The Centers for Medicare and Medicaid Services (CMS) is determined to restrict the ability of physician groups to provide diagnostic imaging services for their Medicare patients.

On July 7, 2008 CMS published its 2009 Proposed Medicare Physician Fee Schedule Rule (PFS). The PFS contains several proposed Stark Law regulations, including two that take dead aim at the provision of diagnostic imaging services by physicians pursuant to the Stark Law exception for "in-office ancillary services."

Required Enrollment as IDTF

The proposed rule would require all physicians and non-physician practitioner organizations which provide diagnostic testing services for Medicare beneficiaries to enroll with the Medicare program as an independent diagnostic testing facility (IDTF). Requiring physician groups which provide imaging services for Medicare patients to enroll as IDTFs would subject such groups to the heightened IDTF performance standards adopted by CMS in 2007. The IDTF performance standards were established to improve the quality of diagnostic testing services furnished to Medicare beneficiaries. Heretofore, physician groups that provide imaging services have been able to enroll as a physician office or clinic and have not been subject to these IDTF performance standards. In fact, in recent months, a number of imaging facilities in Florida which had been enrolled as IDTFs terminated such enrollment and obtained a Medicare number as a physician group or non-physician practitioner organization, so as to be able to avoid the new IDTF performance standards.

CMS is seeking to "level the playing field" by applying the stricter IDTF performance standards consistently for all imaging centers, regardless of who owns the center. Among other provisions, the IDTF performance standards prohibit the sharing or part-time leasing of diagnostic testing facilities. Subjecting physician groups to this requirement would prohibit physician groups from entering into block leases or shared use agreements for imaging facilities and equipment, effectively preventing physician groups from providing imaging services for Medicare patients on a part-time basis. After the proposed rule becomes effective, only practices which are large enough to support their own imaging facility on a full-time basis will be able to own and operate an imaging facility. CMS has proposed that the rule become effective for existing providers of imaging services as of September 30, 2009. For newly enrolling suppliers, the effective date of the rule would be January 1, 2009.

Anti-Markup Rule

A second assault on physician imaging activities is contained in the section of the PFS dealing with Anti-Markup issues. In November, 2007, CMS proposed a broad expansion of the existing anti-markup rule by proposing that the prohibition against "marking up" the cost of a diagnostic test would apply when such test is not performed "in the office" of the billing physician or other supplier. This proposal would have significantly narrowed the exception, set forth in the Stark Law, which permits a physician group to provide in-office ancillary services in the "same building" in which it provides other physician services, or, under certain circumstances, in a "centralized building" used by the physician group for the provision of ancillary services.

In response to numerous comments objecting to the uncertainty as to what was meant by "in the office of the billing physician or other supplier," and the potential disruption of operations of a practice which conducts imaging operations in the same building, but in a different suite from where the practice provides physician services, CMS postponed the proposed January 1, 2008 effective date of the revised anti-markup rule, and indicated it would review the proposal during 2008.

The 2009 PFS contains a revised version of the anti-markup rule. Although CMS clearly wants to restrict the provision of imaging services by physician groups, it is apparently still unsure exactly how to proceed in this area. After months of review and receipt of numerous comments, CMS has proposed two alternate approaches for revising the anti-markup rule, and seeks additional comments on its proposals and regarding "other possible approaches that would address our [CMS'] concerns regarding over-utilization motivated by the ability of a physician or physician organization to profit from diagnostic testing services."

Under the first proposal, the anti-markup rule would apply where the professional component or the technical component of a diagnostic testing service is either (i) purchased from an outside supplier, or (ii) performed or supervised by a physician who does not "share a practice" with the billing physician or physician organization. A physician is deemed to "share a practice" with the billing physician or physician organization only if the subject physician is employed by or contracts with a single other physician or physician organization. A radiologist who contracts to provide professional radiology services for several physician groups, for example, would not be considered to "share a practice" with any of such groups.

Alternatively, CMS proposes to maintain much of the current regulation and its "site of services" approach and apply the anti-markup provision to diagnostic tests that are performed outside the "office of the billing physician or other supplier." CMS proposes to clarify that the "office of the billing physician or other supplier" includes space in which diagnostic testing is performed that is located in the same building in which the billing physician or other supplier regularly furnishes patient care. This proposal is more in line with the exception contained in the Stark Law which permits a physician group to provide ancillary services if such services are provided in the same building in which the group provides physician services. This proposal, if adopted, would, however, prohibit a group practice which provides imaging services in a "centralized building," as currently permitted under the Stark Law, from marking up the cost of providing such services, unless the group also provides a full range of physician services in such centralized building. If a group is prohibited from marking up the cost of a particular ancillary service, it is economically infeasible for the group to provide such service for its patients.

In addition to soliciting comments as to which approach it should take with respect to revising the anti-markup rule to address over-utilization of diagnostic services by physician groups, CMS is soliciting comments on whether the proposed rule should become effective on January 1, 2009, or whether the effective date should be further delayed.

Conclusion

The charges discussed above are proposals. CMS expects to publish the final 2009 PFS rule by November 1, 2008. CMS does not always finalize every proposal it publishes. Regardless of what CMS ultimately decides regarding the anti-markup rule and application of IDTF standards to physicians, it is likely the final 2009 PFS will significantly restrict the ability of physician groups to provide imaging services for their patients.

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