New CMS Rule Affects Contracted Interpretations for Diagnostic Tests

Posted by Team PracticeForces on Dec 16 2008

Fotolia_46042626_Subscription_Monthly_MBeginning on Jan. 1, the Centers for Medicare & Medicaid Services (CMS) will apply a new rule to certain diagnostic tests (excluding clinical diagnostic lab tests) ordered and billed by physicians or their group practices.

In an attempt to curb what it sees as overuse of diagnostic tests and abusive arrangements between providers, CMS has expanded a Medicare billing rule that prevented physicians from marking up the cost of the technical component (TC) of diagnostic tests purchased from an outside supplier (the "purchased diagnostic test rule"). Now referred to as the "anti-markup rule," the new rule will prohibit a billing entity, such as a physician or group practice, from marking up either the professional component (PC) or the TC of a test that was performed by a physician who does not share a practice with the billing entity. The rule will apply when the ordering physician and the billing entity are the same or are related through common ownership or control.

CMS Tests

To determine whether the performing physician shares a practice with the billing entity, CMS has devised two tests.Under the first test, the agency will consider a physician to share a practice with the billing entity if the physician furnishes at least 75 percent of his/her services through the billing entity. If this test is met for both the physician performing the PC and the physician supervising the TC (assuming they are not the same physician), the newly expanded anti-markup rule will not apply.

If either physician does not provide 75 percent of his/her services through the billing entity, the anti-markup rule may still not apply if the physician shares a practice with the billing entity under CMS' second test, which focuses on where the test was performed. If the performing physician is an owner, employee or independent contractor of the billing entity and the TC or the PC is performed in the office of the billing supplier, the performing physician will be deemed to share a practice with the billing entity. Importantly, if the billing entity is a physician organization (that is, a physician, a physician practice or a group practice meeting the requirements set forth in the physician self-referral law), the service must be performed in space where the ordering physician provides substantially the full range of patient care services that the ordering physician provides generally.

If neither test is met, payment to the billing entity will be subject to the anti-markup rule. For the part of the service performed by a physician who does not share a practice with the billing entity, the entity will be paid the lowest of:

  • The performing supplier's net charge to the billing entity;
  • The billing physician's actual charge; or
  • The Medicare fee schedule amount for that service.

 

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Topics: Medical Billing, Medicare, CMS

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