Anthem Rolling Out More Anatomic Path Price Cuts

Insurer is also moving pathology groups from professional contracts to ancillary service contracts

CEO SUMMARY: Anthem is making big changes to its relationships with anatomic pathology groups. Getting most of the attention at the moment are the insurer’s letters announcing price cuts for anatomic pathology services of 50% to 70% of Medicare fees. But another major change may also trigger negative consequences for pathologists. Anthem is moving pathology contracts out of its professional services unit and over to its ancillary services unit, which typically contracts with clinical labs.

IN RECENT WEEKS, anatomic pathology groups in a growing number of states received notices from Anthem, one of the nation’s largest insurers with 40.5 million beneficiaries. The notices announce major changes in the way Anthem contracts for anatomic pathology services.

Anthem’s first change is to cut the prices it pays for most anatomic pathology (AP) services by 50% to 70% of 2018 Medicare fees. These fee cuts will get the most attention by pathology groups and their practice advisors.

But it is the other substantial change that Anthem is pushing on pathology groups that has the potential for serious negative consequences over the long term. That change is to move the contracts it has with pathology groups from the Anthem’s professional services division to its ancillary services division.

Effectively, Anthem will now treat physicians who are board-certified in pathology in the same way that it treats clinical laboratories and other ancillary providers. This change has interesting consequences, one of which is how pathologists will be accredited with the health insurer going forward.

Anthem’s latest effort to cut what it pays for anatomic pathology services started last fall. In November, Anthem made significant cuts in payment rates for the professional component (PC) for lab services in Missouri, according to Vachette Pathology, a consulting firm in Sylvania, Ohio. At the time, Anthem slashed what it pays for the PC portion of certain tests in the 80000 series of CPT costs by as much as 70%, Vachette said.

Reporting on Anthem’s rate cuts to various anatomic pathology services, APS Medical Billing, in Toledo, Ohio, said in a letter to its clients that the rate changes Anthem was making vary widely by state and affect both the professional component and technical component.

Last month, the American Academy of Dermatology Association (AADA) sent a letter to Anthem, expressing serious objections to the price cuts. Writing on behalf of the more than 14,000 association members, AADA President George Hruza, MD, MBA, said the cuts will result in reductions in Anthem’s payment for lab services of 50% to 70%. Hruza based this estimate on a notice of a change in a contract that dermatopathologists in Ohio received on April 17.

“It is the AADA’s understanding that this material change in contract will reduce reimbursement for most office-based pathology lab services to 50% of 2018 Medicare rates, with 86 pathology tests being reduced to 70% of 2018 Medicare rates,” Hruza wrote. “In addition to the announced contract modification in Ohio, it is understood that similar reductions in dermatopathology reimbursement may be implemented in other Anthem states.”

A Rate Realignment?

In correspondence with Anthem, pathologists have learned that the insurer calls the payment cuts it is making to AP services, a “rate realignment.”

Anthem said it wants its payments to be site-neutral—meaning payment will be the same regardless of whether the service is delivered in a hospital-based lab or an independent lab. The insurer’s aim is “to align compensation for lab rates in all settings so that its members would pay the same in out-of-pocket costs regardless of the site of service,” pathologists said.

“These steep cuts in the professional component for pathology services are a significant concern because they are unsustainable regardless of whether they affect hospital-based services or independent-lab services,” commented Vachette’s Vice President of Client Services Ann Lambrix.

“As the second-largest health insurance company with 40.5 million beneficiaries, Anthem had previously been among the best-paying insurers,” added Lambrix.

“Hospital-based labs may struggle more because hospital labs typically serve patients who are seriously ill and often have multiple conditions,” she explained. “That is why testing for hospital patients is more complex and comes with higher costs. Payers recognize that fact and have generally reimbursed hospital labs at higher rates for that reason.”

However, Anthem’s deep price cuts ignore this reality. It is why The Dark Report believes that a growing number of pathology groups are sending termination notices to Anthem. These groups recognize that Anthem’s price cuts—coming on top of Medicare price cuts—will erode the financial stability required for groups to sustain accurate, high-quality services.

