“CMS vs. State Regulations”
by Sean Weiss, Partner & VP of Compliance
This Blog Post is a bit longer than usual, but I am only scratching the surface of issues related to diagnostic tests and anatomic pathology as well as a statute and law that could be potentially violated in addition to the Anti-Markup Rule. For more than a decade, reimbursements have been stagnant to declining and, as a result, has forced physician practices to identify ancillary services to supplement their main revenue stream. But adding services is not as simple as ordering and billing for them and recognizing profits. There are both Federal Rules and State Regulations that prohibit certain behaviors such as marking-up services from what your practice pays the actual performer of the services versus what you bill and are reimbursed by the payors. The Anti-Markup Rule is not new but it has become a topic of significant interest in the past few years due to the fact most don’t know the rules. Thus, it becomes low-hanging fruit for investigators and prosecutors.
The Anti-Markup Rule became effective January of 2009 and focused on most diagnostic tests, not only anatomic pathology services, that are billed by the ordering physician or other Part B supplier. The easiest way to understand how this works is to look at an ordering physician who bills for the professional and/or technical component of a diagnostic service. This is the important part and referred to as “Sharing a Practice Exception”. The anti-markup restriction applies to the professional component of a diagnostic test which is being billed by the ordering physician but is actually being performed by a physician not sharing a practice with the ordering physician. If it is considered a group practice, it means that space in which the ordering physician provides substantially the full range of patient care services that the ordering physician generally provides to patients. The exception for the “TC/PC Arrangements” are clear in that if the interpreting pathologist provides at least 75% of their professional services through the practice of the ordering physician the anti-markup rule does not apply. Or, if they are able to demonstrate that the interpreting pathologist performing the interpretations is located in the same medical space in which the ordering physician regularly furnishes patient care (the second exception), then the ordering physician passes the test for the purposes of the anti-markup rule.
I know, it’s complex and I am barely scratching the surface of just the Federal Rule. In April 2015, CMS issued a revised policy regarding anti-markup and reference laboratory claims. In the policy CMS states, “Effective for claims submitted with a receipt date on and after April 1, 2015, billing physicians and suppliers must report the name, address, and NPI of the performing physician or supplier on all anti-markup and reference laboratory claims, even if the performing physician or supplier is enrolled in a different contractor’s jurisdiction. Contractors shall return as unprocessable any anti-markup or reference laboratory claim with an NPI in Item 32a (or its electronic equivalent) that belongs to the billing physician/supplier, or that cannot be verified as a valid, Medicare enrolled entity…” source: 10.1.1.2 – Payment Jurisdiction for Services Subject to the Anti-Markup Payment Limitation in the Medicare Claims Processing Manual.
In section 30.2.9 – Payment to Physician or Other Supplier for Diagnostic Tests Subject to the Anti-Markup Payment Limitation – Claims Submitted to A/B MACs(B) (of the same manual) states, in part:
“A physician or other supplier may bill for the technical component (TC) and/or professional component (PC) of a diagnostic test that was ordered by the physician or other supplier …, subject to an anti-markup payment limitation, if the diagnostic test is performed by a physician who does not “share a practice” with the billing physician or other supplier. … Under the anti-markup payment limitation, payment to the billing physician or other supplier …for the TC or PC of the diagnostic test may not exceed the lowest of the following amounts:
(1) The performing physician/supplier’s net charge to the billing physician or other supplier. *(With respect to the TC, the performing supplier is the physician who supervised the test, and with respect to the PC, the performing supplier is the physician who performed the PC.);
(2) The billing physician or other supplier’s actual charge; and
(3) The fee schedule amount for the test that would be allowed if the performing physician/supplier billed directly. (See section 10.1.1.2 for information on payment jurisdiction for services subject to the anti-markup payment limitation.) * The net charge must be determined without regard to any charge that is intended to reflect the cost of equipment or space leased to the performing supplier by or through the billing physician or other supplier.
Exception to the Anti-markup Payment Limitation
If the performing physician is deemed to “share a practice” with the billing physician or other supplier (who ordered the test), the anti-markup payment limitation does not apply. A performing physician is considered to “share a practice” with the billing physician or other supplier if the performing physician furnishes “substantially all” (at least 75 percent) of his or her professional services through the billing physician or other supplier. The “substantially all” services requirement will be satisfied, if, at the time the billing physician or other supplier submits a claim for a service furnished by the performing physician, the billing physician or other supplier has a reasonable belief that: (1) for the 12 months prior to and including the month in which the service was performed, the performing physician furnished substantially all of his or her professional services through the billing physician or other supplier; or (2) the performing physician will furnish substantially all of his or her professional services through the billing physician or other supplier for the next 12 months (including the month in which the service is performed).
If the performing physician does not meet the “substantially all” services test, the performing physician may be deemed to “share a practice” with the billing physician or other supplier if the arrangement complies with a “site of service/same building” test. This alternative approach requires the performing physician to be an owner, employer, or independent contractor of the billing physician or other supplier and requires that the TC or PC be performed “in the office of the billing physician or other supplier.” The “office of the billing physician or other supplier” is any medical office space, regardless of the number of locations, in which the ordering physician or other supplier regularly furnishes patient care, and includes space where the billing physician or other supplier furnishes diagnostic testing services, if the space is located in the “same building” (as defined in 42 CFR §411.351 of the physician self-referral rules) in which the ordering physician or other ordering supplier regularly furnishes patient care.
