Feature Story

Delay doesn’t sway supporters of lab payment reform

October 2001
Kathleen Furore

The Sept. 11 terrorist attack on America delayed a scheduled "fly-in" of Laboratory Budget Coalition members to Washington to explain the benefits of the Medicare Patient Access to Preventive and Diagnostic Tests Act. But supporters are still determined to push through legislation that would reform the way clinical labs are paid for outpatient services performed for Medicare patients.

"There were 68 meetings scheduled with various members of Congress to thank the bill’s cosponsors and to encourage others to support the bill," says Kristen Hedstrom, assistant director of federal legislative affairs for the CAP Division of Government and Professional Affairs.

"Our issues pale in comparison [to the terrorist attack]. But we have to be at the table and put our issues before Congress in an appropriate way," says David Sundwall, MD, president of the American Clinical Laboratory Association. "Now, in this new spirit of bipartisanship, which I think is very real, we need to make sure that our menu of options for positive improvements is on the table."

That menu of options includes the legislation H.R. 1798, which was introduced in May by Reps. Jennifer Dunn (R-Wash.) and Jim McDermott (D-Wash.). An identical companion Senate bill (S. 1066) was introduced in June by Sens. Orrin Hatch (R-Utah) and John Kerry (D-Mass.).

The legislation seeks to fix Medicare’s payment system for clinical laboratory services by establishing a single, national, rational laboratory fee schedule for outpatient lab services performed for Medicare patients—something ACLA vice president of government relations JoAnne Glisson calls "a top priority that will greatly streamline the payment of laboratory claims."

"Congress is looking for regulatory relief to make the Medicare program function more efficiently and effectively, and this legislation fits in with what they’re trying to achieve," says Megan Ivory, associate vice president of federal government relations at AdvaMed, a Washington-based association that represents medical device manufacturers.

While AdvaMed has been a key supporter of H.R. 1798, Ivory says many others have been instrumental in drumming up support on Capitol Hill.

"The legislation has to do with breakthroughs in clinical lab tests, so certainly our manufacturers have an interest. But quite honestly, it’s been a coalition of our manufacturers and various national laboratory groups and patient groups," she says.

Those groups include ACLA, CAP, American Association for Clinical Chemistry, American Association of Bioanalysts, American Medical Technologists, American Society for Clinical Laboratory Science, American Society for Microbiology, American Society of Clinical Pathologists, and various regional health associations and patient groups.

Though the fate of H.R. 1798 remains unknown, supporters express hope that some of its provisions will be included in any Medicare reform package that emerges. But they admit it will be a tough battle in light of the new priorities on Capitol Hill.

"The degree to which foreign events have rearranged the entire terrain is clearly a factor," says John Scott, the CAP’s vice president of government and professional affairs. "That doesn’t mean we won’t get bits and pieces [of H.R. 1798]. But the bill itself has a $1 billion price tag over five years." Even before Sept. 11, Scott says, revised Congressional Budget Office projections about the available surplus didn’t bode well for the bill.

"The environment has changed dramatically since the last Congress, when two years in a row they passed legislation that dished out money to health care providers," Scott continues. "It’s not that, overall, we can’t succeed with our agenda, but I think it’s realistic to say that it will be an uphill climb."

Says AdvaMed’s Ivory: "Congress has learned more about the issue and problems that exist in the current system, and the industry has been more organized in figuring out the best solutions. The Hill has been receptive to the issues, and we certainly hope [the bill’s provisions] are included in an overall Medicare reform package."

In addition to establishing a single fee schedule at the national limitation amounts for some 1,100 tests, the legislation calls for an open process for incorporating new technologies; more involvement of pathologists, labs, and manufacturers in setting payment levels; and a process by which stakeholders can challenge fee schedule decisions.

"This bill is essentially trying to bring into the real world the recommendations of the Institute of Medicine report," Dr. Sundwall says. That December 2000 report—"Medicare Laboratory Payment Policy: Now and in the Future"—was the result of a Balanced Budget Act of 1997 provision that directed the Centers for Medicare and Medicaid Services (formerly HCFA) to convene a negotiated rulemaking committee to develop uniform payment policies for clinical lab testing and reduce the number of carriers processing lab claims to no more than five.

"The IOM study is an accurate assessment of where the laboratory industry is now. And it sets the agenda for the future for the laboratory industry and the profession," says John Matsen, MD, professor emeritus of pathology and pediatrics at the University of Utah and a member of the IOM committee that compiled the report.

