Health Industry Washington Watch : Washington DC Healthcare Industry Law Firm : Reed Smith : Health Industry Washington Watch : Regulations, Medicare/Medicaid, Governmental Organizations

• CMS has made a proposal that is very controversial in the industry to expand its multiple procedure payment reduction (MPPR) policy for advanced imaging services (computed tomography scans, magnetic resonance imaging, and ultrasound), which now applies to only the technical component of the service, to the professional component (physician interpretation) of the service. If finalized, Medicare would pay 100% of the technical and professional component for highest-paid procedure, while the payments for the technical and professional component of the second and each additional imaging service done on the same patient during the same session would be reduced by 50%. CMS also has requested comments on more expansive reduction policies in 2013 and beyond, which could include applying the MPPR to the all imaging services (not just advanced imaging studies) or to the technical component of all diagnostic tests (e.g., tests associated with radiology, cardiology, audiology, procedures furnished in the same encounter).
• CMS proposes to updates certain payment policies for Part B drugs to specify that the average manufacturer price (AMP) substitution policy will apply only when the average sales price (ASP) exceeds the AMP by 5 percent in two consecutive quarters immediately prior to the current pricing quarter, or three of the previous four quarters immediately prior to the current quarter. CMS is also proposing a number of changes to the manufacturer ASP reporting template. 
• CMS proposes to update a number of physician incentive programs, including the Physician Quality Reporting System, the ePrescribing Incentive Program, and the Electronic Health Records Incentive Program. CMS also proposes quality and cost measures for a new value-based modifier, mandated by the Affordable Care Act (ACA), that would reward physicians for providing higher quality and more efficient care. CMS is proposing to use CY 2013 as the initial performance year for purposes of adjusting payments in CY 2015. Payments under the value-based payment modifier provision will be risk-adjusted and budget-neutral. 
• Among many other things, CMS identifies a variety of potentially misvalued code and proposes a new public nomination process under which the public could nominate potentially misvalued codes and submit documentation supporting the need for review. CMS also proposes changes in how it adjusts payment for geographic variation in the cost of practice; revisions to how it updates services available through telehealth; updates to the productivity adjustment for ambulatory surgical center (ASC), ambulance, clinical laboratory, and durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) fee schedules; and clarification of the applicability of the “3-day payment window” policy to certain services furnished in a wholly owned or wholly operated physician practice. CMS also seeks comments on physician activities and the associated resources involved in physician provision of effective care coordination surrounding a hospital discharge.

Comments on the proposed rule will be accepted until August 30, 2011.  A variety of supporting files are posted at www.cms.gov/PhysicianFeeSched/PFSFRN/itemdetail.asp?filterType=none&filterByDID=-99&sortByDID=4&sortOrder=descending&itemID=CMS1249142&intNumPerPage=10.

