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2009 CMS MPFS Final Rule - IDTFs

2009 CMS MPFS Final Rule - IDTFs

Health Care Law Note
(November 2008)

On October 30, 2008, the Centers for Medicare and Medicaid Services (CMS) posted the final 2009 Medicare Physician Fee Schedule (MPFS).  The MPFS is the Final Rule with comment period seeking comments for certain sections by December 29, 2008.  It should be published in the Federal Register on November 19, 2008.

The proposed MPFS was published in the Federal Register on July 7, 2008.  Reminiscent of last summer's proposed fee schedule, the MPFS contains additional proposed Stark regulations as well as requests for comments on the proposed alternatives for the anti-markup rule (the implementation of such was delayed until January 1, 2009).

The Final Rule contains several provisions that are significantly different than what was proposed over the summer.  We highlight below the differences between the relevant provisions of the July 2008 Proposed Rule and those of the Final Rule.

Independent Diagnostic Testing Facilities (IDTFs)

Proposed Rule

In the proposed rule, CMS stated that it was proposing to expand on the quality and program safeguards previously implemented for diagnostic imaging services.  CMS established performance standards for IDTFs in the 2007 and 2008 PFS final rules (71 Fed. Reg. 69695 and 72 Fed. Reg. 66285, respectively).  During the 2008 PFS comment period, CMS received comments requesting that the IDTF performance standards adopted in 42 C.F.R. § 410.33, including the prohibitions regarding the sharing of space and leasing/sharing arrangements, apply to physicians and nonphysician practitioners (NPPs) who are performing diagnostic tests for Medicare beneficiaries, and who have enrolled with Medicare as physician offices or clinics.  73 Fed. Reg. 38533.  According to the PFS, commenters stated that two distinct compliance standards for diagnostic imaging centers have emerged, depending on whether the centers were enrolled as physician clinics or as IDTFs.

In response to public comments, CMS outlined the following concerns:

  • Physician entities can enroll as a group practice or clinic and provide diagnostic testing services without the benefit of qualified nonphysician personnel (as required for IDTFs) to conduct diagnostic testing.
  • Some physician entities that furnish diagnostic testing services for their own patients and the general public are enrolling as physician clinics thereby circumventing the performance standards found in the IDTF requirements (42 C.F.R. 410.33).
  • Some physician organizations are furnishing diagnostic tests using mobile equipment provided by an entity that furnishes mobile diagnostic services.

73 Fed. Reg. 38534.

In the proposed MPFS, CMS proposed adding section 410.33(j) to the diagnostic testing services regulations.  The new provision stated that a physician or NPP organization furnishing diagnostic testing services, except diagnostic mammography services, (1) must enroll as an independent testing facility for each practice location furnishing these services; and (2) is subject to the provisions found in 42 C.F.R. § 410.33, except for the following performance standards.  73 Fed. Reg. 38534.  CMS concluded that physician organizations already meet or exceed some of these standards, which are otherwise applicable to IDTFs:

  • Maintaining additional comprehensive liability insurance for each practice location, as required by § 410.33(g)(6).
  • Maintaining a formal clinical complaint process as required under § 410.33(g)(8).
  • Posting IDTF standards as required under § 410.33(g)(9).
  • Maintaining a visible sign posting business hours as required under § 410.33(g)(14)(ii).
  • Separately enrolling each practice location as required under § 410.33(g)(15)(i).

73 Fed. Reg. 38534.

The proposal defined "physician or nonphysician practitioner organization" as any entity that enrolls in the Medicare program as a sole proprietorship or organizational entity, such as a clinic or group practice.  73 Fed. Reg. 38534.  CMS maintained that the enrollment requirement was necessary to ensure that all beneficiaries are receiving the quality of care that can be administered by appropriately licensed or credentialed nonphysician personnel.

CMS sought comment on whether it should consider additional exceptions to the performance standards in 42 C.F.R § 410.33(g) for physician organizations and NPP organizations furnishing diagnostic testing services.  Additionally, CMS sought comment regarding whether the policy should apply to imaging services, advanced diagnostic testing services only (CT, MRI, PET), or all diagnostic testing services (such as electrocardiograms).  For suppliers already enrolled in the Medicare program, the proposed effective date was September 30, 2009.  For newly enrolled suppliers, the effective date of this proposed rule would be January 1, 2009.

Final Rule

In the Final Rule, CMS stated that it is deferring the implementation of its proposals in the proposed rule because of the enactment of section 135 of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) and its need for more time to review the public comments on the proposed provisions.  Section 135 of MIPPA requires that the Secretary establish an accreditation process for those entities furnishing advanced diagnostic testing procedures, which include MRI, CT, and PET, by January 1, 2012.  At this time, CMS is not adopting the proposal to require physicians, physician practices and NPPs to meet certain quality and performance standards when providing diagnostic services within their office setting.  Thus, physicians, physician practices and NPPs will not have to enroll as IDTFs at this time.

