College of American Pathologists
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May 13, 2010  •  Volume 26, Number 10
Next Issue: May 27, 2010
© 2010 College of American Pathologists

In This Issue:

FDA Inquiry Letter Torpedoes Walgreens Plans to Sell Genetic Testing Kit
Statline Focus: McClellan Urges Pathologists to Tackle New Reimbursement, Quality Reporting Realities at CAP’s 2010 Public Policy Meeting
PBS’s Shields, The Hotline’s Amy Walter Predict Republican Gains as Congressional Candidates Face Angry Electorate in November
May 31 Deadline Fast Approaching for Medicare Physician Pay Cut; CBO Estimates Level Reimbursements Could Total $2.7B for 2010
AMA Launches Web Site to Assist Physician Claims from $350 Million UnitedHealth Settlement
Tennessee, Iowa Sign Informed Consent Exemption into Law
CAP Provides HHS’ National Coordinator for HIT Comments on Certification Program Proposals
Complete the AMA Survey about Medicare Payments

FDA Inquiry Letter Torpedoes Walgreens Plans to Sell Genetic Testing Kit

Just days after the nation’s largest drugstore chain announced plans to sell an over-the-counter genetic test by the week’s end, Walgreens announced that it has reconsidered after the FDA raised concerns over regulation of the test via an inquiry letter to the test’s manufacturer, Pathway Genomics. Based in San Diego, California, the company performs the saliva collection genetic test kit at their CLIA-licensed laboratory.

Walgreens had reportedly planned to sell the Pathway Genomics Genetic Health Report for a retail price of approximately $400 at more than 6,000 of its 7,500 store beginning Friday, May 14. The test is designed to assess genetic predisposition for more than 70 health conditions, as well as including pharmacogenetic response and pre-pregnancy health information. FDA officials voiced their concern about oversight of the test, as it was neither cleared nor approved by the agency. The company has claimed that the kit doesn’t need FDA approval, as it is performed in a CLIA lab.

On Monday, the FDA sent an inquiry letter to Pathway’s CEO and founder, James Plante, explaining that the company’s testing kit appears to meet the definition of a medical device, yet there appears to be no record of a clearance or approval. “We request that you provide us with the FDA clearance or approval number for the Genetic Health Report,” read the letter signed by James L. Woods, FDA’s Deputy Director, Patient Safety and Product Quality, Office of In Vitro Diagnostic Device Evaluation and Safety. “If you do not believe that you are required to obtain FDA clearance or approval for the Genetic Health Report, please provide us with the basis for that determination.”

Concerns over the Pathway-Walgreens deal were echoed by Alberto Gutierrez, PhD, Director of the FDA’s Office of In Vitro Diagnostics, at the CAP 2010 Public Policy Meeting, held earlier this week in Washington, D.C. (see related story on news from the meeting below). But worries over direct-to-consumer genetic tests appear to reflect the agency’s struggle with how to regulate—or not regulate—these emerging genetic diagnostic tools. “We have our hands full with personalized medicine,” Gutierrez told the standing-room only crowd. “These novel technologies are tough to regulate.” He went on to say that regulation of companion diagnostics is a particular challenge for the agency, although a guidance on companion diagnostics will likely be issued by the end of the year.

Statline Focus: McClellan Urges Pathologists to Tackle New Reimbursement, Quality Reporting Realities at CAP’s 2010 Public Policy Meeting

Mark B. McClellan, MD, PhD With Congressional Budget Office estimations for health care reform now climbing to $1 trillion, pathologists must take the lead in determining equitable new payment models for the specialty and establishing quality measures or risk being crushed by escalating reimbursement pressures, former CMS Administrator Mark B. McClellan, MD, PhD, announced at this week’s CAP 2010 Public Policy Meeting, held May 10-12 in Washington, D.C.

Under the new reform legislation, the current fee-for-service payment model will likely be upended in favor of a new system over the next 10 years, said McClellan, who is now the Director of the Engelberg Center for Health Care Reform and the Leonard D. Schaeffer Chair in Health Policy Studies at The Brookings Institution. He believes the new system will likely be a blending of fee-for-service and bundled payments.

