On November 1, 2007, the Centers for Medicare & Medicaid Services (“CMS”) published the 2008 Physician Fee Schedule Rule (the “Final Rule”), which contains anti-markup provisions that will significantly impact the ability of many physicians to provide certain diagnostic testing services to their Medicare patients. The Final Rule is scheduled to become effective on January 1, 2008, giving physicians little time to restructure their medical practices and existing contractual relationships to comply with the Final Rule in a way that is economically viable. The Final Rule in large part obviates the “In-Office Ancillary Services Exception” of the Stark Law as it pertains to diagnostics.
The anti-markup provisions prevent physicians, group practices, independent diagnostic testing facilities and any other supplier (the “Billing Entity”) from marking up the technical and professional components of ordered diagnostic tests that are purchased from an outside supplier or performed at a location other than the office of the Billing Entity. The easiest way to interpret the anti-markup provisions is to determine when the provisions are not triggered which is when the technical and professional components are ordered, billed and performed by the Billing Entity at an office space where the Billing Entity regularly furnishes patient care. If the diagnostic tests are performed at the Billing Entitys office space, the diagnostic tests may be performed by a full-time or part-time employee, or an independent contractor that reassigns his or her benefits to the Billing Entity. While CMS motivation behind adopting the Final Rule is to prevent overutilization of diagnostic testing that would otherwise be Stark Law compliant, physicians are concerned that the impact of the Final Rule is over-reaching and will make it economically unfeasible to provide certain diagnostic testing services to Medicare patients. Those that oppose the Final Rule present strong arguments that by requiring the diagnostic tests to be performed at the office space where the Billing Entity regularly furnishes patient care, without carving out an additional exception for tests performed in the “same building” or a “centralized building,” CMS has overstepped its rule-making authority and vitiated the purpose behind the In-Office Ancillary Services Exception, at least as it relates to diagnostic testing. In fact, even members of Congress have been questioning whether CMS has the authority to undermine Congress initial intent to allow a specific exception to the Stark Law for those compensation and ownership relationships that satisfy the In-Office Ancillary Services Exception. Given the reaction to the Final Rule, it would not be surprising if an injunctive action is filed by an aggrieved party in Federal Court to attempt to prevent the Final Rule from taking effect in January. In the meantime, many physicians are fearful because they know that if the Final Rule is not overturned, they will lose a significant portion of their income and their ability to fully care for their Medicare patients come January.
