United States: Rules on Outside Reads Shift Again -- Initial Good News for Radiologists Turns Negative with Latest CMS Missive

A section in the new Medicare reform law approved by Congress last year changed this requirement to allow independent contractor physicians to reassign benefits when the service is performed away from the premises, permitting, for example, remote teleradiology interpretations.

Even with this change, however, the Centers for Medicare and Medicaid Services appears to want to hold the line on offsite contracting. In a recent advisory, CMS said that, despite the new statute, reassignment will be permitted only if image interpretations by independent contractor radiologists are provided on the premises of the billing physician group.

The change in the Medicare reform law was adopted in response to a March 2003 General Accounting Office report noting that the onsite requirement created barriers to staffing hospital emergency departments. The new statutory language was primarily designed to authorize reassignment of benefits and permit contracting by groups such as emergency medicine practice management firms. As amended, the new law permits the staffing companies to contract with hospitals to staff emergency departments and retain contractor physicians-not just physicians with whom the staffing companies have employment relationships-to provide those services. But the new law has other significant ramifications.

Medicare regulations state that "Medicare does not pay amounts that are due a supplier under an assignment to any other person under reassignment, power of attorney, or any other direct arrangement." Physicians have used a limited exception to that rule that allows payment if a contractual agreement exists between the healthcare facility and the supplier, under which the facility bills for the supplier's services. This exception was of little help in permitting reassignment because it was available only if the physician services were performed on the premises of the healthcare facility, such as a physician's office. The "clinic" exception could be used only when radiologists'
interpretation services were provided on the premises of the clinic by the independent contractor radiologist. (This condition is not a requirement for independent diagnostic testing facilities.)

Services such as interpretations of diagnostic tests provide an example of the limitations posed by the clinic exception. Ideally, nonradiologist physicians, such as an orthopedic group practice, could contract with diagnostic radiologists to provide teleradiology interpretations of MR scans off the site of the orthopedic practice. As independent contractors, the radiologists would normally reassign their right to bill and receive payment to the orthopedic practice, which would bill globally for the technical and professional components of the MR scan. The economics of this arrangement would improve the quality of care for patients because interpretations would be performed by the radiologist rather than a less experienced orthopedic physician.

As sensible as this arrangement might be, it has been hampered by an additional requirement: In order for the orthopedic group to bill globally for the technical and professional components of the MR scan, the radiologist's interpretation had to be performed while the radiologist was physically located at the physician group practice. The additional costs of being present, rather than providing the interpretation remotely, may deter the long-term engagement of radiologists as independent contractors. The prohibition on reassignment has thus erected a barrier to constructive interpretation agreements.

Failure to maintain documentation of compliance with the reassignment prohibition and its exceptions can result in revocation of the right to receive Medicare payment. The Office of the Inspector General has indicated that it will consider claims made in violation of the prohibition on reassignment to constitute violations of the False Claims Act.

Prior to last year's Medicare reform law, the statutory language describing the on-premises requirement for reassignment by independent contractor physicians read as follows:

"[P]ayment may be made . . . (where the service was provided in a hospital, critical access hospital, clinic, or other facility) to the facility in which the service was provided if there is a contractual arrangement between such physician or other person and such facility under which such facility submits the bill for such service . . ."

The Medicare reform law deleted that language and substituted the following:

"[P]ayment may be made . . . where the service was provided under a contractual arrangement between such physician or other person and an entity (as defined by the Secretary), to the entity if, under the contractual arrangement, the entity submits the bill for the service and the contractual arrangement meets such other program integrity and other safeguards as the Secretary may determine to be appropriate . . ."

Congress instructed the Secretary of Health and Human Services to implement the change via program instructions to Medicare contractors. On Feb. 27, CMS issued Transmittal 111, which revised the Medicare Claims Processing Manual. The manual now contains the following language:

"A carrier may make payment to an entity (i.e., a person, group, or facility) enrolled in the Medicare program that submits a claim for services provided by a physician or other person under a contractual arrangement with that entity, regardless of where the service is furnished. Thus, the service may be furnished on or off the premises of the entity submitting the bill. The contractual arrangement between the entity and the physician or other person should include the following program integrity safeguards:

"1. Joint and several liability is shared between the entity submitting the claim and the person actually furnishing the service, for any Medicare overpayment relating to such claim."

"2. The person furnishing the service has unrestricted access to claims submitted by the entity for the services provided by that person."

This language explicitly declares that independent contractor physician services may be provided in a location other than the premises of the entity to which the physician reassigns benefits. The change in Medicare reassignment rules therefore appeared to create opportunities for radiologists to enter into providing services as independent contractors through mechanisms such as global billing arrangements and teleradiology.

Now, however, CMS has expressed second thoughts on the subject.

In the new proposed Medicare physician fee schedule rules published last month, the agency advises that "physician group practices should be mindful that compliance with the [Stark] in-office ancillary services exception to the physician self-referral prohibition [which ] requires that a physician who is engaged by a group practice on an independent contractor basis must provide services to the group practice's patients in the group's facilities."

Because the professional component of diagnostic radiology services is a "designated health service" under the Stark law, independent contractor radiologists must continue to provide their interpretation services on the premises of the group performing the test in order for reassignments to be possible. Otherwise, radiologists must separately bill Medicare for services not read on the premises.

CMS also cautions that contractual arrangements involving reassignment may not be used to camouflage inappropriate fee-splitting arrangements or payments for referrals. The agency is soliciting public comment on potential program vulnerabilities and on possible additional program integrity safeguards against such vulnerabilities. CMS has communicated its intention to monitor reassignment arrangements for potential program abuse.

This article is presented for informational purposes only and is not intended to constitute legal advice.