CMS expands payment restriction for diagnostic tests

Centers for Medicare & Medicaid Services (CMS) has expanded the antimarkup provision covering diagnostic tests in the final 2008 Medicare physician fee schedule.

The antimarkup rule applies when a physician bills for the technical component of a diagnostic test purchased from an outside supplier. The physician must bill Medicare the lowest of three possible charges:

• The supplier's net charge to the physician;
  
• The physician's actual charge; or
  
• The fee-schedule amount allowed if the supplier billed directly.
  

In an earlier version of the 2008 fee schedule, CMS proposed expanding the payment restriction by applying the antimarkup rule to the professional component of diagnostic tests and to services performed by anyone other than a full-time employee, which would have included part-time technicians and physicians of a group practice. The Medical Group Management Association (MGMA) and others in the provider community objected to the expansion.

In the final rule, CMS expanded the Medicare payment restriction to the professional component of diagnostic tests but not to services performed by part-time employees. It also extended the antimarkup provision to services performed outside the "office of the billing physician or other supplier." For physician organizations – including professional corporations, a group practice or a physician practice – the "office of the billing physician or other supplier" must be the space in which employees provide "substantially the full range of patient care services that the physician organization provides generally."

In other words, if a group's diagnostic testing facilities are in a different office than the one in which the organization performs its full range of services, the antimarkup rule applies. This new language expands application of the antimarkup rule to diagnostic tests provided in a group's own office by its employees, even if the location where the tests are performed meets the requirements of the physician self-referral ("Stark") law. CMS will require physician groups to report the cost of performing these tests, which should include only the salary of the performing technician or physician, not overhead expenses.

This change is scheduled to take effect on Jan. 1, 2008. MGMA has urged the agency to reverse it, or at a minimum, delay its application because of its significant impact on group practices and its late addition to the proposal.