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Examine the impact of MPFS proposals

Radiology Administrator's Compliance and Reimbursement Insider, October 1, 2007

Beware of possible Stark changes

By now, you’re probably wondering why you became a radiology administrator in the first place. If private payer regulations, new accreditation mandates, and reimbursement cuts to technical component (TC) and contiguous body part scans didn’t cause you to question your career, the proposed Medicare physician fee schedule (MPFS) probably did. Facing cuts from regulations left, right, and center, those managing the business of radiology now also confront a number of financial and compliance concerns relating to MPFS.

Decoding the proposed rule’s language

The MPFS proposed rule that CMS released July 2 offers an update of 9.9% for 2008. However, that’s the least of imaging’s worries. The proposed rule also attempts to close what CMS considers Stark law loopholes, including:

“Per-click” payments for space and equipment leases

“Set-in-advance” percentage-based compensation

Burden of proof

Anti-markup

In-office ancillary services exception

The proposed MPFS also includes new standards for IDTF enrollment in Medicare, which attempt to increase the quality of imaging services.

Medicare first presented IDTF enrollment changes in its Medicare Program Integrity Manual Transmittal 187, released January 26. But CMS withdrew its proposed requirements prior to implementation following an industry outcry. (RACRI subscribers can read more in our online archives at www.hcpro.com/pub-2977.html.)

Incorporating the changes in the MPFS is just another way for CMS to control escalating imaging costs, says Adrienne Dresevic, Esq., an attorney with Wachler & Associates in Royal Oak, MI, who spoke July 8 at the American Healthcare Radiology Administrators annual meeting in Orlando.

CMS will likely publish the final rule soon. It will be effective for services performed on or after January 1, 2008. (Editor’s note: Although CMS did not issue the final rule by presstime, look in future issues of RACRI for further analysis.)

There is no proposal to grandfather existing arrangements or otherwise delay the effective date of the proposed change. So, anyone attempting to comply with the rules as proposed could undergo a significant business disruption as they restructure existing partnerships and legal arrangements prior to the January 1, 2008, MPFS implementation date.

The MPFS proposed rule’s comment period closed August 31. To view the proposed rule, visit www.cms.hhs.gov/physicianfeesched/downloads/CMS-1385-P.pdf.


Differentiating Stark details

Radiology facilities and hospitals enmeshed in any number of business plans should pay particular attention to “under arrangement” and “per-click” agreements.

Under arrangement. Services between hospitals and referring physicians are impermissible when referring physicians own an interest in the entity performing the designated health service (DHS). Facilities must restructure these deals.

Unfortunately, the MPFS proposed changes leave numerous questions unanswered, says attorney Thomas Bartrum, Esq., partner in the healthcare group in the Washington, DC, office of Drinker Biddle Gardner Carton.

For instance, he says, in expanding the definition of “entity” to include those performing DHS, CMS leaves unanswered what exactly constitutes “performing” DHS.

Under the current Stark law, the entity is simply whoever submits the bill to Medicare, according to Robert Wade, Esq., an attorney with Baker & Daniels, LLP, in South Bend, IN. So hospitals have physicians provide services, then submit the bill under the hospital’s provider number. By doing so, the physician or physician group does not have to be in compliance with Stark, just the hospital.

If the proposed MPFS changes make it into the final rule, the entity is no longer just who submits the bill. It’s who submits the bill and who provides the services. The hospital and the physician must both be in compliance.

“A lot of hospitals have abandoned this [under-arrangement] approach,” Wade says. “Hospitals that are considering this type of arrangement are getting cold feet.”

“Clearly, an under-arrangement provider performs the DHS, but what about an entity that furnishes equipment or management services?” Bartrum asks. “The expansion of ‘entity’ [has an effect on] a number of legitimate arrangements around the country.” Additionally, despite the changes to the definition of entity, the IDTF standards would still affect certain shared space and equipment arrangements.

“If implemented as proposed in the final regulations, IDTFs will need to unwind any block lease or shared space arrangements,” says Bartrum.

Per click. The proposed change would require facilities to also restructure arrangements under which referring physicians lease equipment or space to hospitals on a per-click or per-use basis. Instead, they must base these arrangements on daily or hourly fair market value rates.

“A lot of arrangements are set up on a per-click basis,” says Jim Kopf, president of Healthcare Over-sight in New Cannan, CT. Under the proposal, “you can’t do that, and all of those arrangements have to be restructured.”

Historically, entities could handle this arrangement with split billing, or one entity could handle it with global billing.

The billing entity paid on a fair market value, per-click, or per-use basis for the part of the exam that the other entity provided, says James C. Dechene, partner in the Chicago firm of Sidley Austin, LLP.

Although some per-click arrangements are potentially abusive, others simply facilitate efficient billing and collection under managed care contracts, he explains.

Reducing imaging reimbursement

Although some might see imaging services and other diagnostic services as commodities to either purchase or provide, the reality is that imaging services and their interpretation are medical services, says Dechene. “If not done by skilled professionals with an eye on quality, there can be substantial malpractice risks to the practice billing for the service.”

Essentially, the proposed rule seeks to remove the profit element from services that quality radiology personnel do not directly perform, says Dechene.

Under the proposal, physicians who perform the professional component but purchase the TC cannot mark up the TC, says Dechene. Similarly, the opposite would also be true under the proposal. The rule would also make it harder for those who refer patients for imaging service to bill for services without taking on the burden and risk of actually performing the technical or professional components.

Under the proposal, those who employ radiologists on a full-time basis and own imaging equipment can bill for imaging services. However, in this situation, the entity now assumes the risk associated with the imaging services.

Finding room for improvement

Many industry experts suggest the rule isn’t perfect. CMS’ proposals lack clarity at best and, at worst, are incomprehensible, says Bartrum. It is unclear whether CMS has the authority to expand the payment limitation to purchased professional components. Further, it is unclear how the new markup provisions apply to services that part-time employees furnish.

Insider sources

Thomas Bartrum, Esq., partner, Drinker Biddle Gardner Carton, 1500 K Street NW, Washington, DC 20005, 202/230-5196; thomas.barton@dbr.com.

James C. Dechene, partner, Sidley Austin, LLP, One South Dearborn, Chicago, IL 60603, 312/853-7275;jdechene@Sidley.com.

Adrienne Dresevic, Esq., Wachler & Associates, 210 East Third Street, Suite 204, Royal Oak, MI 48067, 248/544-0888; www.wachler.com.

Jim Kopf, president, Healthcare Oversight, 467 Laurel Road, New Canaan, CT 06840, 203/966-5528; jkopf@healthcareoversight.com.

Robert Wade, Esq., Baker & Daniels, LLP, 205 West Jefferson Boulevard, Suite 250, South Bend, IN 46601, 574/239-1906; bob.wade@bakerd.com.

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