College of American Pathologists
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  Fee schedule cuts out, RVs for new services in


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March 2006
Feature Story

Pamela Johnson

Final action was taken early this year to reverse the across-the-board payment cut to physician services that the Centers for Medicare and Medicaid Services had announced in its final rule released on Nov. 21, 2005. In the same final rule, the CMS had adopted College-recommended relative values for several codes that are new this year.

Because of calculation errors the CMS published in the 2006 proposed fee schedule, the agency delayed in the final rule practice expense updates that the CAP supported. Those errors led the CMS to cancel nearly all proposed changes to the practice expense relative value units.

President Bush’s Feb. 8 signing of the Deficit Reduction Act of 2005 canceled a 4.4 percent cut in Medicare physician fees that began Jan. 1, which allowed the CMS to give its payment contractors the final go-ahead to begin paying claims this year at 2005 rates. The president’s signature followed a 216-214 vote on Feb. 1 in the House that gave final approval to the budget bill, S. 1932.

The bill first won House approval Dec. 19 and Senate approval Dec. 20. Legislation to cancel the payment cut was delayed late last year when Senate Democrats used a parliamentary procedure to send the bill back to the House for a second vote.

The CMS originally announced the 4.4 percent reduction to the Medicare conversion factor, a result of the sustainable growth rate update formula, with the release of the final 2006 Medicare physician fee schedule last November. The CAP and other physician organizations argue that the SGR is flawed and have lobbied in recent years to replace it with a formula that accounts more accurately for physicians’ true practice costs. Congress has averted similar cuts in recent years while efforts continue in the physician community to overhaul the fee schedule update formula.

The CMS told its contractors in a Feb. 10 transmittal that they could begin making public the new payment rates and start processing or reprocessing claims at the higher amounts. The transmittal makes final an earlier version with a pending directive that said contractors "will have 2 business days from the date of enactment of the Deficit Reduction Act to begin to process claims using the new fees as well as begin to reprocess those claims that were paid under the [Medicare physician fee schedule] at the -4.4 percent rate." Medicare contractors will automatically reprocess claims submitted since Jan. 1 and paid at the lower rate; physicians need not resubmit claims.

The final physician fee schedule rule for 2006 adopts CAP-recommended values for new array-based evaluation codes and a new intraoperative touch prep examination code ("CPT—What Lies Ahead," December 2005). It revises downward slightly the College-recommended value for an add-on touch prep code for additional sites.

The CAP worked with the American Medical Association CPT editorial panel to establish new codes in these areas and surveyed CAP members to develop proposed work values. It then presented the proposed work values to the AMA/ Medical Societies RVS Update Committee, or RUC, which makes recommendations to the CMS on RVUs for new and revised codes. The CAP also compiled and developed for the RUC direct practice expense costs input recommendations for these new CPT codes, which the CMS uses to determine practice expense relative value units. The RUC endorsed the values and direct practice expense costs that the College proposed and forwarded its approved recommendations to the CMS.

In the Nov. 21, 2005 final rule, the CMS said it has withdrawn its entire practice expense method proposals from the fee schedule’s Aug. 8 proposed rule. A practice expense calculation program error that resulted in incorrect figures across all physician services prompted the decision.

While the CMS did implement practice expense cost inputs for codes new in 2006, practice expense updates for nearly all physician services—including several the College supported as the 2006 fee schedule was being developed-have been put on hold for this year. Specifically, the final rule accepts but does not implement the following practice expense direct cost changes for pathology services supported by the College:

  • Flow cytometry: The CMS accepted revised practice expense cost inputs for flow cytometry codes 88184 and 88185 relating to the clinical staff type and antibody costs, and added a computer, printer, slide stainer, biohazard hood, and FACS wash assistant to CPT code 88184. A computer and printer will be added to CPT code 88185.
  • In situ hybridization (CPT 88365, 88367, and 88368): In the rule, the CMS notes the CAP’s comments on the number of DNA probes assigned to the in situ hybridization codes and agrees to adjust the number for 88367 from 0.75 to 1.5, as the College recommended.
  • Refinement of 88355 and 88356: The CAP presented refined practice expense data to the RUC last year for CPT codes 88355 and 88356. The CMS accepted the refined inputs, as well as additional cost information the College submitted.
  • Supply and equipment items needing specialty input: The CMS accepted additional pricing information sought and provided by the CAP for CPT codes 88184, 88355, and 88356.

Pamela Johnson is CAP assistant director for economic affairs.

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