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Congress is, once again, engaged in its annual “death dance” with the medical community. Absent some extraordinary action by Congress, physicians are scheduled to take a 10 percent pay cut in Medicare reimbursement rates on January 1, 2008. As of this writing, the law makers were a long way from consensus on the resultant fix for physician pay; however, a consensus appears to be building. Both houses of Congress and both parties agree that action is required. The question seems to be, would Congress impose a two-year fix and cease this annual ritual, or alternatively oppose a one-year fix, which appears to be building momentum? A two-year payment fix for doctors would cost as much as much $20 billion. A one-year fix about half that amount. Since all new physician payment costs must be offset in other areas, the amount of the fix is a key factor in resolution.

As the debate is ongoing, the Centers for Medicare and Medicaid Services published, on November 1, the new physician fee schedules for 2008. The published schedules include the 10 percent rate cut. This publication stirred outrage from organized medicine, but the publication also included some other interesting items of note. Specifically, the final regulation did not contain the potentially seismic changes in the physician self-referral area; however, CMS did indicate that it intends to address the self-referral revisions at a future date.

Particular subjects that were referenced for future rule-making include obstetrical malpractice insurance subsidies, ownership interest in retirement plans, unit of service (per click) lease agreements, percentage-based compensation arrangements, “stand in the shoes” provisions, disallowance for non-compliant financial relationships, and, finally, burden of proof.

Another item addressed in the final CMS regulations was change to the reassignment rules in the anti-mark-up provision. Under the new anti-mark-up provisions, physicians will not be permitted to mark up diagnostic tests through their practices unless the tests are provided directly by the practice. This change will put at issue all shared block leases and other space-sharing arrangements for diagnostic testing equipment and services. The restriction on these arrangements could effectively prohibit physicians from providing diagnostic testing, whether pathology or imaging, except where the services are provided directly from principal offices or a central location for a bona fide group practice.

In a separate release, CMS has also issued new regulations in the Phase III Stark Rule. CMS has indicated that there will be technical corrections issues in the Stark area soon. In the meantime, await further developments from an active climate at CMS. The final physician fee schedule rule is available at http://www.cms.hhs.gov/PhysicianFeeSched/downloads/CMS-1385-FC.pdf



Richard G. Cowart is chairman of the health law/public policy department of Baker, Donelson, Bearman, Caldwell & Berkowitz. He can be reached via dcowart@bakerdonelson.com.



December 2007

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