Compliance, Legal & Malpractice

CMS Delays Rule on Anti-Markup Revisions-Except on Condo/Pod Labs

Many specialist physicians who currently mark up pathology professional services will get some unexpected relief from the implementation of new anti-markup rules. On December 28, 2007, The Centers for Medicare and Medicaid (CMS) issued a final rule delaying the anti-markup revisions in the 2008 Medicare Physician Fee Schedule.  Dark Daily asked Rick Hindmand, an attorney for McDonald Hopkins, to comment on the background of the rule and what it means for laboratories.  In-depth analysis is available in the upcoming, January 21^st, issue of The Dark Report.

On November 1, 2007, CMS issued the 2008 Medicare Physician Fee Schedule final rule which included a major expansion of the purchased diagnostic regulation (which has prohibited physicians from marking up diagnostic tests performed by outside suppliers).  The new revisions to this regulation were scheduled to become effective on January 1, 2008. These revisions would have applied: 1) whenever a physician practice or other supplier bills the Medicare program for the technical or professional component of a diagnostic test that was ordered by the supplier or a related party; or, 2) the diagnostic test was either purchased from an outside supplier or performed at a site other than the office of the billing supplier. In either of these situations, payment to the billing supplier for the service which is subject to the anti-markup rule may not exceed the lowest of the performing supplier's net charge, the billing supplier's actual charge or the Medicare fee schedule amount.

Thus, it came as a surprise when, on December 28, 2007, CMS issued a final rule that generally delays, until January 1, 2009, most of the anti-markup revisions.  This time delay is to allow CMS to study the location standard and issue clarifications.  However, the delay in implementation of the anti-markup rule does not apply to certain pathology arrangements.  In its December 28 statement, CMS specifically identified anatomic pathology diagnostic testing arrangements as its "core concern," and therefore did not delay the rule with respect to anatomic pathology diagnostic testing services furnished in a centralized building that does not qualify as the "same building" under the Stark regulations.

Hindmand notes that the implications of the January, 1 2008 implementation of the anti-markup rule will affect the laboratory community in several ways:

• The key issue for pathology condo/pod labs and similar arrangements by medical group practices of non-pathologists will typically be whether the labs are located within the same building where the billing group practice maintains a substantial medical office.  The physical location needs to satisfy "same building" standards under the Stark regulations.  Group practices that currently structure off-site condo/pod labs to comply with the Stark regulations will now be subject to the anti-markup rule, unless the group maintains a substantial medical office in the building where the condo/pod labs are located.

• There may also be cases where the physician group practice's anatomic pathology laboratory is more integrated with the practice than the typical condo/pod lab, yet that arrangement may also be subject to the anti-markup rule-unless the group practice maintains a substantial medical office in the building where the laboratory is located.

For more coverage of this topic, read the January 21^st issue of The Dark Report.

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