Moran Co. Finds CMS Payment Proposals Flawed; Industry Groups Call for Withdrawal

Anew report from the Moran Co. provides support to industry arguments that the Centers for Medicare and Medicaid Services’ (CMS’s) proposal to cap payment for anatomic pathology (AP) services paid under the Medicare Physician Fee Schedule (PFS) at Outpatient Payment System (OPPS) rates is flawed. The report, contracted by the American Clinical Laboratory Association (ACLA), concludes that CMS’s rationale for using OPPS values to cap PFS payment “explicitly contradicts a variety of prior announcements regarding the comparative accuracy of OPPS valuations at the level of individual codes, and the utility of cross-system comparisons of absolute payment amounts. “OPPS rate-setting allows for meaningful comparison of resource-intensiveness and costs of services within the OPPS system,” continues the report. “But the methodology is not designed to allow for comparisons to services outside the OPPS.” CMS proposed to cap payment for 211 codes as part of its proposed PFS rule for 2014, announced July 8 and published in the July 19 Federal Register. Of those 211 codes, 38 are for AP services. The final rule is expected out around Nov. 1. If finalized as proposed, Medicare payment for pathology services billed for nonhospital patients could be cut by as little as 4 percent to as much as 80 percent, depending on the service. According to an analysis by the Moran Co., the cost-accounting information CMS is explicitly relying on in making these cost comparisons is insufficiently granular to be reliable at the level of individual codes. The cost findings are based on averages across data submitted by thousands of hospitals. “When the distribution of actual hospital cost findings for these 38 codes is compared to the distribution of procedure-level costs from our survey findings, there is substantial overlap in the range of cost findings, calling into question whether costs are, in fact, sufficiently different in both settings to justify capping one set of payment rates with another,” says the report. In comments submitted to CMS, ACLA is urging the agency to withdraw its proposal to cap payments for certain services at the OPPS rates, noting that the “proposed policy is built upon the faulty assumption that facility cost reports yield more accurate data about the actual cost of providing a service and that the cost to perform a service in a physician’s office must always be lower.” The OPPS and the PFS systems are hardly comparable, being derived through entirely different methodologies and for different purposes, and individual codes on the PFS cannot and should not be compared to Ambulatory Payment Classification rates in the facility context, the group says in its comments. Violation of Statute Not only does the CMS proposal fail to take into consideration the distinct costs associated with specific individual codes, but it also fails to recognize the distinct costs of physician services, which are required by law to be based on the resources required to perform the service, notes the College of American Pathologists (CAP) in its comments on the proposal. In addition, an analysis by CAP’s legal counsel, Sidley Austin LLP, concludes that CMS’s proposal “violates the statutory Medicare requirement that PE RVUs be resource-based for the particular practice setting.” According to Sidley Austin, CMS has previously observed that taking facility costs into account in determining the PFS in the nonfacility setting would be inconsistent with a resource-based methodology. The agency also has previously stated that comparisons between the PFS and the OPPS payments for services are not appropriate because of the different nature of the cost inputs and has explicitly refused to impose one payment system on the other in rulemakings. The American Society for Clinical Pathology (ASCP) also opposes CMS’s proposals and has launched a grassroots effort to get its members to contact members of Congress and CMS. According to ASCP, more than 7,000 messages had been sent to officials on Capitol Hill by early September, and almost 3,000 messages had been sent to CMS. ASCP, along with ACLA, CAP, and the American Medical Association, has also signed on to a number of letters sent to CMS raising concern about the OPPS cap.

PROPOSED MEDICARE PAYMENT REDUCTIONS FOR PATHOLOGY SERVICES(selected codes)
CODE	MOD	DECRIPTION	2014 PFS PROPOSED PAYMENT	2013 PAYMENT	PERCENT CHANGE
88108	TC	Cytopath, concentration technique	23.82	56.82	-58%
88112	TC	Cytopath, cell enhance technique	23.82	51.37	-54%
88173	TC	FNA interp	38.45	79.95	-52%
88184	TC	Flow cytometry, 1st marker	23.82	88.80	-73%
88185	TC	Flow cytometry, additional marker	12.93	54.10	-76%
88304	TC	Level III path exam	23.82	33.34	-29%
88307	TC	Level V path exam	60.90	215.37	-72%
88312	TC	Special stain, Grp 1	23.82	71.11	-67%
88313	TC	Special stain, Grp 2	23.82	55.80	-57%
88331	TC	Path consult, during surgery	23.82	38.45	-38%
88342	TC	Immunohistochemistry	38.45	73.15	-47%
88360	TC	Immunohistochemistry	38.45	74.85	-49%
88361	TC	Immunohistochemistry	38.45	99.35	-61%
88365	TC	In situ hybridization	38.45	120.44	-68%
88367	TC	In situ hybridization	38.45	198.35	-81%
88368	TC	In situ hybridization	60.90	170.46	-64%
Source: American Clinical Laboratory Association. All CPT codes copyright American Medical Association

  Review of Technology Changes ACLA also commented on CMS’s proposed review of technological changes that may affect the cost of performing some laboratory tests, urging CMS to proceed with “great caution” to ensure that it does not impose unreasonable cuts to laboratory reimbursement. While we take issue with premise that payment amounts for test codes on the [Clinical Laboratory Fee Schedule] have remained unchanged for years, we do agree that the technological changes can affect the cost of performing laboratory tests, both increasing the costs and decreasing the costs,” says ACLA. “In reviewing these technological changes, it is essential that all parties—CMS, laboratories, and other interested members of the public—be involved in the development and refinement of the review process.” ACLA recommends that CMS start with a pilot project in which it reviews a limited number of test codes. CMS also should spread its review over a greater number of years than currently proposed, balance its review of high-volume and low-volume codes, and cap and phase in fee adjustments. Takeway: Lab and pathology groups oppose CMS’s proposal to cap payment for AP services at hospital outpatient rates, and a new report provides further evidence that the proposal is flawed.