Mobile Entity Billing Requirements

Proposed Rule

CMS proposed a new performance standard for mobile entities at 42 C.F.R. § 410.33(g)(16).  The new standard would require that entities furnishing mobile diagnostic services enroll in Medicare and bill directly for the mobile diagnostic services that they furnish, regardless of where the services are performed.  73 Fed. Reg. 38534.  Thus, entities performing mobile services would be required to enroll in the Medicare program, comply with the IDTF performance standards, and directly bill Medicare for services rendered. Id.

Final Rule

In the Final Rule, CMS maintains that a mobile entity providing diagnostic testing services must enroll in Medicare to furnish diagnostic imaging services to a Medicare beneficiary, regardless of whether the service is furnished in a mobile or fixed base location, so that CMS knows which entity is providing these services.  Thus, entities furnishing mobile diagnostic services must enroll as IDTFs, regardless of where the services are furnished.  42 C.F.R. § 410.33(g)(16).  The owner of the mobile IDTF is responsible for ensuring that the mobile IDTF meets all the regulatory requirements to maintain enrollment.

In addition, CMS is finalizing the proposed provision in 42 C.F.R § 410.33(g)(17) that requires mobile diagnostic service providers to bill for the mobile diagnostic services that they furnish, unless the mobile diagnostic service is part of a hospital service and is furnished under arrangement with that hospital.  Mobile IDTFs must provide documentation of the "under arrangements" agreement with the hospital in their enrollment application.

Effective January 1, 2009, physician groups will not be able to bill for imaging services provided to Medicare beneficiaries if the imaging services are provided by a mobile service.

Anti-Markup/Purchased Diagnostic Test Rule

The 2009 MPFS Final Rule amended the anti-markup provision found in 42 C.F.R. § 414.50 for certain diagnostic tests.

Proposed Rule

Under the proposed 2009 rule, if a physician or other supplier bills for the professional component (PC) or the technical component (TC) of a diagnostic test that was ordered by a physician or other supplier (or ordered by a party related to such physician or other supplier through common ownership or control) and the diagnostic test is either purchased from an outside supplier or performed at a site other than the office of the billing physician or other supplier, the payment to the billing physician or other supplier (less the applicable deductibles and coinsurance paid by the beneficiary or on behalf of the beneficiary) for the TC or the PC of the diagnostic test may not exceed the lowest of the following amounts:

  • The performing supplier's net charge to the billing physician or other supplier;
  • The billing physician or other supplier's actual charge; or
  • The fee schedule amount for the test that would be allowed if the performing supplier billed directly.

72 Fed. Reg. 66222.

However, as a result of CMS' concern that the definition of "office of the billing physician or other supplier" was not clear and could result in unintended consequences, CMS delayed the application of the revised anti-markup provision in section 414.50 until January 1, 2009, except in the case of certain anatomic pathology diagnostic services.  73 Fed. Reg. 38545.  In the proposed rule, CMS proposed two alternative approaches for revising the anti-markup provision in Section 414.50:

  • Proposal 1:  The anti-markup provision would apply in all cases where the PC or the TC is either:
    1. Purchased from an outside supplier; or
    2. Performed or supervised by a physician who does not share a practice with the billing physician or physician organization.
  • Proposal 2:  The anti-markup provision would apply to TCs and PCs of non-purchased tests that are performed outside the "office of the billing physician or supplier."

73 Fed. Reg. 38546.

Final Rule

In the Final Rule, CMS modified the two proposed methods for determining whether to apply the anti-markup limitation of § 414.50 originally proposed in the July 2008 Proposed Rule, and adopted what it deems a "flexible approach" by offering two alternatives:  the "substantially all" alternative, and, on a case-by-case basis, the modified "site-of-service" approach.

Alternative 1:  The "Substantially All" Test

First, arrangements should be analyzed under what CMS has coined as Alternative 1, the "substantially all" test.  The anti-markup payment limitation will not apply to services furnished where the performing physician (that is, the physician who supervises the TC, performs the PC, or both) performs substantially all of his or her professional services for the billing physician or other supplier.  "Substantially all" is defined as at least 75 percent of the physician's professional services.

In the Final Rule, CMS addresses what it means to "share a practice" under both Alternative 1 and Alternative 2 (discussed below).  With respect to Alternative 1, rather than requiring that a physician work exclusively for one physician practice as contemplated in the proposed rule, CMS clarifies that in order to "share a practice" with a particular physician, physician organization, or other supplier, a physician must provide "substantially all" of his or her professional services for that practice.  Again, "substantially all" means that a physician is providing at least 75 percent of his or her professional services, as similarly defined in the physician self-referral rules.  See 42 C.F.R. §411.352(d) and §411.356(c)(1) (the "Stark Law").  This is true even if the physician works as a locum tenens physician or for one or more other billing physician groups or health care entities, provided that the physician does not furnish more than 25 percent of his or her professional services to the other groups or entities.

The "substantially all" requirement is satisfied if the billing physician or other supplier has a reasonable belief at the time it submits a claim that:

  1. the physician performing the service has furnished substantially all of his or professional services through the billing physician or other supplier for the period of 12 months prior to and including the month in which the service was performed; or
  2. the performing physician is expected to furnish substantially all of his or her professional services through the billing physician or other supplier during the following 12 months (including the month the service is performed).

