College of American Pathologists




July 9, 2013
© 2013 College of American Pathologists
Special Report
2014 Proposed Medicare Physician Fee Schedule Links Pathology Services to Hospital Outpatient Rates

July 9, 2013—The Centers for Medicare and Medicaid Services (CMS) advanced its efforts to reduce Medicare spending on physician pay by adjusting payment for codes it describes as mis-valued in the proposed rule for the 2014 Medicare Physician Fee Schedule announced yesterday.

The proposed rule contains payment and programmatic changes that will impact pathologists and laboratories as well as other specialties, with new values proposed for over 200 services covering all specialties. Chief among the changes for pathologists is CMS’ proposal to link payment for pathology services to the rates paid under Medicare’s hospital outpatient prospective payment system. If CMS adopts this policy it will reduce the Technical Component (TC) of the affected pathology services by as little as 4% and as much as 80% depending on the services. The proposal would continue CMS’ efforts to adjust payment rates for “mis-valued codes,” by eliminating differentials in payment between hospital outpatient departments and physician offices that, in the government’s view, create incentives to treat patients in higher-paying settings of care.

In addition to the TC cuts, the rule proposes initiating a process to reconsider payment for clinical laboratory tests paid on Medicare’s Clinical Laboratory Fee Schedule (CLFS) that would take into account increased efficiencies and technological advances, and it raises the bar for physicians to earn incentives in the Physician Quality Reporting System (PQRS). The Value-Based Payment Modifier (VBPM) program required by the Affordable Care Act is also proposed for 2014.

While CAP staff continues to analyze the rule, below is a summary of issues included in the rule of concern to pathology and laboratory medicine, as well as initiatives that continue to address concerns from Congress and the agency to enhance payment for primary care physicians as well as address overpayment to specialists.

Cap Payment for Practice Expense Costs at Hospital Outpatient/ASC Rate

CMS proposes to limit the practice expense payments used to calculate the technical component (TC) of pathology services to the lesser of the amount paid at either the hospital outpatient amount or ambulatory surgery center payment rate. This proposal results in steep reductions to all pathology TC payment amounts, as well as significant reduction to the global payment of nearly all pathology codes. The TC reductions range from 75-80% for in situ hybridization and flow cytometry TC payment to a 45 to 55% hit on special stain reimbursement. According to CMS, this proposed policy change accounts for a 6 percent reduction in overall Medicare PFS payment to pathologists and a corresponding 25% cut to Independent laboratory PFS payments (which represents less than 17% of Medicare payment to independent laboratories).

Under this proposal, the 88305 TC, which was revalued just last year would go down 3%; the PC will go up 4%,and the 88305 global payment will increase 1%.

Reconsideration of Payment Amounts for Clinical Laboratory Tests

CMS proposes a new process to review laboratory tests paid on the CLFS to determine if the payments should be adjusted due to technological changes. While the agency acknowledges that adjustments could be made both to increase and reduce fee schedule amounts, the agency expects most payments will decrease due to changes in technology that have occurred since the payment amounts were established. The new process is proposed to begin in 2015. With the exception of molecular pathology codes, CMS would re-value all of the codes on the CLFS over a five year period, starting with the oldest tests.

PQRS Measures for 2014 and Beyond Announced

CMS retained the five quality measures developed by CAP; however, CMS rejected three new measures for lung cancer and melanoma that CAP had proposed for pathologists. In addition, CMS proposes to raise the criteria for successful reporting for the incentive to reporting on 50% of patients for nine measures. The criteria for avoiding the penalty have also been raised.

Value Based Payment Modifier

CMS proposes several changes to the value-based payment modifier program which impact pathologists. Specifically, the agency would apply the value-based payment modifier to groups of physicians with 10 or more eligible professionals starting in 2016 based on their participation in the 2014 PQRS and increase the amount of payment at risk under the value-based payment modifier from 1.0 percent to 2.0 percent. CMS would also make quality-tiering mandatory for groups within Category 1 for the CY 2016 value-based payment modifier, except groups of physicians with between 10 and 99 eligible professionals would be subject only to any upward or neutral adjustment determined under the quality-tiering methodology, and groups of physicians with 100 or more eligible professionals would be subject to upward, neutral, or downward adjustments determined under the quality-tiering methodology. Category 1 includes groups of physicians that either (a) self-nominate for the PQRS as a group and report at least one measure or (b) elect the PQRS Administrative Claims option as a group.

Primary Care Enhanced Payments and Misvalued Code Initiative

CMS misvalued code initiative impacting the TC of pathology payment impacts a total of more than 200 codes, according to the agency, and is consistent with its implementation of the Affordable Care Act. The agency is also proposing revaluation of misvalued codes identified by Medicare Contractor Medical Directors. In addition, the proposed rule continues CMS’ emphasis on primary care management services with a proposal for separate payment for complex chronic care management services beginning in 2015.

See the CMS Fact Sheet for more details about the rule, and the PQRS and VBM Fact Sheet for more information about that program.

There is a 60-day comment period, in which individuals and organizations can provide comments to CMS on the proposed rule. CAP’s Advocacy team has several meetings scheduled with CMS over the next few weeks to discuss these issues, and also intends to submit comments to CMS with the aim of improving the 2014 final rule.


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