Medicare Compliance & Reimbursement

Independent labs and radiology centers expected to take double digit losses.

The Centers for Medicare & Medicaid Services (CMS) has plans which could cost your lab plenty. The July 19 Federal Register includes two proposals you should know about — “Revisions to Payment Policies under the Physician Fee Schedule [PFS], Clinical Laboratory Fee Schedule [CLFS]… for CY 2014” and “Hospital Outpatient Prospective Payment [OPPS] and Ambulatory Surgical Center [ASC] Payment Systems …”

Whether you’re an anatomic pathology practice or a clinical lab, there’s something in the proposals that will concern you. Read on to make sure you’re ready.

Punch 1: Lose Anatomic Pathology Pay With RVU Cap

If CMS sticks by the PFS proposal, you can expect a huge pay cut for many anatomic pathology (AP) codes in 2014 — cuts greater than 50 percent for more than 15 procedures. Why? Because CMS believes that when non-facility fees (paid on the PFS) exceed facility fees (OPPS/ASC), there’s an error in the PFS pricing methodologies.

Based on this assumption, CMS states, “we are proposing to use the current year OPPS or ASC rates as a point of comparison in establishing PE RVUs [practice expense relative value units] for services under the PFS.”

Much of the cost discrepancy CMS identifies occurs in the technical component (TC) of procedures — and that includes many AP procedures.

What this means for you: Assuming no change in the conversion factor from 2013 to 2014 (34.023), you can expect a 71.7 percent pay cut for the TC of 88307 (Level V — Surgical pathology, gross and microscopic examination…), from $215.37 to $60.90. Similarly, you’ll see a 51.9 percent pay cut in the TC of 88173 (Cytopathology, evaluation of fine needle aspirate; interpretation and report), from $79.95 to $38.45.

Punch 2: Expect ‘Technology’ Adjustment to CLFS

Don’t think you’re out of the woods just because you’re a clinical lab, not an AP practice. You have a wholesale re-pricing of tests paid on the CLFS to look forward to.

CMS notes in the “Revision to Payment Policy…” proposal that, unlike other payment systems, “CLFS payment amounts are essentially locked in place and do not change when the cost of the test changes.”

Therefore, CMS proposes “to implement a process to adjust payment amounts based on changes in technology.” Specifically, the agency wants to reconsider payment amounts to take into account “increased efficiency, changes in laboratory personnel and supplies necessary to conduct a test, changes in sites of service, and other changes driven by technological advances.”

You can expect the re-pricing to begin with the CY 2015 PFS proposed rule, starting with codes that have been on the CLFS the longest, and then working forward over multiple (perhaps five) years “until we have reviewed all of the codes on the CLFS,” according to CMS.

Fees could go up: CMS states that the review could result in increases to CLFS amounts (for instance, if new, high-cost technologies are used). But the agency expects that “most payment amounts will decrease due to the changes in technology that have occurred over the years since the payment amounts were established and the general downward trend of costs once technology has had an opportunity to diffuse.”

Punch 3: Bundle Clinical Lab Tests

Currently, Medicare pays hospitals (using the CLFS) for individual lab tests performed for outpatients. In the OPPS proposed rule, however, CMS proposes “to package payment for certain clinical diagnostic laboratory tests into the base payment for the Ambulatory Payment Classification [APC].”

“This is part of CMS’s stated intent to make the OPPS a more complete prospective payment system and less of a fee schedule-type payment system that makes separate payment for each separately coded item,” says Charles B. Root, PhD, president of CodeMap, a laboratory coding and reimbursement consulting company in Schaumburg, Il.

Under the CMS proposal, lab tests that are “integral, ancillary, supportive, dependent, or adjunctive” to the primary outpatient hospital service will be packaged into the APC for that service, and the APC will be priced accordingly.

“Excluding molecular pathology tests, CMS proposes to assign status indicator “N” (not separately payable under OPPS) to all CLFS codes except 36415 (Collection of venous blood by venipuncture) beginning in 2014,” Root reports.

Watch copay: Although lab tests paid to hospitals on the CLFS aren’t currently subject to patient co-payment, “deductible and coinsurance would apply to laboratory tests packaged into other services as proposed,” according to Root.