New CMS Proposed Regualtions Centers for Medicare & Medicaid Services

On July 2nd CMS made available for viewing on its website proposed regulations and commentary that would materially affect the manner in which urologists have historically exploited ancillary revenue opportunities. The new proposed regulations and commentary are expected to be published in the Federal Register on July 12. The proposed regulations and commentary cover 924 pages, and comments are being solicited by CMS until 5 p.m. August 31, 2007. The regulations and commentary most material to urology practices are summarized below:

1. Cuts in Physician Fee Schedule. CMS has issued a proposed rule to revise payment rates and policies under its Medicare Physician Fee Schedule for 2008. Pursuant to the proposed changes, the fee schedule would receive a 9.9% cut in benefits.

2. Prohibition on Per Procedure Fees. Historically, Stark law exceptions have allowed urologist-owned vendors of lithotripsy, bph laser and other medical equipment services to contract with hospitals in exchange for a per procedure fee. The proposed regulations intend to amend the Stark exceptions to eliminate per procedure (unit of service) payments to referral physician sources in the context of equipment and space rentals.

3. Prohibition on Percentage Fees. Certain Stark law exceptions required that payments to referral-based physician ventures be “set in advance,” which phrase was defined by CMS to allow percentage compensation arrangements (e.g., a percentage of revenues or collections). CMS proposes to amend the “set in advance” requirement to exclude percentage payments, except for personally performed physician services.

4. Changes in Under Arrangement Contracting. Medicare allows a hospital to contract with outside providers to obtain services for its patients “under arrangements.” The hospital then bills and obtains Medicare reimbursement for the services, and pays the provider an agreed upon contract rate. Because the only venue for lithotripsy technical fee reimbursement is at hospitals, almost all urologist-owned lithotripsy ventures contract under arrangements with hospitals for the treatment of Medicare patients. CMS is concerned that certain “under arrangement” relationships encourage physician-owners to over-utilize services that result in higher costs to the Medicare program. In an effort to combat this perceived abuse, CMS proposes a new rule that could eliminate under arrangement contracting between hospitals and referring physician owners of ventures that provide certain services. Further clarification is required to determine if the proposed regulations would apply to services that are Stark designated health services solely because they are hospital inpatient or outpatient services (such as lithotripsy and bph laser services).

5. In-office Imaging and Path Lab Services. Over the past few years there has been a proliferation of financial arrangements whereby urologists have provided and billed office-based path lab and imaging services under the Stark in-office ancillary services exception. In some arrangements the urology practice also globally bills the professional interpretation performed by an outside radiologist or pathologist. CMS proposes under its new regulations to prohibit physicians from marking up the charges submitted to Medicare for technical component services above what the physician paid to purchase the test from an outside supplier. Further, when the physician globally bills the technical and professional component of a diagnostic test, the new proposed rules would prohibit the billing physician from profiting from the assigned or purchased professional component. Under the proposed rules, the only technical or professional diagnostic services a professional practice can mark-up are those actually performed by the practice’s full-time employees.

The full 924-page text of the proposed regulations and commentary can be found here. To assist you in navigating these voluminous materials, below are links to the provisions that are most relevant to your urology practice:

1. CMS Commentary on the proposed changes to the reassignment and physician self-referral rules relating to diagnostic tests (anti-markup provisions).

2. CMS Commentary regarding discussions to limit nontraditional services being protected by the Stark inoffice ancillary services exception.

3. New proposed regulation on physician billing for purchased diagnostic tests.

4. New proposed regulation prohibiting reassignment of the technical or professional component of diagnostic test services.

5. CMS Commentary on proposed new rule prohibiting under arrangement hospital contracting by referral based physician vendors.

6. CMS Commentary on proposed new rule prohibiting percentage compensation arrangements with referring physicians (except for physician professional services).

7. CMS Commentary on proposed new rule prohibiting per clic or per procedure lease payments to referral based physician vendors.

8. New proposed regulations prohibiting referring physician vendors from contracting underarrangement with hospitals to provide equipment or services.

9. New proposed regulations prohibiting per procedure/per clic payments to referring physicians.

10. New proposed regulations prohibiting percentage fee payments to referring physicians.

We will provide you with additional guidance in the near future to assist you in timely preparing and submitting comments to CMS regarding the proposed regulations. The proposed regulations certainly threaten many urology ancillary income opportunities but, more importantly, raise serious concerns with patient care and access.

This update on the new proposed regulations was prepared and submitted by:
Greg L. Smith, a healthcare attorney practicing with Womble Carlyle Sandridge & Rice, PLLC, and specializing in urology-based ancillary revenue opportunities. Greg can be reached at gsmith@wcsr.com and 336-721-3665.

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