| The Centers for Medicare and Medicaid Services (“CMS”) announced a one-year delay of its amendments to the “anti-markup” rule for certain diagnostic services furnished in certain locations. The delay is for a time period of one year, until at least January 1, 2009, and may include CMS interim guidance or further proposed regulation on the rule. In the recently released 2008 Medicare Physician Fee Schedule (“MPFS”) CMS revised the longstanding anti-markup rule, which previously only applied to the technical component of diagnostic tests. The revised rule includes the purchased interpretations of certain diagnostic tests performed by physicians and outside suppliers and billed to Medicare or other third-party payers. Medicare regulations currently prohibit the markup of the technical component of certain diagnostic tests that are performed by outside suppliers and billed to Medicare by a different entity or individual. CMS expanded the rule to apply to diagnostic tests performed by anyone (includoffice of the billing physician or other supplier.” The basis for this revision to the anti-markup rule ing a physician’s own employees) outside the “is that a physician or supplier cannot mark up the cost of a test, even if performed by his or her own employees in a building that fully meets the Stark Law requirements, but is not performed in the “office of the billing physician or other supplier”.
The delay, published in the Federal Register on January 3, 2008, states that subsequent to publication of the final MPFS with comments, the application of the rule is “unclear with respect to whether certain types of space arrangements meet the definition of the ‘office of the billing physician or other supplier.”’ Some physician practice groups had alleged that in situations in which they are subject to the anti-markup provisions and are limited to billing Medicare for the amount of the net charged imposed by the performing supplier, physician practice groups would “not be able to realize a profit” and would not be able to recoup their overhead costs; thus, causing them to discontinue providing diagnostic testing services to the same number of patients that were currently receiving such services.
CMS expressed its concern that the definition of “office of the billing physician or other supplier” may not be entirely clear and could have unintended consequences. In the next year, CMS will issue clarifying guidance as to what constitutes the “office of the billing physician or other supplier,” or propose additional rulemaking, or both.
CMS provided some exceptions to the delay. CMS asserted that anatomic pathology diagnostic testing arrangements “precipitated [their] proposal for revisions” of the anti-markup rule and “remain our core concern.” Therefore, CMS did not delay the date of applicability with respect to anatomic pathology diagnostic testing services furnished in space that: (1) is utilized by a physician group practice as a “centralized building” for purposes of complying with the physician’s self-referral rules (Stark law); and (2) does not qualify as a “same building” under 42 CFR 411.355(b)(2)(i).
CMS did not delay the applicability of the revised anti-markup rule with respect to the technical component of any purchased diagnostic test. CMS stated that the anti-markup prohibition on technical components of purchased diagnostic tests was “longstanding and was incorporated into the expanded revised provision of §414.50.”
Hinshaw & Culbertson LLP will issue further alerts with regard to the anti-markup rule when CMS publishes further guidance or proposed rulemaking. For more information, contact your regular Hinshaw attorney.
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