Pinning reimbursement hopes on CMS powwow
Discussions about clinical lab test reimbursement will again
this year be open to soapboxing rather than being held in a "black box."
This is the second year the Centers for Medicare and Medicaid
Services has opened its process for setting Medicare payments for
lab procedures to public input, as directed by federal legislation
passed in 2000. Reimbursement levels won’t be decided until a couple
months after the Aug. 5 meeting in Baltimore, which is devoted to
taking testimony from interested parties, including lab groups,
vendors, and consultants.
Although lab groups say they hope this year’s meeting will be
more interactive than the first one, they’re pleased to be able
to comment on reimbursement levels. Fee-setting previously was a
black box in which CMS officials met in private and established
rates for which there was little recourse.
"Clearly there was a need," says Mark S. Synovec, MD, chair of
the CAP Professional and Economic Affairs Committee and president
of the Topeka (Kan.) Pathology Group. "It would become very frustrating
when new codes would come out with reimbursement that was illogical.
There was no mechanism to proactively address that." With a public
meeting, experts can have their say before fees are set. "It’s a
lot easier to do it correctly the first time than to try to change
it retroactively," he adds.
The new lab procedures that will be considered by CMS are decided
by the Current Procedural Terminology Editorial Panel, run by the
American Medical Association. The College’s advisor to the panel
is Stephen N. Bauer, MD, laboratory director at Mercy San Juan Hospital,
After the CPT panel selects codes for the new procedures, they
are sent to the CMS committee that sets Medicare payments for lab
procedures to determine reimbursement. Fees are set in two ways:
"Cross-walking" applies when a newly coded test is clinically or
technically similar to an existing one, so reimbursement is based
on the related fee schedule amount. "Gap-filling" is used for new
procedures where no comparable test exists. In that case, each local
Medicare carrier determines payment for the first year. In the following
year, CMS uses those amounts to figure out a national payment rate.
On the table
Only about 10 codes are expected to come before the CMS committee
at this year’s meeting, including three in hematology and two each
in chemistry and gynecologic cytology. One new test expected to
be considered is beta natriuretic peptide, or BNP, for congestive
Most, if not all, of these codes will be considered by the CAP
Professional and Economic Affairs Committee for cross-walking, Dr.
Synovec says. Even the new test, BNP, "is not a dramatic departure"
from existing methodologies. "We will look at the reagent costs
and labor involved, compare that to other tests in the chemistry
area, and see if current payments are reflective. If they are, then
we will suggest a cross-walk. If not, then we will suggest a gap-fill
approach," he says.
The most interesting discussion at this year’s meeting is expected
to center on the hematology codes. "There are significant changes
coming in hematology," Dr. Synovec says. "Some of the codes have
been eliminated, and the basic structure of the section has been
modified. Some analyses have been split for more appropriate coding,
and some codes have been contemporized."
The College is more likely to recommend a gap-fill than industry
groups representing national laboratories, Dr. Bauer adds. That’s
because a gap-fill leaves national labs, at least for the first
year, at the mercy of local carriers. "They may wind up with a lot
of different rates before CMS comes up with one," he says. "If you’re
a national lab, you don’t want to see anything gap-filled. You prefer
cross-walking because you know what you’re getting."
Still, both processes are flawed. Cross-walking can perpetuate
old pricing mistakes, says Joan Logue, a principal with Health Systems
Concepts, Longwood, Fla. The first Medicare fee schedule for lab
payments dates to 1984, and many payments are based on decisions
made years ago. Furthermore, to cut costs and meet congressional
budget directives, cross-walked codes are being paid at 74 percent
of the median, while gap-fill codes are paid at 100 percent. "New
technology is definitely being compromised in payment when you cross-walk
it," says Logue. "But the major national labs like cross-walking
because it’s predictable."
Gap-filling, on the other hand, is based on 56 local carriers
determining an appropriate price. The CMS uses those prices to set
its own national payment limit. Carriers above the limit must lower
their payments, but those below the limit do not have to raise theirs.
Consequently, there is no way to correct carrier prices that have
been set too low, Logue says.
AdvaMed, the Washington-based lobbying group for medical device
and lab vendors, usually lets its members decide whether to press
for cross-walking or gap-filling. "It’s their test," says Virginia
Tobiason, chair of AdvaMed’s IVD Payment and Outcomes Work Group
and director of corporate reimbursement for Abbott. "We expect that
our member companies, if it’s a new code with new technology, will
have their experts testify [at the meeting]."
In general, Tobiason adds, the use of new technology should determine
a gap-fill, even if the test is clinically similar to another one.
"If the technology doesn’t mesh, you need new pricing, which would
be a gap-fill," she says. "You’re really penalized when it’s cross-walked"
because of the lower payment level.
Off the table
A potentially contentious issue that won’t be discussed at this
year’s meeting is genetic tests. The American Clinical Laboratory
Association had proposed to the CPTEditorial Panel that a half-dozen
genetic tests be given new codes. One was approved, for cystic fibrosis.
But under pressure from other lab groups, and at the request of
the CAP, the CPT Editorial Panel removed the code from the 2003
CPT manual, a decision that, after further consideration, ACLA supported.
The matter was shelved until lab groups could recommend a methodology
to cover genetic testing in general. "There are good reasons to
think again about how to consider genetic tests," says David Sundwall,
MD, ACLA president. "Should it be by disease or by methodology of
The College asked ACLA to postpone genetic testing out of concern
that setting payment for one test could establish a precedent for
all of them. Says Dr. Bauer: "Some people want different codes for
each gene defect, which would mean thousands of new codes. We’re
not sure how to deal with it, so we wanted to wait until we could
come up with a consensus."
