South Florida Hospital News
Sunday May 26, 2019
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December 2008 - Volume 5 - Issue 6

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Legal Update - 2009 Anti-Markup Rule: Good News for Group Practices

On October 30, 2008, the Centers for Medicare and Medicaid Services (CMS) released the final 2009 Medicare Physician Fee Schedule. The Schedule sets forth many Final Rules, and is voluminous, covering more than 1,400 pages. Physicians who offer diagnostic testing services through their medical practices may be particularly interested in the Final Rule regarding anti-markup (the "2009 Anti-Markup Rule"). The 2009 Final Rule is a breath of fresh air for medical groups, at least compared with what began with the 2008 Final Rule.

For many years a rule had been in place prohibiting a physician or medical practice from marking up the cost of the technical component of diagnostic tests purchased from an outside supplier. However, until 2008 there was no rule providing the same limitation for the professional component. Thus, for example, it was quite common (and still is, at least until January 1, 2009) for a medical practice to have tests read by outside radiologist at an agreed upon fee per read, which fee was less than the actual Medicare reimbursement rate. The professional and technical charges would be globally billed by the medical practice’s ordering physician, and from payments received the medical practice paid the radiologist the agreed upon fee and pocketed the difference. CMS believes that, among other things, this plan may result in overutilization for testing.

In November 2007 CMS issued, as part of the final 2008 Medicare Physician Fee Schedule, the 2008 Final Rule. For the first time the anti-markup concept (except for diagnostic lab tests) was applied in many cases to both the technical and professional components of a diagnostic test when billed by the ordering physician. The 2008 Final Rule was scheduled to become effective on January 1, 2008. It was immediately controversial because it was to apply to the professional component if it was performed outside the billing physician’s office. That would prohibit a markup if the test was performed, for example, in a centralized building (even if this satisfied the Stark in-office ancillary exception), or separate space, located in the same building as the ordering physician’s office but not used by the physician to see patients as part of his or her regular practice. In addition, the markup would be prohibited if obtained from an "outside supplier."

The 2009 Final Rule, which will become effective on January 1, 2009, moves more in the direction of protecting much of the diagnostic testing done in physician offices. It provides that claims submitted for the technical or professional component of a diagnostic test are subject to the anti-markup limitations if (1) the physician billing for those components was the person who ordered the diagnostic test, or (2) the diagnostic test is performed by a physician who does not "share a practice" with the billing physician. The billing physician and the physician who actually performs the test will be deemed to share a practice (and thus not be subject to the 2009 Final Rule) if either of the two following tests are met: (A) the performing physician furnishes at least 75% of his or her professional services through the billing physician’s medical practice, or (B) if the performing physician is an owner, employee, or contracted person of the medical practice and the services are performed in the office of the billing physician. The term "office" means any office space in a building with the same street address as the billing physician.

Thus, a markup can be achieved if one of the sharing rules is met. Some believe that the 2009 Final Rule will not achieve its perceived original aim of limiting overutilization, because it will be relatively easy to meet the test. Block leasing of diagnostics in physician offices (not an IDTF) remains possible. While diagnostic testing in a centralized, off-site building will still not be permissible, it is acceptable to perform the diagnostics in a separate space located in the same building as the medical practice.

Many local medical practices use outside radiologists to read tests electronically. The anti-markup rule will clearly apply to this professional component, and the result will likely be that the radiologists will bill the professional component separately from the technical component, which will be performed and supervised by the medical practice. Keep in mind that Florida law provides that billings not subject to federal law must be billed globally in a group practice diagnostic setting, thus creating an interesting dichotomy.

Mike Segal is a partner in the Miami office of Broad and Cassel and is chair of the statewide firm’s Health Law Practice Group. He can be reached at (305) 373-9400 or msegal@broadandcassel.com.
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