Higher expense RVUs in ’06 fee
  schedule proposal

September 2005
Feature Story

Carl Graziano

A proposed change in Medicare methodology combined with data supplied by the CAP since 1999 would result in a 1.3 percent increase in pathology practice expense relative values next year and a total 13.1 percent increase over four years.

Those changes come under a Centers for Medicare and Medicaid Services proposed rule for the 2006 Medicare physician fee schedule, published Aug. 8 in the Federal Register. The rule includes the agency’s proposal to change the way it calculates practice expenses.

The new method would boost pathology practice expense relative value units, or RVUs, overall by 1.3 percent in 2006, 2.6 percent in 2007, 3.9 percent in 2008, and 5.3 percent in 2009, according to CMS figures in the document. For independent laboratories, practice expense RVUs would rise 6.4 percent next year, 13.1 percent in 2007, 20.3 percent in 2008, and 28 percent in 2009.

For pathology, the revised calculation uses Clinical Practice Expense Panel data that the CAP has worked to refine since 1999 through the American Medical Association’s Practice Expense Advisory Committee and the AMA/Specialty Society RVS Update Committee. Because the new method could cause "some measure of financial stress" for some specialties, the CMS is proposing to phase in the change as a weighted proportion of relative value units that would increase in 25 percent annual increments over four years.

As expected, the 2006 fee schedule proposed rule also calls for a 4.3 percent cut in all physician fees, a result of applying Medicare’s flawed sustainable growth rate, or SGR, formula. The CAP, the AMA, and other physician specialties have lobbied in recent years to replace the SGR with an annual fee update formula that more accurately reflects physician costs. Legislation pending in Congress would require positive updates for physician payments next year and beyond and scrap the SGR system in favor of calculations tied to changes in medical inflation and physician productivity.

If Congress fails to avert the SGR-generated fee cut next year, the improved pathology and independent laboratory practice expense RVUs would blunt the effect of the reduction, leaving pathology with about a three percent decrease and independent laboratories with a 2.3 percent increase in 2006. Also contributing to slightly improved pathology payments is a CMS proposal to reduce payments for certain multiple imaging procedures performed in the same session within the same imaging code families. The policy change would result in a 0.02 percent increase for pathology services next year.

In another practice expense change related to CAP advocacy, the CMS says it will adjust the number of DNA probes assigned to in situ hybridization code 88367. "Currently, CPT codes 88365 and 88368 have 1.5 probes assigned, while CPT code 88367 has only .75 of a probe assigned," the CMS says in the proposed rule. "CAP requested that we also assign 1.5 probes to CPT code 88367, and the comment provided justification for this request. We accept the CAP rationale and propose to change the probe quantity for CPT code 88367 to 1.5."

The CMS also says it will accept refined practice expense inputs, presented by the CAP earlier this year, for CPT morphometric analysis codes 88355 and 88356. In addition, the CMS will accept revised practice expense inputs for flow cytometry codes 88184 and 88185 relating to clinical staff type and changes in antibody costs. Further, the CMS proposes to add a computer, printer, slide stainer, biohazard hood, and FACS wash assistant to 88184, and a computer and printer to 88185.

Elsewhere in the proposed rule, the CMS acknowledges the current debate on and off Capitol Hill surrounding pay-for-performance proposals by stating that Medicare’s payment system should encourage physicians to provide quality care and prevent avoidable health care costs. The agency notes its support of a Medicare Payment Advisory Commission recommendation to develop measures related to the quality and efficiency of care physicians provide. The agency also says it hopes to work with physicians to improve their understanding of the consequences of differences in the use of followup visits, imaging procedures, laboratory testing, and minor therapeutic procedures.

The CMS says that, given rapid growth in spending, it expects to intensify efforts to engage the physician community in developing useful quality measures. The agency says it is now exploring ways to share quality of care and resource use information with individual physicians and would release to the public only aggregate quality data. Some data, the CMS says, will derive from claims.