College of American Pathologists




November 5, 2012
© 2012 College of American Pathologists
Special Report
CMS Targets Specialty Providers, High Volume Codes in Quest to Control Spending

November 5—The government is now acting on its charge to combat health care overutilization and escalating spending, as was evident in the 2013 Medicare Physician Fee Schedule final rule, which featured payment cuts for many specialty providers—including pathologists—and revaluation of numerous high volume codes, including a 52% decrease of the technical component (TC) of the surgical pathology CPT code 88305.

Additional Pathology PFS Changes
  • 1% cut to pathology to cover cost of 7% family physician increase that is spread across all specialists. This is part of multiple year strategy to encourage care coordination services;
  • Additional 1% cut to pathology due to practice expense methodology change phase-in;
  • Total 6% cut to pathology after including change in pathology code values—most notably the TC revaluation, together with primary care and practice expense methodology change.
  • Projected 26.5% cut due to SGR (Congress expected to avert cut);
  • TC Grandfather termination confirmed

“With such intense focus on rising health care costs, no specialty provider organization should be surprised that federal officials with the Centers for Medicare and Medicaid Services [CMS] are scrutinizing those areas of health care spending where there is the greatest growth,” explained Richard C. Friedberg, MD, PhD, Chair of CAP’s Council on Government and Professional Affairs (CGPA). “The amount of the reduction—52%—is significant, but given that 88305 is a high volume code that hasn’t been revalued in over 10 years, it’s not surprising that the TC of this code was reduced.” The final rule also decreased the TC of some other codes in the surgical pathology family (88300-88309) and will lead to reimbursement changes to other pathology codes due to indirect costs, he added (see Table below for complete revaluation data for this code family).

These code revaluations contributed to a total 6% payment cut to pathology, which include cuts related to covering the primary care increase and practice expense methodology (see box for more details). However, pathologists were not the only specialty provider group hit: CMS cut radiation oncologists by 7%, neurologists by 7%, and physicians in radiation therapy centers by 9%.

High Volume Codes Targeted

Under the Health Care Reform law, CMS is empowered to review and revalue high volume codes from all specialties as potentially overvalued services, explained Dr. Friedberg, adding that the agency is carrying out this directive in this final PFS. Indeed, CMS flagged both the professional component (PC) and TC of 88305 for review last year in the 2012 proposed Medicare physician fee schedule. The CAP mitigated the impact on pathologists by limiting the review to the 88305 TC, after successfully arguing that the 88305 PC had been reviewed—and its value validated—in April 2010.

However, since the TC was originally valued in 2000, utilization has increased. “In recent years, there has been open public discussion in the industry about how the 88305 TC can be used as a revenue generator,” explained Dr. Friedberg. “Taking this into account, in addition to the long time since it’s been revalued and the increasing scrutiny of costs associated with the TC of this code, it’s not surprising that 88305 was on CMS’s radar.”

While there’s no doubt that the cuts to the TC are disappointing, CAP was successful in mitigating the size of the cut from the $18 originally put forth by CMS in last year’s proposed rule. Through its participation as Pathology Advisor in the AMA/Specialty Society RVS Update Committee (RUC) process, the CAP collected and defended direct medical inputs for the entire code family, including clinical labor time, medical supplies and medical equipment. This information is used by CMS to formulate TC payment rates; it is used in CMS’ practice expense methodology, as well as CMS’ rate setting formula to create the practice expense relative value units, which are then used to determine payment for the TC.

Special CAP Member Two-Part Webinar Series on PFS Impact: Confronting New Medicare Payment Realities

Part 1: How 2013 Reimbursement Changes Will Impact Pathologists
Wed., Nov. 14, 1:00-2:30 PM Eastern Time
Register online.

Part 2: What CAP Members Need to Know about 2013 PQRS Changes
Thurs., Nov. 15, 3:00-4:30 PM Eastern Time
Register online.

Please note: separate registration is required for each webinar.

