College of American Pathologists
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September 29, 2011  •  Volume 27, Number 20
Next Issue: October 13, 2011
© 2011 College of American Pathologists

In This Issue:

Medicare is “On the Table” As Congress Addresses Budget Woes
AHA, AMA Support TC Grandfather Extension at House Hearing
Court Denies Both Petitions for Rehearing in Gene Patent Case
Survey Finds Over 20% of CAP Members Linked to an ACO
Keep Up with the Latest CAP Advocacy News on Twitter

Medicare is “On the Table” As Congress Addresses Budget Woes

Opportunities and Risks Ahead

With the Joint Select Committee on Deficit Reduction’s initial deadline to identify at least $1.2 trillion in savings set for around Thanksgiving, health care providers groups are going on the offensive as Medicare becomes an obvious target for cuts.

Joint Select Committee on Deficit Reduction Members

Rep. Jeb Hensarling (R-TX), Co-Chair
Sen. Patty Murray (D-WA), Co-Chair
Sen. Max Baucus (D-MT)
Rep. Xavier Becerra (D-CA)
Rep. Dave Camp (R-MI)
Rep. Jim Clyburn (D-SC)
Sen. John Kerry (D-MA)
Sen. Jon Kyl (R-AZ)
Sen. Rob Portman (R-OH)
Sen. Pat Toomey (R-PA)
Rep. Fred Upton (R-MI)
Rep. Chris Van Hollen (D-MD)

For more information, visit

Created as part of the debt ceiling agreement reached between the President and Congress in August, this “Super Committee” is made up of 12 Members of Congress, equally divided between the House and Senate, Republicans and Democrats (see box for a listing of Committee members). By November 23, these Members are charged with identifying between $1.2 billion and $1.5 billion in savings over the next decade. Entitlements, including Medicare, Medicaid and Social Security, are all on the table.

If the Committee reaches agreement on a deficit reduction deal by that November deadline, Congress has to vote on it by the end of December. As long as the package achieves savings of at least $1.2 trillion to $1.5 trillion over 10 years, and Congress passes it, no automatic cuts are triggered. However, if the Committee fails to reach agreement or Congress rejects its plan, automatic across-the-board cuts are triggered beginning in 2013. Under this trigger, Medicare physician payment would be cut 2%. The committee, however, could reach a partial deal that is less than $1.2 trillion. This still could trigger an automatic cut, albeit a smaller one. Medicaid and Social Security are safe from trigger cuts.

It’s important to note that although the Super Committee is a separate congressional committee, there is overlap with the key health committees in terms of Members and issues. For instance, the 12-member committee includes Senate Finance Committee Chair Max Baucus (D-MT) and House Energy and Commerce Committee Chair Fred Upton (R-MI).

In addition, the key health care committees in both the House and Senate will play a role, specifically related to issues like the impending 29.5% Medicare physician payment cut under the sustainable growth rate (SGR) formula set to take effect as of Jan. 1, 2012. While some issues will be addressed as part of the deficit reduction package, other health care spending issues may run on a separate legislative track, but these distinctions have yet to be determined.

Challenges Ahead

During the debt ceiling negotiations in August, health care providers were spared deep cuts. However, the Super Committee will shape its own cuts in Medicare and Medicaid, as well as other entitlement programs.

At the same time, the Medicare Payment Advisory Commission (MedPAC) is also weighing in with its perspective on payment cuts. The independent Congressional agency recently proposed scenarios in which physician specialties could face cuts as part of a longer-term SGR fix. MedPAC has also offered payment cuts as a possible solution to the self-referral issue with respect to imaging, which could have implications for pathology, as related to the College’s efforts to address abusive self-referral arrangements for anatomic pathology services.

Updated CAP Advocacy issue briefs are available online.

All of these proposals are converging at a time when there is a broad effort by policy makers to shift dollars away from physician specialties to primary care. Working to block harmful policy prescriptions, the CAP is advocating on issues that will be decided by year-end. In addition, the College continues to focus on other, longer-term advocacy issues, namely health information technology, the role of pathologists in emerging coordinated care models, like accountable care organizations (ACOs), as well as valuation challenges.

But over the next two months, the College is specifically targeting three advocacy issues that have come to the forefront: the impending 29.5% Medicare physician payment cut under SGR set to take effect as of Jan. 1, 2012; the year-end expiration of the technical component (TC) of the grandfather provision for pathology testing services; as well as the unnecessary spending from self-referral abuses related to the in-office ancillary service (IOAS) exception.

CAP’s Advocacy Plan

Join Forces with AMA on SGR Repeal Proposals

Given the current push to slash health care spending, permanent reform of the Medicare physician payment system at an estimated cost of $300 billion presents a challenge. It’s estimated that the cost for a permanent fix will double to $600 billion by 2016, driven by short-term interventions. The College supports a permanent SGR fix, and is backing the AMA’s three-pronged reform approach. This includes repealing the formula and implementing a five-year period of stable Medicare physician payments while laying the foundation for a new payment system. The AMA recently released a SGR Repeal and the Joint Select Committee on Deficit Reduction: Frequently Asked Questions document for providers.

