College of American Pathologists
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  Pathology joins the PQRI plan this year


CAP Today



January 2008
Feature Story

Karen Lusky

Pathology measures are in the mix for this year’s Medicare Physician Quality Reporting Initiative, which pays physicians 1.5 percent of their total Medicare-allowed charges for the calendar year if they successfully report on quality measures that apply to their practice.

The 2008 voluntary reporting initiative covers 119 performance measures, including two measures for pathologists, who weren’t eligible to participate in the initiative last year. The PQRI, as it’s known, appears to be an evolving framework that the Centers for Medicare and Medicaid Services could use for a pay-for-performance system if Congress approves its doing so.

The PQRI’s two pathology performance measures, developed by the CAP and the American Medical Association, require surgical pathologists to report the pT category (primary tumor), the pN category (regional lymph nodes), and the histologic grade for breast and colorectal cancer resections, respectively (see measures 99 and 100 at

To qualify for the 1.5 percent bonus, which Medicare will pay in a lump sum in 2009, a pathologist has to report on the measures for each of breast and colorectal cancer resections 80 percent of the time via the claims process. If a pathologist signs out only breast or colorectal cancer resection cases, the 80 percent reporting requirement applies to that one type of case alone, says billing and coding expert Dennis Padget, president of DLPadget Enterprises, Simpsonville, Ky., publisher of the Pathology Service Coding Handbook guide.

The PQRI is, of course, designed to improve patient care, but the incentive payment can add up, depending on a practice’s Medicare volume. For example, once the pathologists at PCA Southeast, Columbia, Tenn., learned of the PQRI in December 2007, they recognized that participating made sense in that they were already meeting the measures, says Terry Pearson, MD, managing partner and president of the mid-size outreach practice. Most of PCA Southeast’s pathologists do breast and colorectal cancer resections, and about 20 percent of the practice’s business is Medicare. Thus, Dr. Pearson says, “1.5 percent of Medicare-allowed charges for participating pathologists will come to about $50,000 to $60,000, which is enough to hire another technologist or buy some new equipment.”

The bonus is calculated, Padget explains, based on the total Medicare-allowed charges attributed to each participating pathologist, according to the NPI (National Provider Identifier number) reported on individual claims. “It’s not limited to the allowed charges for breast and colorectal cancer cases alone,” he says. “You can estimate what the bonus might be for your practice by figuring a $15,000 award per million dollars of Medicare-allowed charges per eligible pathologist.”

Professional Pathology Services PC, a group of 20 pathologists that covers 1,300 hospital beds and has a large outreach practice, viewed participation in the PQRI as a “no brainer,” says Edward Catalano, MD, a member of the practice and medical director of lab and pathology, Palmetto Health Richland Hospital, Columbia, SC. “The measures are very similar to the CAP guidelines for the templates for handling those two organ systems,” he says. “And our hospitals have American College of Surgeons-certified tumor registries that require use of CAP protocols for breast and colorectal cancer anyway.”

Reporting the pT and pN categories and histologic grade has almost become the expected standard of practice for these cases, in Dr. Catalano’s view. Thus, pathologists who don’t report them, he says, are “exposing themselves to some liability.”

The CMS has made participating in the PQRI as easy as possible, says Susan Nedza, MD, MBA, chief medical officer for the agency’s Chicago regional office, who was a presenter in a CAP audioconference on the initiative along with pathologists David Witte, MD, chair of the CAP Patient Safety and Performance Measures Committee, and Jonathan Myles, MD, director of medical renal pathology at the Cleveland Clinic. Physicians don’t have to sign up to participate, Dr. Nedza said—they simply start reporting a quality code or codes for applicable cases via the standard claims process.

Dr. Witte sums up what pathologists need to know most about the PQRI for 2008: “You put certain codes in the right boxes on the claim to report the measures and realize it’s a pay-for-reporting initiative.” That means pathologists and other physicians receive the bonus payment simply for reporting the quality code or codes that apply to an eligible case—modifiers are available to clarify whether the underlying quality measure was, in fact, met in particular instances.

