ACLA, CAP Comment on Final 2014 Medicare Rules

Medicare officials moderated some elements of three proposed rules, but fee cuts will happen

CEO SUMMARY: On November 27, as the nation prepared for the Thanksgiving holiday, the federal Centers for Medicare & Medicaid Services (CMS) announced the long-awaited final rules for 2014. Early analysis of the 1,300 pages of rules CMS released indicates that the agency moderated one of its proposals to cut back what pathologists and clinical labs are paid. At the same time, CMS will continue to move forward with its review and revision of other pathology and clinical lab procedures.

LATE AFTERNOON OF NOVEMBER 27, the day before Thanksgiving, the federal Centers for Medicare & Medicaid Services (CMS) released its final rules for the 2014 Medicare Physician Fee Update. This event was long anticipated by laboratory professionals.

Because the final rules take up 1,300 pages, there was only limited analysis available as THE DARK REPORT went to press. This story provides an initial assessment of the multiple key issues of concern to pathologists and clinical laboratory executives. In the weeks to follow, there will be more detailed analysis about the final rules and their effect on labs in 2014 and beyond.

The final rules associated with three different Medicare fee schedules will bring definite changes. There is moderation of at least one proposed rule, but pathologists and clinical lab managers can expect to see reduced reimbursement in certain key areas.

For anatomic pathology, the CMS final rules contain several significant changes that will become effective in 2014 and beyond. One such change involves restrictions on the number of prostate biopsies for which a pathologist can bill the Medicare program. In its analysis of the rule, the College of American Pathologists (CAP) said that CMS imposed restrictions on billing of 10 or more prostate biopsy specimens and will require individuals who bill more than 10 to use a G code for such billing.

CAP also wrote: “CMS halted its plan to cap payment rates in 2014 in the Medicare physician fee schedule at Hospital Outpatient Ambulatory Classification (APC) Rates. Additionally, CMS reduced payment for certain anatomic pathology codes and expanded bundling of payments for all clinical laboratory tests (other than molecular pathology tests) performed on hospital outpatients that are currently billed to the Clinical Laboratory fee Schedule (CLFS).”

CAP further wrote that, “As expected, the final rule included payment reductions to the following pathology code families:”

  • Immunohistochemistry: 88342: CMS reduced the value of both the PC and TC and established a requirement to use new G codes to bill services going forward.
  • Enhanced Cytology Services: 88112: CMS reduced value for the PC and TC. • In situ hybridization services: 88365, 88367, and 88368: CMS deferred action on revaluation of the PC and TC until 2015.
  • 88305 TC: CMS did not reduce valuation for the TC.

One Positive Development

One positive development from the announcement is that CMS will allow pathologists to qualify for incentive payments starting January 1, 2014, under the Physician Quality Reporting System (PQRS) by filing claims or using a registry option for labs that report fewer than nine measures, CAP said.

This rule about PQRS is significant. In 2011, pathologists received an average bonus of $856.50 and—just by participating in PQRS this year—pathologists avoided penalties that begin at 1.5% of their Medicare Part B billing in 2015 and rise to 2% in the following years, CAP said. CMS did not agree to add three new pathology measures that CAP recommended, CAP said.

A major area of concern for clinical laboratories was the draft rule that called for CMS to review the fees for 1,250 clinical lab tests over the next five years. CMS intends to proceed with this initiative.

“Starting in 2014, CMS will review these codes on the Medicare Part B Clinical Laboratory Fee Schedule,” stated Alan Mertz, President and CEO of the American Clinical Laboratory Association (ACLA.) “However, it appears CMS changed the procedure versus what they had proposed back in July.

CMS Gave Itself Flexibility

“In the proposed rule, CMS was going to review all 1,250 codes over five years, starting with the oldest and working forward,” explained Mertz. “In the final rule, it appears from my initial review, that CMS officials gave themselves some flexibility in how they will review the codes.