The College has long advocated for repealing this flawed Medicare physician payment formula, and recently joined the AMA and other national and state physician organizations in urging the Super Committee to include a full SGR repeal in its final legislation. “As the Committee begins its deliberations, it is important to note that the current budget baseline assumes that massive physician payment cuts will be implemented, even though Congress has rejected less severe cuts 12 times over the past decade,” stated a Sept. 20 letter to Committee Co-Chairs Sen. Patty Murray (D-WA) and Rep. Jeb Hensarling (R-TX). “Any effort to stabilize our nation’s finances must be based on a true assessment of future expenditures.”

Of concern to the CAP, the AMA, and other provider groups is MedPAC’s proposal to repeal SGR through budget offsets that would impact specialty physicians like pathologists. Among other provisions, the repeal would be paid for by freezing payment rates for primary care physicians for 10 years. Annual payments to specialists would be reduced by 5.9% under the Medicare Physician Fee Schedule for each of the three initial years. Following the three years, specialty payment rates would be frozen for seven years. The offsets also include reducing clinical laboratory service payments for 10 years, which is estimated to yield $21 billion in savings.

MedPAC, which advises both the Senate and House on payment issues affecting the Medicare program, released these draft recommendations at their most recent meeting on Sept. 15. MedPAC Commissioners will vote on these recommendations at their next meeting on Oct. 6-7. Nevertheless, the College has learned that these proposals are circulating on Capitol Hill, and could already have some traction.

This proposal drew opposition from the AMA’s President Peter W. Carmel, MD. The AMA is also planning to send a formal letter to MedPAC opposing these draft recommendations, which the College will support.

Reduce Medicare Spending by Closing the Stark Loophole

As the Super Committee scrutinizes entitlement programs like Medicare for $1+ trillion in savings over the next two months, the College has the opportunity to confront these challenges while working with lawmakers to identify unnecessary spending in the health care system, said the CAP’s Chair of Council on Government and Professional Affairs (CGPA), Richard C. Friedberg, MD, PhD. “These next two months are a real call to action for the CAP, in that we have only this brief window to head off physician pay cuts and offer alternative actions that would reduce the deficit,” he explained to Statline. “College members will be flying into Washington to to advocate eliminating self-referral of anatomic pathology services with key members of the Super Committee. We need to send Congress the message that ending abusive self-referral practices will cut spending.” CAP members are urged to visit the PathNET Legislative Action Center to sign up for the Self-Referral Action List and find out more about this fall’s Grassroots Fly-In, when CAP members travel to Washington, DC, to meet with their Members of Congress on this issue.

The key to reducing self-referral abuses related to the IOAS exception is removing diagnostic imaging, anatomic pathology, physical therapy, and radiation therapy services, believe the College and its partners in the Alliance for Integrity in Medicare (AIM). In addition to the College, members of AIM include the American College of Radiology (ACR), the American Society for Radiation Oncology (ASTRO), and the American Society of Clinical Pathology (ASCP), among others. In a Sept. 20 letter to Super Committee Co-Chairs Murray and Hensarling, AIM noted its support for efforts to rein in inappropriate spending in the Medicare program, but noted that this requires a legislative remedy address these self-referral abuses.

In addition to driving higher costs to the health care system, Dr. Friedberg also emphasized that the argument to curb self-referral abuses must focus on the potential impact on the patient, in terms of unnecessary testing. That being said, Congress will not want to address this issue if seen as rooted in competing economic interests. “We can’t afford to depict this as a fight among specialists, but rather about the quality of care delivered to patients,” explained Dr. Friedberg.

Advocate for TC Grandfather Extension

Also impacting pathologists is the potential expiration of the TC grandfather provision, allowing independent laboratories to bill Medicare for the TC of surgical pathology services for hospital patients.

The CAP continues to work with lawmakers to make this provision permanent. The College provided testimony last week to the House Ways and Means Committee for a hearing on extending this and other Medicare physician payment provisions (see related article for details on this hearing).

Keep watching Statline for updates—and special action alerts—as the Super Committee negotiations ramp up over the coming months.

AHA, AMA Support TC Grandfather Extension at House Hearing

Two leading health care provider organizations—the American Hospital Association (AHA) and American Medical Association (AMA)—are supporting the extension of the technical component (TC) grandfather provision for pathology testing services, top officials told Congressional members of the House Ways and Means Subcommittee on Health during last week’s hearing on extending a host of Medicare provider payments set to expire at the end of the year.

CAP’s Position on TC Grandfather for Pathology Services

“The CAP strongly supports a permanent extension of the ‘grandfather’ provision contained in bipartisan legislation H.R. 2461, the Physician Pathology Services Continuity Act of 2011, introduced by Representatives Geoff Davis (R-KY) and Mike Ross (D-AR). This legislation allows independent laboratories, under certain conditions, to bill Medicare directly for the technical component (TC) of anatomic pathology services, commonly referred to as pathology services, provided to hospital patients. Unless Congress acts this year, the ‘grandfather’ will expire, adversely impacting hospitals, independent laboratories and the patients they serve.”

