CMS Proposes Changes to the Anti-Markup Rule: Round Two

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The only constant is change is an apt mantra for the imaging industry over the past several years. For the second time in two years, CMS has proposed comprehensive changes in the anti-markup provision of the purchased diagnostic test rule (AMR) in the Medicare Physician Fee Schedule (MPFS) regulations. The most significant of the 2008 finalized changes were the extension of the AMR to the interpretation of a diagnostic test (as opposed to just the technical component), the introduction of a location requirement for determining when a test had been purchased, and the limitation on the markup to the net charge of a test. In the eleventh hour, however, CMS postponed the effective date of the new AMR (except as it related to anatomical pathology labs) after stakeholders requested clarification of definitions and expressed concerns over the ambiguities created by the new rule (the delayed AMR).

The delayed AMR’s site-of-service location requirement restricted an ordering physician or physician organization (the billing physician) from marking up the technical component or the professional component of a diagnostic test performed outside of the suite where the billing physician provides the full range of patient-care services (the location restriction), even if the test and/or interpretation were to be performed in the same building. CMS further restricted the charge allowed for a purchased test to the net charge of the billing physician, which cannot take into account the cost of the equipment or space of the billing physician or the outside supplier. The definition of net charge sent stakeholders to CMS to address the ambiguity of the new charge restriction.

Under the delayed AMR, an orthopedic group that provides MRI services within its suite (where the ordering physicians provide the full range of patient-care services) and contracts with a radiologist for the interpretations will be able to mark up both components of the MRI study, and bill CMS globally, only if the radiologist performs the interpretation within the orthopedic group’s suite. If the radiologist were to provide the interpretation outside of the orthopedic group’s suite, however, the orthopedic group would be restricted from marking up the professional component. If the same orthopedic group provides MRI services on the first floor of a building, but its practice suite is located on the second floor in same building, the orthopedic group will be also restricted from marking up the technical component, and it could only bill Medicare the lower of the Medicare fee schedule or its net charge.

Alternative Approaches

In the proposed 2009 MPFS, CMS sought various general comments on the delayed AMR to address the concerns expressed by stakeholders, and CMS specifically solicited comments on two alternatives to the delayed AMR.

In approach number one, AMR is implicated if the professional component or technical component is purchased outright from the outside supplier or if the physician who either performs the interpretation or supervises the technical component of the test does not exclusively share a practice with the billing physician.

Approach number one completely revamps the delayed AMR by eliminating the location restriction, instead imposing an exclusive supervision/performance requirement to determine whether a test or interpretation is purchased. Under approach number one, performance location is irrelevant to the determination of whether a test and/or interpretation has been purchased. The supervising and performing physicians, however, must be exclusively employed or contracted (on either a full-time or a part-time basis) with the billing physician. Although CMS did not provide any regulatory language for approach number one, it stated that this approach may be a bright-line test for determining when a test or interpretation has been purchased, without affecting nonabusive arrangements.

Using the scenario above, assuming that the ordering physician (or a physician with whom the ordering physician shares a practice) supervises the technical component, the orthopedic group could mark up the technical component of the test, regardless of where the MRI unit is located. The orthopedic group, however, would still be unable to mark up the professional component unless the interpreting radiologist is exclusively providing services to that orthopedic group, and to no one else (not even his or her own radiology group). In approach number one, the locations