Mid-Atlantic Health Law TOPICS

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Mark It Up- Medicare May Pay

Physicians ordering and rebilling diagnostic tests in late 2007 and early 2008 have been caught in a quagmire, because of the regulatory fits and starts implemented by the Centers for Medicare and Medicaid (CMS). However, a new, easier to implement anti-markup rule went into effect on January 1, 2009, and health care providers should now carefully review their arrangements under the new rule.
Specifically, CMS' 2009 anti-markup rule states that, except for two exceptions discussed below, a physician should be paid the lesser of (1) the wholesale price he or she pays for the technical and/or professional component of a purchased diagnostic test billed by the ordering physicians, or (2) the Medicare Physician Fee Schedule.
Accordingly, absent an exception, the physician billing for an ordered test may only bill his or her wholesale cost, using a reasonable methodology to determine that cost. The calculation of wholesale cost may be difficult because suppliers may be charging the ordering physician on a monthly basis, and not per test. Moreover, the new rule states that such wholesale cost must exclude any amounts the performing physician is paying the ordering physician for leasing diagnostic equipment or space from the ordering physician.
Furthermore, if the ordering physician does not disclose when billing Medicare that the diagnostic tests were purchased, then the ordering physician is subject to the False Claims Act.
However, as noted above, there are two important exceptions to the 2009 rule that will result in Medicare paying a markup.
The two exceptions are the "same practice" rule and the "same office" rule, and both exceptions recognize the importance of cost effective in-office diagnostic testing. Under either exception, the ordering physician may purchase a diagnostic test, bill for the test, and Medicare will pay the lower of (1) the marked up (or retail) price for the diagnostic test, or (2) the Medicare Physician Fee Schedule.
A. Same Practice Rule
The same practice rule allows an ordering physician to bill for a diagnostic test performed by someone who is in the same practice as the ordering physician. To satisfy the same practice rule, the physician performing the diagnostic test must perform 75% or more of his or her services on behalf of the ordering physician's group.
The 75% rule may be satisfied retroactively or prospectively. This means that the ordering physician may take into account the performing physician's services in the prior 12 months or reasonably anticipate the performing physician's services for the next 12.
For anti-markup rule purposes, the performing physician for the professional component of a diagnostic test is the physician performing the interpretation. For the technical component, the performing physician is the physician supervising the diagnostic test. In many cases, general supervision of the diagnostic test is sufficient for Medicare, which means that the procedure is furnished under the physician's overall direction and control, but the physician is not required to be present during the procedure.
B. Same Office Rule
If the same practice rule cannot be satisfied, an ordering physician may still bill and collect a marked up amount of a purchased diagnostic test if the ordering physician qualifies for the same office rule.
For the same office rule to apply, the performing physician must perform the technical and/or professional component in the ordering physician's office. For a diagnostic test to be performed in the ordering physician's office, the office must be one in which the ordering physician provides substantially the full range of patient care services.
In addition, ordering physicians who offer a full range of services in an office with the same street address as the performing physician may also bill and markup the technical component of a purchased diagnostic test, if the ordering physician leases diagnostic space and equipment in the performing physician's office. However, the space and equipment must be leased and used exclusively by the ordering physician for the block of time when the test billed by the ordering physician is performed.
If the performing physician also performs the professional component in the leased space during the block time, then the ordering physician may also bill and markup the professional component.
C. Other Applicable Regulations
While compliance with the anti-markup rule will likely result in compliance with other applicable statutes, such as the federal Stark law, a separate analysis must be done to confirm such a conclusion on a case-by-case basis.


March 24, 2009




Rosen, Barry F.


Health Care