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Medicare’s reassignment of payment rules

By Michael R. Burke, Esq.

The Centers for Medicare & Medicaid Services (CMS) has numerous rules and regulations that govern the manner in which physicians and other health care providers are paid for their services by Medicare. This article will focus on what are commonly known as Medicare’s “reassignment rules,” which govern the right of an individual or entity to receive payment for services rendered by a health care provider on behalf of the individual and/or entity. Please note that Medicare’s reassignment rules do not apply to private third party payors such as Independence Blue Cross or Aetna; while these payors may follow Medicare’s rules on this topic, they are not bound to do so and may have their own unique policies for dealing with these issues.

A Medicare beneficiary has the right to assign the payment to be made by Medicare for services provided to him or her to the health care provider that provides such services. However, the Social Security Act also provides that Medicare does not pay any amounts that are due to a health care provider under an assignment from a beneficiary to any other person under reassignment, power of attorney or any other direct arrangement unless it meets one of the exceptions permitted by statute or regulation or included in one of the manuals published by CMS; this is commonly referred to as Medicare’s prohibition against reassignment of payment. The most extensive discussion of Medicare’s rules on the reassignment of payment from a physician to another individual or entity are found in the CMS Medicare Claims Processing Manual (Manual), Chapter 1, Sections 30.2 to Sections 30.2.16.

The most common exception to the basic prohibition on reassignment that is utilized by physicians is the exception that permits Medicare to pay the employer of a physician if the physician is required as a condition of his or her employment to turn over to his or her employer the fees for his or her services. There must be an employer-employee relationship between the physician and the individual or entity hiring the physician to perform services, and the terms of employment must provide that the employer has the right to receive the payment for the employee’s services within the scope of employment.

A Medicare carrier may also make payment under the reassignment rule exception that permits an individual or entity to submit a claim for services provided by a physician under a contractual arrangement with the entity, such as an independent contractor. These services may be furnished on or off the premises of the individual or entity submitting the bill and receiving the payment; this provision was changed several years ago as prior Medicare rules on this subject allowed an individual or entity to bill for the services of an independent contractor only when they provided services on the premises of the billing entity. The individual or entity receiving payment and the physician independent contractor that furnished the service are also subject to the following CMS program integrity safeguard requirements: (i) the individual or entity receiving payment and the person that furnished the service are jointly and severally responsible for any Medicare overpayment to that entity; and (ii) the independent contractor physician furnishing the service must have unrestricted access to claims submitted by the individual or entity for services provided by that person. While the initial iteration of this Manual provision required the preceding two provisions to be included in any physician independent contractor agreement, those provisions were changed and these provisions do not have to be expressly set forth in an agreement between the billing entity and the independent contractor.

The Manual also includes reassignment rule exceptions related to reciprocal billing arrangements and locum tenens arrangements. The requirements for these exceptions are almost identical, with the “reciprocal billing” arrangements exception being intended for a longer running arrangement and the locum tenens arrangements exception being designed for a short term absence (such as vacation, absence due to illness, etc.). The reassignment exceptions for these arrangements allow a patient’s regular physician to submit a claim and receive payment from Medicare in the physician’s name for covered visit services which the regular physician arranges to be provided by a substitute physician if: the regular physician is unavailable to provide the visit services; the Medicare patient has arranged or seeks to receive the visit services from the regular physician; the substitute physician does not provide the visit services to Medicare patients over a continuous period of longer than 60 days; and the regular physician identifies the services by using the proper modifier after the procedure code when billing the claim. An additional requirement applicable to locum tenens arrangements is that the regular physician pays the substitute physician on a per diem or similar fee-for-time basis. CMS notes that for locum tenens arrangements, the term “regular physician” includes a physician who has left a physician group and for whom the group has engaged the locum tenens physician as a replacement.