Anthem’s Price Cuts

After introducing the lower rates for the professional component in Missouri last fall, Anthem next introduced lower prices on Jan. 1 in Alaska and Washington. Based on letters sent to its pathology group clients, Vachette said Anthem is scheduled to cut AP rates as follows:

  • July 1: California, Georgia, and Indiana.
  • July 10: Ohio.
  • Aug. 1: Wisconsin.
  • Sept. 1: Kentucky, Virginia and West Virginia.
  • Jan. 1, 2020: New York.
  • No date yet: New Hampshire.

“Providers in Kentucky, Colorado, Connecticut, Maine, and Nevada are expected to experience similar cuts in the near future,” Lambrix added.

In a note on its website, Vachette explained that many of the new rates reflect a roughly 70% drop from previously-negotiated reimbursements for many groups and are a significant reduction from 2019 Medicare rates published in the Physician Fee Schedule and Clinical Laboratory Fee Schedule.

American Academy of Dermatology Sends Letter of Objection on Price Cuts to Anthem

IN ITS MAY 13, 2019 LETTER TO ANTHEM, the president of the American Academy of Dermatology Association (AADA) voiced serious concerns about the deep price cuts the health insurer was implementing to many anatomic pathology CPT codes. AADA President

George Hruza, MD, MBA, FAAD, asked Anthem to establish a dialogue with AADA to work through these concerns. Relevant sections of the AADA letter are highlighted below:

The AADA is concerned that this material change impacting dermatology office labs will create an undue burden and force many of these labs out of the Anthem network. In forcing these labs to either accept rates below the cost of providing the service or terminate their contract, dermatologists will lose access to the dermatopathologists they rely upon to serve your patients through an inadequate network of dermatopathology labs.

Valuation of Procedures

The American Medical Association (AMA) Relative Value Scale (RVS) Update Committee, commonly referred to as the RUC, is a transparent multispecialty committee that reviews and values the resources required to provide physician services. Through this review, the RUC evaluates physician time, direct expense, and the indirect expense incurred to deliver care, including diagnostic pathology services, and makes a recommendation to CMS. CMS makes any adjustments in value that it deems warranted and then converts them into RVU’s which is the foundation of the Medicare Fee Schedule.

All codes receive extensive review to ensure the value is reflective of the effort and resources required to deliver the service. In 2012 CPT 88305 (Level IV-Surgical pathology and microscopic examination), the most common code in dermatology, underwent this review and the value decreased by 33%. With a robust process in place to determine the value of a service, any reduction in reimbursement for pathology services below the Medicare Fee Schedule [by Anthem] is not warranted given the validity of the current CMS value.

The AADA is also concerned that the steep reduction in reimbursement, without justification, could be considered a violation of the good faith and fair dealing covenants requirements in these contracts [with Anthem].

Anthem Plans in Ohio

In the same note, Vachette quoted from a letter Anthem sent to pathologists in Ohio. “The 80000 to 89999 CPT codes are involved, although certain in-office testing will be exempt from these changes,” the letter said. “Rates for 0362T and 0373T will be reduced to be consistent with the recent changes to those code definitions that reduce the time per unit from 30 minutes to 15 minutes. The rate for 97153 will be reduced to reflect an update to the manner in which adaptive behavior services may be billed.”

The new rates will differ from one state to another. “For example, in Kentucky 88300 to 88309 will not be impacted, possibly as a concession to those [pathologists] who have already pushed back against these changes in other states,” Vachette said.

Pathology groups that disagree with these changes must send a Notice of Objection within 10 days of receiving Anthem’s notice, Lambrix said. This short time to object is a source of contention.

APS Medical Billing encouraged its clients to object to the rate changes each time a lab or group gets a notice. “In many cases, groups have objected and sent notice of termination for the impacted plans,” the biller said.

Lambrix agreed, saying some groups have said they will end their contracts rather than take drastic cuts in payment that do not cover their costs. She could not estimate how many labs and pathology groups would end their Anthem contracts.