CMS hopes that this provision clarifies the concerns with locum tenens and other part-time or on-call arrangements.  For example, if a locum tenens physician is providing more than 25 percent of his or her professional services for another billing group or moonlighting at a hospital, then the substantially all test cannot be met.

Alternative 2:  The "Site-of-Service" Approach

If the performing physician does not meet the "substantially all" services requirement of Alternative 1, an analysis under Alternative 2, the "site-of-service" approach, may be applied on a case-by-case basis to determine whether the anti-markup payment limitation applies.  Under the Alternative 2 "site-of-service" approach, the anti-markup limitation will not apply to TCs conducted and supervised in, or PCs performed in, the office of the billing physician or other supplier by an employee or independent contractor physician.  CMS believes that the "conducted in" and "supervised in" requirements of Alternative 2 establish sufficient control and the proper nexus to the individuals conducting and supervising the test to help alleviate concerns regarding the ordering of unnecessary diagnostic tests.  CMS further believes that compliance with either one of the two alternatives will address its concerns regarding overutilization and abusive billing by establishing a sufficient nexus with the billing entity to justify not applying an anti-markup payment limitation.

CMS clarified that diagnostic testing performed in the "same building" in which the "office of the billing physician or other supplier" is located is not subject to the anti-markup limitation.  "Same building" is given the same definition as found in the Stark Law (42 C.F.R. § 411.351).  CMS also has adopted its proposed definitions of "office of the billing physician or other supplier."  The "office of the billing physician or other supplier" is defined as space in which the ordering physician or other ordering supplier regularly furnishes care.  With respect to physician organizations, it is the space in which the ordering physician performs substantially the full range of patient care services that the ordering physician generally provides.

With respect to the TC in Alternative 2, CMS added the requirement that the physician supervising the TC must be an owner, employee, or independent contractor of the billing physician or other supplier.  With respect to the PC, the physician performing the PC must be an employee or independent contractor of the billing physician or other supplier.

CMS did not finalize a definition of "outside supplier;" rather, it deleted references to TCs and PCs purchased from outside suppliers.  CMS also deleted references to a "purchased" test or interpretation as an unnecessary and unduly complex basis for imposing an anti-markup payment limitation in consideration of both Alternatives 1 and 2.  Therefore, CMS is eliminating the separate basis for imposing the anti-markup payment limitation on purchased tests and purchased limitations.

CMS notes that Alternative 2 does not serve as an exception for tests ordered by a physician in a physician organization with no physician owners who have the right to receive profit distributions.  Rather, the Alternative 2 option serves to facilitate other non-problematic arrangements that do not perform diagnostic testing in the same building where patients are seen, such as nonprofit, multi-specialty groups with campus-based treatment facilities.

Further, CMS is not revising the definition of "net charge" at this time.  CMS is also not prohibiting reassignment or revising the in-office ancillary exception, but may propose to do so in future rulemaking.  The revisions to the anti-markup limitation will become effective on January 1, 2009.

Examples of Alternatives 1 and 2

Due to the complexity of Alternatives 1 and 2, a few examples of their application may aid in understanding when the anti-markup rule applies:

  • Typical In-Office Service.  Physician group owns CT equipment that is located in a suite where group physicians have offices.  Imaging operations are conducted under supervision of group members.  The physician group contracts with a radiology group to provide interpretations.  The Anti-Markup Rule does not apply; Alternatives 1 and 2 apply.
  • Multi-Office Group/Centralized Location.  Physician group is a multi-office group and, as permitted by the Stark regulations, conducts imaging and other ancillary services in a "centralized location" that does not include physician offices.  The imaging service is supervised by a group member.  The Anti-Markup Rule does not apply; Alternative 1 applies.
  • Same Building/Shared Imaging Services.  Groups A and B have offices in the same building.  Group A has MRI equipment; Group B uses the MRI from time to time.  During its lease periods, Group B designates one of its physicians to supervise MRI operations. Group B may bill for the MRI services without application of the Anti-Markup Rule; Alternatives 1 and 2 apply.


Proposed Rule

In the July, 2008 proposal, CMS included provisions that would specifically authorize gainsharing arrangements and would set forth certain operational parameters for gainsharing arrangements.  73 Fed. Reg. 38548.

Final Rule

CMS declined to include the gainsharing rule, and instead asked for additional comments for a series of gainsharing-oriented issues.  Because gainsharing programs have been given specific authorization in a number of advisory opinions from the OIG, CMS's reluctance to create a new gainsharing rule does not signal that gainsharing programs are improper.  It does signal that issues surrounding gainsharing programs are complex and may have a wide variety of solutions.

The rules governing IDTFs are complex and are still evolving, as demonstrated by CMS's decision to accept addition comments on certain aspects of the rules.  Providers should evaluate their billing practices and be prepared for additional changes to the rules governing diagnostic testing.  Providers should additionally note that CMS continues to amend the Stark Law through vehicles such as the MPFS and the Hospital Inpatient Prospective Payment System (IPPS) (the 2009 IPPS Final Rule was published on August 19, 2008), and should be aware of these changes.

Tobin N. Watt
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