News Story #17446

Good news in reimbursement is coming to a clinical laboratory near you! That’s a headline we’ve been looking forward to publishing in CLP, and it looks like it has a good chance of being true later this year.

After 17 years of declining reimbursement, the financial health of the clinical diagnostic laboratory industry has been in for a bumpy ride. Of course, there are exceptions. The half-dozen or so high-volume national reference labs, for example, are experiencing a phoenix-like rebirth — 10 years after their first encounter with managed care. Today they’re issuing IPOs almost as fast as they can turn around a STAT glucose. But for many hospital laboratories, the steady erosion of reimbursement payments meant doing more with less and less and less.

Hope is on the horizon in the form of the Medicare Patient Access to Preventative and Diagnostics Tests Act (H.R. 1798). Medicare, the federal program that provides healthcare coverage for the elderly and disabled, is the largest payer of clinical laboratory services, accounting for 29 percent of the nation’s lab bill for inpatient and outpatient services. In addition to its role as a payer, Medicare policy plays a strong role in influencing other payers’ policies.

Introduced in the U.S. House of Representatives on May 10 by Rep. Jennifer Dunn (R-WA) and Rep. Jim McDermott (D-WA), H.R. 1798 recently was joined by a companion Senate bill introduced by Sen. Orrin Hatch (R-Utah) and Sen. John Kerry (D-MA). The bills seek to put into law several of the 12 recommendations issued by the Institute of Medicine in its December 2000 report, Medicare Laboratory Payment Policy. A four-page synopsis of the report and its recommendations can be found at: www.iom.edu/iom/iomhome.nsf/wfiles/4pager/$file/4pager.pdf. The report addresses the Medicare Part B fee schedule for outpatient laboratory services, which accounts for approximately one-third of Medicare’s budget for laboratory services — or 1.6 percent of its total annual budget.

The legislation seeks to:

• establish an open, transparent and rational public process for incorporating new tests;
• develop sound methodologies for setting fair and appropriate payment levels for new tests;
• implement a single, national, rational fee schedule for new and current tests that provides for regular updates;
• provide a mechanism for stakeholders to challenge fee schedule decisions.

How did the laboratory industry end up as the reimbursement whipping boy for Medicare? A brief history lesson: in 1984, when Congress established the DRG method of payment for outpatient care, it also singled out the laboratory under a national fee schedule that put a cap on the price of what are currently about 1,100 lab tests. Because the laboratory is an obvious and very common outpatient service, it was put on the hit list early.

“The lab industry is somewhat of an anomaly in that we’ve been on a fee schedule since 1984,” said Robert Neri, executive vice president of the 6,500-plus member CLMA, one of the lab organizations supporting the bill. “It’s only recently that other healthcare segments such as radiology, respiratory care and cardiology have come under a fee schedule-type arrangement. Each of those is now subject to the ambulatory payment category system, but for them it just came into effect within the last year.”

So Medicare has used different methodologies for determining reimbursement on say, an interventional radiology procedure, which is based upon actual cost data. In the lab we’ve had 17 years of a fee schedule that hasn’t changed very much. There has not been any re-examination of the actual cost of what we do, and there has not been one particular method used to evaluate reimbursement on new tests.”

Although the 11 most powerful laboratory groups support H.R. 1798, the one spearheading the

drive for passage is AdvaMed, the Advanced Medical Technology Association (formerly the Health Industry Manufacturers Association). AdvaMed sponsored an advocacy-based press event on May 24 to garner support for the legislation. On hand to speak in favor of the bill were the two co-sponsoring House representatives, John Matsen, MD, professor emeritus at the University of Utah and an IOM panel member, David Sundwell, MD, ACLA, Mike Sanflippo, manager at Polymedco and Charles Fleishman of Digene Corp.

“This isn’t the first time this issue has come before Congress,” said Megan Ivory, AdvaMed’s director of federal government relations. “The Balanced Budget Act of ‘97 included the requirement that the Institute of Medicine do the study that came out in December which was highly critical of HCFA’s current process with regard to lab test reimbursement.”

Also last year, Congress passed the Beneficiary Improvement and Protection Act (BIPA) which means new lab tests will now be reimbursed at 100 percent of the national limitation amount rather than 74 percent like all other lab tests. There was also a provision requiring HCFA to review its current Medicare payment policy for outpatient lab tests and establish open procedures for setting codes and payment amounts.

It’s clear that diagnostics manufacturers and clinical laboratories stand to benefit from H.R. 1798 becoming law, but what about laboratorians?

According to CLMA’s Neri, “Everyone has a stake in it. Any bill that puts some logic and rationale into the methodology of determining outpatient Medicare reimbursement, which provides a huge portion of our respective employers’ funding source, that bill will benefit everybody in the laboratory.”

That means you, too! Not sure of the name of your federal representatives or senators? Go to www.house.gov or www.senate.gov and find out.

E-mail, phone or write your elected officials in Congress to make sure they know how you feel about H.R. 1798.

Coleen Curran
Editor