• CMS estimates that the rule will increase HOPPS payments by 2.5% in 2011 compared to 2010 (the increase is 2.8% when cancer and children’s hospitals and community mental health centers are excluded). Note that the impact of the rule on payment for individual procedures varies. The HOPPS update for 2011 is 2.35%, reflecting a 2.6% market basket increase minus a 0.25 percentage point adjustment mandated by the Affordable Care Act (ACA). The HOPPS update is reduced by 2.0 percentage points for certain hospitals that do not meet quality reporting requirements. In the final rule, CMS has expanded the set of quality measures that must be reported by hospital outpatient departments to qualify for the full payment update.
• CMS is increasing the threshold for separate payment of hospital outpatient drugs and biologicals to those with a cost-per-day that exceeds $70 (up from $65 currently). Payment for separately-payable drugs and biologicals without pass-through status will equal the average sales price (ASP) plus 5% (compared to the current rate of ASP plus 4%). This amount reflects the cost of separately-payable drugs and biologicals, calculated from hospital claims and cost reports, with an adjustment that reflects the redistribution of $200 million of pharmacy overhead costs currently attributed to packaged drugs and biologicals to separately-payable drugs and biologicals.
• The rule modifies the supervision requirements for outpatient therapeutic services in a number of ways. Among other things, the rule: requires direct supervision of the initiation of a service, followed by general supervision for certain non-surgical, extended-duration services, including observation services; extends through 2011 the notice of non-enforcement regarding the direct supervision requirements for outpatient therapeutic services furnished in critical access hospitals (CAHs) and applies the notice to certain small rural hospitals; and modifies the definition of direct supervision of diagnostic tests for all hospital Medicare outpatients, except for under arrangement services, to require “immediate availability” of the supervising physician without reference to the boundaries of a physical location. Presence in the office and immediate availability will be required for supervision of tests performed under arrangement.
• The rule implements a number of ACA provisions related to limitations on certain physician referrals to hospitals in which they have an ownership or investment interest (and certain related changes to provider agreement regulations); payments to hospitals for direct graduate medical education and indirect medical education costs; and waiver of beneficiary cost-sharing for preventive services.
• With regard to ASC services, 2011 is the first year of the fully-implemented payment rates under the revised ASC payment system following a 4-year transition. CMS estimates that the ASC update factor for CY 2011 is 1.5%; however, this update will be almost entirely offset by a “multi-factor productivity” (MFP) adjustment mandated by the ACA, which is 1.3% in 2011. The MFP adjustment is designed to encourage more efficient care by reducing Medicare reimbursement by the 10-year moving average of changes in annual economy-wide private nonfarm business multifactor productivity, as reported by the Bureau of Labor Statistics Consequently, CMS is applying a 0.2% update to the ASC payment system for CY 2011. CMS also is adding six surgical procedures to the list of covered ASC procedures, designating two procedures as office-based procedures, and updating the list of covered ancillary services. The rule also implements an ACA provision waiving beneficiary copayments for certain preventive services under the ASC payment system.

Comments on select provisions of the rule (HOPPS payments for certain new codes and provisions addressing certified nurse anesthetist services furnished in rural hospitals and CAHs) will be accepted until January 3, 2011.

Among many other things, the final rule:

• Establishes a 2011 conversion factor of $25.5217, compared to the conversion factor of $36.8728 applicable June 1-November 30, 2010. This steep drop is due primarily to the statutory sustainable growth rate (SGR) formula, which reduces rates by a total of 24.9% from November 2010 to January 2011 (reflecting the December 1, 2010 expiration of a temporary increase established by Congress plus an additional 2.9% cut that goes into effect January 1, 2011). CMS also has adopted a rescaling /budget neutrality adjustment of -8.2%, which is designed to offset rescaled relative value units and a rebased Medicare Economic Index (MEI) for 2011. Congress is expected to once again step in to at least mitigate the SGR cuts, but the timing and scope of any such action is still speculative at this time.
• Updates several durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) competitive bidding program policies, including provisions that: expand Round 2 by adding 21 of the largest metropolitan statistical areas (MSAs); subdivide three of the largest MSAs; implement a national mail order competitive bidding program for diabetic testing supplies and make other refinements related to the furnishing of diabetes supplies; modify the definition of mail-order suppliers; create an appeals process for suppliers considered to be in breach of contract; and modify policies related to off-the-shelf orthotics, oxygen and oxygen equipment, and reimbursement to grandfathered suppliers. In addition, the rule addresses payment policy for power wheelchairs outside of the competitive bidding program.
• Implements ACA provisions that assign a 75% utilization rate assumption to certain expensive diagnostic imaging equipment used in diagnostic CT and MRI services, and that increase the multiple procedure payment reduction (MPPR) applied to the technical component of certain single session imaging services to contiguous body parts from 25% to 50% for more than one imaging procedure preformed in the same session. CMS also adopted its proposal (not mandated by the ACA) to apply the MPPR policy across imaging families and not limited to contiguous body areas. In addition, the rule implements an ACA requirement that physicians who refer patients to certain imaging services under the in-office ancillary services exception to the physician self-referral prohibition inform patients of their option to receive these services from other area suppliers and to provide a list of at least five alternative suppliers within a 25-mile radius of the physician’s office.
• Establishes a multiple procedure payment reduction policy applicable to certain Part B outpatient therapy services, under which CMS will apply a 25% payment reduction to the practice expense component of the second and subsequent therapy services for certain multiple therapy services furnished to a single patient in a single day (note that under the proposed rule, CMS would have imposed a 50% reduction).
• Updates certain payment policies for Part B drugs, including establishing a new “carry over” process to address certain delays in manufacturer reporting of pricing data for multiple-source drugs, and establishing an “intentional overfill” policy under which the Medicare payment limit will based on the amount of product in a vial or container as reflected on the FDA-approved label.
• Finalizes a proposal to use the annual MPFS rulemaking to consider changes in practice expense (PE) price inputs for supplies and equipment, but CMS deferred adopting its proposal to base PE inputs for supplies $150 or more on the U.S. General Services Administration medical supply schedule while it continues to review this policy.
• Implements ACA provisions that: establish the methodology for applying the ACA’s “multi-factor productivity” adjustment to the updates for the ASC, ambulance, clinical laboratory and DMEPOS fee schedules; update the Physician Quality Reporting Initiative and Electronic Prescribing Incentive Program; eliminate beneficiary coinsurance for most preventive services and expand coverage of certain preventive services; require the Secretary to identify and make appropriate adjustments to the relative values of misvalued services; and revise the timely filing requirements for Medicare claims.

