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April 2007
Feature Story

CMS changes course on pod lab rule
Ill. court upholds PC billing

CAP requests an MUE advisory committee

Bill would permit psychologists to order, interpret lab tests

In Utah, anti-markup disclosure legislation

Report issued on SGR reforms

Cytology legislation introduced in House

bullet CMS changes course on pod lab rule

Centers for Medicare and Medicaid Services officials recently informed the College that the CMS this year will address pod labs, a type of abusive contractual joint venture. However, contrary to earlier information from the CMS that a final rule would be published, the CMS will address pod labs in a proposed rule, possibly as part of the 2008 physician fee schedule expected mid-year.

A CMS official said the agency decided to publish the rule in proposed format because it will include “significant changes” from what was proposed last August. By issuing the changes as proposed, the agency will avoid challenges based on the rulemaking process.

The 2007 physician fee schedule issued Nov. 1, 2006 by the CMS did not include pod labs but did include a placeholder for it. At that time, CMS officials said they were taking comments—including those of the CAP—into consideration. The CMS also said it “remains committed to addressing arrangements that may encourage over utilization of diagnostic services.”

In addition to working with the CMS, the CAP has worked since 2004 with Congress on a possible legislative remedy to the abusive practice. Should the CMS fail to resolve problems in the expected regulation, the College will pursue a legislative solution. The College also assisted the Office of the Inspector General in its review of suspect contractual joint ventures in 2005. It is unclear when or if an OIG report will be released.

bullet Ill. court upholds PC billing

An Illinois court dismissed in March a class action against a group of pathologists and other defendants that alleged the practice of professional component billing to be unlawful. In the case, Martis v. Pekin Memorial Hospital, the Tazewell County Circuit Court upheld the practice of professional component billing, noting the precedent created in Central States Health & Welfare Fund v. Pathology Labs of Arkansas, 71 F.3d 1251 (7th Circuit 1995). In the Central States case, the court found that professional clinical pathology services provided “value to all patients” and concluded that, in the absence of a state law or health plan contract to the contrary, pathologists had the right to bill plans, patients, or both for these services. (Detail on Martis v. Pekin Memorial Hospital will be published in an upcoming issue of CAP TODAY.) The Texas Medical Board has deemed professional component billing an ethical practice. Last summer, the Texas board dismissed an investigation of a pathologist for an alleged violation of medical ethics for professional component billing. The American Medical Association also recognizes the appropriateness of professional component billing.

bullet CAP requests an MUE advisory committee

The College is leading an effort to urge the Centers for Medicare and Medicaid Services to establish an advisory committee that would provide guidance on the complex issues surrounding medically unlikely edits, or MUEs. Eight national organizations signed on to the College’s March 5 letter that requested the advisory committee be composed of the various stakeholders, including CMS physicians and the CMS contractor for MUEs and the national correct coding initiative, or NCCI; representatives of the pathology and laboratory community; and members of other clinical specialty societies that may be implicated. Since MUEs were introduced last year, the College has urged the CMS on a number of occasions to provide a better rationale and method for the proposed MUEs and to establish a more transparent and formal process for their proposal. Most recently, communications from the CMS contractor suggest that MUEs—which were based initially on unbelievability and later on unlikelihood—may be moving toward medical necessity. This has raised concerns about the proposed MUEs and, in particular, the inadequate level of expertise of the NCCI/MUE contractor and CMS physicians to make sound clinical judgment. The College said in its letter that an advisory committee would “lend transparency and assurance that edits will be based on appropriate evidence to achieve CMS’s objectives without impeding good medical practice.” Several recommendations from the College and other pathology and laboratory organizations for phase two of the proposed MUEs have been accepted, but the CAP continues to be concerned about MUEs for cytopathology codes. Phase two implementation begins this month. The College and other pathology and laboratory organizations had earlier informed the NCCI/MUE contractor that cytopathology codes should be set at least to three to account for the 1.2 percent of cases where there is a duplicate cervix, for circumstances in which a woman with a history of in utero DES exposure may require a sampling of both uterine and vagina, or for both. The NCCI contractor responded that the MUE would be one for the cytopathology codes and the examples provided are “unusual.” Should a provider need to use an MUE of greater than one for the abovementioned reasons, the additional specimens can be reported separately with a modifier -59. It is the CAP’s view that the MUE should be set at the appropriate level rather than rely on a modifier for those cases that might fall below the stated MUE. The concern about having to rely on a modifier was heightened given the CMS’ recent statement made in public forums that it will not publish the explicit MUEs for fear of providers gaming the system. This means providers will not know with certainty when to use a specific modifier. In addition, not all private payers use or recognize modifiers, and should private payers adopt MUEs, providers could face denials of claims in the aforementioned circumstances. The College received phase three of MUEs in January and sent its comments, coordinated with various pathology and laboratory societies, to the CMS in March. Phase three had 154 edits for the pathology and lab sector and largely focuses on clinical codes. The CAP had concerns about only approximately 10 percent of those edits. Phase three is scheduled for implementation in July.

