CMS’ Anti-markup Rule

The Centers for Medicare & Medicaid Services (CMS) recently issued Transmittal 445 to provide claims processing instructions for contractors when submitting claims for diagnostic tests subject to the antimarkup payment limitation.

Effective July 1, 2009, CMS’ contractors will process claims submitted for diagnostic testing services in accordance with the anti‐markup provisions outlined in the 2009 Medicare Physician Fee Schedule (MPFS) final rule (published November 19, 2008). Under the 2009 MPFS final rule, CMS amended and expanded the payment limitations for diagnostic tests. The provisions are anticipated to reduce the likelihood of physicians “marking up” the prices billed to Medicare for diagnostic tests performed and interpreted by a third party (i.e. preventing physicians from billing Medicare for diagnostic services he/she did not render but rather were ordered and furnished by an outside supplier). The new antimarkup rule became effective January 1, 2009 and required physicians and other suppliers (e.g. physician organizations) to evaluate their diagnostic testing and billing arrangements to ensure compliance with the anti‐markup rule.

Although the anti‐markup provisions have been in effect since the beginning of this year, physicians and suppliers submitting Medicare claims for diagnostic tests should reexamine billing arrangements in light of the recent release of CMS’ claims processing instructions to Medicare contractors. Physicians and suppliers who fail to comply with the anti‐markup payment limitation will not only risk submission of a false claim, but may also be sanctioned under civil monetary penalty laws and mandated to be excluded from participating in federal programs.

What is the Anti-markup Rule?

The anti‐markup rule is a price limitation for diagnostic services (technical and professional components) that are ordered by a physician or supplier and provided by a third party.2 More specifically, under section 1842(n)(1) of the Social Security Act, CMS is required to enforce a payment restriction on diagnostic tests “where the physician performing or supervising the test does not share a practice with the billing physician or other supplier.”3,4 Essentially, the anti‐markup rule prevents a medical practice from profiting from diagnostic tests when diagnostic services were not performed, supervised or interpreted by the ordering physician. This is achieved by requiring physicians to bill Medicare the lowest of the following amounts for the diagnostic test:

• The performing supplier’s net charge (less the cost of equipment or space leased to the performing supplier) to the billing physician or supplier;
• The billing physician or supplier’s actual charge; or
• The fee schedule amount of the diagnostic test that would be permitted if the performing supplier billed Medicare directly.