Maryland State Bar Association Health Law Section

1. Maryland State Bar AssociationHealth Law Section Understanding Medicare Billing Issues: Anti-Markup Rules, Independent Diagnostic Testing Facility Rules, and Liability Risks Associated with Non-Compliance with Medicare Billing Rules Kathleen M. Stratton Crowell & Moring LLP 1001 Pennsylvania Avenue, N.W. Washington, D.C. 20004 (202) 624-2723

2. 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.

3. 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.

4. 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

5. 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.

6. 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: • Physician practice is owned by physicians or hospital • The entity primarily bills for physician services (e.g. evaluation & management (E&M) codes and not for diagnostic tests • It furnishes diagnostic tests primarily to patients being treated by physicians in the practice • The tests are performed and interpreted at the same location where the practice physicians also treat patients for their medical conditions.

7. 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.

8. 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

9. 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

10. 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?

11. 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

12. 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

13. 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

14. 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

15. 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