College of American Pathologists
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Pathology spared the ’03 relative value cuts

Pap test computer error
2003 Medicare relative values for pathology services

February 2003
Carl Graziano

The College has averted targeted Medicare cuts to the relative
values of pathology services in 2003.

In the Dec. 31 final rule for the 2003 Medicare physician fee schedule, the Centers for Medicare and Medicaid Services granted the College’s request for a moratorium on a proposed change to the way the agency calculates pathology professional and technical components and global service relative value units, or RVUs. During the one-year delay, the CAP will lead a study of independent laboratory practice expenses.

The delay means Medicare payments to hospital-based pathologists are not affected by changes made to physician service RVUs for 2003 and independent laboratory-based practices will experience a three percent increase, CMS said in its final rule impact analysis Dec. 20. Without the moratorium the CAP requested, the proposed calculation changes would have produced a two percent cut in relative values for hospital-based pathologists and an eight percent reduction in independent laboratory RVUs.

The CAP successfully argued that CMS’ use of default practice-expenses-per-hour ratio data underestimates the practice expenses laboratories incur and, as a result, undervalues the pathology relative values for direct costs, whether paid to laboratories or to hospital-based practices for outreach work. CMS uses American Medical Association survey data for medical specialties, but the AMA does not survey business entities such as independent laboratories and ambulatory surgery centers.

CMS’ proposed change would have affected pathology technical component payments most dramatically. As published, the calculation revision would have forced a one percent drop this year in the 88305 professional component relative value, a 12 percent cut in the technical component, and a seven percent reduction in the global RVU.

With the moratorium, the 88305 pathology technical component relative value remains unchanged. The 88305 professional component relative value for 2003 will decline by 0.01 relative value units (35 cents) because, in a move carried out in a budget-neutral manner across all services, more recent utilization statistics are used.

If the published 4.4 percent reduction to the conversion factor for 2003 is factored in, CMS predicts, hospital-based pathologists will suffer a five percent reduction in Medicare payments; independent laboratories will suffer a one percent reduction. But a mandated 60-day congressional review period means the new rates will not start until March 1, given the final rule’s Dec. 31 publication date.

Successes stemming from other College recommendations were evident elsewhere in the 2003 fee schedule. The results of the past year’s practice expense RVU refinement process were released in the final rule and show the technical components for first frozen sections, flow cytometry cytoplasmic/nuclear marker studies, and immunofluorescent studies as the big pathology winners for 2003. The 88331 technical component RVUs will increase 49 percent, 88180 technical component relative values will go up 136 percent, and 88346 technical components will rise 32 percent in the new relative value scale. Interpretations of cytogenetic studies (a professional-component-only RVU) will see a nine percent boost. But the immunocytochemistry 88342 TC RVU is down 10 percent for 2003, based on CMS’ consideration of economies in laboratory personnel use when multiple services are provided during a single day.

The practice expense refinement process studies the direct cost inputs (nonphysician clinical personnel and medical equipment and supplies) used at the time of each service and assigns practice expense RVUs accordingly, replacing the previously used charge-based values. As the direct cost data are refined, practice expense relative values among all services can more closely align with the actual costs assigned to each service. Because Medicare pays the hospital for direct cost inputs for hospital patients, the relative values used in that setting do not benefit as much from the practice expense refinement process as the values paid in a non-facility setting.

The College and other physician groups, meanwhile, continue to lobby vigorously to avert the conversion factor cut and replace it with positive updates this year and in 2004 and 2005. The 60-day review period for the 2003 fee schedule final rule gives Congress a window in which to act, and at least one prominent lawmaker already has signaled his willingness to help physicians. On the 108th Congress’ first day, Jan. 7, Rep. Bill Thomas (R-Calif.) introduced Joint Resolution 3, which would freeze physician payments at 2002 rates for one year and nullify the final fee schedule rule. Under the Congressional Review Act of 1996, Congress may reject a rule by enacting a joint resolution of disapproval.

At CAP TODAY press time, Thomas’ legislation appeared likely to pass the House. But it was expected to face a tough fight in the Senate, which scuttled efforts last year to improve Medicare payments by failing to approve (as the House had) CAP-backed legislation that would have increased fees by two percent this year and in 2004 and 2005. The Senate, reluctant to pass piecemeal physician pay increases and split over prescription drug coverage, adjourned last year without acting on the issue.

Physicians’ fortunes could improve with the 108th Congress, which now is Republican-controlled and likely to be more receptive to Bush administration health initiatives.

Carl Graziano is CAP manager of government communications.