• CMS estimates that the rule would increase HOPPS rates by 2.2% in 2011 compared to 2010 (the increase is 2.1% when cancer and children’s hospitals and community mental health centers are excluded). This update reflects a provision of the Affordable Care Act (ACA) that imposes a 0.25 percentage point reduction to the HOPPS update for CY 2011. Note that the impact of the policy and payment provisions of the proposed rule on payment for individual procedures varies.
• The HOPPS update is reduced by 2.0 percentage points for certain hospitals that do not meet quality reporting requirements. CMS is proposing to expand the set of measures that must be reported by hospital outpatient departments (HOPDs) to qualify for the full payment update. To allow hospitals more time to prepare, CMS is proposing measures for reporting in CYs 2011 through 2013. Among other things, CMS is proposing to add six quality measures to the current 11 measures to be reported by HOPDs in CY 2011 for purposes of CY 2012 payment, including one structural health information technology measure, four claims-based imaging efficiency measures, and one chart-abstracted measure for emergency departments.
• CMS proposes to increase the threshold for separate payment of hospital outpatient drugs and biologicals to those with a cost-per-day that exceeds $70, up from $65 currently. Payment for separately-payable drugs and biologicals without pass-through status would equal the average sales price (ASP) plus 6% (compared to the current rate of ASP plus 4%). This amount reflects the cost of separately-payable drugs and biologicals, calculated from hospital claims and cost reports, with an adjustment for pharmacy overhead cost that reflects the redistribution of $200 million of pharmacy overhead costs currently attributed to packaged drugs and biologicals to separately-payable drugs and biologicals.
• The proposed rule would modify the supervision requirements for outpatient therapeutic services to require direct supervision of the initiation of a service followed by general supervision for certain non-surgical, extended-duration services, including observation services.
• CMS would implement a number of ACA provisions related to limitations on certain physician referrals to hospitals in which they have an ownership or investment interest (and related changes to provider agreement regulations); payments to hospitals for direct graduate medical education and indirect medical education costs; waiver of beneficiary cost-sharing for preventive services; and payment adjustments for certain cancer hospitals.
• With regard to ASC services, CMS estimates that the ASC update factor for CY 2011 would be 1.6%; however, this update would be entirely offset by a “multi-factor productivity” (MFP) adjustment mandated by the ACA, which CMS estimates will be 1.6% for 2011. The MFP adjustment is designed to encourage more efficient care by reducing Medicare reimbursement by the 10-year moving average of changes in annual economy-wide private nonfarm business multifactor productivity, as reported by the Bureau of Labor Statistics. Consequently, CMS is proposing a 0% update to the ASC payment system for CY 2011. CMS also is proposing to add five surgical procedures to the list of covered ASC procedures, designate six procedures as office-based procedures, and update the list of covered ancillary services. The proposed rule also would implement an ACA provision waiving beneficiary copayments for certain preventive services under the ASC payment system.