Anthem Responds to Contract Questions

IN RESPONSE TO A QUESTION from THE DARK REPORT, Anthem provided the following statement: “Anthem’s goal is to help ensure our consumers have access to high quality, affordable healthcare, and one of the ways to help achieve that goal is to routinely analyze and rebalance professional fee schedules for medical services, including lab services.

“This evaluation includes competitive benchmarking, analysis of government reimbursement, consideration of changes in care delivery models, and the impact of rate changes on consumers. Anthem’s adjustment to office-based lab fee schedules is an effort to address the wide disparity in prices for this service. Anthem has successfully worked to obtain competitive pricing with a robust network of providers and is committed to providing numerous lab testing access points for our consumers at rates that are consistent and clear,” said the statement.

“Anthem followed the notice provisions defined in our provider agreements when making changes to the fee schedule. We won’t comment on the specifics of Anthem’s fee schedule, which is proprietary and confidential,” said the insurer.

Payment Cuts of 70%

“As a result of the changes, Anthem is instituting a decrease in payment of about 70% in the most extreme instances,” she added. “At that point, I called Anthem and said, ‘These numbers must be wrong,’ but I was told they were correct,” Lambrix explained. “At the same time, I was told that a lot of pathologists in Missouri had called to complain and that Anthem was reconsidering.

“One pathology group we work with in Ohio had a reduction from Anthem of roughly 42% of Medicare on all codes in the 80000 series except for 88305, which got a $7 increase,” she explained.

In Missouri, pathologists were not much concerned when Anthem announced that new lower rates were coming, Lambrix said. “In November, the letters from Anthem indicated there would be changes to the fee schedule in Missouri,” she explained. “But the way the letters went out didn’t raise any alarms until the pathologists there started getting paid at the lower rates and noticed that the fee schedules had changed significantly.

“Previously, pathologists in Missouri had been getting paid about $66 for the PC under the old rates, but under the new rates, the fee schedule calls for paying less than $15 for the professional component,” she added. “That’s a $50 cut in payment— a 78% decrease—for the PC portion of CPT88305.”

Contact Ann Lambrix at (517) 486-4262 or alambrix@vachettepathology.

Anthem Ends ‘Professional Provider’ Agreements, Moves Pathology Groups to ‘Ancillary Provider’

IN PAST MONTHS, Anthem sent anatomic pathology groups in several states letters that terminated their “professional provider agreements” with the insurer. In place of those agreements, Anthem enclosed a new “ancillary provider agreement” that it uses for clinical laboratory providers. This is an unprecedented action in the field of managed care contracting and has many implications for the pathology profession.

Reproduced below is one example of an Anthem letter sent to an anatomic pathology group in the Midwest. This letter terminates the group’s existing professional provider agreement and offers the pathology group an ancillary provider agreement in its place.

Excerpts from Anthem letter to a Pathology Group:

Re: Notice of Material Amendment and Termination of Professional Provider Agreement

Dear Provider:

Thank you for participating in our Anthem Blue Cross and Blue Shield (Anthem) networks.

During the past year, we have reviewed your billing patterns and determined your organization should be contracted as a laboratory. Therefore, it is necessary to terminate your existing professional provider agreement (“Current Agreement”) and move you to the appropriate laboratory provider agreement, as follows.

Pursuant to the Termination section of your Current Agreement, this letter serves as notice that your Current Agreement will be terminated effective August 22, 2019.

In support of having the appropriate agreement in place to continue your participation in the Anthem networks, enclosed for your signature is an Ancillary Provider Agreement (“New Agreement”) for laboratory providers. This New Agreement will become effective 45 days following Anthem’s receipt of the signed and dated New Agreement, but must be received no later than July 1, 2019.


Leave a Reply


You are reading premium content from The Dark Report, your primary resource for running an efficient and profitable laboratory.

Get Unlimited Access to The Dark Report absolutely FREE!

You have read 0 of 1 of your complimentary articles this month

Privacy Policy: We will never share your personal information.