Payments are now set separately for each of 56 different carrier jurisdictions, Dr. Matsen says. Carriers compare what the lab is charging with the NLA and local fee schedule amounts. They then pay labs the lower of those amounts. That means labs are sometimes reimbursed less than the national limitation amount. CMS reviews local fee schedule amounts from carriers and uses the median to set NLAs.

Further complicating the matter is that reimbursement rates for most tests now on the fee schedule were set in 1984 based on 1983 lab charges, and they were updated for inflation only periodically. Consequently, payment rates don’t adequately address the technological advances of the past two decades, Glisson says.

If passed, H.R. 1798 would increase payments to labs that perform tests and are reimbursed at amounts lower than the NLA. Those now at the NLA would remain there.

"We don’t feel like we’re getting a raise," Dr. Sundwall says of the hoped-for reimbursement increases. "We feel like we’re modernizing the process and getting back pay."

Dr. Matsen adds that "an impressive amount of uniformity" exists in spite of the process, but he notes that labs working with multiple carriers "are dealing with subtleties and variations in the way rules and regulations are interpreted."

A kidney disease test to detect albumin in urine and identify early kidney failure, for example, has a national cap of $6.33, which is what Illinois laboratories are reimbursed, according to AdvaMed’s Ivory. About half the states pay at the NLA. "But if you go to Alabama, [labs] are only getting $3.26," Ivory says. The situation is even worse in Arkansas, where labs are reimbursed $2.62, and in Utah, where payment is
just $2.12.

The homocysteine test for cardiovascular disease suffers similar inconsistencies. "There’s a $23.34 cap, but in Colorado the payment is $3.65, and in Kentucky it’s $2.81," Ivory says. Further underscoring the problem is the payment situation for the test in New York, where reimbursement differs between areas within the state. "It’s $19.99 in the metro area and in Queens, but $14.78 upstate," Ivory says.

Though most inconsistencies are, in Glisson’s words, "nickels and dimes," "really egregious" examples do exist. Some carriers, for example, are paying only $107 for HIV kits that have a national limitation amount of $355, she says.

Sums up Dr. Sundwall: "The legislation for the first time puts us on the playing field on the offensive. There are good reasons for all the provisions we’re seeking. They’re not just self-serving."

One of those "good reasons" is that all patients will have more equitable and timely access to new laboratory tests if a single payment schedule is adopted, says Stephen Bauer, MD, of Mercy San Juan Hospital Laboratory, Carmichael, Calif. Dr. Bauer is immediate past-chair of the CAP Professional and Economic Affairs Committee.

"The key components [of H.R. 1798] are establishing a national process to incorporate new tests into the payment system," Dr. Bauer adds. "The process should be open and provide an opportunity for organizations with expertise, such as CAP, to provide input. This will hopefully allow development of fair and appropriate payment for the test. Failure to do so could impede the introduction of valuable new technologies."

Mark Synovec, MD, of Topeka Pathology Group, Topeka, Kan., and chair of the CAP Professional and Economic Affairs Committee, concurs. "One of the IOM’s major concerns was the incorporation of new technologies to make them more readily available for Medicare beneficiaries. Right now there’s no fast track for the incorporation of these tests," he says. "If passed, this bill could create a more balanced and efficient system to address mainstreaming appropriate new technologies. This would eliminate the redundant, variably intense, and variably accurate assessments made individually by all the current Medicare carriers."

Entering new tests into the system is now done by gap-filling and crosswalking. In gap-filling, CMS tells carriers to determine their own price based on data in their geographic areas, which can lead to large discrepancies in payment levels. In crosswalking, CMS links a new CPT code to the code of an existing test, even though the tests may have little in common with regard to cost.

"It became evident at the [Aug. 6] CMS town hall meeting [on lab coding and payment issues], where various stakeholders suggested a variety of crosswalks for new tests, that the process needs to be national, as do payment levels," Dr. Bauer says. "Very low payment levels for some carriers made some of the crosswalks unrealistic for the new tests."

Reform is clearly needed in the way laboratories are paid. Dr. Matsen believes the need is acute.

"To me, there is a major problem now in the way CMS deals with new tests," he says. "We have a situation in which the process is not timely and not open. There is the potential for a crisis in the future that will be accentuated by the introduction of complex new tests-for example, genetic and other molecular diagnostic tests."

Perhaps the best argument for reform is that it helps Medicare beneficiaries, the ACLA’s Glisson says. "Now, with various policies, beneficiaries have uneven access. I don’t think Medicare ever intended coverage for lab services to depend on where people live," she says. "We believe greater uniformity and simplicity in lab payment policies will lead to greater benefits for labs, Medicare, and patients."

Kathleen Furore is a writer in Oak Park, Ill.