-markup rule follows this Executive Summary.

Application of IDTF Standards to Physician Practices
In the proposed 2009 Medicare physician fee schedule rule, CMS proposed imposing the stringent performance standards for independent diagnostic testing facilities, commonly known as “IDTFs,” on physician practices. The imposition of IDTF performance standards on physician practices likely would have increased the operating costs of physician practices and also resulted in practices being prohibited from entering into common equipment sharing arrangements. However, under Federal law enacted by Congress after the publication of the proposed physician fee schedule rule, the Department of Health and Human Services is required to establish an accreditation process for any non-hospital entities furnishing high-end imaging services (for example, PET, MRI and CT). In light of the new mandate from Congress to HHS to establish accreditation standards for any non-hospital entities providing sophisticated imaging services, CMS withdrew its proposal to apply IDTF performance standards to physician practices.

Pay for Performance and Gainsharing
In the proposed 2009 Medicare physician fee schedule rule, CMS proposed a new exception that would have protected payments under incentive payment programs designed to achieve improvement of quality of hospital patient care services (i.e., pay-for-performance programs) and certain shared savings programs intended to achieve hospital savings resulting from the reduction of waste or changes in physician clinical or administrative practices (i.e., “gainsharing” programs). CMS declined to finalize the proposed exception in the final rule, opting instead to seek further comments from the public regarding a number of issues. In fact, in the final rule CMS solicited public comments to 55 specific questions, and also encouraged comments on any and all other relevant issues related to the proposed exception.

Physician Enrollment and Reporting
Current Medicare rules allow physicians and nonphysician practitioners to bill retroactively up to 27 months prior to the effective date of enrollment. The final 2009 Medicare physician fee schedule rule substantially limits retroactive billing by physicians and other nonphysician practitioners. Physicians and nonphysician practitioners now can only bill retroactively to the effective date of enrollment which is defined as the later of (i) the date a Medicare contractor receives an enrollment application that is eventually approved by a Medicare contractor, or (ii) in the case of an enrolled physician or nonphysician practitioner who is enrolling a new practice location, the date he or she first furnished services at that location. There are two exceptions to this limitation on retroactive billing.

The first exception is that a physician or nonphysician practitioner can bill up to 30 days prior to the effective date of enrollment if the physician or nonphysician practitioner met all program requirements, including state licensure requirements, services were furnished at the enrolled practice locations prior to the date of filing the application and circumstances precluded enrollment in advance of providing services to Medicare beneficiaries (e.g., an ED physician had to begin providing services to Medicare beneficiaries before an application could be filed). The second exception allows billing retroactive to 90 days prior to the effective date of enrollment, but only in situations where a properly declared national disaster precluded enrollment in advance of providing services to Medicare beneficiaries.

CMS also has adopted a final rule denying enrollment to any physician or nonphysician practitioner who is under an existing Medicare payment suspension or has an outstanding overpayment that has not been repaid in full. CMS notes that suspended physicians and nonphysician practitioners have been continuing to bill Medicare by re-enrolling under a different tax identification number or by reassignment to another entity.

In addition to these enrollment changes, CMS has finalized a rule in which physicians and other suppliers are required to maintain ordering and referring documentation, including the National Provider Identifier of the ordering physician, for a period of seven years from the date of service. CMS had previously proposed such records be maintained for ten years.

The final rule also requires physicians and other nonphysician practitioners to report changes in ownership, adverse legal actions, and changes in practice location within 30 days. The current rule generally allows 90 days. Failure to comply with these reporting requirements may subject a physician or practitioner to revocation of Medicare billing privileges and recoupment of all payments received since the date of the unreported change.

Detailed Discussion of Anti-Markup Rule

Background
In November 2007, CMS expanded its anti-markup rule to apply to all suppliers and to both the technical and professional components of diagnostic tests (other than certain clinical diagnostic laboratory tests). Previously, the rule had prohibited a physician from "marking up" the technical component of a diagnostic test when billing Medicare if the test was purchased from another physician or supplier. Following publication of the November 2007 final rule, CMS received informal comments alleging that the application of the "site-of-service" component of the expanded anti-markup rule was unclear and would significantly disrupt patient access to diagnostic testing services. Accordingly, CMS generally delayed until January 1, 2009 the effective date of the expanded anti-markup rule and subsequently proposed two alternative revisions to the expanded rule. Note that the application of the expanded rule was not delayed with respect to the technical component of any purchased diagnostic test or with respect to certain anatomic pathology diagnostic testing services. The first alternative proposed by CMS was to abandon the "site-of-service" component in favor of a supervision component. Under the first alternative, the expanded rule would apply to diagnostic tests (i) purchased from an outside supplier or (ii) performed or supervised by a physician who does not share a practice with the billing supplier. The second alternative proposed by CMS was to retain the "site-of-service" component but with several clarifications. In its final revised rule, CMS allows physicians to consider both alternatives (with modifications) in determining whether the anti-markup rule applies to particular diagnostic tests.

