New CMS rules will prohibit certain equipment leasing arrangements

November 9, 2007

Independent diagnostic testing facilities have only until the end of the year to dissolve imaging equipment leasing arrangements with referring physicians to comply with new rules in the 2008 Medicare Physician Fee Schedule that becomes effective Jan. 1.

Independent diagnostic testing facilities have only until the end of the year to dissolve imaging equipment leasing arrangements with referring physicians to comply with new rules in the 2008 Medicare Physician Fee Schedule that becomes effective Jan. 1.

Restrictions forcing this exit head a long list of regulatory changes in the 2008 MPFS final rules that reflect Medicare's growing impatience with costly imaging overutilization.

To meet a longstanding Congressional mandate, the Centers for Medicare and Medicaid Services also called for a 10.1% across-the-board payment cut for all physicians who bill for Medicare Part B services. Senators Max Baucus (D-MT) and Charles Grassley (R-IA) quickly proposed legislation to counteract the cuts. Baucus, chair of the Senate Finance Committee, introduced a bill that would increase physician payments for two years. Grassley's proposal would set a one-year payment freeze.

The diagnostic imaging community focused on changes affecting equipment leasing and IDTF practices after an advance text of the final schedule rules was released on the Internet Nov. 1. The document can be examined online. Final rules will be published Nov. 27 in the Federal Register.

Two new restrictions will force IDTFs to discontinue part-time equipment leasing arrangements with physicians, said Thomas W. Greeson, J.D., a partner in the law firm of Reed Smith LLP in Falls Church, VA, in an interview with Diagnostic Imaging. One will prohibit operators from sharing space or equipment with physicians or physician groups. The other extinguishes referring physicians' financial incentive to participate in leasing by forbidding them from earning a profit or marking up technical fees billed to Medicare.

"Any lease arrangement in place now with a fixed-site IDTF needs to be unwound," Greeson said, "Any lease arrangement with any referring physician group that triggers the purchased technical component service rules needs to be modified to address the anti-markup rule."

Mobile and hospital-based IDTFs are exempted from the shared space and equipment rules. IDTFs that share only physical space with referring physicians will have until Jan. 1, 2009, to discontinue the practice, Greeson said.

Physician group practices that take advantage of the in-office exception to the Stark self-referral law will be subject to new anti-markup restrictions as well. The anti-markup rule will apply to professional fees from imaging interpretation performed outside of the exempted office site.

Until January, radiologists who perform offsite interpretation must bill Medicare independently to comply with Stark law. The 2008 rules will eliminate this "onsite" interpretation requirement, creating opportunities for teleradiology while still prohibiting the referring physician who can now bill for offsite services from marking up the difference between the purchase price for interpretation and the dollar amount billed to Medicare.

The anti-markup rule will not apply when in-office services, such as MRI performed in an orthopedic surgeon's office, employ radiologists for interpretation performed at the site, Greeson said. Stark law still governs these arrangements and forces the billing physician to secure direct individual contracts with each physician who interprets images.

Responding to provider comments, CMS decided against a proposed rule banning the sharing of personnel. Operators of multicenter imaging businesses were concerned that the restriction would keep them from moving technologists between facilities to address changing workflow.

In the 2008 final rules, CMS clarified its rationale for changing the rules this year for supervising physicians. Medicare assured radiologists in the rules for the 2008 fee schedule that they can provide direct supervision for multiple IDTFs from day to day; for example, by overseeing imaging services at five different centers in a given week. However, they may not have general supervisory responsibility for more than three facilities, Greeson said.

CMS redefined terms for new IDTFs for the day they may begin performing procedures that qualify for Medicare reimbursement. The new standard emphasizes the value of submitting error-free applications. Billing may commence on the day an application in full compliance with agency regulations is filed with the regional Medicare carrier.

For the most part, CMS did not address reforms to Stark law regulations discussed in its 2008 proposal. Medicare received about 1100 comments about the draft changes. CMS noted in the final rules that the comments provided enough input to allow the agency to move forward with future regulatory initiatives without more discussion.

Reforms could be announced as soon as spring 2008 and could have a dramatic effect on the viability of physician joint venturing, Greeson said.

For more information from the Diagnostic Imaging archives:

Follow eligibility rules to ensure reimbursement

House, Senate conferees move toward CHAMP Act compromise

Analysis encourages comments on CMS fee schedule proposal

Medicare outpatient payment proposal singles out imaging services for bundled services