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Structuring Compliant Mobile Diagnostic Unit Arrangements

Mobile diagnostic units provide benefits for both referring physicians and their patients. They allow referring physicians to provide diagnostic services to their patients in the convenience of their own office, thereby saving their patients the trouble of traveling to another location for diagnostic tests.

A common arrangement with respect to mobile diagnostic units is the following: The reading physician leases the mobile diagnostic unit and contracts with the radiology technicians who perform the technical component (“TC”) in the referring physician’s office. The reading physician pays a fair market value fee for the lease of the mobile diagnostic unit and compensates the technicians a fair market value fee for their services. The reading physician reads such studies from a remote location. The reading physician bills for both the TC and the professional component (“PC”). There are certain limitations with respect to such an arrangement which need to be understood in order to structure such an arrangement in a compliant manner.

First, reading physicians must be aware of the supervision levels required in order for such reading physicians to have the right to bill for the TC of such studies. The levels of supervision required for furnishing the TC of a diagnostic test for a Medicare beneficiary who is not a hospital inpatient or outpatient are defined in the Code of Federal Regulations as follows:

“(i) General supervision means the procedure is furnished under the physician’s overall direction and control, but the physician’s presence is not required during the performance of the procedure. Under general supervision, the training of the nonphysician personnel who actually perform the diagnostic procedure and the maintenance of the necessary equipment and supplies are the continuing responsibility of the physician.

(ii) Direct supervision in the office setting means the physician must be present in the office suite and immediately available to furnish assistance and direction throughout the performance of the procedure. It does not mean that the physician must be present in the room when the procedure is performed.

(iii) Personal supervision means a physician must be in attendance in the room during the performance of the procedure” 42 C.F.R. § 410.32.

The U.S. Centers for Medicare & Medicaid Services (“CMS”) assigns one of the following numerical levels to each CPT code in the Medical Physician Fee Schedule Database with respect to the foregoing three levels of supervision:

1 Procedure must be performed under the general supervision of a physician
2 Procedure must be performed under the direct supervision of a physician
3 Procedure must be performed under the personal supervision of a physician

If the reading physician does not provide the required level of supervision with respect to the TC, then the reading physician is not the rendering physician with respect to such TC and will not be permitted to bill for such TC.1

Therefore, with respect to the arrangement described above, the reading physician can only bill for the TC if the applicable supervision level with respect to the CPT code applicable to such study is general supervision. Anything greater than general supervision would require the reading physician to be onsite at the referring physician’s office during the provision of the TC by the technicians.

In addition to the supervision requirements with respect to mobile diagnostic unit arrangements, when the reading physician performs the PC remotely and not in the referring physician’s office, consideration has to be given as to whether global billing is permitted by the reading physician. If the same physician or other supplier entity furnishes both the TC and the PC, but the PC is furnished in a different Medicare payment locality from where the TC is furnished, the PC of such test must be separately billed with modifier -26. Global billing is not allowed in such a scenario.

When the PC is billed separately from the TC, as identified by modifier -26, the reading physician (or his or her billing agent) must report the address and ZIP code of the reading physician’s location on the claim Form CMS 1500.

Furthermore, certain states prohibit what is known as the corporate practice of medicine. In these states, the mobile diagnostic unit arrangement must not run afoul of the corporate practice of medicine prohibition. New York is one such state which prohibits the corporate practice of medicine and prohibits what is referred to as fee-splitting. Therefore, in New York, with respect to the arrangement described above, the lease fee that the reading physician pays for the mobile diagnostic unit and the compensation the reading physician pays to the contracted technicians must not amount to fee-splitting. This means that the reading physician cannot split with the contracted technicians the fees such reading physician receives for the provision of the PC and the TC, since the technicians are not licensed to practice medicine. Rather, the lease fee and compensation paid to such technicians by the reading physician must be a fair market value lease fee and fair market value compensation not related to the fees received by the physician for his or her provision of medical services.

The physician referring the studies to the reading physician must also be mindful of the myriad of legal issues which arise with respect to such a mobile diagnostic unit arrangement, particularly with respect to any compensation arrangement with such reading physician and/or technicians.

Any such compensation arrangement must be structured to comply with the federal Anti-Kickback Statute, the federal Stark Law and any applicable state anti-kickback laws and/or applicable state physician self-referral laws.2

Contact our office if you need legal assistance structuring a compliant mobile diagnostic unit arrangement.

This article is for informational purposes only, does not constitute legal advice and shall not be deemed to create an attorney-client relationship.


1 The reading physician would be permitted to bill for the TC if the rendering physician with respect to the TC assigned his or her right to payment of the TC to the reading physician and the reading physician in turn paid the rendering physician a fair market value fee for such services. However, this will not be addressed in this article.

2 This article is by no means an exhaustive list of all legal issues which must be addressed when structuring a mobile diagnostic unit arrangement.

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