In a related development, CMS has released a notice modifying the final 2010 HOPPS and ASC rules to reflect provisions of the ACA applicable to 2010 rates, including a 0.25% reduction to the HOPPS update for 2010. CMS estimates that the revised update to the HOPPS conversion factor and other adjustments as provided by the statute will decrease total HOPPS payments by 0.1% in CY 2010 compared to payment rates under the November 20, 2009 final rule, while CMS expects no change in aggregate ASC expenditures under the notice. CMS also issued a final rule making technical changes to the final 2010 HOPPS/ASC rule; the official version of both documents will be published in the August 3, 2010 Federal Register. 

Among many other things, the proposed rule would:

• Provide a negative 6.1% update for 2011 under the statutory sustainable growth rate (SGR) formula. Coupled with the expiration of a temporary 2.2% boost in MPFS payments on November 30, 2010 (see summary of related legislation below) and the more than 21% cut that goes into effect December 1, 2010, along with a proposed 0.921 “rescaling factor”/ budget neutrality adjustment, the conversion factor will be reduced by approximately 29% in 2011 unless Congress takes further action.
• Update several durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) competitive bidding program policies, including provisions that: expand Round 2 by adding 21 of the largest metropolitan statistical areas (MSAs); implement a national mail order competitive bidding program for diabetic testing supplies and make other refinements related to the furnishing of diabetes supplies, create an appeals process for suppliers considered to be in breach of contract; and modify policies related to off-the-shelf orthotics, oxygen and oxygen equipment, and reimbursement to grandfathered suppliers. In addition, the rule addresses payment policy for power wheelchairs and oxygen and oxygen equipment outside of competitive bidding.
• Implement ACA provisions that reduce Medicare payments for certain diagnostic imaging equipment, including assigning a 75% utilization rate assumption to certain expensive diagnostic imaging equipment used in diagnostic CT and MRI services and increases the multiple procedure payment reduction applied to the technical component of certain single session imaging services to contiguous body parts from 25% to 50% for more than one imaging procedure preformed in the same session (CMS also is proposing to apply the MPPR policy across imaging families and not limited to contiguous body areas).  CMS estimates that this provision, along with the equipment utilization change, will save Medicare $160 million in 2011.  In addition, CMS discusses how it will implement the ACA requirement that physicians who refer patients to certain imaging services under the in-office ancillary services exception to the physician self-referral prohibition inform patients of their option to receive these services from other area suppliers and to provide a list of alternative suppliers.
• Establish a multiple procedure payment reduction (MPPR) policy applicable to certain outpatient therapy services reimbursed under Medicare Part B, under which CMS would apply a 50% payment reduction to the practice expense (PE) component of the second and subsequent therapy services for certain multiple therapy services furnished to a single patient in a single day..
• Update certain payment policies for Part B drugs, including implementing the ACA provision providing for Medicare payment of biosimilar biological products using the ASP methodology.
• Implement an ACA requirement that the Secretary periodically review and identify potentially misvalued codes and make appropriate adjustments to the relative values of misvalued services.  As part of this effort, CMS has asked the RUC to review services that fall into five categories: high volume/cost items on the RUC's "Multi-Specialty Points of Comparison list of procedures, codes with low work values that are reported with multiple units; codes with high volume and low work RVUs; 23 hour stay services, and procedures that were inpatient and have subsequently migrated to the outpatient setting.
• Base future PE updates for certain high cost supplies (priced at $150 or more) on the U.S. General Services Administration medical supply schedule.
• Establish the methodology for applying the ACA’s “multi-factor productivity” adjustment to the updates for the ASC, ambulance, clinical laboratory and DMEPOS fee schedules.
• Update a variety of policies applicable to payment for renal dialysis services furnished by end stage renal disease facilities.
• Implement ACA provisions that authorize Physician Quality Reporting Initiative incentive payments through calendar year 2014, with a penalty thereafter for eligible professionals who do not provide satisfactory reports, and make revisions to the Electronic Prescribing Incentive Program and the Physician Feedback Program.
• Implement ACA provisions that eliminate beneficiary coinsurance for most preventive services and expand coverage of certain preventive services.

