Overview: Stark-related Changes in IPPS and MPFS.
East Tennessee Medical News – January 2009
By Patti T. Cotten

The Centers for Medicare & Medicaid Services (CMS) has begun piecemeal rulemaking of the Medicare Physician Fee Schedule (“MPFS”) and Inpatient Prospective Payment System (“IPPS”) rules for 2009. Both sets of rules effect changes in the Stark law as well as alter the basic reimbursement rules for diagnostic testing payment amounts. Both sets of rules also create new challenges where physician groups either provide or obtain professional or technical components of all Medicare diagnostic testing of any type (known as the “Anti-Markup Rules”).  In addition, these new rules affect the provision of any kind of Stark DHS to another entity who bills for it (think “under arrangements” with hospitals). Many of the changes became effective on October 1, 2008, while others become effective January 1, 2009 and October 1, 2009.

What are “under arrangements” with Hospitals?
The term “under arrangements” is used to refer to certain medical services typically provided by hospitals which are actually provided by a physician-owned entity under contract with the hospital.  The new IPPS rules specifically point to lithotripsy arrangements where urologists lease to the hospital the lithotripsy equipment they use to perform lithotripsy services.  The hospital pays the physician-owned entity a “per click” rental fee and bills third party payors for the lithotripsy service.  The physicians bill their own professional fees.

How do the new rules affect services provided “under arrangements”?
The new IPPS rules eliminate such arrangements by making the Stark self-referral restrictions applicable to both the entity that performs the service (i.e., the physician group) and the entity that bills for the service (i.e., the hospital).  As a result, a physician with ownership or compensation arrangements with the entity providing the “under arrangements” services will not be able to refer patients to that entity, unless a Stark exception applies.

When does the IPPS rule prohibiting these “under arrangements” entities become effective?
Knowing that the new rule would affect many hospital-physician arrangements, CMS has delayed the effective date to October 1, 2009.  Prior to that time, physicians and hospitals should examine their “under arrangements” agreements to ensure that they meet an applicable Stark exception or, if not, to make alternative arrangements.

Do the new IPPS rules affect leases?
Yes.  The new IPPS rules prohibit the use of “per-click” leases for office space or equipment, to the extent that the per-click payment is for office space or equipment used by the lessee (e.g., a hospital) to treat patients referred by the lessor (e.g., a physician group).

The new IPPS rules also prohibit the use of percentage-based compensation for determining the rental charges for the lease of office space or equipment.  However, the new rules do not apply to the use of percentage-based compensation in management agreements, billing services arrangements, and shared savings arrangements.

What is the Anti-Markup Rule?
Prior to the adoption of the 2009 MPFS rules, the “Anti-Markup” rule (the “AMR”) prohibited a physician from "marking up" the technical component of a diagnostic test when billing Medicare if the test was purchased from another physician or supplier.   The 2009 MPFS expands the applicability of the AMR to both the professional and technical components of diagnostic tests.  While not a part of the Stark legislation, the new expansion of the AMR may adversely affect reimbursement for many Stark-compliant ancillary arrangements.

When does the AMR apply?
The AMR does not apply if the performing physician “shares a practice” with the billing supplier, as determined by one of two alternative methods:  (1)  does the performing physician (i.e., the physician who supervised the test or performed an interpretation) provide at least 75% of this physician services through the billing physician/group or (2) is the performing physician an employee or contractor of the billing physician/group who performs his supervision or interpretation in the same building as the billing physician/group. 

Does Stark Compliance mean the AMR does not apply?
No!  Especially for physician groups with multi-office locations, the AMR may limit reimbursement unless one of the two alternative tests is met.  It is crucial to review all arrangements involving diagnostic services soon as the new AMR becomes effective January 1, 2009!

Disclaimer: The information contained herein is strictly informational; it is not to be construed as legal advice.