College of American Pathologists
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  What’s inside the 2011 physician fee schedule final rule


CAP Today




January 2011
Feature Story

Kim Chisolm

In the 2011 physician fee schedule final rule, the Centers for Medicare and Medicaid Services included a cut in physician reimbursement of 24.9 percent. That percentage is the result of the flawed sustainable growth rate formula that Congress and the CMS use as a budgetary tool when total expenditures exceed a certain target. Congress passed early last month and the president signed into law, on Dec. 15, H.R. 4994, the Medicare and Medicaid Extenders Act of 2010. It provides a 12-month reprieve from the pay cut that was scheduled to take effect Jan. 1.

This law established a payment update of zero percent for 2011.Under the zero payment update, the conversion factor for 2011 would have been the same as that in the second half of 2010, $36.8729, but other adjustments included in the final rule resulted in a reduction to the conversion factor. The adjustments include rebasing and revising the Medicare economic index, referred to as the rescaling of the relative value unit weights (–8.2 percent), and a positive budget neutrality adjustment of +0.5 percent brought about by changes in the RVUs. The conversion factor for 2011 after the above adjustments were made is $33.9764.

Rebasing and revising the Medicare economic index. The CMS finalized its proposal to rebase and revise the MEI. The MEI is the input price index used to determine annual updates to the physician fee schedule and to measure changes in the cost of operating a medical practice. It is composed of two broad categories: the physician’s own time and the physician’s practice expense, or PE.

The CMS periodically rebases and revises the index so that the expense shares and their associated price proxies reflect current conditions more accurately. The MEI was last rebased and revised in 2003, which means the cost weights in the 2010 index reflected physician expenses from2000. In rebasing the MEI, the proportion of the relative value units assigned to physician work, practice expenses, and professional liability insurance are adjusted. This adjustment is made in a budget-neutral manner and accomplished by a change in RVUs, a change in the conversion factor, or a combination of the two.

For 2011, the CMS rebased the MEI using 2006 Physician Practice Information Survey data to determine the expenditure weights and made the following changes: (1) decreased physician work from 52.5 percent to 48.3, and (2) increased practice expense, including professional liability insurance expense, from 47.5 to 51.7 percent. To reflect these changes in the 2011 physician fee schedule, the CMS increased the practice expense RVUs by an adjustment factor of 1.81 and the malpractice RVUs by an adjustment factor of 1.358. So as not to distort the physician work RVUs, the conversion factor was adjusted by –8.2. The RVU table in addendum B of the final rule reflects these adjustments (see box at left).

Resource-based practice expense relative value units. This year is the second year of the four-year transition to the revised practice expense RVUs resulting from the AMA’s Physician Practice Information Survey data. This year the practice expense RVUs are a 50/50 blend of the practice expense RVUs prior to the revision and the revised RVUs. As a result of the practice expense RVU transition and the adjustment made to the PE RVUs from the rebasing of the Medicare economic index, the technical component of pathology services experienced an overall increase in 2011.

Technical component grandfather provision. In the final rule, the CMS did not extend the payment for the technical component grandfather provision, which was set to expire on Dec. 31, 2010. But a provision in the Medicare and Medicaid Extenders Act of 2010 extended the TC grandfather for another 12 months. Therefore, independent laboratories can continue to submit claims to Medicare for the technical component of physician pathology services furnished to patients of a hospital, regardless of the beneficiary’s hospitalization status (inpatient or outpatient). This policy is effective through Dec. 31, 2011.

Signature requirement on laboratory requisitions. The CMS finalized in this rule a policy requiring the signature of a physician or qualified non-physician practitioner on all laboratory requisitions for clinical diagnostic laboratory tests paid through the clinical laboratory fee schedule. Though this policy was specific to tests paid on the lab fee schedule, language in the rule insinuates that a signature requirement already existed for pathology services paid through the physician fee schedule. The CAP brought this issue to the agency’s attention and said that the Jan. 1, 2011 implementation date did not provide enough time to educate the medical community. The CAP requested that this policy be delayed.

The CMS postponed the enforcement of the policy for a three-month period and clarified that the signature requirement did not apply to laboratory services paid on the physician fee schedule, such as anatomic pathology and cytology. During the delay, the agency is focusing on developing educational and outreach material to educate those the policy will affect. The CAP is continuing to work with other provider groups and is engaging with the CMS to make the agency aware of the potential negative impact this new requirement would have on health care business and Medicare beneficiaries.

