Independent Labs Won’t Get Medicare PQRI Bonuses

Independent labs learn they will not get same Medicare PQRI payments as other pathologists

CEO SUMMARY: Medicare does not intend to make bonus payments this year to independent labs currently reporting quality information for breast and colon cancer cases. The federal claims payment system is unable to pay independent labs for participating in the federal physician quality reporting initiative (PQRI). But physician pathology groups participating in PQRI will receive the bonus payments as expected. CMS has yet to formally acknowledge this problem, leaving labs with unanswered questions.

OVER THE PAST FEW WEEKS, independent laboratories have learned they will not get any bonus payments this year under the new federal Physicians Quality Reporting Initiative (PQRI). Bonus payments for next year also are in question. Pathology physician groups, however, will get their bonuses under the program.

Officials from the federal Centers for Medicare & Medicaid Services (CMS) have yet to publicly explain why independent labs are being excluded. THE DARK REPORT left messages with CMS officials last week seeking comment, but, as of press date, no one from CMS had responded.

Independent Labs

By some estimates, independent labs represent only about 12% to 28% of all labs. But officials at Pathology Service Associates, LLC, (PSA) a company in Florence, South Carolina, that does revenue cycle and business management for pathologists, say independent labs make up about 60% of their 500 lab clients nationwide. PSA officials could not estimate how much money independent labs stand to lose as a result of not getting Medicare PQRI bonus payments this year.

John Outlaw, CHC, PSA’s Chief Compliance Officer, who has investigated the problem, explained that the problem relates to the fact that CMS treats independent laboratories as suppliers rather than physicians. “Therefore, for claims from independent laboratories, although CMS has the quality code for each of these cases, it does not have the ‘rendering physician’ information it needs to determine which physician is eligible for the PQRI bonus,” he said.

“CMS didn’t see this coming,” Outlaw added. “They found out about it after they built all their PQRI reporting tools into the physician claims-adjudication logic. It never occurred to them that a substantial portion of claims would come from independent labs and go down a separate claims processing route.

“At this point, CMS can’t do anything about it without incurring significant expense to rewrite their claims-adjudication systems,” Outlaw said. “We hoped that CMS would develop some alternative reporting measures, but from what we can tell, it looks like CMS will not develop a solution to this situation.”

Beginning late last year, pathologists nationwide scrambled to get the requisite paperwork in order to participate in Medicare’s voluntary PQRI. Most pathologists believed the effort was worthwhile because Medicare officials had said all participating pathologists that met certain quality reporting requirements would earn a bonus of 1.5% of their total Medicare billings for the year.

For PQRI reporting in 2008, CMS had designed two pathology-focused quality measures that relate to breast and colon cancer cases. The 2008 PQRI bonus was designed to be based on labs reporting quality measures and not on actual compliance with quality standards. The quality measures required labs to modify their reporting, documentation, and coding protocols. Bonus payments of as much as 1.5% of total Medicare allowed charges (not just those for the quality measures) were due to pathologists that successfully reported quality measures for 80% of their eligible breast and colon cases.

PQRI Bonus Calculations

In a memo to its client pathologists last December, PSA said, “It is important to note that the participation is measured by each individual physician as opposed to each practice; this is true for both computing the 80% as well as payment of bonuses on total Medicare allowed charges. Further, based on PSA data, it appears, that relatively few cases will actually be eligible for reporting which means, proportionately, the work to enhance coding and documentation on the select cases in order to garner additional payment on all Medicare cases should yield a nice return on investment.”

This past spring, officials at PSA and at other organizations that represent pathologists began asking CMS officials about the PQRI program. PSA said CMS has recently indicated on its Web site that physicians employed by independent laboratories will not be included in the PQRI program. It is important to note, however, that except for this mention on the Web site, CMS has made no formal statement about the status of independent laboratories in PQRI.

CMS Statement

On its Web site, CMS said the following: “Independent Laboratories (ILs) are a sup- plier specialty (69), not a physician specialty. The rendering provider field (24J) on the CMS-1500 claim is not valid for IL claims in the billing methodology for ILs. Because the statute authorizing PQRI requires analysis of reporting and allowed charges at the level of the individual professional, pathology services billed under IL rules are not able to be considered in PQRI analyses. Reference:”

THE DARK REPORT observes that CMS has painted itself into an interesting corner. These developments are evidence that officials within CMS do not fully understand how laboratory testing services are organized and delivered.

By incorporating several pathology procedures into the Medicare PQRI reporting and bonus program, CMS was recognizing the value of anatomic pathology services and how they contribute to improved quality and better patient outcomes. But, by not developing a system to allow PQRI reporting from pathologists working in independent labs to earn the same bonus payments as pathologists working in physician group practices, CMS has once again put itself at odds with the laboratory profession.

First, CMS is again creating ill will with a segment of the pathology profession, by discriminating against pathologists working in an independent laboratory. Second, since independent labs won’t get PRQI incentives, CMS is not likely to get information from these sources going forward. That will skew interpretation of the pathology data it does collect.


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