• CMS is cutting technical component payments for certain non-hospital imaging procedures by changing the imaging equipment usage assumption for equipment priced over $1 million from the current 50% usage rate to a 90% usage rate, which will reduce per procedure practice expense (PE) relative value units (RVUs) -- and thus the per procedure technical component reimbursement -- for services using such imaging equipment).   In the final rule, CMS decided only to apply this change to MRIs and CTs. The payment cut will be transitioned with full implementation not for four years. Beginning 2010, 75% of the practice expense is paid based on the old usage rate with full implementation in 2013. CMS also has adopted provisions to begin implementing the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) provision mandating an accreditation process for entities furnishing the technical component of certain advanced diagnostic testing procedures by January 1, 2012. CMS also is publishing a separate notice inviting independent accreditation organizations to participate in the accreditation program. 
• The final rule revises the Electronic Prescribing Incentive Program and the Physician Quality Reporting Initiative (PQRI) to, among other things, simplify e-prescribing reporting requirements, provide additional reporting options (including an electronic health record-based reporting mechanism), allow group practices to be considered successful e-prescribers; and expand PQRI quality measures. 
• CMS is adopting its proposal to refine malpractice RVUs to redirect payment to physicians with the highest malpractice costs.
• CMS is ending payment for consultation codes and instead requiring use of evaluation and management (E/M) codes. Note that under the final rule, CMS is making an exception to this policy for telehealth consultations and maintaining payment for G-codes used to bill for these consultations. Savings from the discontinuation of consultation codes are being redistributed to increase payments for the existing E/M services and to the payment for the surgical global period.
• The final rule clarifies the "stand in the shoes" standard for considering compensation arrangements under Stark.
• CMS is establishing a process for submitting claims for damages caused by the MIPPA provision terminating contracts awarded in 2008 under the durable medical equipment, prosthetic, orthotic and supplies (DMEPOS) competitive bidding program, and making changes in the “grandfathering” rules for noncontract suppliers. CMS is also finalizing policy changes regarding maintenance and servicing of oxygen equipment. 
• The rule provides that the annual per beneficiary outpatient therapy caps for CY 2010 will be $1860 each for (1) outpatient physical therapy and speech-language pathology services combined, and (2) outpatient occupational therapy services. CMS also notes that its authority to provide for exceptions to therapy caps will expire on December 31, 2009, unless the Congress acts to extend it.
• The final rule implements a variety of other Part B policies, including provisions that: establish Medicare coverage of cardiac and pulmonary rehabilitation services and chronic kidney disease education; update end-stage renal disease (ESRD) facility rates; require authorized compendia used to determining medically-accepted indications of drugs and biologicals used off-label in anti-cancer chemotherapeutic regimens to have a transparent process to evaluate therapies and identify potential conflicts of interests; revise certain requirements under the Part B drug competitive acquisition program. 

The official version of the rule is scheduled to be published in the Federal Register on November 25, 2009. CMS will accept comments on certain provisions of the final rule until December 29, 2009. Specifically, CMS is accepting comments on the following issues: interim RVUs for selected codes, the physician self-referral designated health services, services for consideration for the Five-Year Review of work RVUs, and whether additional guidance is needed regarding CMS’s policy regarding services provided under arrangement.  

Other major provisions of the HOPPS final rule include the following: 

