On September 27, 2008, Governor Schwarzenegger approved California Assembly Bill 2794, which will become effective January 1, 2009.  AB 2794 adds Section 655.8 to the California Business and Professions Code (the "B&P Code").

New B&P Code Section 655.8 prohibits any physician or any other person licensed under Division 2 of the B&P Code from billing for the technical component of CT, MRI or PET imaging services, unless the person actually performed or supervised the technical component.  No definition of "perform" is given.  "Supervision" has the meaning given it for Medicare purposes under Section 410.32 of Title 42 of the Federal Regulations (i.e., general, direct or personal).  Every diagnostic imaging test requires at least a general level of physician supervision.

Additionally, Section 655.8 requires that radiological facilities or imaging centers bill either the patient or the responsible third-party payor directly for the diagnostic imaging services rendered by those facilities.  Consequently, an imaging center may only seek payment for the technical component of services from the patient or the third-party payor.  The technical component of a diagnostic imaging service includes "personnel, materials, space, equipment, and other facilities."  Therefore, the party who bills the patient or responsible third-party payor for the technical component must provide the personnel, the materials, the imaging equipment and the office space of the diagnostic imaging services.

The imaging center may not receive any fee or payment from the referring physician for the technical component of diagnostic imaging services that the imaging center provides for patients of the referring physician or medical group.  This prevents referring physicians from purchasing the technical component of an imaging study from an imaging center and then billing globally for both the professional interpretation and the technical component.

There are several significant exceptions and qualifications to Section 655.8:

  • It only applies to PET, CT and MRI; therefore, it does not apply to X-Ray, ultrasound, mammography, or other imaging services.
  • It does not apply to any person, radiological facility, or imaging center which contracts directly with a health care service plan licensed under the Knox-Keene Act.
  • It does not apply to diagnostic imaging services performed within a physician and surgeon’s office, which is defined as either (i) an office of a licensee in solo practice, or (ii) an office in which services or goods are personally provided by the licensee or by employees in that office, or personally by independent contractors in that office, in accordance with other provisions of law.  Therefore, this section retains the Stark Law and PORA (B&P Code §§  650.01 and 650.02) exception for in-office ancillary services provided by a group practice.  Many in-office diagnostic imaging services can be structured to fit within this exception; although, the medical imaging services to be provided in each case will need to be analyzed to confirm compliance with Stark, PORA and Section 655.8.
  • This new law does not prohibit a physician or physician entity from billing globally if (i) the physician and his/her medical group did not order the diagnostic imaging services, and (ii) the physician and his/her medical group provides the professional interpretation of the diagnostic imaging service.  Consequently, radiologists may purchase the technical component of diagnostic imaging services assuming that neither the radiologist nor a person in their medical group ordered the diagnostic image.

On October 30, 2008 the Centers for Medicare and Medicaid Services released the final Medicare Physician Fee Schedule ("MPFS") 2009.  For providers who intend to submit claims to Medicare or other Federal payors, the MPFS sets forth the final anti-markup regulations for the technical component and professional component of diagnostic imaging services.  B&P Code Section 655.8 will need to be taken into consideration in planning or structuring billing arrangements related to diagnostic imaging services.

For further information, please contact Courtney Mathes at (619) 338-6533.