Work RVUs accepted for AP codes. In the final rule, the CMS accepted the AMA/Relative Value Scale Update Committee’s recommendation to maintain the current physician work RVUs for anatomic pathology codes 88300–88309. Two years ago, under pressure from the CMS, the RVS Update Committee was instructed to identify potentially misvalued code families by reviewing high-volume codes that met specific criteria, which identified the 88300–88309 code family.

During the review process, the CAP Economic Affairs Committee worked closely with the CMS and the RVS Update Committee to determine appropriate values for these codes. The CAP developed recommendations for the RVS Update Committee’s review based on surveying, historical review, and data analysis to validate the current work RVUs for these codes. In its presentation before the RVS Update Committee in February 2010, the CAP maintained that the current work values were appropriate, as the physician work for these services had not decreased since the original valuation of these codes in 1982.

In a statement issued after the final rule was released, Jonathan L. Myles, MD, chair of the CAP Economic Affairs Committee and the CAP’s RVS Update Committee advisor, said, “The CAP devoted considerable time and resources over the past two years in preparing for the revaluation of the anatomic pathology codes, and we are pleased that the RUC and CMS accepted our recommendations.”

CPT code additions and revisions. For 2011, new CPT codes 88120 and 88121 were established, at payers’ request, to report fluorescence in situ hybridization evaluations of urologic cytology specimens for urothelial carcinoma using multiple probes. Codes 88367 and 88368, previously used to report these services, were established and valued in 2005 to report FISH evaluations of the HER2 gene using a single probe or, nonroutinely, multiple probes. Because codes 88367 and 88368 were not valued for reporting multiple probes, the request was to have 88367and 88368 revalued, or to establish new codes for UroVysion services.

88120 Cytopathology, in situ hybridization (eg, FISH), urinary tract specimen with morphometric analysis, 3-5 molecular probes, each specimen; manual.

88121 Cytopathology, in situ hybridization (eg, FISH), urinary tract specimen with morphometric analysis, 3-5 molecular probes, each specimen; using computer-assisted technology.

(For morphometric in situ hybridization on cytologic specimens other than urinary tract, see 88367, 88368.)

(For more than five probes, use 88399.)

Fine-needle aspirate code 88172 was revised to clarify the number of units appropriate for reporting this service. Code 88172 is reported for the first evaluation episode per site. An evaluation episode is defined in the parenthetical item following this code. A new parenthetical item following code 88173 instructs the user to “report one unit of 88173 for the interpretation and report from each anatomic site, regardless of the number of passes or evaluation episodes performed during the aspiration procedure.” Additionally, a new add-on code, +88177, was established to report each separate additional evaluation episode from the same site.

88172 Cytopathology, evaluation of fine needle aspirate; immediate cytohistologic study to determine adequacy for diagnosis, first evaluation episode, each site.

(The evaluation episode represents a complete set of cytologic material submitted for evaluation and is independent of the number of needle passes or slides prepared. A separate evaluation episode occurs if the proceduralist provider obtains additional material from the same site, based on the prior immediate adequacy assessment, or a separate lesion is aspirated.)

88173 Cytopathology, evaluation of fine needle aspirate; interpretation and report.

(Report one unit of 88173 for the interpretation and report from each anatomic site, regardless of the number of passes or evaluation episodes performed during the aspiration procedure.)

(For fine needle aspirate, see 10021, 10022.)

(Do not report 88172, 88173 in conjunction with 88333 and 88334 for the same specimen.)

+88177 Cytopathology, evaluation of fine needle aspirate; immediate cytohistologic study to determine adequacy for diagnosis, each separate additional evaluation episode, same site (list separately in addition to code for primary procedure).

(When repeat immediate evaluation episode(s) is required on subsequent cytologic material from the same site, eg, following determination the prior sampling that was not adequate for diagnosis, use 1 unit of 88177 for each additional evaluation episode.)

(Use 88177 in conjunction with 88172.)

Also new for 2011, CPT code 88363 was created to capture the pathologist’s findings following the identification and selection of appropriate tumor tissue from a previously diagnosed surgical pathology case.

88363 Examination and selection of retrieved archival (ie, previously diagnosed) tissue(s) for molecular analysis (eg, KRAS mutational analysis).

Kim Chisolm is CAP assistant director for economic affairs, Washington, DC.