Determining Whether the Anti-Markup Rule Applies
As previously mentioned, the anti-markup rule imposes a Medicare payment limitation on the professional and technical component of diagnostic tests (other than certain clinical diagnostic laboratory tests) to which it applies. The rule does not apply if the performing physician shares a practice with the billing supplier. For the purpose of determining whether the anti-markup rule applies, the performing physician will be deemed to share a practice with the billing supplier if the arrangement satisfies either of the following two tests.

"Substantially All" Test
The anti-markup rule does not apply if, at the time the billing supplier submits a claim to Medicare for the test, the performing physician furnishes substantially all (at least 75%) of his or her professional services through the billing supplier. Note a few things about the "substantially all" test:

The performing physician will be deemed to share a practice with the billing supplier if the billing supplier has a reasonable belief that either (i) the "substantially all" test was met for the 12 months prior to and including the month in which the service was performed, or (ii) the "substantially all" test will be met for 12 months beginning with the month in which the service is performed.
In locum tenens situations only, if the permanent physician performs substantially all of his services through the billing supplier, tests performed or supervised by a locum tenens physician will not be subject to the anti-markup rule, even if the locum tenens physician furnishes less than 75% of his or her professional services through the billing supplier.
The performing physician does not have to be an employee of the billing supplier to satisfy the "substantially all" test. Any physician, regardless of whether the physician is an owner, employee or independent contractor of the billing supplier, that provides 75% of his or her professional services through the billing supplier satisfies the "substantially all" test.

"Site of Service" Test
The anti-markup rule does not apply if both (i) the performing physician is an owner, employee or independent contractor of the billing supplier, and (ii) the applicable component(s) of the test are performed in the office of the billing supplier. Note a few things about the "site of service" test:

The office of the billing supplier is any medial office space, regardless of the number of locations, in the same building in which the ordering physician or other ordering supplier regularly furnishes patient care.
The term "same building" has the meaning given to it in the Stark regulations. That is, it means a structure with, or a combination of structures that share, a single address, excluding exterior spaces (e.g., lawns, courtyards, driveways and parking lots), interior loading docks or parking garages and mobile vehicles, vans or trailers.
With respect to billing suppliers that are physician organizations (as defined in the Stark regulations), the office of the billing supplier means the space in which the ordering physician provides substantially the full range of patient care services that the ordering physician provides generally. For example, a diagnostic test performed in a Stark "centralized building" would likely not satisfy the "site of service" test and therefore would be subject to the anti-markup rule unless the "substantially all" test was satisfied.
The performance of the technical component of a diagnostic test includes both the conducting and supervision of the test. Therefore, to satisfy the "site of service" test, not only must the test be conducted in the office of the billing supplier, but the physician supervising the test also must be present in the office of the billing supplier, regardless of the level of supervision otherwise required by Medicare.

Permissible Charges Under the Anti-Markup Rule
If the anti-markup rule applies, Medicare will pay the billing supplier the lower of (i) the performing physician's net charge, (ii) the billing supplier's actual charge, or (iii) the fee schedule amount for the test that would be allowed if the performing physician billed Medicare directly. Note a few things about the anti-markup rule's payment limitation:

The performing physician's net charge does not include the billing supplier's billing expenses or other overhead costs. If the anti-markup rule applies, the billing supplier cannot recoup these costs.
In the case of the technical component of a diagnostic test, the performing physician's net charge is the amount the performing physician charged to supervise the test. Accordingly, if the anti-markup rule applies, the billing supplier cannot recoup any of the other costs of conducting the test (e.g., the cost of supplies, equipment, technicians, etc.).

BCCB Commentary on the Anti-Markup Rule
CMS' revised final rule is simpler and clearer than the original expanded anti-markup rule published in July 2007. For example, by deleting references to purchased diagnostic tests, CMS has ended the debate as to whether tests performed with leased space, equipment and/or personnel are "purchased tests" and therefore subject to the rule. Also, with respect at least to the technical component of diagnostic tests, physician groups may find it easier to avoid the application of the revised final rule. For example, most diagnostic tests do not require supervision by a physician practicing in a particular specialty. Accordingly, unless Medicare's rules require on-site supervision (i.e., direct or personal supervision), groups may designate any group member to serve as the supervising physician. If a group member serves as a supervising physician, the technical component will likely satisfy the "substantially all" test and therefore will not be subject to the anti-markup rule, even if the supervising physician is not present in the same building where the test is conducted.

However, the professional component of diagnostic tests performed by physicians who do not pass the "substantially all" test will be more difficult to protect. For example, if the professional component of a diagnostic imaging test is performed by an independent radiologist, the professional component likely will be subject to the anti-markup rule unless the radiologist is both (i) employed by, or an independent contractor of, the billing supplier, and (ii) performs the interpretation on-site. Further, for tests subject to the rule, the rule is nearly a de facto prohibition against billing by the billing supplier since the billing supplier will not be able to recoup its billing or other overhead costs.

Finally, remember that the effective date of the final ant-markup rule is January 1, 2009. Accordingly, billing suppliers should review their arrangements quickly and, if necessary, restructure them to assure compliance by the end of this year.

For more information on the final 2009 Medicare physician fee schedule rule, please feel free to contact any member of the Boult Cummings Health Care Team.