On Oct. 30, 2008, the Center for Medicare and Medicaid Services (CMS) released a display copy of the Final Medicare Physician Fee Schedule for 2009 (“Final 2009 MPFS”) on its Web site. The Final 2009 MPFS, effective Jan. 1, 2009, establishes payment rates for various types of services and also establishes several policy changes that will affect many providers participating in the Medicare program. Some of the policy changes related to imaging services, diagnostic testing services, and previously proposed exceptions to the Stark law are particularly significant.
Summary of key policy issues in Final 2009 MPFS
We identified four key Medicare policy issues addressed in the Final 2009 MPFS. First, CMS will require mobile entities performing diagnostic testing services to enroll as independent diagnostic testing facilities (IDTFs) and bill Medicare directly, except for those providing services “under arrangements” with hospitals. Next, CMS finalized, with modifications, changes to the anti-markup payment limitation it proposed earlier this year—also known as the "purchased diagnostic test" (PDT) rule. Also, CMS chose not to adopt at this time the proposed exception to the Stark physician self-referral law regarding shared savings and incentive plans. Lastly, CMS indicated that it will not require physicians and nonphysician practitioners (NPPs) to enroll as IDTFs at this time.
Mobile IDTFs required to enroll in Medicare; leasing entities exempt
The Final 2009 MPFS finalizes the proposed regulation that requires entities that furnish mobile diagnostic testing services to Medicare beneficiaries to enroll in the Medicare program and comply with Medicare's IDTF performance standards. Effective Jan. 1, 2009, mobile diagnostic testing units must enroll with Medicare as IDTFs, comply with Medicare IDTF performance standards, and directly bill Medicare for the services they furnish, except if they provide services “under arrangement” with hospitals.
Initial confusion regarding leasing entities
The Final 2009 MPFS was not initially clear whether the new regulation would apply to entities that solely lease equipment and technicians to providers. The commentary in the Final 2009 MPFS suggested that CMS may intend to require leasing entities to enroll as IDTFs. A commenter in the Final 2009 MPFS specifically urged CMS to exclude entities that lease equipment and technicians from the definition of an entity that furnishes mobile diagnostic testing services.
CMS declined to adopt the commenter's suggestion and stated that, “. . . a mobile entity providing diagnostic testing services must enroll for any diagnostic imaging services that it furnishes to a Medicare beneficiary, regardless of whether the service is furnished in a mobile or fixed base location . . . .” Curiously, although CMS clearly declined to accept the commenter's suggestion, CMS failed to specifically address whether a leasing company will be subject to the new regulation. CMS's response did not even mention the words “lease” or “leasing.” This comment and response created uncertainty for leasing entities trying to comply with the new rules.
CMS clarification via FAQ
However, on Dec. 15, 2008, CMS displayed an FAQ on its Web site that clarified this uncertainty. It states:
Companies that lease or contract with a Medicare enrolled provider or supplier to provide: a) diagnostic testing equipment; b) non-physician personnel described in 42 CFR 410.33(c); or c) diagnostic testing equipment and non-physician personnel described in 42 CFR 410.33(c) are not required to enroll as an IDTF. Medicare continues to evaluate arrangements where both diagnostic testing equipment and non-physician personnel are contracted to a Medicare enrolled provider or supplier and where the Medicare enrolled provider or supplier is billing for the diagnostic service.
The FAQ indicates that for the time being, at least, companies that lease diagnostic testing equipment and/or personnel to providers are not required to enroll as IDTFs with Medicare.
Anti-markup/PDT rule: final version
CMS has long imposed a payment limitation on certain diagnostic tests when the physician that performs or supervises the test does not share a practice with the physician or other supplier that bills for the test. This is commonly known as the “anti-markup” or PDT rule.
Changes in 2008: application to pathology labs only
In the Final 2008 Medicare Physician Fee Schedule (“Final 2008 MPFS”) published in 2007, CMS amended the anti-markup provision in two important ways.
First, CMS amended the anti-markup provision to apply to the technical component (TC) of diagnostic tests that are ordered by the billing physician when the TC is outright purchased or when the TC is not performed in the “office of the billing physician or other supplier.” The “office of the billing physician or other supplier” was defined as the medical office space where the physician or other supplier regularly furnishes patient care.
Second, CMS expanded the anti-markup payment limitation to the professional component (PC) of diagnostic tests that are ordered by the billing physician if the PC is outright purchased or if the PC is not performed in the office of the billing physician.
Thus, under the Final 2008 MPFS, if a physician bills for the TC or PC of a diagnostic test that was ordered by the physician and the diagnostic test was either purchased from an outside supplier or performed at a site other than the office of the billing physician, the payment to the billing physician for the TC or PC of the diagnostic test could not exceed the lowest of the following amounts:
- The performing supplier's net charge to the billing physician;
- The billing physician or other supplier's actual charge;
- The fee schedule amount for the test that would be allowed if the performing supplier billed directly.
