Fee cuts proposed; CAP to pose alternatives
The College is working with Congress, federal health officials,
and other laboratory organizations to avert payment cuts for pathology
services under a proposed rule for the 2003 Medicare physician fee
The June 28 proposed rule from the Centers for Medicare and Medicaid
Services would reduce Medi-care’s conversion factor by 4.4 percent
and revise the way the agency calculates relative values. The calculation
revision would further depress payments to hospital-based pathologists
and independent labs.
But the proposed conversion factor reduction may not materialize
because Congress appears likely to pass legislation that would require
Medicare to change the way it calculates annual conversion factor
updates and increase the factor by two percent next year. The House,
responding to strong lobbying by the College and numerous other
medical organizations, passed the Medicare Modernization and Prescription
Drug Act of 2002 (H.R. 4954) in June, and Senate action to im-prove
Medi-care pay-ments is expected.
Less clear is what will happen to provisions in the CMS proposed
rule that would change how the agency calculates practice expense
relative values. The change, if carried out, would reduce payments
overall to hospital-based pathologists by two percent. The proposed
rule’s changes to global relative value calculations would lower
overall payments to independent laboratories even more—eight
percent, according to CMS. And another change to the way nonphysician
clinical staff are used to allocate costs would take an additional
one percent off independent laboratory payment but would not affect
The sum of all proposed changes, including the 4.4 percent conversion
factor drop, would give hospital-based pathologists a six percent
decline in payment overall, if Congress fails to act on the conversion
factor issue. Independent laboratories would see a 12 percent drop.
For each practice, the number could be higher or lower depending
on the practice’s mix of services.
The major relative value reductions in the proposed rule would
result from changes in the relationship between the professional
components (PC), technical components (TC), and global values of
diagnostic services. Now, CMS separately calculates the PC and TC
of a service using defined methods. But when it calculates the global
service using the same methods and compares the two, the sum of
the PC and TC does not equal the global, because the data are volume
weighted using the frequency of billing for the various components.
The agency is left in the position of making adjustments to rationalize
the relationship of the components.
In its proposed rule, CMS adopted a suggestion by the Lewin Group,
a CMS consultant. Lewin advised the CMS to first calculate a global
value and then derive the TC by subtracting the professional component
from the global. The CMS reasons that because many more global and
PC charges are billed than TC charges, the data for the first two
are more robust and the TC should be calculated as the residual.
The problem for pathology is that the value for CPT code 88305,
the highest-volume pathology service, drops significantly under
Under the Lewin Group method, the PC relative value of 88305 would
drop 0.8 percent, the TC would fall 11.6 percent, and the global
value would decrease 6.98 percent. The reductions would be made
to the practice expense, or PE, portions of the relative values.
Other services, such as the 88304, are expected to see technical
component, and thus global, relative value increases under the proposed
method Table 1. The 88305 is such a dominant service in most practices, however, that the overall impact
A major component of the reason for the problem is the practice-expense-per-hour
(PE/Hr) data used in the calculation Table
2. Several years ago the CAP succeeded in getting the pathologist
PE/Hr data adjusted to ensure that time spent on services not paid
for under the Medicare Part B fee schedule was not counted in the
formula. Since the number of countable hours went down, the PE/Hr
ratio went up.
The CMS has no data source for the PE/Hr for independent laboratories,
so the agency assigned the "all physician" average to the labs.
The proposed change in method has highlighted the need for more
accurate independent lab data. The relatively low number used as
a default reduces the share of overall Medicare spending allocated
to pathology services and thus reduces payment to pathologists based
in both independent labs and hospitals.
The College is analyzing the proposed rule and communicating with
CMS representatives about alternative approaches that would restore
pathology payments. The proposed changes would cause current Medicare
payment for pathology services to flow out to other specialties
for their services, because physician fee schedule changes are subject
to budget neutrality adjustments across all specialties.
"Any CAP alternative proposal would need to ensure that the result
does not inadvertently shift relative value, and thus payment, from
pa-thol-ogy PCs to pathology TCs, and thus not benefit the specialty
overall," says Mark S. Synovec, MD, chair of the CAP Professional
and Economic Affairs Committee that analyzes the annual changes
to the fee schedule. "This is not a PC-TC issue, and we don’t want
to make it one," he says.
In other changes, the proposed rule also would establish a new
code for billing bone marrow aspirations and biopsies performed
on the same date of service through the same incision. Now, Medicare
will not pay for both services when billed by the same physician.
The agency proposes a relative value of 4.92 when the service is
provided outside of a hospital and 2.20 when provided inside the
hospital. Proposed 2003 relative values for the two separate services
when not provided through the same incision on the same day are
5.70 for the aspiration and 6.11 for the biopsy when provided outside
the hospital. When provided inside the hospital, the values are
1.54 for the aspiration and 1.95 for the biopsy.
Says Dr. Synovec, "The College opposed the Medicare Correct Coding
Initiative edit that eliminated payment for both bone marrow services
by the same physician, but CMS advisors who feel that economies
are present refused to routinely pay for both services." Now the
agency is proposing a compromise solution, a Medicare alphanumeric
code that would allow some extra payment for the combined service.
The proposal is based on the idea that the typical case involves
aspiration and biopsy through the same incision.
"The committee is looking at the proposal and will communicate
with the hematology and oncology organizations to learn their thinking
before making recommendations to the CAP on how to respond," Dr.
The Medicare physician fee schedule proposed rule is on the CAP
Web site, www.cap.org, under Advocacy,
From the Government. Appendix B toward the end of the document includes
the proposed relative values for all pathology services subject
to the fee schedule. Comments on the proposals are due Aug. 27;
the final rule is scheduled for publication in early November.
Carl Graziano is CAP manager of government communications.