Illinois Pathologists Dodge Medicaid CP Payment Cut

Illinois Medicaid Program was prepared to end payment for clinical pathology professional services

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CEO SUMMARY: Pathologists in Illinois acted swiftly to this month’s announcement that the Illinois Medicaid program would cease to directly pay pathologists directly for clinical pathology professional services. The new policy was to take effect on October 1, 2008. As this issue of THE DARK REPORT goes to press, there is breaking news that educational efforts by the Illinois Society of Pathology have led the state’s Medicaid program to rescind implementation of the announced cuts to CP professional services.

ONCE AGAIN, clinical pathology professional component reimbursement is under attack by a payer. However, swift action by pathologists appears to have forestalled efforts by one state’s Medicaid program to cease direct payments for these services.

It was September 9 when the Illinois Department of Healthcare and Family Services (DHFS) said it would no longer reimburse providers for the professional component (PC) of automated laboratory services, effective October 1, 2008. The net effect for individual pathologists in Illinois was predicted to be a loss of about $25,000 for the year. For pathology groups in Illinois, the loss could have been as much as six figures annually.

Now comes news that the Illinois Medicaid program has decided not to cease payment for clinical pathology professional services. The decision was made following meetings that took place last week between pathologists and representatives from the Illinois Society of Pathologists (ISP) and officials from the Illinois Department of Healthcare and Family Services.

“IDHFS said on Friday, September 26, that it would reduce its base rate for automated lab services by 25% for the professional and the technical component rather than eliminate the professional component fees,” stated ISPs Executive Director Pamela Cramer today in an interview with THE DARK REPORT. “The change will be effective October 1.

“Pathologists are waiting for IDHFS to issue its fee schedule so they can determine the net effect of the change in reimbursement,” she added. “What the IDHFS has done is change the formula. They are leaving in the professional component and instead the department will reduce its base rate. They are recognizing the professional component, which is good for pathologists. But it’s still a 25% cut for the professional and the technical component.

“One positive outcome triggered by this issue is that, we have developed a good relationship with the IDHFS now and they recognize what pathologists do,” stated Cramer. “Following numerous meetings and phone calls, IDHFS now better appreciates pathology services.

“Previously, IDHFS was simply making a blind cut based on how other state Medicaid programs reimburse for pathology. They didn’t realize that the rates in Illinois are different than they are in other states.

“Pathology is such a small percentage of total state spending and IDHF officials didn’t have a precise understanding of what pathologists do,” continued Cramer. “Now, this issue has given the Illinois society an opportunity to have a relationship with IDHFS. After meetings last week, IDHFS officials said, ‘Thank you for enlightening us. We had no idea.’ So, in that respect, it was a win-win.”

When it announced this no-payment policy on September 9, DHFS stated that the change would affect CPT codes 80000 through 85999. Any claim submitted with a 26 modifier would also be rejected.

While news that the Illinois Medicaid program will continue to pay for clinical pathology professional component services is welcome, the trend of payers targeting reimbursement for these services remains worrisome. “Over the past 10 years, a number of public and private payers have ceased payment for clinical pathology professional component services,” said Mick Raich, President and CEO of Vachette Pathology, a company in Blissfield, Michigan, that provides business services to pathology groups nationwide. “Any time a payer establishes a policy of non-payment for clinical pathology professional services, it undermines the long term financial solvency of pathology groups.”

Clinical Pathology Services

Since Medicare instituted Diagnosis Related Groups (DRGs) for hospital payments in the 1980s, fees for clinical pathology (CP) professional component services have been under attack by payers. Starting about five years ago, Aetna, Humana, and United Healthcare stopped paying for CP professional services,” noted Raich. “This recent attempt by the Illinois Medicaid program shows that this trend has momentum. That’s not auspicious for the pathology profession.”

According to Attorney Jane Pine Wood of McDonald Hopkins, the attempted action by the Illinois Medicaid program action continues a trend established many years ago. “The Medicaid program in Illinois is one of the few that continues to pay pathologists directly rather than paying the hospital for these services,” she explained. “The Arizona Medicaid program stopped paying pathologists for the clinical pathology professional component about eight or more years ago. Since then, we have seen that Medicare and many state Medicaid programs do not pay pathologists directly for these services.

Experts have warned against the use of arbitrary cutbacks to provider compensation as a way to balance state Medicare program budgets, declaring that this is a short-sighted policy. At some point, these arbitrary reductions in provider reimbursement will fall so far below the cost of providing such services, that physicians, including pathologists, will find it impossible to provide services to Medicaid patients.

Stepping from the Illinois state level to the national level, pathologists and laboratory administrators should recognize that a growing number of states are no longer able to fund their Medicaid programs at an adequate level, given three factors. The first is the year-to-year increase in the cost of health services.

The second factor is the increased utilization of health services by the beneficiaries covered by state Medicaid programs. These individuals often have multiple, chronic diseases and conditions and their healthcare needs can be both complex and expensive. The third factor is the increased number of beneficiaries who enroll in Medicaid each year. That raises the overall cost of a state’s Medicaid program from one year to the next.

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