However, due to an outcry from industry, at the eleventh hour CMS delayed the implementation of this version of the anti-markup rule for all providers except pathology labs. Immediately thereafter, CMS began modifying the rule.
Proposed 2009 modifications
In the Proposed 2009 Medicare Physician Fee Schedule, CMS suggested that anti-markup provisions adopted in the Final 2008 MPFS would apply in all cases where the TC or the PC of a diagnostic testing service is either: (1) purchased from an outside supplier; or (2) performed or supervised by a physician who does not share a practice with the billing physician or other supplier.
CMS proposed two alternative approaches to determining whether the performing or supervising physician shares a practice with the billing physician or other supplier.
The first alternative proposes that if the performing or supervising physician is employed by or contracts with the billing physician or his or her medical practice, whether full or part-time, they will be considered to share a practice .
The second alternative uses a site-of-service approach to determine whether a physician shares a practice with the billing physician. If TCs and PCs are performed outside the office of the billing physician, the performing or supervising physician is not considered to share a practice with the billing physician, and the anti-markup payment limitation will apply.
Final 2009 MPFS application
In the Final 2009 MPFS, CMS finalizes the application of the anti-markup provisions to cases where the TC or PC of a diagnostic testing service is either: (1) purchased from an outside supplier; or (2) performed or supervised by a physician who does not share a practice with the billing physician.
CMS however modified the two alternative ways in which performing or supervising physicians will be considered to share a practice with the billing physician.
- Alternative 1: employee or contractor approach
CMS indicated that arrangements to share a practice should first be analyzed under Alternative 1. Under Alternative 1, physicians will be considered to share a practice if the performing or supervising physician is employed by or contracts with the billing physician.
The Final 2009 MPFS clarified that the performing or supervising physician will be considered to be employed by or contracting with the billing physician if he or she performs substantially all of his or her professional services for that billing physician or physician organization. Substantially all is defined as at least 75 percent of the performing or supervising physician's professional services.
- Alternative 2: site-of-service approach
If the performing or supervising physician does not perform substantially all his or her services for the billing physician's organization, an analysis under the Alternative 2 requirements may be applied on a test-by-test basis to determine whether the anti-markup limitation applies.
Under the Alternative 2 site-of-service approach, only TCs conducted and supervised in, and PCs performed in the office of the billing physician or other supplier by an employee or independent contractor physician will avoid application of the anti-markup payment limitation. The “office of the billing physician or other supplier” is defined as space in which the ordering physician or other ordering supplier regularly furnishes care.
With respect to physician organizations, “office of the billing physician or other supplier” is the space in which the ordering physician performs substantially the full range of patient care services that the ordering physician provides generally.
With respect to the TC, the physician supervising the TC must be an owner, employee, or independent contractor of the billing physician, and with respect to the PC, the performing physician must be an employee or independent contractor of the billing physician.
Shared savings and incentive plans: no final Stark exception yet
In the Proposed 2009 MPFS, CMS proposed a new exception to the Stark physician self-referral law for incentive payment and shared savings programs. The proposed exception covered various types of hospital-sponsored pay-for-performance, shared savings (gainsharing), and similarly styled programs.
In the Final 2009 MPFS, CMS chose not to issue a final rule containing a Stark exception for gainsharing. CMS indicated that it did not have sufficient agreement among commenters to formulate an exception. Instead, CMS will seek additional comments. CMS suggests that its goal is to develop an exception that is sufficiently flexible to encourage the development and implementation of beneficiary, nonabusive incentive payment and shared savings programs that foster high quality, cost-effective care.
Physician enrollment as IDTFs: no final rule, but keep monitoring
CMS first established performance standards for providers enrolled in the Medicare program as an IDTF in 2007 and 2008. In 2009, CMS proposed expanding the IDTF performance standards (established at 42 CFR § 410.33) to physicians and nonphysician practitioners (NPPs) who furnish diagnostic testing services for Medicare beneficiaries, and who have enrolled in the Medicare program as a clinic, group practice, or physician's office.
CMS proposed this expansion based on concerns that physician entities can furnish diagnostic testing services without appropriately trained personnel, without complying with CMS's IDTF performance standards and by using mobile equipment and technicians. CMS then solicited public comments on its proposed change.
In the Final 2009 MPFS, CMS indicated that it will defer implementation of these proposals while continuing to review the public comments received and will consider finalizing the expanded application of the IDTF performance standards in a future rulemaking effort if necessary. Accordingly, physicians and NPPs may continue to provide diagnostic testing services within their medical practice without complying with CMS's IDTF quality and performance standards at 42 CFR § 410.33.