“It looks as if CMS will not necessarily review the oldest ones first, as was proposed in July,” he added. “From reading this final rule, it appears CMS officials wanted more flexibility in how they prioritize the codes for their review.

“The rest of what CMS decided appears to be the same as what was proposed,” Mertz said. “CMS has the statutory authority to adjust rates on a code-by-code basis for any technological changes that have been made since the codes were introduced.

“CMS did not alter the definition of technological changes,” he said. “A technology change is still defined as any difference in how labs use labor, tools, and machines. Again, this is based on my first review of the rule which came out on Thanksgiving eve, so we may have subsequent interpretations that are different.

Hitting Labs Twice

“One problem CMS does not appear to address is that Congress already put in place an annual ‘productivity adjustment’ in 2010 that occurs every year going forward that cuts prices for all test codes to account for increased efficiencies such as those from technological changes,” Mertz said. “In essence, labs are being hit twice: once by CMS for making improvements in technology and once by law for making improvements in productivity. However, for a lab, these improvements are what they do and so they are penalized twice.”

Mertz did praise CMS for not finalizing a proposal to cut Medicare payments drastically for anatomic pathology services used to diagnose breast, colon, prostate, skin, ovarian, leukemia and other cancers. “Under a proposal in the Physician Fee Schedule published in July, CMS would have capped Medicare payments to independent laboratories at the same rate it pays hospitals under the Hospital Outpatient Prospective Payment System (OPPS),” noted Mertz. “In so doing, CMS would have cut payment for 39 common AP tests by an average of 26% and specific tests by as much as 80%.

“It was good news that this proposal was not made final because it was a big cut and it was coming fast, since it would have gone into effect on January 1,” Mertz said. “We appreciate that CMS recognized our comments and also heard the concerns of labs, pathologists, manufacturers, patients, and members of Congress who had expressed strong opposition to the OPPS proposal as well.”

Bundled Payment Rule

Neither Mertz nor CAP commented on the CMS decision regarding bundling payment under Medicare’s Hospital Outpatient Prospective Payment System (HOPPS). CAP explained that “beginning January 1, 2014, payment for all clinical diagnostic laboratory tests (other than molecular pathology tests) performed on hospital out-patients that are currently billed under the CLFS will be bundled into payment for primary hospital outpatient procedures.”

CAP further wrote that “the expanded bundling payment would apply for services that are provided on the same date of service as the primary service and ordered by the same practitioner who ordered the primary service.”

Financial Analyst Assesses Final Medicare 2014 Rules

IN ASSESSING THE FINAL RULES published November 27, by the federal Centers for Medicare & Medicaid Services (CMS), one financial analyst characterized some of the modifications made by CMS as a “meaningful positive” for pathology groups and clinical labs.

In her first notes about the announcement, Amanda Murphy, CFA, of William Blair & Co., in Chicago, noted that CMS will take additional time to consider capping payments on the physician fee schedule for services provided in nonfacility settings. This proposal deals with tests that are performed in independent labs and would set the price cap at the same rates paid in the hospital outpatient prospective payment system (HOPPS).

“We view this as a meaningful positive,” wrote Blair. “Based on the pro- posed rule published in mid-July, these caps would have resulted in meaningful cuts to 39 anatomic pathology services and could have had outsized implications on reimbursement rates for a number of key anatomic pathology procedures, including fluorescence in situ hybridization (FISH) testing (cut by 62% globally) and flow cytometry (technical component of add-on markers cut by 76%). Both of these tests are frequently leveraged to diagnose cancer and are particularly important in diagnosing hematological malignancies (such as leukemia and lymphoma).

“CMS also appeared to back off of its original proposal to formally reevaluate payment rates for all 1,250 codes on the Medicare clinical lab fee schedule (CLFS) over a five-year period,” Murphy wrote. “However, the 2014 rule indicates that CMS intends to explore an existing statutory provision that would allow CMS to review and update the CLFS based on changes in technology.”

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