Says Dr. Myles: “By reporting on the measures, a pathologist may realize that he or she didn’t include the required elements in the pathology report and thus go back and add them. That’s the whole point of the quality reporting process—physicians improving care by self-assessment.” Dr. Myles predicts that though it will be fairly easy for pathologists to comply with the two quality measures, the problems will occur on the billing side in terms of understanding how to code the claim to get credit for reporting the measures.

In a nutshell, the coding works like this: A pathologist reports as usual the CPT procedure code for the service on the CMS-1500 paper claim or electronic bill (CPT code 88307 or 88309 for breast cancer resections or 88309 for a colorectal cancer resection) and the applicable diagnosis (ICD-9-CM) codes for breast or colorectal carcinoma. “Not all breast and colorectal specimens are eligible for PQRI reporting,” Padget explains. “For example, biopsies at the 88305-code level don’t count, nor do noncancer resections. The case has to show one of a limited number of specific CPT and ICD-9-CM code combinations to qualify.”

Next, the pathologist or biller includes a CPT category II code (3260F) known as a quality code to indicate the pathologist met the measure, meaning that the report includes the pT and pN categories and histologic grade for a particular breast or colorectal cancer resection case. If a case qualifies for the PQRI based on the CPT and ICD-9 coding, but the pathologist does not include the measure in the report for a medical reason and documents the reason in the report, the 1P modifier is used (3260F-1P). One example would be no tumor found in a re-excision specimen. If the pathologist didn’t include the pT category, pN category, and histology grade in the pathology report without specifying a reason (for example, forgot or was too busy), the pathologist or biller appends modifier 8P to the quality code (3260F-8P).

The quality code (3260F) with or without a modifier goes into field 24D of the CMS-1500 hard-copy form or the corresponding electronic field on the electronic claim, Padget advises. “Report the quality code just as you would a regular CPT code,” he says. “The unit count must be one, and the dollar value must be zero or one cent.” He adds, “Don’t forget to include the proper diagnosis code pointer, too.”

In calculating a pathologist’s compliance with reporting the breast or colorectal resection quality measure, the CMS will divide the number of cases billed with the quality code with or without modifiers (the numerator) by the total number of cases with the applicable combination of CPT procedure codes and ICD-9 diagnoses (the denominator).

Pathologists who hit the 80 percent mark in reporting quality code 3260F (with or without a modifier) are eligible to receive the 1.5 percent bonus payment. But pathologists who perform and thus report on relatively few cases could be subject to a calculation resulting in them receiving less than 1.5 percent of their total Medicare-allowed charges. The formula is “intended to prevent people from gaming the system—for example, if a practice had all its pathologists do 10 each of the breast or colorectal resections and try to get the 1.5 percent incentive for all of [the pathologists],” says Harry Pukay-Martin, CPA, MBA, general manager and chief financial officer of Ohio State University Pathology Services LLC, Columbus, a 45-member pathology services group participating in the PQRI.

He speaks of the cap to which the bonus payment is subject and which is based on the number of instances of reporting (; in the search box, type 8519). It’s expected to affect pathologists who report on very few breast and colorectal cancer resections in a year relative to their overall Medicare-allowed claims.

The PQRI rules don’t bar late-comers from jumping in after Jan. 1. But pathologists may have difficulty reaching the 80 percent threshold for getting the bonus if they start even in February or March, caution reimbursement experts. You can’t resubmit claims for the purpose of adding the quality code to report on the measure, John Outlaw, chief compliance officer for PSA LLC, said in a December 2007 audioconference held by the Florence, SC-based company, a wholly owned subsidiary of Med3000.

Thus, PSA was suggesting that if any of its pathology practices intended to participate in the PQRI but were unable to be ready by Jan. 1 because they needed more time to train pathologists or coders, or both, to verify the measures and assign the PQRI quality codes, they may have been better off holding back qualifying cases initially rather than submitting the claims without the quality code, Outlaw says.

To ensure consistent reporting of the quality codes on claims, Charles Root, PhD, president of CodeMap, Barrington, Ill., advocates using automated billing systems that flag the CPT codes and ICD-9 diagnosis pairs where the measure may apply. This approach, he notes, is similar to billing systems that automatically notify the biller that the patient may need to sign an advance beneficiary notice before receiving a service.