John Scott Whatever the new system, one thing is clear: the government is putting the pressure on providers to demonstrate quality and cost savings. “Measurement of quality and lower costs will provide the foundation for payments,” he explained. “With performance measures in place, it will become easier to make payment changes.” He urged pathologists to ensure adequate measures are in place to demonstrate the value of the specialty.

Developing pathology measures is a priority for CAP, explained Vice President, Advocacy John Scott at the D.C. meeting. CMS has currently approved two measures, and CAP is working on developing more.

Expanding the Secretary’s Power

Another sign that Congress is serious about containing costs is the establishment of the Independent Payment Advisory Board (IPAB). This provision of the reform law marks a new era in Medicare and Medicaid spending, in that the HHS Secretary has direct authority to circumvent Congress in making Medicare payment decisions. “This group has real power,” said McClellan. “However, the problem is that it is restrictive in what it can do. The only thing it can really do is change payments to providers.”

Scott pointed out that the Secretary’s reach is also more direct with relation to CPT codes, under the new law. “The Secretary now has greater authority to adjust fee schedule rates that are found to be misvalued or inaccurate,” he explained.

High-Risk Insurance Pools

Many of the health care reform legislation’s current initiatives center on insurance reform; specifically, the creation of state-based, high-risk insurance pools. Slated to be established by Jan. 1, 2011, at least 19 states have opted out of these pools. Even though the federal government is paying for 90% of these pools (100% in the opt-out states), the states are still in dire financial straits because of the recession, making the issue a flashpoint for November gubernatorial elections, explained Raymond C. Scheppach, PhD, Executive Director of the National Governors Association, at the CAP meeting.

With at least 24 new governors projected to come into office in January, the simultaneous launch of these high-risk pools presents a challenge. Some of the gubernatorial candidates taking office could be severe critics of the law. There is also uncertainty about how these insurance entities will be organized, whether they will be non-profits or part of the state government, and how the IT-aspects of the enrollment system will be designed. These same questions also pertain to the insurance exchanges.

“The 300-pound gorilla in the room is the magnitude and complexity around the exchanges, and whether states are going to do them,” said Scheppach. “There are not a lot of good roadmaps out there about how to run an exchange. There are only small roadmaps, such as for Massachusetts, but that doesn’t really apply to states like Texas.”

Taking Self-Referral to the Hill

In addition to hearing from top policymakers, the meeting presented CAP’s grassroots a first chance to lobby Congress on stopping physician self-referral of anatomic pathology services. CAP members met with over 175 Congressional leaders to press Congress to introduce legislation that would remove anatomic pathology (AP) services from the in-office ancillary services exception under the current Stark self-referral law. While the exception was originally intended for patient convenience for simple clinical laboratory tests, such as glucose and urinalysis tests, it’s currently being used as a loophole by some specialty physician groups, such as urology and dermatology.

“Policymakers and regulators have expressed concerns that when physicians self-refer tests on biopsies and other specimens to in-office pathology laboratories in which they have a direct financial interest, there is an incentive to over-order such tests,” said Denise Bell, CAP’s Director of Federal Legislative Affairs, at the policy meeting. “This incentive is not what we want in place when moving from a volume to value-based health care system.”

PBS’s Shields, The Hotline’s Amy Walter Predict Republican Gains as Congressional Candidates Face Angry Electorate in November

Political analyst Amy Walter told attendees at the CAP 2010 Public Policy meeting held earlier this week in Washington, D.C. that the mood among the national electorate is angry and “anti-Washington and anti-Wall Street” and many of the votes for the mid-term election are likely to go in the Republicans favor.

Amy Walter Voter frustration is centered on what is viewed as a “lot of checks being written, but not a lot of tangible benefits” following the bank bailout and grueling health care debate amidst an economic recession, said Walter, who is Editor-in-Chief of The Hotline. In terms of the impact on the mid-term elections, she predicted that while the Senate is likely to be left Democratic, it could lose six or seven seats and could have a new leader. She also pointed out the impact that Presidential approval ratings can have on these elections. According to her trend analysis, if Presidential approval is 50% or higher, his party loses an average of 12 seats. If the approval rating is below 50%, his party loses an average of 40 seats. President Obama’s current approval rating is 51%, according to the most recent Gallup data.