• CMS adopted its proposal to increase the threshold for separate payment for outpatient drugs to drugs with a cost per day that exceeds $65, up from $60 in 2009.  CMS will continue making payment for separately-payable drugs and biologicals at average sales price (ASP) plus 4%, representing a combined payment for both the acquisition and pharmacy overhead costs of separately payable drugs and biologicals. CMS uses a new methodology to arrive at this rate for CY 2010. In short, CMS is basing payments on estimated costs of separately-payable drugs and biologicals for 2010 (estimated to be ASP minus 3%), with an adjustment for pharmacy overhead cost. Through the pharmacy overhead adjustment, CMS is redistributing $200 million (rather than $150 million in the proposed rule) from the cost of packaged drugs and biologicals to separately payable drugs and biologicals.
• CMS is maintaining its policy of beginning the pass-through payment eligibility period for a new drug or nonimplantable biological on the date that the first HOPPS pass-through payment is made (rather than it the date of first U.S. sale of the product following FDA approval as the agency had proposed). CMS did adopt its proposal to establish a payment offset for pass-through contrast agents in accordance with its standard offset methodology, and the agency modified the payment methodology for pass-through implantable biologicals.
• CMS adopted its proposal to provide payment for separately-payable therapeutic radiopharmaceuticals and pass-through radiopharmaceuticals using ASP data, if data is submitted by manufacturers for a given calendar quarter (CMS has posted subregulatory guidance on submitting radiopharmaceutical ASP data).
• CMS adopted significant revisions and clarifications its rules regarding physician supervision of outpatient services. Among other things, CMS is requiring all hospital outpatient diagnostic services furnished directly or under arrangement -- in a hospital, provider-based department, or nonhospital location -- to follow the same physician supervision requirements for individual tests that apply under the Medicare physician fee schedule. Diagnostic tests can be supervised only by physicians. CMS will allow physician assistants, nurse practitioners, clinical nurse specialists, certified nurse-midwives, and licensed clinical social workers to directly supervise all hospital outpatient therapeutic services that they may personally perform under their state scope of practice rules and hospital-granted privileges. CMS also is clarifying that, for purposes of on-campus hospital outpatient services, “direct supervision” means that the physician (for diagnostic tests) or the physician or nonphysician practitioner (for therapeutic services) need not be in the department, but must be present anywhere on the hospital campus and immediately available to furnish assistance and direction throughout the performance of the procedure. For outpatient services furnished in an off-campus provider-based department, “direct supervision” would continue to require the physician (for diagnostic tests) or the physician or nonphysician practitioner (for therapeutic services) to be present in the off-campus provider-based department and immediately available to furnish assistance and direction throughout the performance of the procedure.

With regard to ASC services, the final rule provides a 1.2% inflation update to the conversion factor.  CMS also is adding 26 surgical procedures to the list of procedures covered when performed in an ASC. In addition, the rule: designates six procedures as office-based procedures (subject to payment at the lesser of the national office practice expense payment to the physician or the national standard ASC rate); temporarily designates an additional 16 procedures as office-based for 2010; and updates the list of device-intensive procedures and covered ancillary services. 

CMS is accepting comments on limited provisions of the rule until December 29, 2009. These provisions pertain to: payment classifications for certain HCPCS codes; treatment of plasma protein fraction for HOPPS payment purposes; alternative coding for hospital clinic visits for new and established patients; potentially extending the direct supervision requirements for hospital-based partial hospitalization program services to such services in community mental health centers; and potentially establishing direct physician supervision requirements for ASC services.

• Change the equipment usage assumption for imaging equipment priced over $1 million from the current 50% usage rate to a 90% (which would significantly reduce per procedure practice expense relative value units (RVUs) -- and thus the per procedure technical component reimbursement -- for services using such imaging equipment) and begin to implement the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) provision mandating an accreditation process for entities furnishing certain non-hospital advanced diagnostic testing procedures by January 1, 2012;
• Expand the measures and measure groups that eligible physicians can report under the Physician Quality Reporting Initiative (PQRI), allow physicians to report data on PQRI measures through a qualified electronic health record product, and establish a new process for group practices to be considered successful electronic prescribers.
• Refine malpractice RVUs to redirect payment to physicians with the highest malpractice costs;
• End payments for consultation codes and instead require use of evaluation and management codes;
• Amend the "stand in the shoes" standard for considering compensation arrangements under Stark;
• Establish a process for submitting claims for damages caused by the MIPPA provision terminating contracts awarded in 2008 under the durable medical equipment, prosthetic, orthotic and supplies (DMEPOS) competitive bidding program, and make changes in the “grandfathering” rules for noncontract suppliers;
• Implement MIPPA provisions that provide Medicare coverage of cardiac and pulmonary rehabilitation services and chronic kidney disease (CKD) education;
• Revise Medicare end stage renal disease facility (ESRD) rates, including updating the drug add-on adjustment (using a refined methodology for projecting growth in drug expenditures), the wage index adjustment, and the ESRD wage index floor;.
• Make changes to the Part B drug competitive acquisition program designed to better define certain aspects of the program and minimize the administrative burden for participating physicians and vendors; and
• Require authorized compendia used in determining medically-accepted indications of drugs and biologicals used off-label in an anti-cancer chemotherapeutic regimen to have a transparent process for evaluating therapies and for identifying potential conflicts of interests.

