Changes to Reassignment and Physician
Self-Referral Rules Relating to Diagnostic Tests
(Anti- Markup Provisions) in the Centers for Medicare and Medicaid Services
(CMS) 2008 Physician Fee Schedule (MPFS) Final Rule
Effective January 1, 2008, the Centers for Medicare and Medicaid Services (CMS) has imposed new provisions on how Medicare will pay for diagnostic test services. These anti-markup restrictions would prohibit the markup of a technical component (TC) and professional component (PC) [modifier 26] and would apply when the diagnostic service is purchased from an outside supplier, or performed at a site other than 00he office of the billing physician or supplier.00u>
Medicare regulations currently prohibit the markup of the TC of certain diagnostic tests that are performed by outside suppliers and billed to Medicare by a different individual or entity. In addition, Medicare program instructions restrict who may bill for the PC (the interpretation) of diagnostic test. With this revision, CMS has expanded the anti-markup rule to cover both the PC and the TC of diagnostic test services provided by the physician or group when they are performed outside the billing physician00 office.
The provisions apply to the TC and PC when diagnostic test services are purchased or performed outside the billing physician00 office the practice could bill only for the lesser of:
the [performing] supplier00 net charge to the billing physician or group practice; the physician or group practice00 actual charge; or the fee schedule amount for the test that would have been paid if the supplier had billed Medicare directly.
Physicians are permitted to determine where the TC and PC are performed, provided that the arrangement is in compliance with the purchased test rules and physician self-referral rules. CMS also notes that the anti-markup rules do not apply to independent labs that have not ordered the TC.
According to CMS, these revised requirements are designed to address potential program abuse where physicians and other suppliers, order tests and bill CMS for the same tests that they did not perform at a markup. The final rule prohibits the markup of the TC and PC of diagnostic tests in order to prevent physicians, physician group practices, and medical groups from profiting through such practices. CMS has expressed concerns that allowing physicians, group practices, or other suppliers to purchase or otherwise contract for the provision of diagnostic testing services and to then realize a profit by applying markups when billing Medicare may lead to program and patient abuse in the form of overutilization of services, resulting in higher costs to the Medicare program.
The final provisions were designed by CMS to reduce overutilization of diagnostic tests, so that tests are ordered because they are medically necessary and not because a profit can be made on the test. Practices can maintain relationships with other professionals on a part-time or contractual basis. If the services are furnished in the office of the billing supplier, the anti-markup rules will not apply, unless the services of an independent contractor are billed as a purchased test. The anti-markup provisions do not apply to non-purchased TCs and PCs performed in the office of the billing physician or other supplier. However, the anti-markup provisions apply irrespective of whether: (1) the billing entity outright purchases the TC or the PC; or (2) the physician or other supplier performing the TC or PC reassigns his or her right to bill the Medicare program to the billing entity (unless the performing supplier is a full-time employee of the billing entity).
Scenarios on How and When Medicare00 New Anti-Markup Provisions Apply for Diagnostic Tests
CMS RULES APPLY CMS RULES DO NOT APPLY
Example 1: A dermatology group practice contracts with a leasing company that supplies a technician and a pathologist to perform testing on samples. The technician performs the tissue sampling and the pathologist reads the slides. All work that is done outside the office of the billing group practice, is instead performed in a space that is rented exclusively 004/700 by the group practice (thus meeting the definition of a 00entralized building00at 搂411.351) for the sole purpose of providing pathology services for the group00 patients. Because the centralized building does not qualify as 00he office of the billing physician or other supplier,00the anti-markup provisions apply to both the TC and the PC, and the group may bill Medicare the lowest of either: (1) the leasing company00 net charge to the group; (2) the group00 actual charge; or (3) the fee schedule amounts for the TC and interpretation that would be allowed if the leasing company were enrolled in and billed Medicare directly.
Key point Leasing space away from the billing practice is not an exemption from the anti-markup provisions.
Example 3: A physician in a group practice orders a diagnostic test and a technician who is a part-time employee of the group performs the test in the group00 office. A physician who is an independent contractor of the group performs the PC in the group00 office and reassigns his or her right to payment to the group. The anti-markup provisions do not apply to the group00 billing of the TC or the PC.
Key point An independent contracting physician performing the PC on- site can reassign his or her right to payment to the billing practice and still be exempt from the anti-markup requirement.
Example 2: Same as Example 1, except that the TC and PC are performed by a technician who is employed by the billing practice and an independent contracting pathologist of the billing practice, respectively. Here, the anti-markup provisions will apply to both the TC and the PC because the work was not done in the 00ffice of the billing physician or other supplier00(the office of the group practice). It does not matter that the technician is an employee and the pathologist is an independent contractor because the work was not performed in the office of the billing group practice.
Key point Though the TC was performed by a technician who is an employee of the billing practice, and the PC by a contracted pathologist at an off-site location, this does not qualify as an exemption to the anti-markup requirements.
Example 6: A group practice orders a diagnostic test from an independent laboratory. The laboratory performs the test and contracts with a physician to perform the PC. The laboratory bills Medicare for both the TC and the PC. The laboratory is not subject to the anti-markup provision for the PC, because the laboratory did not order the test.
Key point If the off-site laboratory contracts with the billing practice ordering the PC, the laboratory is exempt from the anti-markup provision.
CMS RULES APPLY
Example 4: Same as Example 3, except that the independent contractor physician performs the PC in his or her home and reassigns his or her reimbursement of benefits to the group. The group00 billing of the TC is not subject to the anti-markup provision, but the group00 billing of the PC is subject to the anti-markup provision because the work was not performed in the office of the billing supplier.
Key point
Outsourcing the PC to an independent contracting physician who performs the work off-site is subject to the anti-markup requirement.CMS RULES DO NOT APPLY
Example 7: Same as Example 6, except that a physician orders a diagnostic test from an independent diagnostic testing facility (IDTF). The IDTF bills Medicare for both the TC and the PC of the test. The anti-markup provisions do not apply because the IDTF did not order the test.
Key point
The lab that performed the test off-site on orders from the billing practice, then bills Medicare for both TC and PC, is exempt from the anti-markup provision.Example 5: A group practice purchases both a diagnostic test and its interpretation from a laboratory and bills the TC and PC to Medicare. The anti-markup provisions apply to both the TC and the PC. Because the TC and the PC were purchased, the location(s) at which the TC and the PC were performed does not matter.
Key point Purchase of both the TC and PC from a laboratory by a billing practice when the test is performed offsite, is subject to the anti-markup requirement.
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