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CAP loses appeal but cites some gains on reimbursement.

The College of American Pathologists has lost its Appeals Court bid to overturn several controversial Medicare rules governing Part B payment for inpatient hospital services. But there's no sign that the organization has lost its resolve to fight for more favorable reimbursement treatment for pathologists.

While the CAP board of directors decided not to seek Supreme Court review of the case, it pledged instead to "continue the active pursuit of legislative relief from TEFRA."

TEFRA, the Tax Equity and Fiscal Responsibility Act of 1982, had directed the Health and Human Services Department to write new reimbursement regs to distinguish "professional medical services" from "professional services" given for "general benefit to patients."

In March 1983, the department defined medical services--payable under Part B--as those contributing to the diagnosis or treatment of an individual patient, and ordinarily requiring performance by a physician. Moreover, for lab services specifically, Part B payment was to be allowed for anatomical pathology, and for consultations, where the latter 1) were requested by the attending physician, 2) were related to test results outside a "clinically signnificant or expected range," 3) resulted in a medical report, and 4) required the consulting physician's medical judgment.

CAP lost no time in filing suit, and last year it argued unsuccessfully in Federal District Court that HHS's definition exceeds Congressional authority because it effectively excludes most clinical lab procedures from charge-based reimbursement.

On appeal, the College hammered at the same points, but won no relief in the three-judge panel's unanimous May 11 decision.

The HHS criteria for Part B-eligible services "are reasonable," the Court said. They meet "Congress's broad mandate and reflect a rational attempt to establish a framework over a complicated field."

CAP's suit, the Court said, "distills to a challenge to the statutory authority" for two criteria--that the consultations be requested by the attending physician and that the service "ordinarily require performance by a physician."

Regarding consultations, the Court found that HHS "reasonably decided that the best person to identify which services contribute to a diagnosis or treatment of an individual patient is the attending physician. . . . Under this scheme, Part B reimbursement is available only for needed advice and not for superfluous and unsolicited communications."

Moreover, the Court went on, "this regulation furthers an additional legislative goal in that it serves to check possible abuses of the Medicare program by preventing laboratory reports from being described routinely as 'consultations' . . . . If one thing is clear from the legislative history, it is Congress's desire to use the TEFRA amendments as a vehicle to contain the [Medicare program's] cost."

Nor did HHS overstep its authority in limiting Part B payment to services that "ordinarily require performance by a physician," the Court held. Although no explicit statutory language prescribes that rule, the Court said, HHS's "actions accurately reflect Congressional intent mirrored in the conference committee's decision." The committee's distinction is "between services that 'require' a physician and services that do not."

The Court also found this criterion in keeping with TEFRAhs general cost containment aims in that it "reduces the incentive for physicians to perform technical work not requiring medical judgment."

The Government also prevailed on two other aspects of the reimbursement case:

* Operating costs. The rule prohibiting hospitals from agreements whereby pathologists assume a lab's operating costs "represents a reasonable 'anti-spin-off' provision" consistent with TEFRA's intent to contain costs and prevent abuse, the Court said. Although Congress did not specifically direct HHS to restrict the contracting out of hospital labs, the Court continued, it "emphasized the limited extent of Part B payments" with an "underlying mandate" to discourage hospital costs and compel efficiency.

Said the Court: This regulation "gives force" to this Congressional concern by preventing hospitals from "farming out lab expenses that could be reimbursed under Part A. In other words, the regulation prohibits hospitals and pathologists from transforming recognized Part A costs into Part B cost . . . . We find no merit in appellant's argument that [a lab's] operating costs are within the ambit of the 'medical services' exception to the definition of inpatient services."

* Direct billing. The regs also provide that if a service may be reimbursed under Part A, neither the hospital nor the physician may seek compensation from the patient under Part B or outside the Medicare program. CAP portrayed this as contrary to sections of the Medicare Act's legislative history that "arguably reveal that the physician-patient relationship is sacrosanct."

The Court reasoned that the Medicare Act sactons some "interference" in the physician-patient relationship by explicitly forbidding hospitals from seeking payment beyond costs billed to Medicare. Since the provision at issue refers only to Part A services, it affects the pathologist only "when he or she is acting, in essence, as a hospital employee." Thus "the 'affected' relationship is that between the hospital and the patient, and not that between the doctor and patient."

The Court, however, was not entirely pleased with the Health and Human Services Department. In an unusual departure, the opinion concluded by admonishing HHS for sloppy wording. "Many of the challenges urged by CAP stem from the quality of drafting reflected in the rules," the Court said.

In one example, the court referred to the regulations' explanatory comment that a Part B consultation payment requires the exercise of "serious" medical judgment. "We are at a loss as to the meaning of 'serious' . . . and reject it as irrelevant . . . a clear example of over-explanation to the point of confusion. If we thought HHS was making a distinction between 'serious' and 'non-serious' medical judgments, this case would be much, much closer."

Indeed, CAP has pressed for clarifications with the Health Care Financing Administration since before the suit was filed. And although the litigation failed, it served to buttress CAP's behind-the-scenes negotiations, according to CAP President Herbert Derman, M.D.

"The Court seemed to rule that the regulations were lawful because TEFRA intended to reduce Medicare costs and these regulations carry out that objective," he told members in a letter following the decision. But the Court "made little effort to analyze the specific issues . . . . Instead [it] accepted the fallacious reasoning whereby HCFA sought to convert clinical pathology from a 'physician service' to a 'laboratory service.'"

Still, he said, the suit's mere presence enabled CAP to win "numerous beneficial changes in HCHFA's position," restoring to pathologists "some of the dignity of practicing clinical pathology as physicians."

A memorandum from CAP's lawyers outlined the changes considered beneficial. They include the following revisions:

* Hematology. In oral arguments during the lawsuit and then in directions to carriers, HCFA gradually clarified that hematology is an anatomic service when a physician is required to perform a service.

* Bloob banking. HCFA has told carriers that blood bank services are anatomic when analyses are performed to determine compatible donor units for transfusion where "crossmatching is difficult or where contamination with transmissible disease of donor blood is suspected."

* Cytopathology. The HCFA carrier's manual now recognizes that where results are or appear to be abnormal, a microscopic evaluation does ordinarily require performace by a physician and is a covered service.

* Consultations. In its Court of Appeals brief, HCFA pointed out that attending physicians need not initiate communication with a pathologist for a consultation to occur, though the attending must concur that a necessary consultation took place. Also, HCFA indicated during oral arguments that consultations resulting from standing orders with certain pathology services would qualify for Part B.

* Interpretations. The HHS Appeals Court brief noted that Part B is allowable for all interpretations performed for individual patients and contributing demonstrably to diagnosis and treatment.

* Additional procedures. The carrier's manual now permits payors to identify and list tests "where a presumption can be made that an interpretive consultation is required at the time the test is ordered."
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Copyright 1984 Gale, Cengage Learning. All rights reserved.

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Publication:Medical Laboratory Observer
Date:Jul 1, 1984
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