bullet Bill would permit psychologists to order, interpret lab tests

Legislation that empowers psychologists to order and interpret laboratory tests has been introduced in six states. The provision for this authority appears to be ancillary to the psychologists’ primary motive, which is securing the authority to prescribe medications for their patients. The College will oppose the legislation. This is consistent with its position on other legislation with scope-of-practice implications in which nonphysician practitioners such as pharmacists have sought similar authority. The legislation has been introduced in California, Florida, Georgia, Illinois, Missouri, and Tennessee. The American Psychiatric Association is working on the grassroots level in opposition to the legislation. As a Steering Committee member of the American Medical Association Scope of Practice Partnership, the College will urge the AMA to use the resources of the partnership to oppose such bills that threaten the health and safety of patients.

bullet In Utah, anti-markup disclosure legislation

Utah governor John Huntsman Jr. signed legislation March 12 that prohibits the markup of anatomic pathology services by an ordering clinician. In addition, House Bill 292 requires disclosure of “the charge for each anatomic pathology service.” This victory for pathology was the result of joint advocacy by the Utah Society of Pathologists and the College. The legislation was passed in the final hours of the 2007 session by a vote of 24 to 1. HB 292, as originally introduced, would have required direct billing for pathology services; however, opposition within medicine forced a negotiated compromise before the House took action on the bill. The revised bill says: “A health care practitioner who orders anatomic pathology services for a patient from an independent physician or laboratory may not directly or indirectly mark up, charge a commission, or make a profit on the anatomic pathology service provided by the independent physician or laboratory.” In addition, as an enforcement measure, the legislation requires the following: “A health care provider when billing a patient directly for anatomic pathology services provided by an independent physician or laboratory shall furnish an itemized bill which conforms with the billing practices of the American Medical Association that conspicuously discloses the charge for each anatomic pathology service, physician or laboratory name and address.” Violations of the new law are considered “unprofessional conduct” and subject to discipline by the state medical board. Utah is the sixth state to have an anti-markup law applicable to certain pathology services, having joined California, Florida, Michigan, Oregon, and Washington. In addition, 12 states have direct billing laws for certain pathology services.

bullet Report issued on SGR reforms

The Medicare Payment Advisory Commission has released its annual report to Congress focusing on possible reforms to the sustainable growth rate, or SGR, formula. Though Congress averted a five percent cut in payments with SGR legislation during the final hours of the 109th Congress, it is only a short-term fix. Without further legislative action, the SGR could result in a 10 percent cut in 2008, with nearly 40 percent in cuts expected over the next eight years. At the same time, physician practice costs are expected to rise nearly 20 percent over the same period. The advisory commission’s report suggests two possible paths to address the SGR. The first is for Congress to speed up the development and adoption of approaches for improving incentives for physicians and other providers to furnish higher quality care at a lower cost. The second path would replace the SGR with a new expenditure target system that would be expanded to all providers under Part B (not just physicians). These targets would be set by geographic region, type of service, group practice, hospital medical staff, and physician outliers. The commissioners were divided on what path should be taken and thus the report does not recommend to Congress any one alternative; rather, it outlines the advantages and disadvantages of the different approaches. The advisory commission’s annual report does recognize that the current SGR formula is flawed and that it neither rewards physicians who restrain volume growth nor punishes those who prescribe unnecessary services. It cautions, “Absent careful development and significant investment, the risk that a formulaic expenditure target will fail and have unintended consequences is significant.” The House Ways and Means and Senate Finance committees held hearings on the report at which the CMS, American Medical Association, and commission officials testified. The College, along with the majority of other specialties, signed on to a letter to the chairman of the Ways and Means Committee, Rep. Charles Rangel (D-NY), requesting that the SGR formula be repealed and replaced with a system that more accurately reflects practice costs. Several other recommendations were outlined in the letter. CAP leaders and staff will study the commission’s report and analyze the impact of various alternatives on the pathology and laboratory sector.

bullet Cytology legislation introduced in House

Legislation was introduced Feb. 28 by U.S. Reps. Bart Gordon (D-Tenn.) and Tom Price (R-Ga.) to modify the controversial federal regulations requiring annual proficiency testing of pathologists and laboratory professionals who screen for cervical cancer. H.R. 1237 mirrors legislation introduced last year and makes the program educational rather than punitive by suspending the current regulation that subjects cytotechnologists and pathologists to annual proficiency testing and instead requiring annual continuing medical education that would provide them with opportunities to improve their screening and interpretive skills. The legislation tracks recommendations the College made to modify the federal cytology quality assurance standards to make them parallel to the federal standards for breast cancer screening in the Mammography Quality Standards Act of 1994. Under the MQSA, the Food and Drug Administration rejected the need for individual proficiency testing for radiologists, radiologic technicians, and physicists. In 2005, the House passed H.R. 4568, the Proficiency Testing Improvement Act of 2005, which called upon the CMS to suspend the current program and to implement specific changes. A federal advisory panel recommended in June revisions to the current regulation, including significant revisions to the scoring and frequency of the test. However, the CMS and Centers for Disease Control and Prevention blocked discussion of any alternatives that required changes other than adjustments to the existing regulatory framework. A CMS official said during a recent Clinical Laboratory Improvement Advisory Committee meeting that a proposed rule to modify the current regulation will be published “sometime this year.” The CMS initially announced the rule would be published in February and later moved that time to July.


Gretchen Schaefer is director, CAP Communications for Advocacy, Washington, DC.