As discussed in prior Newsletters, the Centers for Medicare and Medicaid Services (“CMS”) has proposed anti-markup regulations over the past year related to diagnostic testing procedures payable under Medicare and Medicaid. The long-anticipated, final anti-markup regulations were published in the 2009 Physician Fee Schedule and are now in effect.

I. WHAT IS ANTI-MARK UP?

The Anti-Markup Rule details when a provider is prevented from “marking up” (i.e., charging more than the cost) the Technical Component (“TC”) and the Professional Component (“PC”) of providing the test. Whether billing separately for the TC or PC or billing globally, if a provider is prevented from marking-up the TC and/or PC, then payment for the TC and/or PC to that provider is limited to lowest of:

(1) The performing supplier’s (i.e., physician who performed the PC or supervised the TC) net charge to the billing provider;
(2) The billing provider’s actual charge; or
(3) The physician fee schedule amount.

Typically, the performing supplier’s net charge is the lowest amount.

II. WHEN IS MARK-UP PROHIBITED?

Two separate, alternative tests are used to determine whether markup is prohibited: (1) the “substantially all services” test; and (2) the “site of service” test. If a provider satisfies either of these tests, then the Anti-Markup Rule does not apply.

A. Substantially all Services Test

If the physician performing the PC performs at least 75% of his or her professional services solely for the billing provider, then markup of the PC is not prohibited.

Similarly, if the physician supervising the TC performs at least 75% of his or her professional services solely for the billing provider, then markup of the PC is not prohibited. The physician supervising the TC need not be the radiologist – just an employee or contractor who spends 75% of his or her time with the ordering physician.

To meet the 75% threshold, the performing physician must: (1) have furnished at least 75% of all his or her professional services through the billing physician or other supplier for a period of 12 months prior to and including the month in which the services was performed; or (2) be expected to furnish at least 75% of all of his or her professional services through the billing physician during the following 12 months and including the month the service is performed.

B. Site of Service Test

The site of service test requires:

(1) The physician performing the PC or supervising the TC is an owner, employee or independent contractor of the billing provider; and
(2) The PC is performed, and the TC is performed and supervised, in the office of the billing provider.

The billing provider’s office is defined as any medical office space where the ordering physician regularly furnishes patient care, including space where diagnostic testing is furnished if it is in the same building (structure or structures sharing the same street address) where the ordering physician regularly furnishes patient care. With respect to multiple physician group offices, if the ordering physician only performs services in office A, then performance of the PC at office B will not be considered the “office of the ordering physician.”

The site of service test is not met, however, if the TC or PC is performed in a centralized building that is not located in the same building where the ordering physician regularly performs services. As a result, many centralized building arrangements that meet Stark requirements will not meet the site of service test.

We will continue to review arrangements where the Anti-Markup Rule may be at issue. You are encouraged to contact us with any concerns.