Coding & Reimbursement

Purchased Diagnostic Tests

By Suzanne L. Corcoran, COE

Physicians have available many different devices to perform sophisticated diagnostic tests. Medicare has special rules for billing when a physician does not own testing equipment but engages an outside party to provide it for the practice.

Q. How would a practice bill if the equipment is leased or rented?

A. A written rental or lease arrangement qualifies as "ownership" of the equipment. As long as the physician or an employee of the practice performs the test, Medicare does not require that the practice own testing equipment. Either a long-term lease or a short-term rental agreement suffices.

Billing for the tests is the same as though the equipment had been purchased. Note that Medicare considers leased employees (e.g., staff leasing companies) to be employees for this purpose.

This situation often arises with new testing devices, and the physician wants to determine how valuable it will be to the practice before making a capital purchasing decision.

Q. What if the equipment is rented and a technician employed by the rental company performs the test?

A. In some instances, the physician may have access to the testing equipment but may not own it, or may not employ a skilled technician to operate it. He or she may contract with an independent individual or company. For example, a general ophthalmologist may want the information from fluorescein angiography tests but does not want to purchase the camera or employ a nurse or otherwise qualified person to perform the injections.

Under the Medicare physician fee schedule, reimbursement for some tests is subdivided into a technical component (i.e., the test itself) and a professional component, which is the physician service associated with the test (the interpretation). In the situation where: a) a physician does not own a specialized diagnostic instrument; and/or: b) the physician does not employ a technician to operate the device, different reimbursement issues exist.

If another entity provides either the equipment or the operator, the physician (or the physician's medical group) can charge for the technical component by following these criteria:

1) The purchasing physician or group may not "mark up" the "purchase price" of the test.

2) The purchaser must perform the interpretation.

3) The physician or other supplier that furnished the technical component must be enrolled in the Medicare program. No formal reassignment is necessary.

4) The "purchase price" cannot be based on volume, (i. e., "a volume discount").

5) The purchaser must accept the lowest of the following as full payment for the technical component of the test:

► the Medicare fee schedule amount for the technical component
► the physician's actual charge
► the supplier's net charge to the purchasing physician.

The purchasing physician may not disguise the purchased service and bill the test as a global test.

To submit a claim for a purchased diagnostic test, Box 20 of the CMS-1500 claim form (or electronic equivalent) must be completed when the diagnostic test is subject to purchase price limitations (i.e., those with a technical component). The purchase price under charges must be shown if the "yes" block is checked. A "yes" check indicates that an entity other than the entity billing for the service performed the diagnostic test. A "no" check indicates that "no purchased tests are included on the claim."

When "yes" is annotated, item 32 must be completed with the independent supplier's name, address, ZIP code and NPI /PIN. When billing for multiple purchased diagnostic tests, each test must be submitted on a separate claim form.

As an alternative arrangement, the ordering physician may claim reimbursement for the professional component alone and ask the performing physician or independent supplier to bill for the technical component.

Q. What about non-Medicare patients?

A. As always, private insurers are not bound by Medicare's policies but may have similar guidelines. In addition, there may be state laws governing these arrangements; when in doubt, check with your state society or a health care attorney. OM