The official version of the rule will be published in the Federal Register on July 13, 2009, and comments will be accepted until August 31, 2009. 

• CMS has adopted changes to the antimarkup rule for diagnostic tests billed by an ordering physician. In the proposed rule, CMS had offered two alternative approaches to reforming the anti-markup rules. Under the first approach, the anti-markup provision would apply if the professional component (PC) or technical component (TC) of a diagnostic test is ordered by a billing physician and is either: (i) purchased from an outside supplier, or (ii) performed or supervised by a physician who does not share a practice with the billing physician or physician organization. A supervising or interpreting physician could "share" a practice as an employee or contractor of the single physician or physician group billing the test; otherwise the anti-markup restriction would apply. Under the second alternative approach, CMS would maintain the current regulatory text that applies the anti-markup provisions to the technical and professional components of diagnostic tests performed outside the “office of the billing physician or other supplier,” but CMS would more broadly define the “office of the billing physician or other supplier” to include space in which diagnostic testing is performed provided that it is located in the same building in which the billing physician or other supplier regularly furnishes patient care. In the final rule, CMS provides that a billing physician or other supplier can avoid application of the anti-markup provisions by meeting either alternative 1 or, on a case-by-case basis, the “site-of-service” approach of alternative 2, both of which were subject to certain modification in the final rule. Specifically, under alternative 1, a performing physician "shares a practice" with the billing physician group if he or she provides at least 75% of his or her professional services through the billing physician group-- even if the physician works for one or more billing physician groups or other health care entities. There are no restrictions on the location where the services can be performed under alternative 1. If the performing physician does not meet the 75% test, the billing physician may avoid the anti-markup rule if the performing physician is an owner, employee or independent contractor and the services are performed in the billing physician’s office. The “office” means any medical office space (regardless of the number of locations) in which the ordering physician regularly furnishes patient care and includes space where the billing physician furnishes diagnostic testing if the space is located in the same building where the ordering physician regularly furnishes patient care. 
• CMS did not adopt its proposal to require any physician or nonphysician practitioners organization furnishing diagnostic testing services (except diagnostic mammography services) to enroll as an independent diagnostic testing facility (IDTF) and meet most IDTF performance standards. Instead, CMS cites a MIPPA provision requiring accreditation of entities furnishing certain advanced diagnostic testing procedures by January 1, 2012. CMS states that it may reconsider finalizing the IDTF standard in a future rulemaking. CMS did, however, adopt its proposal to require entities providing mobile diagnostic testing services to enroll in Medicare, comply with IDTF performance standards and bill Medicare directly for their services (although CMS is not requiring mobile testing entities to bill directly for the services they furnish when such services are furnished “under arrangement” with hospitals). 
• CMS did not finalize in the rule its proposed exception to the physician self-referral rule that would have protected remuneration provided by a hospital to physicians on its medical staff under incentive payment or shared savings programs under certain conditions. Instead, in order to finalize the exception(s) CMS is reopening the comment period and soliciting detailed information on 55 specific questions related to such issues as the definition of key terms, safeguards against patient or program abuses, and various aspects of program design. 
• The final rule expands the quality measures that eligible professionals may report to qualify for incentive payments under the Physician Quality Reporting Initiative in 2009thatequal to 2% of their total Medicare allowed charges.  It also provides new PQRI reporting periods and provides for certain PQRI data to be submitted via clinical registries. In addition, as authorized by MIPPA, physicians and other eligible professionals who use a qualified electronic prescribing (e-prescribing) system to transmit prescriptions to pharmacies and submit required information on the claim may earn an incentive payment of 2% of their total Medicare allowed charges during 2009 (in addition to any PQRI incentive payment). 
• In the final rule, CMS is refining relative value units (RVUs), continuing the transition to a new “bottom up” methodology for practice expense RVUs, and applying the budget neutrality adjustment factor to the overall conversion factor (rather than applying the adjustment only to the physician work RVUs).
