Claims Processing Instructions for Diagnostic Tests Subject to the Anti-Markup Pricing Limitation

In the 2009 Physician Fee Schedule final rule, CMS finalized changes to include alternative methods to determine when not to apply anti-markup payment limitation rules.

Background

Section 1842(n)(1) of the Social Security Act requires CMS to impose a payment limitation on certain diagnostic tests where the physician performing or supervising the test does not share a practice with the billing physician or other supplier. Such a test was formerly referred to as a “purchased diagnostic test”. This rule requires an “anti-markup” payment limitation for the technical component (TC) of a diagnostic test (other than a clinical diagnostic laboratory test payable under the Clinical Laboratory Fee Schedule) that is acquired by contractual arrangement from an outside supplier.

In the CY 2008 PFS final rule, CMS amended the anti-markup provision. This amendment expands the coverage of the anti-markup payment limitation to include a situation when the TC is not performed in the “office of the billing physician or other supplier.” In addition, CMS imposed an anti-markup payment limitation on the professional component (PC) of a diagnostic test ordered by a billing physician or other supplier if the PC is acquired by contractual arrangement or if the PC is not performed in the office of the billing physician or other supplier. However, in a subsequent final rule, CMS delayed the implementation of these new anti-markup provisions.

In the CY 2009 PFS final rule CMS finalized changes to include alternative methods to determine when not to apply anti-markup rules. Because this new application of the anti-markup rules is more complex than a simple contractual arrangement between two parties for a TC service, CMS is changing the references of the term “purchased diagnostic test” in the Internet Only Manual to “anti-markup test(s)”. The provision of Publication 100-04, Chapter 16, §40.2 still applies, thus this new anti-markup provision does not apply to independent laboratories.

When anti-markup applies:

Anti-markup applies when a diagnostic service payable under the Medicare Physician Fee Schedule (MPFS) is performed by one physician/supplier and billed by another physician/supplier. The anti-markup payment limitation will apply in cases where a physician does not share a practice with the billing physician or other supplier, either under the “substantially all services” or “site of service” test.

When anti-markup does not apply:

The anti-markup payment limitation will not apply if the performing physician “shares a practice” with the billing physician or other supplier. There are two alternatives for determining whether a performing/supervising physician shares a practice with the billing physician or other supplier.

Alternative one; substantially all services requirement:

Under the first alternative, if the performing physician (that is, the physician who supervises the TC or performs the PC, or both) furnishes substantially all (at least 75 percent) of his or her professional services through the billing physician or other supplier, none of the physician’s diagnostic testing services will be subject to the anti-markup payment limitation. If the performing physician does not meet the “substantially all services” requirement, a “site of service” analysis may be applied on a test-by-test basis to determine whether the anti-markup payment limitation applies.

Alternative two; site of service test:

The second alternative is the “site of service” test. Only TCs conducted and supervised and PCs performed in the “office of the billing physician or other supplier” by a physician owner, employee or independent contractor of the billing physician or other supplier will avoid application of the anti-markup payment limitation.

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 regularly furnishes patient care. This includes space where the billing physician or other supplier furnishes diagnostic testing, if the space is located in the “same building” (as defined in 42 CFR § 411.351) in which the ordering physician regularly furnishes patient care.

If the billing physician or other supplier is a physician organization (as defined in 42 CFR § 411.351), the “office of the billing physician or other supplier” is space in which the ordering physician provides substantially the full range of patient care services that the ordering physician generally provides.

With respect to the TC, the performing supplier is the physician that supervised the TC and, with respect to the PC, the performing supplier is the physician that performed the PC.