CMS also allows Medicare carriers to make payments in the name of a provider directly to an agent who furnishes billing or collection services under certain limited circumstances. However, two of the key requirements in this regard are that the agent’s compensation is not related in any way to the dollar amount billed or collected and the agent’s compensation is not dependent upon the actual collection of payments. Since most physicians who use billing companies pay them a fee based on a percentage of collections or the amount collected, this reassignment exception is not often utilized. In most billing arrangements, then, claims to Medicare are submitted in the name of the physician or group providing the service and payments received are paid directly to the group or physician in question.

There are other exceptions to the reassignment rule that are used less often, including payment by Medicare to a governmental agency where payment to the governmental agency or entity is permissible under one of the other listed reassignment exceptions above (e.g., employment); payments made directly to a bank; payment pursuant to court order; payments to university-affiliated medical faculty practice plans; and payments to health care pre-payment plans, cost-contracting HMOs, competitive medical plans and Medicare+Choice organizations.

CMS also allows payments to be made under exceptions to the reassignment rule for purchased diagnostic tests and for purchased diagnostic test interpretations. When an individual or entity wants to purchase the technical component of a diagnostic test, the following requirements apply: the purchasing physician or group may be the same physician or group as ordered the test or may be a different physician or group; the purchasing physician or group may not markup the charge for a test from the purchase price and it must accept the lowest of the fee schedule amount for such service, the physician’s actual charge or the supplier’s net charge to the purchasing physician or group. The purchaser must perform the interpretation on the diagnostic test; and the physician or supplier that furnished the technical component must be enrolled in the Medicare program.

In addition, the person or supplier that provides the technical component of diagnostic tests may submit the claim and receive payment for the professional component of diagnostic tests which that person or entity purchases from an independent physician or medical group if: the tests are initiated by a physician or medical group which is independent of the person or entity providing the tests and the physician or group providing the interpretation; the physician or medical group providing the interpretation does not see the patient; the interpreting physician must be enrolled in the Medicare program; and the purchaser must perform the technical component of the test. Many physicians and physician groups do not utilize this exception because they are unable to meet the requirements set forth above, and then simply instead satisfy the reassignment exception for independent contractor relationships.

Regulations implemented in the final 2008 Medicare Physician Fee Schedule (for the most part scheduled to be effective on January 1, 2009, but already effective for clinical laboratory tests) and proposed revisions to such regulations included in the recently issued proposed 2009 Medicare Physician Fee Schedule have proposed special payment rules which limit the amount of payment to a physician or group for the purchase of either the technical and professional components of diagnostic tests and which would, among other things, create limitations on where diagnostic tests may be performed, implement limitations on the calculation of the “net charge” of the supplier for purposes of purchased technical components, and restrict the amounts that may be billed for the professional component of diagnostic tests in certain circumstances. While an analysis of these rules is beyond the scope of this article (and they are likely to be substantially revised before they are finalized towards the end of 2009), physicians must be aware of the existing and proposed rules related to the prohibition on marking up the costs of diagnostic tests.

The penalties for failure to follow the reassignment rules set forth in the Manual include termination of a provider’s Medicare participation agreement or revoking the right of a provider to receive assigned payment from Medicare for physician services. In addition, Medicare law provides that any person who accepts assignment of benefits under Medicare and who “knowingly, willfully, and repeatedly” violates its Medicare assignment agreement shall be guilty of a misdemeanor and subject to a fine of not more than $2,000, imprisonment of not more than six months, or both.

Medicare’s rules on reassignment of payment are another set of hurdles that must be overcome by physicians and physician groups in attempting to ensure that they are paid correctly in the Medicare program. While many of these rules have changed little over time, the 2009 Medicare Physician Fee Schedule solicited comments as to whether, in lieu of the anti-markup provisions discussed above, CMS should prohibit reassignment in certain situations and require physicians supervising the technical component of diagnostic tests or performing the professional component of a diagnostic test to bill Medicare directly. As such, the reassignment rules related to diagnostic tests may be the subject of further important changes in the near future.

Michael R. Burke, Esq., is a shareholder with the health care law firm of Kalogredis, Sansweet, Dearden and Burke, Ltd. located in Wayne, Pa.

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