“The College collected and presented this information to the RUC, which further reviewed the direct inputs and forwarded their recommendations on to CMS for use in their rate setting methodology,” explained Dr. Friedberg. “However, in the final rule, CMS did not consider several of the direct inputs that were recommended by the CAP and the RUC, including equipment maintenance cost and specimen, solvent, and formalin disposal costs, among others. This contributed to the TC and global payment changes.”

The direct inputs for these services are open for comment, as they are considered interim for 2013. CMS has stated it would consider additional information regarding these items and consider utilizing these costs for calculating pathology payment for 2014. CAP will provide additional information, work with other stakeholders and continue to work to secure these costs for use in calculating the TC payment rates for surgical pathology services.

CMS is also weighing further cuts in regard to direct practice expense recommendations. Specifically, the agency is looking closely at the quantities and items included in these recommendations that were developed for each code in the family based on the number of blocks used each time a service is reported. CMS accepted the RUC’s recommendation based on the number of blocks on an interim bases for 2013. However, for 2014, the agency is seeking additional evidence regarding the appropriate number of blocks for each service, as it is concerned about the accuracy of the number of blocks assumed for each CPT code. If these concerns are not addressed, then the agency could decide to enact further payment reductions in 2014. The CAP will work with the RUC and other stakeholders to provide this requested information to CMS to prevent additional cuts in the 88305 code family for 2014 and beyond.

Molecular Code Placement

In addition to the code payment changes, the final rule also announced that the molecular diagnostic “stacking” codes currently used for billing molecular pathology services to Medicare beneficiaries will be eliminated next year, replaced by new analyte specific CPT codes on the Medicare Clinical Laboratory Fee Schedule (CLFS). CMS did not publish payment rates for these codes, which instead will be paid by gap fill methodology for 2013. The agency did, however, provide a new G-code for use by physicians, specifically pathologists, asserting that physician interpretation of these tests is sometimes medically necessary. CMS will monitor the use of the new HCPCS II G-code.

CAP led a multi-stakeholder effort to develop the CPT codes, and supported their placement on the PFS, explained Jonathan L. Myles, MD, FCAP, Chair of CAP’s Economic Affairs Committee. “While CAP does not agree with CLFS placement, CAP supports the establishment of a G-code to ensure that pathologists are recognized for their professional work associated with molecular pathology services provided to Medicare beneficiaries,” he said.

The final rule also discussed payment for interpretation and preparing the report when non-physicians perform this service. Specifically, CMS stated that the interpretation and report service of non-physicians associated with the molecular pathology codes is captured in the CLFS payment and no separate payment will be made for PhD interpretation, noted Dr. Myles. “Moving forward, the CAP will continue its work to ensure that pathologists professional work is recognized for their contribution to molecular pathology services,” he added.

Assessing the Impact of TC Changes
The following chart shows the impact of the change to revalue the 88300-88309 code family on these and other services. Please note that to best compare the impact of the relative value unit changes, the payment rate and percentage change is calculated using the 2012 conversation factor. CMS announced a 26.5% cut in the conversion factor which Congress is expected to avert later this year.
CPT Codemod2012 Total2013 Total based on 2012 CFChange, based on 2012 CF % Change, based on 2012 CF
88112 $102.45$109.60$7.157%
88300 $28.25$14.64($13.62)-48%
88304 $61.95$44.59($17.36)-28%
88305 $105.86$70.46($35.40)-33%
88307 $234.5$297.49$62.9727%
88309 $355.35$449.64$94.2827%
88311 $19.06$20.42$1.367%
88313 $65.69$67.73$2.043%
88331 $92.58$99.39$6.817%
88342 $105.52$115.73$10.2110%
88342TC$64.67 $73.52$8.8514%

Note: The 2013 data, changes, and percentage changes were calculated with the current 2012 conversion factor (CF), of $34.0376. The 2013 CF was reported as $25.0008.

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