"Most of us," adds Dr. Synovec, "anticipate a huge explosion in
molecular diagnostics in the not too distant future. We want to
build a system in CPT to allow appropriate codification of foreseeable
permutations with these technological advances." He says laboratory
groups "will have to sit down and decide how we want to address
this, rather than wind up with a chaos of seemingly random codes
Lab consultant Logue concurs. Given the flaws in the payment structure,
"I don’t think it [genetic testing] is an area where you want to
rush in because it’s so hard to undo the wrong pricing," she says.
For the few genetic tests that have been approved, such as HIV-1
genotyping, CMS has used a cross-walk. "They simply added up what
they saw as the underlying molecular diagnostic codes to arrive
at a fee," Logue says. The problem, however, is that vendors and
labs may use different molecular diagnostic methods to arrive at
the same result. "CMS is going to pick the lowest level," she adds,
so if there’s no standardization in methodology, "everybody else
is going to wind up being underpaid."
Participants hope they can generate more dialogue with the committee
this year, rather than just present testimony and have pricing levels
released later. "Last year was very much a one-way process," says
JoAnne Glisson, vice president of government relations for ACLA.
"The CMS announced they were just there to listen. We all read our
statements, they said, ’Thank you very much,’ and we sat down."
The committee did not question the experts who testified.
Although CMS generally followed the group consensus, there appeared
to be no context for its pricing decisions. "We couldn’t quite figure
out their rationale," Glisson says. "If you’re going to have experts
fly in from all over the country to give testimony, you should have
more dialogue. Otherwise, what’s the point?"
Dr. Sundwall is quick to add that he appreciates the effort CMS
made last year. "My impression is basically positive. They’re trying
to do a better job and be inclusive." As the committee gets more
accustomed to the open meetings, the dialogue should improve, he
AdvaMed is pushing legislation that would require CMS to make
its payment-setting procedure and rationale public. The legislation
would require CMS to post on the Internet new tests being considered
for pricing, hold public meetings to receive comments and recommendations,
disclose (on an Internet site) the context for determining payment
levels, and finalize payment levels. The legislation has passed
the House and is expected to be included in the Medicare reform
"The meeting last year was a good starting point, but we’re looking
for the process to be improved," Tobiason says. Committee members
"should try to get more opinions at the meeting and have more discussion,
then explain how their decisions are made."
Because the CMS committee is not composed of experts in lab pricing,
"it’s unrealistic to expect them to make a decision on what they’re
going to do by the end of the meeting," says the CAP’s Dr. Bauer.
Members need time to consider the testimony and consult with their
own experts. Nonetheless, "We’d be interested in hearing the rationale
for their decisions because it would give us more insight into the
process," Dr. Bauer adds.
A CMS official who asked not to be identified says, "We understand
the concern that people voiced about the meeting. We’re trying very
deliberately to break out of the black box, and our intent is to
provide more information about why we’re making the [pricing] decisions
that we do."
The information, however, would have to be provided after CMS
deliberates the pricing levels, the official says. The target release
date for final pricing is Nov. 1. "Our intent would be to provide
a tentative set of potential decisions sometime in September on
the Web site www.hcfa.gov/medicare/payment.htm,
which would allow a few weeks for groups to give us input if we
really got something wrong."
CMS found last year’s testimony to be constructive, the offical
says. "It wasn’t just the manufacturers chewing on us. It was very
helpful to have technical input from the lab community, and we welcome
that again this year."
While no one, not even CMS, is particularly enamored of cross-walking
and gap-filling, lab groups do not want to change the system until
they’re sure it can be improved. They are particularly concerned
about possible legislation to impose a competitive-bidding process
on laboratory fee schedules.
"We have issues with the current system," says Stephanie Mensh,
associate vice president of payment and policy for AdvaMed. "Would
we want to replace it with competitive bidding? No," she says emphatically.
But "we are very concerned with what CMS has done with some of the
cross-walked codes in reducing payments by significant amounts."
"There’s no question that cross-walking and gap-filling are flawed,"
says the CAP’s Dr. Synovec. "But competitive bidding has significant
problems, in part because of regional differences in the way care
is provided." Competitive bidding represents the "Wal-Mart mentality,"
he asserts, and would hurt smaller labs. "Any national payment system
is bound to produce winners and losers because costs for these laboratory
tests are not even throughout the country, or even within the same
community," depending on factors such as the type of provider, he
Dr. Synovec personally would like to see CMS consider a relative
value system in which tests are reimbursed according to their value
in providing quality health care in addition to traditional cost
methodologies. "Sheer economics should not be the primary driver
of appropriate lab health care," he says. "We don’t want to drive
the laboratory health care system by reimbursement. We want to drive
it by appropriate care." Under-reimbursing or over-reimbursing create
the wrong incentives for using or not using tests, he says. "Either
way we, as well as our patients, will ultimately lose."
Looking at the resources used in conducting a test—the actual
costs rather than the assumed ones—"would be a more rational
way of calculating payments," says ACLA’s Dr. Sundwall. Rate-making
is "very arbitrary," he adds. "There needs to be an effort to take
into consideration newer technology and higher costs for resources
The CMS official acknowledges that the current method for setting
fees "certainly has some antique aspects to it." He says CMS’ research
branch has issued a draft report "in which we simulate how we could
go about using charge data from actual lab claims to update our
payment levels." But any change will be a long time coming, he cautions,
since it would have to be done legislatively. Then too, CMS pays
for about 1,100 lab procedures, and updating the fee schedule for
all of them would be a tedious and contentious process.
Karen Southwick is a writer in San Francisco.