• CMS is codifying changes to the Part B drug average sales price payment methodology resulting from the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) that went into effect April 1, 2008, including the use of a volume-weighted methodology and revised payment rules for certain inhalation drugs. CMS had proposed several changes to the competitive acquisition program (CAP), which offers physicians the option to acquire certain injectable and infused Part B drugs from an approved CAP vendor rather than buying and billing the drugs directly. On September 10, 2008, CMS announced it was postponing the 2009 CAP indefinitely. In light of this postponement, CMS is not adopting changes in the CAP at this time, but the agency continues to solicit public feedback on a range of CAP issues.
• The final rule updates the End Stage Renal Disease (ESRD) facility wage index, implements a MIPPA provision providing a 1% increase to the ESRD composite rate and establishing a site-neutral base composite rate for hospital-based and independent dialysis facilities, and provides no update to the drug add-on payment.
• CMS has adopted a series of enrollment and documentation-related changes. Currently, newly enrolled physicians and non-physician practitioners may retroactively bill Medicare for up to 27 months prior to the effective date of their enrollment. The new enrollment rules will significantly limit retroactive billing by physicians and non-physician practitioners to no more than 30 days prior to the effective date of enrollment. In addition, the rule requires physicians and nonphysician practitioners to report to their carrier any changes of ownership, adverse legal actions, or change in practice location within 30 days (versus the current 90 days) or face revocation of Medicare billing privileges and the recoupment of Medicare payments from the date of the reportable change. Physicians and non-physician practitioners are barred from billing for services furnished after certain adverse actions. The final rule also requires providers and suppliers to maintain ordering and referring documentation (including the referring physician’s National Provider Identifier) for 7 years (rather than the proposed 10 years) years from the date of service, and it requires physicians and nonphysician practitioners to maintain written ordering and referring documentation for 7 years (rather than 10 years) from the date of service. CMS also clarifies the effective date of Medicare billing privileges.
• The final rule implements a MIPPA provision related to Medicare coverage of oxygen equipment. Specifically, MIPPA repeals a requirement that a supplier of oxygen equipment transfer title of the equipment to the beneficiary at the end of a 36-month rental period. Medicare payment for oxygen equipment will continue to be capped at 36 months (although payment will continue to be made for the oxygen contents). MIPPA requires the supplier that furnishes oxygen equipment during the 36-month rental period continue to furnish the equipment after the rental period ends for any period of medical need for the remainder of the “reasonable useful lifetime” of the equipment, even if the beneficiary moves out of the supplier’s normal service area. In addition, if a break in medical need occurs following the 36-month rental period, the supplier must resume furnishing the oxygen equipment when the beneficiary once again has a medical need for the oxygen equipment.  While MIPPA authorizes CMS to make maintenance and servicing payments for non-routine maintenance and servicing of supplier-owned oxygen equipment, CMS has determined that it is not reasonable and necessary to make such payments. However, for CY 2009 only, CMS will make payments when the supplier performs a routine maintenance and servicing visit (but not replacement parts) for oxygen concentrators and transfilling equipment following each period of continuous use of 6 months after the 36-month rental period ends. CMS welcomes comments on this issue, especially regarding whether these payments should continue past CY 2009.
• The final rule includes numerous other policy and payment changes, including provisions to address: potentially misvalued services; an expansion of the procedures subject to the multiple imaging procedure payment reduction; updates to the telehealth policy; potential refinements to geographic practice cost indices; revisions to the conditions of participation and other requirements affecting comprehensive outpatient rehabilitation facilities; changes to rehabilitation agency requirements, including provisions related to extension locations and emergency care; a prohibition on payment to suppliers of a continuous positive air pressure device when the supplier or its affiliate is directly or indirectly the provider of the sleep test that is used to diagnose a Medicare beneficiary with obstructive sleep apnea (although in the final rule CMS provides an exception for attended facility-based polysomnography); a new payment methodology for therapeutic shoes; and codification of other MIPPA self-implementing provisions, including an extension of the therapy cap exceptions process and changes to payments for clinical laboratory and ambulance services, among others. 

CMS has released the advanced text of the rule, and the official version is scheduled to be published in the Federal Register on November 19, 2008.  CMS is accepting comments on a limited number of provisions until December 29, 2008, including the exception for incentive payment and shared savings programs; certain MIPPA provisions, interim RVUs and pricing information for selected codes; and physician self-referral designated health services codes.