Luncheon speaker and nationally recognized political analyst, Mark Shields, also noted growing support for Republican candidates among independent voters. “Today, the intensity and passion is on the Republican side and independents are turning to Republicans,” he explained.

May 31 Deadline Fast Approaching for Medicare Physician Pay Cut; CBO Estimates Level Reimbursements Could Total $2.7B for 2010

While the next deadline for averting the 21% Medicare physician payment cut is fast approaching on May 31, the Congressional Budget Office (CBO) estimates that keeping the reimbursement level for the remaining months of 2010 would cost the government $2.7 billion. This would result in an approximate 26% reduction in 2011, which would cost the government $3.8 billion for the entire year, bringing the total cost for the remainder of 2010 and 2011 to $6.5 billion.

These estimates, released on Apr. 30, are part of comprehensive cost projections based on alternative proposals to the Sustained Growth Rate (SGR) formula for determining physician payment rates under Medicare. These alternatives include various update approaches, including Medical Economic Index (MEI) updates and replace or restructuring the SGR. The scenarios are split into three different options:

  • Cliff Options: After one or several years of overriding reductions, payment rates would be dramatically reduced—between 29%-34%— in the year following the last override. The rates would then be at the level they would have been if there had been no change to the payment rates during the overriding years. Cost estimates for the various scenarios under the “cliff options” range from $8.9 billion to almost $60 billion between 2011-2015 and between 2011-2020.
  • Clawback Options: Limits to payment rate updates are determined by the sustainable growth rate (SGR) formula go into effect after overriding periods that are scheduled under current law. More specifically, this option includes between a 0%–2% update, or an update determined by the MEI. No other reductions are made. Cost estimates for this option range from $53.9 billion–$96.4 billion from 2011-2015 to $60.1 billion-$175.6 billion from 2011-2020.
  • Options to Replace/Restructure SGR: These options include either a 0%, MEI, or 2% update through at least 2020, as well as the option to “reset” SGR targets to the 2009 spending level. This last option would forgive all spending that has accrued above the cumulative targets, while setting both the cumulative target and spending to zero as of Dec. 31, 2009.

Reacting to the estimates, AMA President J. James Rohack, M.D. said in a quote to Statline that the projections were not surprising, given that the “budgetary gimmicks” used by Congress to delay Medicare physician payment cuts actually increase the cost of reform and the size of the cuts. “It’s time for Congress to put aside the short-term actions that have more than quadrupled the price of a solution for American taxpayers and fix the problem once and for all for seniors, military families and their physicians,” he added.

SGR Update

As of press time, the “extenders” bill that would extend the physician payment cut freeze through Sept. 30 was expected to head to the House floor by next week, according to a May 12 report in Congress Daily. The legislation, the American Workers, State, and Business Relief Act of 2010 (H.R. 4213), was passed in the Senate on March 10, but the House of Representatives had yet to act on the legislation before now.

But this latest extension will likely continue to frustrate medical societies, likely the AMA, as well as lawmakers who advocated scrapping the SGR process throughout the reform negotiations. Physician groups, including CAP and the AMA, have been pushing for a permanent repeal of the SGR formula in favor of a Medicare Economic Index update as defined in the Medicare Physician Payment Reform Act of 2009 (H.R. 3961). This bill is currently stalled in the Senate.

“We included the SGR [fix] in the House reform bill,” said Rep. Lois Capps (D-CA) at the CAP Meeting this week. “This reform legislation is not going to work unless physicians are adequately reimbursed. But we need to have enough conviction for physicians from certain Senators from the other side of the aisle…when it comes to Medicare payments.”

AMA Launches Web Site to Assist Physician Claims from $350 Million UnitedHealth Settlement

Now that the $350 million settlement with UnitedHealth Group has been finalized, the American Medical Association (AMA) has launched an online guide to help physicians and patients determine eligibility, assemble documentation, and file a claim for damages as a result of invalid reimbursement.

