United States: CMS Proposes Stark, Diagnostic Test, And Physician Payment Changes For 2008
15 August 2007
Article by Ross C. D'Emanuele

The Centers for Medicare and Medicaid Services ("CMS") recently sent a tremor throughout the healthcare provider world. The calendar year 2008 proposed Medicare physician payment rule includes far-reaching changes to the Stark regulations, diagnostic test payment rules, and independent diagnostic testing facility ("IDTF") standards, among others..

Diagnostic Testing

After considering a variety of revisions to the reassignment and mark-up prohibitions regarding diagnostic tests for calendar year 2007, the agency has proposed to extend the mark-up prohibition to the professional component of diagnostic tests. In addition, the proposed rules would extend the mark-up prohibition to nearly all tests billed under reassignment.

The proposal would amend both the reassignment and existing mark-up prohibitions regulations to state that if a physician or medical group bills for either the technical or professional component of a diagnostic test that is performed by an outside supplier, then the payment for that test will be the lowest of: (1) the outside supplier's net charge to the physician or medical group; (2) the billing physician's or medical group's actual charge for the test; or (3) the Medicare physician fee schedule amount for the test. The billing physician or group must declare the outside supplier's net charge for the test on the claim.

The outside supplier's net charge to the billing physician or medical group must subtract any amounts for equipment or space leases that the outside supplier pays to the billing physician or medical group.

There are two fundamental elements of this proposed regulation that create huge challenges.

First, the proposal would apply not only to purchased tests, but to all tests billed pursuant to a reassignment.

Reassignment of the right to bill and receive payment for the professional component of radiology occurs throughout the health care system. Many radiologists reassign for their professional interpretations to other medical groups as independent contractors. Often, the radiologists are paid on an aggregate monthly or annual amount (e.g., $100,000 for the entire year of service). The proposed rules do not address how the billing physician or medical group can determine the amount to declare on the claim as the charge for any single specific interpretation.

Second, an outside supplier under the proposed rules is someone other than a full-time employee of the billing physician or medical group. This means, for example, that if a billing physician or medical group enters into an arrangement with a radiologist as a full-time leased employee or full-time independent contractor (or, e.g., a 75% leased employee or 75% independent contractor), the billing physician or medical group would nonetheless be considered an "outside supplier," and could not bill more than the charge it pays the radiologist for the test.

The same would apply to a radiologist who wishes to work as a part-time employee or independent contractor for a radiology practice. Indeed, the part-time employed radiologist may even be an owner of the billing physician or medical group. The radiologist would be an "outside supplier" to the radiology practice because he or she is not employed full-time. Consequently, the practice could only charge Medicare the amount that it pays the part-time radiologist for any particular test.

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