The billing physician or other supplier must keep on file the name, the National Provider Identifier, and address of the performing physician. The physician or other supplier furnishing the TC or PC of the diagnostic test must be enrolled in the Medicare program. No formal reassignment is necessary.
NOTE: When billing for the TC or PC of a diagnostic test (other than a clinical diagnostic laboratory test) that is performed by another physician, the billing entity must indicate the name, address and NPI of the performing physician or supplier in Items 32 and 32a of the Form CMS-1500 claim form.
Effective for claims submitted with a receipt date on and after April 1, 2015, for reference laboratory and anti-markup claims, the billing physician or supplier must report the name, address, and NPI of the performing physician or supplier in Item 32a of the CMS-1500 claim form (or its electronic equivalent), even if the performing physician or supplier is enrolled in a different B/MAC jurisdiction. See § 10.1.1.2 for more information regarding claims filing jurisdiction.
If the billing physician or other supplier performs only the TC or the PC and wants to bill for both components of the diagnostic test, the TC and PC must be reported as separate line items if billing electronically (ANSI X12 837) or on separate claims if billing on paper (Form CMS-1500). Global billing is not allowed unless the billing physician or other supplier performs both components”
Within the States, they differentiate based one of three prohibitions; Direct Billing, Anti-Markup or Disclosure:
Direct Billing: Arizona, Rev. Stat. 32-3210; California, Bus. & Prof. Code Sec. 655.6 and 655.7; Iowa, Iowa Code Sec. 147.105; Kansas, K.S.A. 65-2837; Louisiana, Rev. Stat. Sec. 1742; Maryland, Ann. Code of Maryland 1-301; Massachusetts, Mass. Gen. Laws Sec. 118G (29); Montana, Montana Code Sec. 37-2; Nevada, Rev. Stat. Sec. 652.195 (cytology); New Jersey, Stat. Sec. 45:9-42.41A; New York, Pub. Health Law Sec. 586; Rhode Island, Gen. laws Sec. 23-16.2-5.1; South Carolina, South Carolina Code Sec. 44-132-10 – 40; Utah, Utah Code Ann. 58-1-501.
Anti-Markup: California, Bus. & Prof. Code Sec. 655.5; Florida, Admin. Code, Rule 59A-7.037; Michigan, Comp. Laws Ann. Sec. 445.161; Oregon, Rev. Stat. Sec. 676.310.
Disclosure (markup allowed so long as physicians disclose the price they paid for the testing to patients and non-federal third-party payers): Arizona, Rev. Stat. Sec. 36-472; Connecticut, Gen. Stat. Ann. Sec. 1769; Louisiana, Rev. Stat. Ann. Sec. 37:1471; Maine, Rev. Stat. Ann. Sec. 2033; Maryland, Health Occ. Code Ann. Sec. 14-404; North Carolina, Gen. Stat. 90-681; Pennsylvania, Admin. Code Sec. 5.48; Tennessee, Tenn. Code Ann. Sec. 63-6-214(b)(22); Texas, Health & Safety Code Sec. 161.061; Vermont, 26 Vt. Stat. Ann. Sec. 1354.
The last thing to keep in mind is this, violating the anti-markup rule can result in potentially violating the Anti-Kickback Statute and/or the Stark Laws.
- The federal Anti-Kickback Statute (AKS) (See 42 U.S.C. § 1320a-7b.) is a criminal statute that prohibits the exchange (or offer to exchange), of anything of value, in an effort to induce (or reward) the referral of business reimbursable by federal health care programs. Examples of prohibited kickbacks include receiving financial incentives for referrals, free or very low rent for office space, or excessive compensation for medical directorships. Other kickbacks include waving copayments, either routinely or on a selective case-by-case basis. CMS claims that kickbacks have led to overutilization and increased costs of healthcare services, corruption of medical decision making, steering patients away from valid services or therapies and unfair, non-competitive service delivery. Possible penalties for violating the AKS include: fines of up to $25,000, up to five years in jail, and exclusion from Medicare and Medicaid care program business.
- The physician self-referral laws (Stark Laws) (See 42 U.S.C. § 1395nn) are a set of United States federal civil laws that prohibit physician self-referral, specifically a referral by a physician of a Medicare or Medicaid patient to an entity providing designated health services (DHS) if the physician (or his/her immediate family member) has a financial relationship with that entity. Although the financial penalties may be even greater than with the AKS, these are non-criminal charges. Penalties for violations of Stark Law include denial of payment for the DHS provided, refund of monies received by physicians and facilities for amounts collected, payment of civil penalties of up to $15,000 for each service that a person “knows or should know” was provided in violation of the law, and three times the amount of improper payment the entity received from the Medicare program, exclusion from the Medicare program and/or state healthcare programs including Medicaid and payment of civil penalties for attempting to circumvent the law of up to $100,000 for each circumvention scheme.
It is critical to keep up with the Designated Health Services (DHS) Lists since they are updated annually by CMS, which can be found here.
The table below provides a snapshot of the above Statute and Laws to help you sort through them easier: