Attorneys for CAP Say CMS Fee Proposals Illegal

CMS lacks statutory authority to change resource-based pricing, CAP letter says

CEO SUMMARY: In its comments about a proposal to change the way CMS pays for clinical laboratory and pathology services, the College of American Pathologists (CAP) said that CMS is using faulty assumptions. CAP further commented that the CMS proposal to cap physician fee schedule payments at the level of hospital outpatient department rates violates a statutory Medicare requirement that physician expenses should be resource-based. The comment period ended on September 6.

LAST FRIDAY WAS THE DEADLINE for submitting comments in response to the proposed new Medicare rules published in July by the federal Centers for Medicare & Medicaid Services (CMS).

In its comments submitted to the federal agency, the College of American Pathologists (CAP) stated that the proposed rule that would link payment for pathology services on the Physician Fee Schedule (PFS) to lower rates paid under Medicare’s Hospital Outpatient Prospective Payment System (OPPS) violates the statutory requirement that Medicare practice expenses be resource-based.

 Contrary to Law, Regulation

In the opinion for CAP, lawyers from the law firm of Sidley Austin LLP said the proposal from CMS “does not reflect actual resource costs in the non-facility setting—contrary to law and regulation and CMS’ stated policies and past practices.” The proposal also “relies on faulty assumptions and inapplicable facility resource data,” CAP said in a statement released Friday (September 6).

In a 96-page letter to CMS Administrator Marilyn Tavenner, CAP urged CMS to withdraw the proposed rules CMS issued on July 8. CAP said the proposals could threaten patient access to pathology services.

In an interview with THE DARK REPORT, Richard C. Friedberg, M.D., Ph.D., Chair of CAP’s Council on Government and Professional Affairs, said, “We have a legal opinion that clearly shows that the Medicare proposed rule linking the PFS to lower rates paid under the OPPS violates the statutory rules regarding practice expenses.” Friedberg also is Chairman of the Department of Pathology at Baystate Health in Springfield, Massachusetts.

Asked if CAP would file a legal challenge against CMS if the agency pursued these proposals when it issues a final rule in November, Friedberg said he could not be certain what course of action CAP might take. “That’s not what we’re focused on right now,” he stated. “CAP has provided its comments and legal analysis to CMS and just because the comment period has ended, that doesn’t mean this campaign will end.

“CAP members have been—and will continue to be—in touch with their members of Congress about these concerns,” emphasized Friedberg. “We expect members of Congress to engage with CMS on these issues.

“Keep in mind that there is much time between now and November 1, when the final rules will come out,” he observed. “During this time, we expect to have many discussions about these proposed rules.”

Concerns about New Rules

In its letter to Tavenner, CAP not only focused on the issues CMS raised about the PFS, but it also listed other concerns the college has with two other proposed rules. One rule deals with the bundling of payment under the OPPS. The other rule would establish a review of lab tests that are reimbursed under the Clinical Laboratory Fee Schedule (CLFS).

CAP pointed out that the proposed rule to lower PFS payments to no more than the hospital outpatient department rates, would, “if finalized as proposed, …reduce the technical component (TC) and global payment of 39 pathology services billed for non-hospital patients by as little as 4% and as much as 80% depending on the service.”

In its comments about the proposed rule to change the Hospital Outpatient Prospective Payment System, CAP advocated “for the withdrawal of CMS’ Hospital Outpatient Prospective Payment Proposed Rule (CMS-1601-P), which attempts to bundle pathology physician services and nearly all clinical laboratory tests into Medicare’s payments to hospital outpatient departments.”

The college noted that “CMS proposes three packaging policies in the OPPS proposed rule that create serious concerns and questions for CAP members: packaging physician pathology services into ‘primary procedures;’ packaging certain ‘add- on’ codes; and packaging nearly all clinical diagnostic laboratory tests (except molecular pathology.)”

In particular, CAP noted that “CMS’ proposal to ‘bundle’ over 1,000 clinical laboratory tests into the payments for hospital outpatient procedures could create financial disincentives to perform medically necessary testing, or shift testing from out-patient settings to hospital settings, creating new burdens for patients and higher costs for the healthcare system.”

CAP additionally commented that “Within the proposal, CMS proposes to conditionally package over 280 physician services, including over 80 pathology physician services, without any assurance that they will be reimbursed adequately. As pathology practices may receive referrals of specimens from multiple hospitals and physician practices, keeping track of when tests should be paid separately vs. packaged into a hospital service will create enormous administrative burdens.”

Wary of Rule about CLFS

The college was equally wary of the proposed rule involving the Clinical Laboratory Fee Schedule. It wrote that, “With respect to CMS’ proposed review of technological changes that may affect the cost of performing some laboratory tests, the CAP urges CMS to proceed with great caution. In reviewing these technological changes, it is essential that all parties— CMS, the laboratory community, and other interested members of the public— be involved in the development and refinement of the review process.”

All pathologists and clinical lab administrators should take note of the fact that each of the three proposed rules, if implemented as written, would have a substantially negative impact on the finances on virtually all of the nation’s labs.




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