New Senate Bills Include Repeal of Competitive Bid

Bills would kill lab competitive bidding demo, eliminate cut to physician fees, and extend TC

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CEO SUMMARY: One proposed Senate bill would repeal the laboratory competitive bidding demonstration project, replace the 10.1% cut to physician fees with a 1.1% increase, and extend the so-called technical component (TC) grandfather clause. Senator Max Baucus (D-Montana), Chairman of the Senate Finance Committee, is sponsor of the bill (called S 3101). Congress is under pressure to pass a Medicare funding bill before July 1, 2008, when the 10.1% reduction in physician fees will occur.

EFFORTS TO DERAIL the Medicare Competitive Bidding Demonstration Project for Part B Laboratory Services have shifted from a federal court in San Diego, California, to the nation’s capital in Washington, DC.

With Congress gearing up to pass a Medicare funding bill for fiscal 2008, there is optimism that a clause to repeal the Medicare Laboratory Competitive Bidding Demonstration Project may be included in the final legislation passed by Congress.

Competitive Bidding Repeal

Source of this optimism is a Senate bill introduced on June 6. This bill includes a clause to repeal Medicare Competitive bidding for Part B Laboratory Services. Also included in the bill, “The Medicare Improvement for Patients and Providers Act of 2008” (S 3101), is a provision to avert a 10.1% cut in the Medicare physician fee schedule, and an extension of the so-called “technical component (TC) grandfather clause” for 18 months.

All three provisions are significant and positive developments for the lab industry, said Alan Mertz, President of American Clinical Laboratory Association (ACLA), in Washington, DC.

Senator Max Baucus (D-Montana), introduced S 3101. Baucus is the Chairman of the Senate Finance Committee. Mertz reports that Senator Chuck Grassley (R- Iowa) is sponsoring a Republican version of the bill that includes similar language for repeal of Medicare competitive bidding.

“We’re very pleased with this bill, and, of course, it would be significant to have both sides of the aisle supporting a bill that would repeal the competitive bidding project,” Mertz said. “But, as it is written now, S 3101 is a legislative triple play for important laboratory services and a grand slam for Medicare beneficiaries.

“The three provisions are significant because each one affects the lab industry in a different yet substantial way,” he noted. “First is the competitive bidding demonstration, which would be eliminated. Second is stopping the cut in the Medicare physician fee schedule and adding an increase to the fee schedule. And third is getting the TC grandfather clause continued.

“All the provisions in this bill have a good chance of passing because the physician fee schedule cut is scheduled to take place July 1,” Mertz added. “That means there is urgency in Congress to pass this bill. You could say we have a good chance of being on this train which appears to be leaving the station.

“All physicians, including pathologists, are interested in getting Congress to stop the 10.1% cut calculated by the physician fee schedule,” he explained. “And currently, the Senate bill calls for stopping the 10.1% cut and adding a 1.1% increase to the physician fee schedule.

“The TC grandfather clause extends the ability of independent labs to bill Medicare directly for the technical component of surgery pathology services,” Mertz continued. “Without this authority, labs would have to bill the hospital and try to get the hospital to reimburse them, which can be difficult. Maintaining the ability to bill Medicare directly assures laboratories of payment for those services.

“The problem is that the authority for direct billing for TC keeps expiring and we have extended it several times now,” he said. “We want to get it extended permanently but short of that we have to keep extending it temporarily.

Educating Congress

“By including three very positive provisions in this bill, this legislation shows our effort to promote the work of labs in Congress is starting to pay off,” Mertz added. “The fact is we now have champions in Congress that we never had previously. When I got here five years ago, it didn’t seem that we had enough folks in Congress to champion our causes. But this campaign against competitive bidding has had a real silver lining in helping us get champions for S 3101—as well as for the future. In addition, the ‘Labs Have Value’ educational campaign has also helped.

Because it is unlikely that Congress will allow Medicare physician fees to be cut by 10.1%, a Medicare funding bill is likely to be passed. Repeal of laboratory competitive bidding has a growing number of sponsors in both houses, which is why there is optimism that the final Medicare bill will include repeal.

Update on Competitive Bid Lawsuit in San Diego, CA

Since April, when Federal District Court Judge Thomas J. Whelan issued a preliminary injunction halting the competitive bidding demonstration that was scheduled to begin in San Diego on July 1, federal attorneys have been studying their legal options.
(See TDR, April 14, 2008.)

On June 2, the parties in the case jointly requested 60 days to respond to the judge’s order. The plaintiffs are Internist Laboratory, Sharp Healthcare, and Scripps Health. The defendant is Michael Leavitt, Secretary of the federal Department of Health and Human Services (HHS).

“In compliance with the injunction, defendant has ceased all activities related to implementing the project,” said the joint motion from the defendants and plaintiffs. “In addition, defendant, through the Centers for Medicare and Medicaid Services (“CMS”), is still in the process of considering what course of action to take in light of the Court’s ruling. It remains possible that CMS will ultimately decide on a course of action that would render further litigation unnecessary.”

“The court ruling in April was important because it stopped the bidding demonstration project from going forward and stopped CMS from using those bid documents to revise the fee schedule,” observed Alan Mertz, President of the American Clinical Laboratory Association (ACLA) in Washington, DC. “But the court case ultimately doesn’t stop the demonstration project. The government could have proceeded with new rule making to try to do the project, even though it would take some time to do. So, statutory repeal is the ultimate strategy to stop the demonstration project.”

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