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HCFA setting its agenda for reforms to seek in 1988.

HCFA setting its agenda for reforms to seek in 1988 Looking to the horizon, top officials at the Health Care Financing Administration are already spelling out their legislative and regulatory agenda for 1988. The exercise offers the first indications of how the national laboratory fee schedule might be implemented.

At press time, Congress was still at work on fiscal year 1987 reforms contained in the House and Senate budget reconciliation packages. As lawmakers wrestled with their compromises, HCFA Administrator William Roper was circulating a draft report to other key officials within the Health and Human Services Department.

An internal memo from Roper to Robert Helms, HHS Assistant Secretary for Planning and Evaluation, explains: "Our legislative and regulatory proposals are designed around several objectives or themes." Asking for "expeditious consideration" of the package, Roper noted that these themes include:

* Promoting capitated, competitive medical plans for Medicare and Medicaid.

* Reforming and refining Medicare reimbursement rules to achieve budget savings, "increase equity," and narrow the disparity between traditional fee-for-service Medicare and prepaid health care.

* Assuring quality of care in Medicare and Medicaid, while better targeting certain benefits in the latter program.

The proposal with the greatest direct importance for laboratorians pertains to construction of the national lab fee schedule, slated to take effect Jan. 1, 1988.

The 1986 budget reconciliation package, COBRA, established limits on carrier-wide lab fee schedules in effect until the national schedule is implemented. Currently, the limit is 115 per cent of the median for all carrier-wide schedules for a particular service. That level would drop to 110 per cent on Jan. 1, 1988.

The HCFA document states: "Despite having established limits for the interim carrier-wide fee schedules, COBRA did not revise the methodology for calculating the national lab fee schedule. As a result, continued savings from the limits are forgone when the national schedule is implemented."

Therefore, in implementing the national schedule Jan. 1, 1988, HCFA wants to "build in" savings achieved by the COBRA limits. According to the proposal, "For each service, the national fee schedule amount would be determined based on the weighted average of the 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."

A copy of the report obtained by MLO contained no further discussion or analysis of the proposal's potential impact, although the agency has clearly thought through the justification for most items in the draft report.

In what appears to be a matching of budgetary and quality of care themes, HCFA also wants to "revise standards to reflect that a Clinical Laboratories Improvement Act (CLIA) laboratory must participate in a proficiency testing program that meets the [HHS] Secretary's standards."

The CLIA program requires that clinical labs engaged in interstate commerce hold licensure from the state's Medicare survey agency. In 1979, HCFA assumed responsibility for issuing initial and renewal licenses under CLIA, and for issuing notices of denial, revocation, suspension, or limitation of such licenses. The Centers for Disease Control kept responsibility for conducting proficiency testing of CLIA labs, and for technical and scientific matters relating to both CLIA and Medicare-approved labs.

Currently, CDC administers the Secretary's proficiency testing program. But the new HCFA document comments that the CDC efforts have been diminished due to budget cuts. Top HCFA officials maintain, "If funds continue to be cut, CDC may have to allow laboratories to participate in another organization's proficiency testing program. These 'other' proficiency testing programs have no established grading criteria that clearly demonstrate poor performance by a laboratory."

Observations like that are sure to rankle some laboratory industry members, but Washington observers note that such reports are very preliminary, and individual proposals are frequently changed or dropped on the way to the law books.

The HCFA draft report offers other important clues to the priorities of its top officials. Some proposals may not appear to have direct meaning for clinical labs. But the changes being sought or considered could play a major role in shaping the environment in which labs will operate. Among some of the additional proposal topics:

* Physician payments. HCFA would seek to enact a national prevailing charge limit on all physician fees under Medicare. The limits would be set at 115 per cent of the national average prevailing charge, adjusted for cost of living and practice costs in a given area. Other limits would be imposed under the so-called "inherent reasonableness" authority to deviate from standard payment methodologies.

Agency officials are attempting to tackle what they see as "grossly excessive" prevailing charges for certain coverpriced" procedures. Cataract and bypass surgery are tops on the hit list, along with diagnostic procedures such as endoscopy and colonoscopy. Part of the rationale is variation in treatment costs. As an example, the report notes that charges for a radical mastectomy range from $670 to as high as $2,097 in different parts of the country.

Doctors would also see fee cuts under a proposal to bundle costs of preoperative diagnostic testing. The same inherent reasonableness authority would be used to develop the packaging for cataract surgery and other selected services. Carriers would recognize only the standard diagnostic package, and deny claims for other tests performed within the same time period, probably 60 days prior to the surgery. The proposal is designed to "minimize incentives for unnecessary and duplicative tests and unbundling of services that should be included in the surgical global fee."

* Hospital prospective payment. A particular area of focus for 1988 "will be modification of the Medicare prospective payment outlier policy to better reflect the actual resource intensity of outlier cases," according to the draft document. HCFA also wants to "refine" Medicare's treatment of rural and urban hospitals, addressing some of the payment differences between the two classes.

The Administration apparently feels it's getting a better handle on prospective payment, which will be in its fifth year during fiscal 1988. The recent availability of hospital cost reports from the first year under DRGs will help officials fine-tune the system. Concern among industry groups over unintended consequences "underscores the importance of using these new data to review and refine prospective payment," HCFA states.

Such reviews are also expected to ease concerns about Medicare beneficiaries' access to quality health care.

* Prepaid health plans. Proposals in this area reflect the Administration's stated intention to move the Federal Government out of provider regulation. Most discussion in Washington has centered on a "voucher" option, under which the Government would give beneficiaries a set amount to spend for health insurance however they see fit.

The 1988 proposals state: "While the voucher [approach] will remain our preferred mechanism for achieving capitation in Medicare, there is a growing Department consensus to move to a set of individual proposals that would achieve some interim capitation goals."

The agency did not address how the interim efforts should relate to a voucher system. But it did introduce seven legislative proposals designed to pursue two broad policy objectives. The objectives are to expand the number and type of organizations that contract to cover Medicare benefits on a prepaid basis (five proposals), and to assure quality of care in prepaid plans (two proposals).

The first four proposals would remove current legal constraints to Medicare contracts with prepaid plans. The fifth, which permits employer-based plans to contract with Medicare, is seen as a "significant expansion" in prepaid contracting. The remaining two proposals strengthen quality assurance in prepaid plans.

Again, the report drafted by HCFA is preliminary, and chances for all the proposals being enacted in current form is virtually zero. Still, Washington analysts believe it's not too soon to mobilize industry comment to the initiatives being put forward.
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Title Annotation:Health Care Financing Administration
Publication:Medical Laboratory Observer
Article Type:column
Date:Oct 1, 1986
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