Inside the Lab Industry: Pathologists Decry New Cuts to Cytology, Immunohistology

Call it 88305, the sequel. That is the prevailing sentiment among pathologists regarding reimbursement cuts that focus on cytology and immunohistology procedures recently implemented by the Centers for Medicare and Medicaid Services (CMS). The biggest cuts involve cytopathology cell enhancement, CPT code 88112. The global payment was reduced 43 percent, from $109.55 to $62.73, according to data from the College of American Pathologists. That included a 52 percent reduction in the professional component payment and a 33 percent cut in the technical component payment. Joanathan L. Myles, M.D., a Cleveland Clinic pathologists who chairs CAP’s economic affairs committee, believes the cuts will create an overall 6 percent reduction in revenues for pathologists. However, cytology procedures usually do not make up a large proportion of any specific practice, according to Robert DeCresce, M.D., president of University Pathologists, an 18-physician practice in Chicago. But specialty practices that focus on flow cytometry, GI pathology, dermopathology, and uropathology might take a comparatively larger hit, he added. CMS also eliminated the professional and technical components of immunohistology-related antibody slide staining, CPT code 88342, replacing them with a series of G-codes. Several clinicians say the change not only deeply reduces reimbursement for multiple staining but actually penalizes them for undertaking the deep analysis crucial for detecting cancers and other serious medical conditions. The global payment under the old code was $115.34. It’s now $88.04, a cut of more than 23 percent. The global payment for a subsequent stain had been the same rate. It was cut to $68.08, including a payment of only $12.48 for the professional component. The prior professional component payment was $42.19. The reductions take place just a year after a 52 percent cut in reimbursement for the technical component of CPT code 88305, a bread-and-butter procedure for pathologists that many say has gouged deeply into the cash flow of their practices. Pee Dee Pathology Associates, an eight-doctor practice in Florence, S.C., for example, took a 10 percent hit in revenues, with no offset in overhead. Similar revenue losses were reported by other practices. “Clearly for independent laboratories, the economic reality of this is going to be pretty rotten,” said Barry Portugal, president of Health Care Development Services, a consulting firm in Nokomis, Fla. Portugal added that the changes will also hit hospital labs that employ pathologists as independent contractors, particularly regarding the technical component of pricey procedures such as a 12-core prostate biopsy. Such a procedure costs Medicare about $840 for both the technical and professional components in the past. Now, it will be less than half of that amount altogether, according to Portugal. Economic Hit Not Yet Fully Analyzed Most the pathologists interviewed by Laboratory Industry Report have yet to fully analyze the financial impact the cuts will have on their practices. For the most part, their books of business from Medicare range from about 30 percent to 40 percent. However, CellNetix Pathology & Laboratories, a sizable Seattle-based practice, calculates the code changes will cost it $600,000 a year. It is “quite a significant hit,” said Donald Howard, M.D., CellNetix’s chairman and chief executive officer. According to DeCresce, CMS paid for each slide stain at an equal rate. Now, payment is on sliding scale that is reduced with subsequent stains. “The old code paid $42 per stain. When I used to do two stains, I would get $84. Now I am getting $54. For four stains, I used to get $168. Now I am getting $68,” he said. For a lymphoma analysis, which requires nine or 10 stains, the cuts are geometrically deeper, he added. Another pathologist, Stephen Ruby, M.D., medical director of 4path Ltd. Pathology Services, a three-physician practice in Justice, Ill., likened the change to the G-codes to a student being instructed to color in a clown with three different crayons—but prohibited from using more than one color in a drawing. The end result is three pictures of incompletely drawn clowns. “What [the government] is saying is that you have to buy all these crayons. And we’ll pay you a dollar for the first crayon you buy to color in that picture, and 60 cents for the next,” Ruby said. “But I am not paying less for the antibodies just because they are the second or third antibody used in a case.” As a matter of fact, reagent costs went up 7 percent over the last year for Ruby’s practice. Not only are fixed expenses still in place, but Ruby noted that pathologists will get paid significantly less for the complicated multilayered stains used to analyze breast lesions and prostate biopsies to make cancer diagnoses. Myles also noted that the shift to the G-codes could also be emulated by private payers, and that pathology practices would have to check their contracts to see if those changes will be implemented. Kenneth Ries, M.D., Pee Dee’s chief executive officer, described the methodology CMS adopted as a “sledgehammer” approach. “They’re smashing the payments down because Quest and LabCorp can do it at those rates, and they’re looking to save money,” he said—without taking into account the fact that smaller practices do not have the economies of scale enjoyed by the national players. Tough Choices Remain The latest round of reimbursement cuts will prompt the pathology practices to further scrutinize their expenses and determine what other costs they may be able wring out in the near term. Pee Dee, for example, has decided not only against hiring any new pathologists, but it will likely not fill positions as they become vacant. Two of its doctors—fully one-quarter of its practice—are nearing retirement and will likely not be replaced. “We’ll see how it goes with seven pathologists when one leaves. We may even see how things do with a staff of six,” Ries said. Ruby has not been able to provide any raises for his staff of 15 since the cuts back in January 2013, and that does not take into account the current cuts. He has initiated renegotiations with his reagent suppliers to try to peel back some of the recent price increases. “I no longer have the ability to reinvest in the practice,” he said. More concerning among the pathologists is how care may be impacted by the ongoing reductions, which include not only this round of cuts but the 88305 cut, the sequester, and other reimbursement changes. “It is really a shame because ultimately, we will either no longer do the work for these particular payers, and there will be a decline in the level of service, or you will just have the risk for less complete levels of study, because certain tests will be no longer cost-effective [to perform],” Ries said. None of the pathologists thought that the rollout of the Affordable Care Act would help their bottom lines in significant ways. Ruby, for example, expressed concerns that those enrolled in commercial plans via the state exchanges might balk at making deductible and copayments on their coverage when they receive bills. And while millions of other Americans will also be enrolled via an expansion of Medicaid, the rates paid under that program are meager compared to Medicare. “What it’s done, it really puts labs at risk of not being able to survive, period,” Ruby said. “And if we can’t survive, there is a whole segment of the population who will lose a large part of their medical services and medical resources.” Takeaway: The recent cuts in cytology and immunohistology reimbursements compound last year’s 88305 cuts, putting the survival of some pathology practices in question.