Maryland State Bar Association
Health Law Section
Understanding Medicare Billing Issues:
Anti-Markup Rules, Independent
Diagnostic Testing Facility Rules, and
Liability Risks Associated with NonCompliance with Medicare Billing Rules
Kathleen M. Stratton
Crowell & Moring LLP
1001 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
(202) 624-2723
Anti-Markup Rules
 Current Medicare statutes and regulations prohibit
the markup of the technical component (“TC”) of
certain diagnostic tests performed by outside
suppliers and billed to Medicare by a different
individual or entity.
2
Anti-Markup Rules
 42 C.F.R 414.50 payment to the billing physician is
limited to the lowest of the following amounts:
 1. The supplier’s net charge to the physician
 2. The billing physician’s actual charge; or
 3. The Medicare fee schedule amount that would be
allowed if the supplier billed directly.
3
Anti-Markup Rules
 Significant changes made to anti-markup rules in the
2008 Medicare Physician Fee Schedule Rule
 Restrictions would apply to technical and professional
component billing
 Restrictions would also extend to billing for diagnostic
tests performed at a site “other than the office of the
billing physician”
 Significant controversy arose with these changes;
CMS delayed implementation until January 1, 2009
4
Independent Diagnostic Testing Facilities
 Free-standing facilities providing (and billing for)
diagnostic tests, i.e. MRI, CT, PET (not clinical lab or
pathology tests) to patients referred by their treating
physician (the physician responsible for treating the
patient’s medical condition and who will use the
results of the diagnostic test in the care of the patient)
 Must comply with Medicare Performance Standards
specific to IDTFs.
 Standards related to business operating procedures,
location, medical record-keeping, patient solicitation,
etc.
5
When Must a Supplier of Diagnostic Tests
Enroll in Medicare Program as an IDTF?
An entity may bill for diagnostic tests as a physician office rather
than an IDTF only if it meets the following four characteristics:
1. Physician practice is owned by physicians or hospital
2. The entity primarily bills for physician services (e.g. evaluation
& management (E&M) codes and not for diagnostic tests
3. It furnishes diagnostic tests primarily to patients being treated
by physicians in the practice
4. The tests are performed and interpreted at the same location
where the practice physicians also treat patients for their
medical conditions.
6
When Must a Supplier of Diagnostic Tests
Enroll in Medicare Program as an IDTF?
 If a substantial portion of the entity’s business
involves the performance of diagnostic tests, the
diagnostic testing services may be sufficiently
separate business to warrant enrollment as an IDTF
in addition to enrollment as a physician group
practice.
 In this case, the group would bill as an IDTF for tests
performed on patients who are not patients of the
practice; the group would bill under its group billing
number for tests performed on patients of the group.
7
Radiology Groups
 Radiology group practices are generally different from
those of other physicians because radiologists
usually do not bill E&M codes, nor do they treat a
patient’s medical condition on an ongoing basis
 Generally not required to enroll as an IDTF
 Requirements may vary from carrier to carrier
8
New IDTF Standards
 2008 Medicare Physician Fee Schedule Rule imposed a new
performance standard related to shared space
 A fixed-based IDTF (as opposed to hospital-based or mobile
IDTFs) may not:
– share a practice location with another Medicare-enrolled
individual or organization;
– Lease or sublease its operations or its practice location to another
Medicare entity or individual; or
– Share diagnostic testing equipment with another Medicare
individual or entity
 Disruptive to common leasing arrangements such as block
leases between IDTFs and physician group practices seeking
to take advantage of Stark Law “in-office ancillary services
exception – which was in large part CMS intent
9
What Happens When Medicare Rules are
Violated?
 Routine errors, mistakes vs. intentional violations
 Pattern of routine errors = reckless disregard for the
law?
 When does a routine overpayment become a “false
claim?
10
The False Claims Act
 Primary government weapon in combating health care fraud
- Huge penalties
– Favorable burden of proof
– “Intent” element is somewhat vague
– Scope of activities covered: very broad
 Since 1986: $ 20 billion recovered under FCA
 In 2007, FCA recoveries exceeded $2 billion; $54 million in
1986
 Whistleblower provisions are incorporated in FCA
 72% of FCA whistleblower recoveries are health-related
11
Elements of the False Claims Act
 Submitting, causing to be submitted, or conspiring to
submit:
– A claim for payment to the government
– When the claim is false or fraudulent and
– When the defendant acted “knowingly”
 In addition, using a false record or statement in
support of a claim is also actionable
 “Knowingly” means “deliberate ignorance” or
“reckless disregard” of the truth or falsity of the
submission
– “Intent to defraud” need not be proven
12
Applying the FCA Beyond Mere Truth &
Falsity of the Claim
 Anyone in the “chain of events” leading to an FCA
violation is potentially liable
– E.g. Physician, physician office staff, billing company, etc.
 Implied Certification Theory
– Failure to comply with any applicable law or regulation
13
FCA Damages and Penalties: Enormous
 Treble the government’s damages
 Additional penalties of $5,500 - $11,000 per claim
 Parallel consequences: suspension/exclusion from
participation in health care payer programs – the
death knell for most physicians
 Not to mention:
– Time and effort
– Attorneys’ fees
– Likely Corporate Integrity Agreement
– Damage to reputation
14
Examples of Enforcement Actions Related
to Physician Billing
 Anesthesiologist in Oregon – double billing
 Cardiologist in Maryland – billing for left and right
heart catheterizations; only performing left heart
catheterization
 Psychiatrist in New York – Overbilling resulting from
glitch in billing software
15