Final budget reconciliation a mixed bag for health care providers.
What they couldn't cut, they capped. What they couldn't cap, they increased modestly. And what they couldn't agree on at all was put on the shelf for a year.
A sketch of the Omnibus Budget Reconciliation Act of 1986 (OBRA, covering fiscal 1987, not to be confused with COBRA, the fiscal 1986 act) shows a customary mixture of back-room bargaining and compromise that yields both good and bad news for various health care providers.
For clinical laboratories, one of the most significant provisions is a two-year delay in the requirement for a national fee schedule. Congress has now ordered the Health and Human Services Department to report by April 1, 1988, "on the advisability, feasibility of, and methodology for' the national schedule.
With that delay, the spotlight shifts back to the Health Care Financing Administration, where officials are already looking for ways to continue savings established by current payment limits. Preliminary drafts suggest that for each laboratory service, the national rate would be based on a weighted average of current carrier-wide fee schedule amounts. The carrier-wide fee schedule amounts would in turn be limited to 110 per cent of the median of all carrier-wide fee schedule amounts for the same service.
Congress also answered a call from many independent labs to level the playing field by eliminating the 2 per cent reimbursement differential previously granted to hospital labs for test work on hospital outpatients. There is, however, an exception for hospital labs that provide 24-hour emergency outpatient testing service.
In a somewhat controversial decision, lawmakers extended for one year the moratorium on any trial of the clinical lab competitive bidding plan. No demonstrations may now take place prior to Jan. 1, 1988. The action was apparently pushed through by Sen. Dave Durenberger (R-Minn.), who took up the cause after receiving complaints from providers in his state. Project consultants at Abt Associates have essentially finished the design phase. They now await direction from HCFA on what to do during the moratorium.
On another pocketbook issue, Congress authorized Medicare payments to cover transportation and personnel expenses for specimen collection. The fee applies only for specimens from nursing home or homebound patients. OBRA does not define "home-bound,' a somewhat rubbery term that has become an issue for providers of home health services.
Labs could benefit from OBRA prompt payment provisions that require carriers to pay interest if they are late in sending checks. The goal is to have 95 per cent of all "clean' claims paid within 27 days. A clean claim, according to Congress, is one "that has no defect or impropriety . . . or particular circumstance requiring special treatment preventing timely payments from being made.' That definition could still leave a big escape hatch for carriers if they simply question more claims.
In the personnel area, laboratories will continue to qualify for Medicare reimbursement if they meet state licensure or state practice laws pertaining to laboratory directors. No additional qualifications will be required.
OBRA contains numerous Medicare provisions with direct and indirect implications for laboratorians. The following is a summary of new rules for various provider segments:
Hospitals. DRG rates for fiscal 1987 will increase 1.15 per cent. That's more than double what the Administration originally proposed, but below what hospitals had sought as compensation for inflation. The final level was a compromise between a House-proposed 1 per cent increase, and the Senate's 1.3 per cent proposal. Congress also decided that 1988 DRG rates would be set at the hospital "market basket rate minus 2 percentage points.'
Laboratory spending may well be affected by new rules on Medicare capital reimbursement. Payments will continue to be cost-reimbursed rather than incorporated into DRGs, but rates will be reduced 3.5 per cent. That is seen as a stopgap measure until a plan is finalized for incorporating capital into the prospective payment system. Barring further Congressional action, current capital payments would decrease 7 per cent in fiscal 1988 and 10 per cent in 1989. Sole community providers are exempt from the cuts.
In other provisions, periodic interim payments will be eliminated for most prospective payment hospitals on July 1, 1987. Certain "disproportionate share' hospitals, skilled nursing facilities, and home health agencies are exempt.
Physicians. One of the most complicated and controversial sections of OBRA places unprecedented caps on income of physicians who don't take assignment for all patients. Essentially, when a "non-participating' physician's customary charges exceed Medicare prevailing limits by 15 per cent or more, the bill to the patient will be held to a limit of 1 per cent above the previous year's charges.
But while apparently taking with one hand, the Government will give with the other. Nothing in OBRA prevents the scheduled 3.2 per cent increase in all physicians' prevailing charges on Jan. 1, 1987. Moreover, the 1 per cent reduction in physician payments, triggered by Gramm-Rudman in March, was left to expire last Sept. 30.
Competitive medical plans. One little-publicized but potentially significant section of OBRA promises to change the way competitive medical plans (typically health maintenance organizations) compensate physicians.
The section, which won't actually be implemented until April 1989, prohibits "a hospital or risk-contracting HMO or CMP from knowingly making incentive payments to a physician as an inducement to reduce or limit services provided to Medicare beneficiaries under direct care of the physician.' Offenders risk a civil penalty of $2,000 for each doctor paid such inducements.
Congress's clear intent is to make sure the elderly get all the care they need, regardless of cost to the insurer. However, the prohibition eliminates a key mechanism by which HMOs pay and pass on utilization risks to physicians. Without it, the HMO sponsor loses one of the "carrots' for encouraging doctors to keep costs down and make capitation work. The volume of inpatient lab testing could be affected by the rule if HMO doctors see no incentive to hold diagnostic procedures to a minimum.
The provision could prove to be a sticking issue for the Administration, which has repeatedly espoused HMOs as a vehicle to "get the Government out of the health insurance business.' Some Washington observers speculate that Congress may also be trying to build a fire under HHS officials and make them provide a meaningful study correlating reimbursement and quality of care in HMOs.
A number of health care proposals never made it into the budget reconciliation bill and will have to be reintroduced for further consideration. Among them:
S. 2331 and H.R. 4638. These companion bills, which died in committee, were designed to repair perceived flaws in the prospective payment system and assure Medicare patients access to quality health care.
S. 2474. The Health Care Innovation Act aimed at encouraging the availability of new technologies and procedures not currently recognized for the hospital setting.
H.R. 4862, an amendment to the Freedom of Information Act, called for improved FDA processing of requests for business data. It passed in the House, but died of neglect in a Senate committee.
The epitaph for the 99th Congress might well read: "At least they finished on time.' Last year, the budget reconciliation process stretched on past Christmas, almost till the arrival of spring. When the new Congress convenes next month, election day survivors and Capitol Hill rookies will start with a fresh slate.
Anyone interested in learning the fate of other legislative proposals can get an update by calling a Capitol Hill information number--(202) 225-1772--and referring to the bill number.
Court rules on lab directors
A California state regulation requiring pathologists as clinical laboratory directors in acute care facilities was declared invalid by a Sacramento Superior Court. The court granted a summary judgment in favor of George Highland, BLD, and Stanley Schaffer, BLD, both members of the American Association of Bioanalysts.
Judge Roger Warren found that the regulation conflicted with a state licensing law allowing a licensed bioanalyst or physician to direct a clinical lab. The California Health Services Department, supported by the state pathologists' society, had argued the regulation was necessary because hospital lab directors are often required to make medical decisions. The judge ruled that providing lab procedures does not constitute the practice of medicine.