Outlaw reports that PSA is, in fact, working on putting flags in its billing system to catch CPT/ICD-9 combinations that would trigger the Medicare edit to look for a quality code. The flags “will alert our claims staff to look for that quality code, and if it isn’t there, go back to the pathology practice to see if they have something to give us on that,” he says. But since the PQRI information from the CMS was so late in coming, PSA was not going to have the software edit in place on Jan. 1. They have developed a manual system to perform that function in the interim. “In reviewing historical data...we have determined that the volume of services to which the measures apply is relatively low,” Outlaw says. Thus, “we are comfortable that we can train our claims staff to recognize these cases manually until we get the flags into the system.”

The CAP is developing additional quality measures with an ultimate goal of including as many different types of pathology services as possible for future quality reporting. Yet CodeMap’s Dr. Root points out that the CPT/ICD-9 codes to which quality measures apply are not restricted by specialty.

“The only restriction on performing and reporting on the service is whether the physician is legally qualified to perform the service and participates in Medicare,” Dr. Root explains. For example, orthopedists sometimes read their own films, so they could report on the same quality measures as radiologists, Dr. Root says. And “if pathologists did consulting in oncology or radiation therapy, they could theoretically report on quality measures for those services,” to the extent they exist.

Other physicians can report whether they order clinical diagnostic lab tests such as A1c and low-density lipoprotein for diabetes mellitus, which were part of the initial 74 measures for the 2007 PQRI. This year’s reporting initiative has new measures encouraging physicians to order hepatitis C virus testing, including genotype testing for patients with chronic HCV prior to antiviral therapy, and HCV RNA testing for patients on antiviral therapy.

Brian Jackson, MD, medical director of informatics for ARUP Laboratories, Salt Lake City, thinks the HCV-related quality measures may promote use of testing for patients who were not receiving it previously. For example, based on ARUP’s analysis of its hospital clients’ HCV genotyping testing, most hospitals appear to be ordering genotyping adequately, though there are definitely some settings in which that’s not the case, he says. “Our sample may be weighted a little bit toward academic centers but overall it’s fairly representative, with hospitals having inpatient, outpatient, and outreach.”

Dr. Jackson couldn’t help but notice that clinical laboratory testing appears to be underrepresented in the PQRI quality measures overall, given that it makes up only 50 percent of the measures related to diagnostics. Yet in the clinical world, he adds, laboratory tests are about 80 percent of diagnostics. CodeMap’s Dr. Root predicts, however, that as the quality reporting matures, in vitro diagnostics companies may develop tests that become part of quality measures, as A1c has become for diabetes.

As for the future of quality measure reporting, Padget says that if “you listen to how CMS representatives talk, you get the idea that the current quality reporting initiative is expected to mature into a full-fledged pay-for-performance system, similar to what CMS is accomplishing on the hospital side.”

That’s why OSU Pathology’s Pukay-Martin says the cost for pathologists not participating in the PQRI is “probably enormous in that if we don’t get ready to do this now, we could lose money down the line.”

Robert Michel, editor of The Dark Report, predicts that each generation of the physician quality measures will become more focused on outcomes. Already there are visible signs of this. “One new development takes effect on Oct. 1, 2008, when Medicare will no longer pay hospitals for the cost of care for a defined set of preventable events, including hospital-acquired infections and administering the wrong blood product.”

“Against this background,” Michel adds, “Medicare’s PQRI is one more example of the trend in the American health care system to gather the data needed to drive improvements in health care. PQRI is an early step in the process of encouraging providers to pay close attention to evidence-based medicine guidelines as a way to standardize care and reduce variability.”

Others point out that the fate of the PQRI and whether it will evolve into a true pay-for-performance system is a decision that ultimately rests in congressional hands. As government affairs consultant Donald Lavanty, JD, notes, “The administration that fostered the physician reporting initiative had a Republican Congress that brought it to the 40-yard line. But whether it gets to the end zone remains to be seen.”

Karen Lusky is a writer in Brentwood, Tenn.