CMS Loosens Restrictions on Medicare Billing Reassignment of Physician Fees

Hospitals, hospital systems, clinics, medical groups, and physicians receive long–awaited relief from Medicare's limits on who can bill for the services of physicians. Billing reassignment rules permit only the physician who actually furnishes the service to bill Medicare and receive payment for the service, unless one of the exceptions applies. Historically, in order to qualify for one of the more common exceptions, the billing provider has to employ the physician. This exception, however, is limited in some cases based on the corporate practice of medicine doctrine. Another exception applies only to services furnished in premises owned or leased by the billing provider. Such restrictions, however, do not accommodate many of today's innovative health care arrangements. A good example is a hospital's use of staffing companies to provide specialty services. Historically, the reassignment rules require the hospital to do the billing in such cases. Now, Medicare permits an entity to submit Medicare bills and receive payment for services furnished by a physician with whom it has a contract, regardless of where the services are furnished or whether an employer–employee relationship exists. This new rule greatly enhances flexibility for hospital–physician contracting.

As revised, the Medicare Claims Processing Manual provides:

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.

When implementing this new rule, providers and physicians must ensure that their contracts contain certain safeguards identified by the Centers for Medicare and Medicaid Services (CMS). Specifically, the contracts should specify that:

  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; and

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

See, Medicare Claims Processing Manual, Chapter 1 – General Billing Requirements, §30.2.7 – Payment for Services Provided Under a Contractual Arrangement Carrier Claims Only.

The CMS issued these revisions in Transmittal No. 111, dated Feb. 27, 2004. They are to be implemented by Carriers March 12, 2004. These revisions implement congressional directives made in Section 952 of the 2003 Medicare Modernization and Improvement Act, signed into law Dec. 8, 2003.

Hospitals and other providers should review their affiliations, billing relationships, and contracts with physicians to determine whether this new rule potentially creates opportunities for enhanced organizational and financial efficiencies.


Any questions about this Advisory should be directed to:

Susan L. Fine, Seattle, (206) 628–7684, susanfine@dwt.com
Gerry Hinkley, San Francisco, (415) 276–6530, gerryhinkley@dwt.com
Robert G. Homchick, Seattle, (206) 628–7676, roberthomchick@dwt.com
Thomas E. Jeffry, Jr., Los Angeles, 633–6882, tomjeffry@dwt.com
M. Steven Lipton, San Francisco, (415) 6550, stevelipton@dwt.com
Clark Stanton, San Francisco, (415) 276–6538, clarkstanton@dwt.com

This Health Law Advisory is a publication of the Health Law Department of Davis Wright Tremaine LLP. Our purpose in publishing this Advisory is to inform our clients and friends of recent developments in health law. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations.