CMS proposes 10% rate cut and self-referral restrictions in 2008 Medicare physician payment schedule

The Centers for Medicare and Medicare Services has bundled hard-hitting reforms aimed at curbing self-referred imaging practices in its proposal, announced July 2, for an across-the-board 9.9% cut in physician payment rates in its 2008 Medicare Physician Fee Schedule.

The proposed rate cuts were required by the Congressionally mandated sustainable growth rate formula that has governed Medicare payment policy for several years. Congress has, in fact, intervened in each of the past five years to prevent implementation of proposed cuts, said acting CMS administrator Leslie V. Norwalk.

Although the American College of Radiology announced general opposition to the cuts, it was also encouraged by provisions that appear to be designed to curb the use of leasing arrangements between freestanding diagnostic imaging centers and referring physicians.

"This is an area that they really do need to tighten up," said Cindy R. Moran, ACR assistant executive director of government relations and public policy.

Policy analysts spent Monday attempting to comprehend the numerous terms laid out in CMS's 924-page proposal. It was clear even with a preliminary reading to attorney Thomas Greeson, a partner with the law firm of Reed Smith LLP, that CMS is taking big steps this year in dealing the Stark self-referral law and referring physician fraud and abuse.

"This is a really significant rule," he said.

Among numerous provisions, it would prohibit independent diagnostic testing facilities (IDTFs) from participating in any type of leasing arrangement, Greeson said. IDTFs, which include many privately owned freestanding imaging centers, would be barred from leasing space to another physician or business entity.

The anti-markup provisions of the proposal would ban any type of healthcare facility, including physician practices, hospitals, and IDTFs, from realizing a profit from services performed by part-time physicians and billed to Medicare. CMS will continue to permit outside imaging interpretation by part-timers, such as nighthawk teleradiology services, but facilities will not be allowed to charge Medicare more than they were charged by the part-timer for those services, Greeson said.

"For teleradiology companies, it's going to be fine," Greeson said. "The rule just makes sure that their customers don't profit by billing Medicare for professional services provided by their part-time physicians."

Moran was encouraged that CMS decided against including revisions to the equipment utilization formula in its 2008 plans. The payment formula is now based on a 50% utilization rate for any type of imaging equipment. Some CMS analysts questioned the accuracy of that rate, but no data exist to substantiate a change, Moran said.

With its initial announcement, CMS asked for public comment, though rules will not be officially proposed until their publication in the Federal Register in a few weeks. The deadline for comment is Aug. 31. Final rules will be published in the fall, though Congress will still have an opportunity for intervention. The new rates and policy will be implemented Jan. 1, 2008.