Proposed Physician Fee Schedule Rule Includes Stark,
Purchased Diagnostic Test and IDTF Changes and Clarifications
By Barry Alexander*

On June 30, 2008, the Centers for Medicare and Medicaid Services (CMS) posted at the Office of Federal Register its Proposed 2009 Medicare Physician Fee Schedule rule. The rule is scheduled to be published in the July 7, 2008, edition of the Federal Register, but was placed on display at the Office of Federal Register.

As with any proposed physician fee schedule update, this proposed rule is full of interesting and significant changes to Medicare Part B payment policies, including pieces impacting the Stark Law and the purchased diagnostic test (PDT) rule. In particular, the proposed rule:

  • Includes annual updates to relative value units (RVUs) used to calculate physician payment.
  • Proposes to create a new series of HCPCS codes for follow-up inpatient telehealth consultations.
  • Proposes changes to the methodology used to calculate the Average Sales Price (ASP) of certain covered Part B drugs effective April 1, 2008, and proposes changes to the Competitive Acquisition Program (CAP) for Part B drugs.
  • Proposes changes to the IDTF enrollment requirements including: (1) proposed requirements that physician and nonphysician practitioner entities enroll and meet certain IDTF requirements; (2) proposed requirements that mobile entities furnishing diagnostic tests bill directly for the mobile diagnostic services that they furnish, regardless of where the services are performed; and (3) proposed limits regarding how long an IDTF can submit claims for services furnished prior to any effective date of IDTF revocation.
  • Includes significant clarification and proposed changes to the PDT or anti-markup rule including: (1) changes that would conform aspects of this payment limitation rule to the federal physician self-referral or Stark law by modifying the current definition of "office of the billing physician" to include diagnostic services furnished in the same building (even if furnished on different floors of the building provided applicable supervision requirements can be met); (2) changes that would clarify that physician supervision—not the employment relationship of the technician—is the key factor for application of the payment rule provisions; (3) changes that would exempt diagnostic services furnished by certain multi-specialty practices in locations where only some of the ordering physicians of the physician organization work; and (4) a proposed exemption for certain non-compliant relationships where an ordering physician in a physician organization does not have any owners who have a right to receive profit distributions.
  • CMS solicits numerous comments regarding these proposed changes including: (1) alternatives to the proposals it offers; (2) whether the term "net charge" should include any overhead or other costs of the billing physician when the PDT applies; and (3) whether the effective date of the PDT clarifications should be extended beyond January 1, 2009. CMS does not, however, back away from its view in the final 2008 Medicare Physician Fee Schedule that the PDT rule will apply in situations that could qualify under the "centralized building" component of the in-office ancillary services exception under the Stark law.
  • Proposes a new and permanent Stark exemption for certain incentive payment and shared savings programs offered by hospitals.
  • Proposes revisions to the physician and non-physician practitioner enrollment requirements.
  • Proposes revisions to the appeals process rules where CMS or a contractor determines that a provider or supplier fails to meet the requirements for Medicare billing privileges.
  • Proposes to change the DMEPOS supplier standards to prohibit payment to a supplier for furnishing a CPAP device to a beneficiary if the supplier also "directly or indirectly" provided the diagnostic sleep study or furnished the sleep test device used in the study.
  • Proposes changes to the Physician Quality Reporting Initiative (PQRI) reporting requirements.

Comments on this proposed rule are due by August 29, 2008, with the final rule expected in November for implementation effective as of
January 1, 2009.

*We would like to thank Barry Alexander (Nelson, Mullins, Riley & Scarborough, LLP Raleigh, North Carolina) and Alex M. Hendler (Washington, DC) for providing this email alert.