Source: Submitted testimony to House Ways and Means Subcommittee on Health, Hearing on Expiring Medicare Provider Payment Policies

If this grandfather provision is not extended, independent laboratories currently billing under this exception will no longer be permitted to bill Medicare directly for the TC of surgical pathology services for hospital patients, stated the CAP’s testimony submitted to the House Subcommittee for the record. The College has long advocated for not only extending this provision but making it permanent. To this end, the CAP is supporting legislation (H.R. 2461) introduced by Rep. Geoff Davis (R-KY) and co-sponsored by Rep. Mike Ross (D-AR) in early July. This bill, “The Physician Pathology Services Continuity Act of 2011”, would make the TC grandfather policy permanent.

The College believes that if this provision expires at the end of this year, it will present a hardship for both independent laboratories and hospitals. This position is backed by AMA, as one of the organization’s board members, Robert M. Wah, MD, indicated in a written statement submitted at the Sept. 21 hearing. “Hospitals would have to absorb new costs without a payment increase,” said his statement. “New complex billing systems and administrative operations would be required for both the hospital and laboratory.”

Burdens on Small, Rural Hospitals

Eliminating direct payment to laboratories would prove particularly burdensome for small and rural hospitals, said AHA President and CEO Richard Umbdenstock in his testimony. These hospitals don’t typically have the volume to support in-house pathology testing services, necessitating reliance on independent laboratories. “The hospitals would also have to pay the independent laboratories directly for their services, despite the fact that Medicare DRG payments do not include these costs,” he added. The Federation of American Hospitals also submitted a statement in support of extending the TC grandfather provision.

From the outset of the hearing, however, Subcommittee members were clear that just because Congress has extended these provisions in the past, it is taking a hard look at all Medicare payments.

As the extenders package costs $2 billion annually, Congress must scrutinize this spending, even though Medicare providers are also facing a 29.5% cut when the current sustainable growth rate “patch” expires at the end of this year, said Subcommittee Chairman Wally Herger (R-CA). “History shows that Congress has continued to blindly extend these policies year in and year out, which raises the question: Given that these additional payments do not appear to be ‘temporary,’ isn’t the true cost of the annual $2 billion extenders package actually $25 billion, when measured over Congress’ standard 10-year budget window?” he stated.

Court Denies Both Petitions for Rehearing in Gene Patent Case

The U.S. Court of Appeals for the Federal Circuit will not be further reviewing arguments from either side in the Myriad gene patent case, as it recently denied both the appellees’ and the appellant’s petitions for a rehearing before the Court.

“The only remaining step is to petition the Supreme Court to consider the case, which we are actively considering,” explained American Civil Liberties Union (ACLU) staff attorney Chris Hansen to Statline. The CAP, represented by the American Civil Liberties Union (ACLU), is a co-plaintiff in the trial case challenging gene patents on human DNA, specifically Myriad Genetics’ patent claims on BCRA1 and BCRA2.

The petition from the appellees, including CAP, was denied on Sept. 13; Myriad’s petition was denied on Sept. 16. Each side has 90 days from the denial date to petition the Supreme Court to hear the case, added Hansen, meaning that these petitions would have to be filed by mid-December.

Survey Finds Over 20% of CAP Members Linked to an ACO

Preliminary findings from the College’s 2011 Practice Characteristics Survey found that over 20% of CAP members report that they are either currently participating in or negotiating to participate in a coordinated care or accountable care organization (ACO).

Over 1,400 practicing CAP members from the United States responded to the survey, which was conducted between May and August 2011. Most of the responding pathologists (74.4%) reported spending their professional time in a hospital setting. Of those, the majority had either an ownership interest in or were employed by a pathology-owned group that contracted to provide services to a hospital.

The CAP staff continues to analyze the final results of the Practice Characteristics Survey. Full survey results will be posted on the CAP website in October.

Health Care Executives and ACOs

Another recent survey of health care executives found that 92% reported being in the planning or development stages of an ACO, and 30% of these are involved in operational ACOs, according to the most recent findings from the health care management consulting firm Beacon Partners. This survey was completed in the third quarter of 2011. This finding represents a significant increase from a similar survey conducted by Beacon in the second quarter of 2011, when only 47% of respondents reported being involved in the planning or developing stages of an ACO.

The majority of respondents to this most recent survey were CIOs (28%) and clinical management executives (27%). Of the 200 respondents, 45% have committed funding from their operating budgets for ACO planning efforts. However, many (53%) have not created a department or executive role to lead ACO development. In fact, 44% have no plans to hire personnel for this purpose, while another 25% plan to reallocate existing personnel.

Complete results, including comprehensive analysis, from the Beacon Partners’ Accountable Care Organization Readiness Study can be found online.

Keep Up with the Latest CAP Advocacy News on Twitter

CAP Advocacy is now on Twitter. Follow CAP Advocacy’s daily “tweets” to keep pace with regulatory and legislative news affecting the pathology industry. For the latest health care news, be sure to check out what we are following on Twitter.


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