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CMS Issues Medicare Physician Fee Schedule Without Finalizing Proposal Most Harmful to Independent Laboratories

Written by Roy Albert and Karen Lovitch

On the day before Thanksgiving and a little over one month after the end of the government shutdown, the Centers for Medicare & Medicaid Services (“CMS”) published a rule finalizing revisions to payment policies under the Medicare Physician Fee Schedule (“MPFS”) and other revisions to Medicare Part B for calendar year 2014.  As we reported when CMS published the MPFS proposed rule, the changes proposed under the MPFS would have significantly impacted independent laboratories if finalized.

CMS elected not to finalize its proposal to cap reimbursement for certain pathology services furnished in an office, laboratory, or other non-facility setting to the total payment that Medicare would make when the service is furnished in a hospital outpatient department or ambulatory surgical center (“ASC”).  This proposed change threatened to decrease reimbursement to independent laboratories, generally, by about 25%, with an even more significant reduction to pathology laboratories because their revenue is derived primarily from physician services.  Some common anatomic pathology codes would have been cut by as much as 80%.

Congressional pressure to abandon the proposal likely contributed to CMS's decision.  Senators Amy Klobuchar (D-MN), Johnny Isakson (R-GA), and 38 of their colleagues sent a letter asking CMS not to implement the proposed cuts.  The Senators noted that the proposal was based on inadequate data that may lead to below-cost Medicare payments for certain services.

Independent laboratories – especially pathology laboratories – are likely breathing a collective sigh of relief.  Industry stakeholders, such as the College of American Pathologists (“CAP”) and the American Clinical Laboratory Association, (“ACLA”) lobbied vigorously on this issue and submitted highly critical comment letters.  ACLA issued a press release commending CMS for its decision.

However, CMS left room for further modifications to pathology codes provided in the office, laboratory, or other non-facility setting.  CMS stated that it plans to “consider more fully all the comments received, including those suggesting technical improvements.”  CMS anticipates that it will develop a revised methodology subject to notice and comment rulemaking that will use hospital outpatient department or ASC rates to develop practice expense relative value units (“RVUs”) used in the reimbursement calculation of various pathology codes.

Clinical laboratory services did not fare as well. CMS forged ahead with its plan to reexamine the payment amounts established under the Medicare Clinical Laboratory Fee Schedule (“MCLFS”) to determine if changes in technology warrant payment adjustments but implemented a modified approach to this process.  CMS will analyze codes on the MCLFS to determine which should be adjusted due to technological changes.  CMS will examine test codes in several ways, including reviewing those that have been on the MCLFS the longest, those that are high volume test codes, those that have a high dollar payment, and those that have experienced rapid spending growth.  Each year beginning with the 2015 MPFS proposed rule, CMS will identify certain test codes, describe how tests have been impacted by changes in technology, and propose an adjustment to the payment amount that takes into account the impact of the technological change.  CMS also finalized its proposal to allow the public to nominate codes for review.

These are just several of the many issues addressed in the MPFS final rule.  CAP has published a chart that shows the MPFS final rule’s impact on many different laboratory codes.  The Pathology Blawg also provides detailed information in this post

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Roy Albert