The settlement is related to an AMA-led litigation challenging the validity of the insurer’s Ingenix database, which had been used to determine out-of-network reimbursement rates. AMA first began the lawsuit approximately 10 years ago and was joined by the Medical Society of the State of New York and the Missouri State Medical Association. The case also caught the attention of New York Attorney General Andrew Cuomo in 2008. As a result of this related investigation, UnitedHealth Group agreed to pay $50 million towards establishing a new, independent database to be used by insurers to determine payment rates to patients, physicians, and other health care providers for out-of-network services. This new database is to be created by a coalition of academic institutions, and is designed to pay out-of-network providers “more fairly and protect patients rom paying higher out-of-pocket expenses,” according to information from the AMA’s Website.

Physicians have until July 27 to file objections to the settlement or opt out, and until Oct. 5 to file a claim to share in the settlement fund.

Tennessee, Iowa Sign Informed Consent Exemption into Law

Exemptions related to informed consent requirements were passed in the form of amendments recently in Iowa and Tennessee. In Iowa, amended language authored by CAP averted the tightening of medical informed consent requirements, which could have limited the pathologists’ practice of medicine. The amended language was signed into law on April 29, 2010 by Governor Chet Culver (House File 2531).

In Tennessee, Governor Phil Bredesen signed into law SB 2563 (Public Chapter 862) that included a CAP-authored amendment removing a provision that could have prevented pathologists from accessing a patient’s medical record or from making a diagnosis not covered under a patient’s initial informed consent. Moreover, the exemption was amended to ensure that medical examiners’ dissemination and use of autopsy records in the course of their work continues to be a protected activity.

CAP Provides HHS’ National Coordinator for HIT Comments on Certification Program Proposals

In response to calls for public comments, CAP has submitted feedback to HHS on the proposed establishment of certification programs for health information technology (HIT). The letter was submitted to David Blumenthal, MD, head of the HHS’s Office of the National Coordinator (ONC) for Health Information Technology. Financial incentives for HIT systems are part of the American Recovery and Reinvestment Act. However, in order for professionals and hospitals to be eligible to receive payments under the incentive programs, they must be able to demonstrate meaningful use of a certified EHR system.

The letter included comments urging the ONC to understand the cascading impact of costs associated with extending permanent certification programs to other types of systems, with cost increases eventually affecting consumers. In addition, CAP recommended that authorization for recognizing certifications bodies should be clarified as they relate to the the physician self-referral electronic health record (EHR) exception and anti-kickback EHR safe harbor regulations. Clarifying this authorization would also help in determining interoperability between software systems.

Requirements for inter-developer EHR module testing and certification should also ensure interoperability. Making interoperability a requirement for certification will ensure that minimum standards are met by EHR systems to facilitate record transactions. “This is especially important for EHR modules where integrated care (e.g., medical homes) will almost certainly occur beyond a single module and involve other EHR system products,” states the letter.

Complete the AMA Survey about Medicare Payments

Nine times in the last seven years, physicians have faced Medicare payment cuts that were avoided only after Congress intervened. Many of these interventions provided little or no annual increase in payment rates and most were funded with budget gimmicks that merely put off cuts to some future date. As a result, payments today are only about 1% higher than in 2001 and physicians now face a 21.2% cut unless lawmakers step in again before May 31. In the last four months alone, there have been three last-minute reprieves and two instances of Medicare holding up claims processing because Congress didn’t act until after the cuts had officially started.

CAP is working with the AMA and other specialty organizations to determine how these threatened pay cuts and instability in the program are affecting physician practices. Results of the survey will be used in advocacy efforts to reform Medicare’s current physician payment formula. Please take a moment to complete this very short survey—it should take only 2-3 minutes to complete. The survey, which can be accessed at the link below, will be open through close of business May 21. Results will be collated for individual specialties and across all specialties

Please fill out the survey only once.


202-354-7100  •  202-354-7155 (fax)  •  800-392-9994


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