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Medicare Finalizes Increases for Pathologists in 2016 Fee Schedule; Cut to Prostate Biopsy Services

The Centers for Medicare & Medicaid Services (CMS) finalized increases sought by the CAP for pathology services, including immunohistochemistry and in situ hybridization, in the final 2016 Medicare Physician Fee Schedule published on October 30.

The CMS estimates that the initiatives included in the final 2016 fee schedule would result in an overall increase of 8% for pathology services. This estimate would impact overall payment to pathologists by a 4% increase based on the changes to the work relative value units used to calculate the professional component of pathology services as well as the global payment. The impact on changes to the practice expense used to calculate the technical component as well as global payment resulted in a 4% increase in pathology payment.

The physician fee schedule payment received by independent laboratories is estimated to increase by 9% in 2016: 1% increase is attributed to changes in the physician work values, and 7% is attributed to changes in the practice expense values (the CMS notes the total may not be equal to the sum of changes to physician work and practice expense values due to rounding). The impact upon an individual pathologist or practice would depend on the mix of services provided.

The CMS states that several specialties, including pathology and independent laboratories, will experience significant increases in payment resulting from the Misvalued Code Initiative, including the establishment of relative value units (RVUs) for new and revised codes. For 2015, the CMS had discounted the add-on services for immunohistochemistry and in situ hybridization services from the original RUC recommended work RVUs by 40%, based on flawed assumptions. For 2016, the CMS increased the physician work values for the add-on codes, but included a 24% discount in the add-on services compared to the base code.

While this change represents increased values, the CAP maintains that no discount should be taken from recommended values for the add-on services.

Download the CAP's impact table analysis of the 2016 fee schedule

Register for the CAP's November 5 Webinar

Learn more about these and other changes by attending the CAP's November 5 webinar "The 2016 Medicare Physician Fee Schedule's Impact on Pathology Services." Throughout this hour-long panel discussion, CAP experts will explain reimbursement and policy changes to pathology services in 2016. The webinar will begin at 2 PM ET. If you are unable to attend the live session, you should still register so you will receive a link to the archived version of the presentation.

Register for the webinar today!

Misvalued Code Target

The CMS is applying a 0.77% across-the-board reduction to all physician fee schedule services as a result of a new law that requires the agency to achieve savings through its misvalued code initiative. For 2016, a 1% savings is required through services identified by the agency as misvalued. As the CMS achieved a 0.23% net reduction on targeted services, the law requires this 0.77% across-the-board cut.

Prostate Biopsy Reimbursement Change

In 2015, the CMS redefined G0416 to report all prostate biopsy pathology services and requested revaluation information from the American Medical Association/Specialty Society Relative Value Scale Update Committee (RUC) process. For the 2016 fee schedule, the CMS accepted the RUC's recommendations for the direct practice expense inputs for G0416, which will result in a reduction in the technical component of no more than 19% for 2016.

The CMS will review changes to the professional component as part of its 2017 rulemaking. The agency, however, received comments suggesting that the typical number of blocks used in these services can be significantly lower than what is assumed in the RUC recommendations. The CMS is seeking evidence of the typical batch and block size used in furnishing this service.

Please note that the technical component (TC) valuation is independent of the professional component (PC) valuation, except for the allocation of indirect costs, which is a relatively small component. The sum of the two components will provide for the total change in the global service payment.

CAP Advocates to Mitigate Cuts to IHC, Other Pathology Services

The CAP provided its formal comments on the 2016 proposed fee schedule in a letter to the CMS on September 4. While the CAP urged the CMS to finalize and implement the RUC's recommendations included in the proposal, the CAP called for additional changes to appropriately reimburse pathologists for patient services under Medicare's fee schedule. Read the CAP's comment letter on the proposed 2016 fee schedule.

For 2015, the CMS had discounted the add-on services for immunohistochemistry and in situ hybridization services from the original RUC recommended work RVUs by 40%, based on flawed assumptions. For 2016, the CMS increased the physician work values for the add-on codes, but included a 24% discount from the base code for the add-on services. While this change represents increased values, the CAP maintains that these reductions should not be taken for the add-on services. The CAP has stated it does not agree with these arbitrary calculations and urged the agency to accept the RUC recommendations that relied on survey data.

Potentially Misvalued Services for 2017

The CMS finalized its misvalued code list and the following pathology services were identified as potentially misvalued. Any payment rate change as a result of future review would be effective as early as 2017. The CAP will continue its engagement with CMS on these identified pathology services.

CMS Maintains Quality Reporting Options

The CMS finalized retention of the eight pathology measures developed by the CAP, and made no changes to the claims, registry, and electronic health record reporting mechanisms under the Physician Quality Reporting System (PQRS) program in 2016.

A -2% payment adjustment would be applied to 2018 Medicare payments for individual eligible provider or group practice who do not satisfactorily report or participate in PQRS in 2016. Eligible providers who successfully participate in PQRS would not receive an automatic penalty.

Like the PQRS program, the Medicare's value-based modifier (VBM) would apply to all eligible physicians in 2018 based on 2016 performance. Under the modifier program, bonus payments and penalties are assessed based on performance on quality and cost measures. The 2018 VBM penalty for unsuccessful participation in the PQRS would be maintained at 4% for groups of 10 or more eligible providers and 2% for solo practitioners or groups with two to nine eligible providers; the bonus would also be maintained at 4% for high quality, low cost providers.

The VBM will apply to all physicians and some non-physician eligible professionals. The CMS proposes to apply the quality-tiering methodology to all groups and solo practitioners that satisfactorily report PQRS meaning that physicians may face VBM penalties even if they successfully participate in the PQRS.

For eligible professionals participating in more than one accountable care organization (ACO), the CMS will use the higher scoring ACO in determining their VBM adjustment.

The PQRS and VBM programs are set to expire after 2018, the CMS stated. In 2019, Medicare will transition to the new Merit-Based Incentive Payment System (MIPS) that was created in the law repealing the sustainable growth rate (SGR) formula in April. The CAP will continue to engage accordingly as the CMS implements the new physician payment incentive provisions included in the new law.