How final 1990 budget affects labs.

How final 1990 budget affects labs

Marathon pre-Thanksgiving Congressional bargaining sessions finally produced a fiscal 1990 budget package that disgruntled members consider a turkey.

Still, the agreement met President Bush's call for a budget cut of at least $14 billion. He was expected to approve it by Jan. 1.

The most sweeping decision emerging from the closed-door bargaining sessions was to keep automatic Medicare spending cuts of 2.1 per cent in place until April 1 of this year. The cuts affecting all providers took effect Oct. 17 after lawmakers failed to meet a budget deadline imposed by the Gramm - Rudman - Hollings Act.

As of April 1, Medicare will cap payments for clinical laboratory tests at 93 per cent of the national median of local fee schedules. That cap, 2 per cent lower than the level approved by Congressional health committees, apparently emerged in an 11th-hour money hunt during conference discussions. Offsetting those reductions will be labs' full Consumer Price Index update of 4.7 per cent on April 1.

In other key provisions, labs will be barred from billing Medicare for work performed by a referral facility if those referrals comprise more than 30 per cent of the "shell" lab's total volume. The direct billing exemption would end for labs failing to meet the 70 per cent inhouse testing requirement.

With the exception of the extra 2 per cent in fee schedule reductions, the laboratory provisions came as little surprise to industry observers. The larger intrigue involved whether Congress could compromise on a host of other issues and negate the effects of Gramm - Rudman - Hollings for the full fiscal year.

Perhaps the most intense debate over Medicare issues concerned physician payment reform. Proposed action was an on-again, off-again affair that finally produced some fundamental changes for Part B payments. When the smoke cleared and bleary-eyed lawmakers finally adjourned, this was the plan left for the President's signature:

As with all other providers, the 2.1 per cent fee cuts for physicians will remain in effect until April 1. At that time, primary care doctors will receive a full Medicare Economic Index update, currently estimated at about 5 per cent. Pathologists and all other non-primary care specialties will get a 2 per cent boost.

Congress also approved a House Energy and Commerce proposal to reimburse pathologists according to a Medicare fee schedule effective Jan. 1, 1991. What that actually means is uncertain, however, because no one yet knows what such a schedule would be based on.

The Health and Human Services Department is reportedly studying a charge-based schedule for pathologists, but industry sources say it's too soon to tell what might actually emerge. Consideration of a separate schedule is a legacy of a 1987 debate over reduced fees for radiologists, anesthesiologists, and pathologists.

Any separate action on pathologist reimbursement would have to be reconciled with approved plans to implement a resource-based relative value scale. The RBRVS, devised by researchers at Harvard University, is intended to be phased in over a five-year period beginning Jan. 1, 1992.

The scale is designed to reallocate payments by giving doctors relatively higher rates for noninvasive "cognitive" skills and less for performing expensive tests and high-tech procedures. The Physician Payment Review Commission has estimated that family practitioners, for example, would receive 38 per cent more under the RBRVS, while pathologists would suffer a 25 per cent reduction.

Organized pathology did, however, manage to convince the commission to remove many of the specialty's services from a hit list of "overvalued" procedures singled out by RBRVS methodology.

In its 1989 report to Congress, the Federal advisory panel explained: "Pathology services were eliminated because the physician work values may change substantially and available charge data from 1986 and 1987 may not reflect current practice. These services will be extensively restudied by [Harvard researcher Dr. William] Hsiao. Problems with recent data on charges for these services prevent us from using them to accurately estimate either the work component or the practice costs for these services."

CAP officials are expected to continue working closely with both the Harvard team and the Federal government to develop an equitable reimbursement plan this year.

Physicians overall won a significant lobbying victory in a decision over ways to keep practitioners honest under RBRVS. Some lawmakers, notably Rep. Pete Stark (D - Calif.), had pushed hard for strict expenditure targets (ETs) as a means for cutting future payouts if the volume of services exceeded certain thresholds. Stark firmly believed the targets are necessary to keep doctors from gaming the new system by billing for more services.

A compromise measure will set a Medicare Volume Performance Standard (MVPS) each year to indicate what the Government thinks is an appropriate growth rate for the volume of physician services. For 1990, the MVPS would be minus 0.5 per cent.

The standard would be used to determine future fee updates, but unlike ETs, there would be no automatic cut if payments exceeded the target. In no case would a fee adjustment be less than zero.

While Stark was rebuffed on the matter of ETs, he did see through a modified version of his so-called Ethics in Patient Referrals Act. The final budget package prohibits referrals to clinical laboratories in which the physician has a financial interest. Earlier versions contained a blanket prohibition for all provider facilities, not just laboratories. Barring further tinkering, the provision will take effect Jan. 1, 1991.

Other providers under the bill would be subject to certain reporting requirements, effective Oct. 1 of this year, designed to disclose ownership relationships of referring physicians. Exemptions are granted for group practices, in-office ancillary services, prepaid health plans, home IV services, rural facilities, facilities issuing publicly traded stocks, and entities in Puerto Rico. By Feb. 1, 1991, the General Accounting Office must submit a study on the effects of self-referral arrangements on service utilization, access, cost, and quality.

In other Medicare provisions, hospital capital payments will be set at 85 per cent of actual costs through Sept. 30, 1990. Hospitals that are exempt from the prospective payment system will be fully reimbursed for costs.

DRG rate increases, meanwhile, will be approximately 3.75 per cent for facilities in urban areas of less than one million persons, 4.4 per cent in cities of more than one million persons, and 8.5 per cent in rural areas.

In a final area of controversy, Congress bowed to protests from upper-income seniors by repealing catastrophic health insurance coverage. Two-thirds of the cost of the program would have been financed by those enrollees through a surtax of up to $800 per year. Late attempts to retain at least some benefits failed in both houses. Some members of Congress, angered by what they considered a concession to a vocal minority, said they might revisit catastrophic care this year.

Ironically, millions of enrollees will continue paying the $5.30 monthly premiums for coverage that no longer exists. It will take several months for Social Security Administration computers to be adjusted to halt the withholding from benefit checks. Officials say lump sum refunds will then be made, perhaps by late April or early May.

Overall, the final budget package approved by Congress reduces Medicare spending by about $2.7 billion for the fiscal year. Some analysts estimate approximately $1 billion of the savings will come from curbs on physician payments.

Regs about to surface

from IG, HCFA 

Two long-awaited issuances from HHS agencies appeared close to publication at press time.

The first, from the Inspector General's Office, is a revised version of the "safe harbor" regulations intended to guide providers involved in potentially fraudulent or abusive practices (Washington Report, MLO, April 1989).

A draft copy of the proposed rules circulating in Washington contained no provision for advisory opinions HHS might issue to providers on the specifics of a given practice. The draft indicated there would also be a number of new safe harbors affecting price discounts to group plans such as HMOs, malpractice insurance paid by a hospital, hospital group purchasing organizations, and treatment of investment interest. The proposals will go through another public comment period after publication in the Federal Register.

Meanwhile, the Health Care Financing Administration was expected to publish a final version of rules consolidating laboratory regulation into a uniform framework. Agency officials said their strategy was to finalize HCFA's own August 1988 proposals, then move on to regulations implementing the Clinical Laboratory Improvement Amendments (CLIA) of 1988. The first notice is expected to tip the agency's hand on its thinking about the elimination of bench-level personnel standards.