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Conferees agree on lab fee ceilings in midst of budget morass.

Conferees agree on lab fee ceilings in midst of budget morass

House and Senate conferees agreed in late December on clinical laboratory fee ceilings effective April 1. But at press time, it remained uncertain whether they would be enacted or swept aside by a new law that trumps Congressional inaction with automatic budget cuts.

Government officials were unclear themselves on just how the controversial Gramm-Rudman-Hollings legislation might affect laboratory payments. But industry spokesmen suggested that, at this point, labs may be better off with the devil not known. Indications were that the new rules might decrease revenues less than the fee ceilings.

The conference committee package was approved by the Senate, but the House failed to act before adjournment. Elements of the package include:

April 1 fee caps set at 115 per cent of the national madian for each of the current carrier-wide fee schedules. On Jan. 1, 1987, the limit would drop to 110 per cent of the median, but fees would be updated by the Consumer Price Index. The plan would decrease lab payments more than $125 million over three years, according to the Congressional Budget Office.

A moratorium, through Jan. 1, 1987, on the competitive bidding demonstration project being commissioned by the Health Care Financing Administration. The Secretary of Health and Human Services is instructed to work more closely with the lab industry on alternatives to competitive bidding.

Mandatory claim assignment for physician in-office testing, effective Jan. 1, 1987.

A study of possible standards for physicians' office testing. The HHS Secretary would report with recommendations within 12 months of enactment.

As the holiday recess approached, passage of the proposals was blocked by disagreement over other elements of the fiscal 1986 budget reconciliation package. Lawmakers were hung up primarily over taxes to support the "Superfund' toxic waste cleanup program. A Washington analyst with the College of American Pathologists noted that debate "caused the whole process to break down.'

Still, a health staff member with the House Energy and Commerce Committee predicted a "concerted effort' to approve the entire package when Congress reconvened in January. With regard to the laboratory provisions, he stated: "A great deal of time and effort went into it, and I don't think there's much interest in reopening issues that have already been resolved.'

Failure to pass the reconciliation package by next month would trigger some $11.7 billion in domestic spending cuts demanded this year by Gramm-Rudman. The law requires that the White House Office of Management and Budget and the Congressional Budget Office calculate program-by-program reductions according to a specified formula.

Their report would be reviewed by the watchdog General Accounting Office to verify that the timetable for eliminating the Federal deficit by 1991 is being met. The President could then sign the package into law.

Cuts in Medicare payments would be limited to 1 per cent for the current fiscal year, which began Oct. 1. If Congress again fails to approve its own reductions for fiscal 1987, the maximum increases to 2 per cent.

Lab spokesmen are leery about the possible implications of Gramm-Rudman, but they suggest it may cause less industry disruption and take a smaller chunk out of reimbursement.

William O'Neil, president of the American Clinical Laboratory Association, commented at press time, "If the fee schedules take effect April 1, that only leaves a month or so of lead time for labs to learn the specifics and figure out the effects. That's just not long enough to do good management planning.

"I doubt that anyone in Washington has figured out how Gramm-Rudman would work in practice, but sometimes you like the unknown a little better than the known.'

O'Neil noted that one of the keys would be whether lab payments would be allowed a scheduled July 1 update under the new law. A 1 per cent reduction followed by a 3 or 4 per cent Consumer Price Index increase would leave most labs better off than they would be under fee ceilings.

HCFA officials refused to speculate on how they would handle the update. Other Washington analysts opined that the update would hold good, barring any further tinkering by Congress.

Lab officials would just as soon see the fee ceiling proposal cave in. But failure to approve the reconciliation package would strand other provisions very much in their interest.

In a somewhat unexpected move, the conference committee required that physicians' offices be subject to the same mandatory assignment rules that currently affect independent and hospital labs. Lab groups had pressed for the change in order to level the regulatory playing field.

Responding to this action, Dr. Mark Birenbaum, associate administrator of the American Association of Bioanalysts, remarked, "We have long felt that reimbursement for laboratory services should come under the same rules for all providers. I'm not taking a position for or against mandatory assignment, but a rule for one sector of the lab industry should apply to all.'

ACLA's O'Neil adds that the measure "gives physicians time to argue about it, but it would help close a loophole that has encouraged [overutilization of] in-office testing.'

Failure for the reconciliation package would also abandon the moratorium on competitive bidding. But as a practical matter, it might not matter much, according to Stephen Mennemeyer, Abt Associates, Inc.

Mennemeyer, a senior economist with the HCFA project contractor, explained: "Since we've been anticipating the moratorium will be approved, we've gotten on a schedule that assumes we can't do anything till 1987. So even if it doesn't pass, the intent of the proposal has already been achieved. Basically, we are prepared to drag out the design phase for a year. It will just give everyone more time to comment as we watch the clock tick down.'

During the lull, Mennemeyer says Abt will be refining the system design to make it more palatable to the industry. It had been rumored the project will be based on an exclusionary model that would leave losing bidders locked out of the Medicare program.

But Mennemeyer explains: "We're developing a model in which losers could continue to participate in the program at some price that is discounted below what the winners are paid. There would be several winners with a preferred status in the market, but the losers could participate even though they would find it less profitable to do so. We want to make it in the interest of all parties to submit low bids.'

Irrespective of the moratorium, Mennemeyer expects debate during 1986 to remain centered on "how,' not "whether' competitive bidding should be tested. As he put it, "The potential savings to the Government are so large that it would be hard to see how a trial project like this could be abandoned.'

Still, leaders at lab associations are hoping the delay will thwart the entire project's momentum. "We think this will allow the industry some time to put forth alternative proposals that would be more successful and less disruptive,' Birenbaum said, "I've been disappointed that HCFA hasn't made more of an effort to solicit comment all along.'

Some groups plan to assess approaches that focus on decreased utilization rather than pricing pressures. For example, Birenbaum cited an experiment with the Nevada Medicaid program in which reimbursement was denied for in-office testing. By reducing physicians' incentive to order tests, Birenbaum reports overall utilization was reduced approximately 50 per cent and program costs were cut nearly 40 per cent.

Whatever other options may surface, officials in Washington are bracing for a full year of dialogue on competitive bidding and other reimbursement issues.

Bowen confirmed as Secretary of HHS

Former Indiana Governor Otis Bowen, M.D., sailed through two days of cordial Senate hearings and was confirmed as Secretary of Health and Human Services. He succeeds Margaret Heckler, now ambassador to Ireland.

At the hearings, Bowen said his top priorities will be to fill department vacancies and expedite overdue reports and regulations. He also suggested creating "individual medical accounts' similar to individual retirement accounts to help finance health care for the elderly.

One of Bowen's first responsibilities may be to stabilize the top spot at the Health Care Financing Administration. C. McClain Haddow, who has been filling in for the departed Carolyne Davis, is rumored to be headed for the private sector as a consultant.
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Publication:Medical Laboratory Observer
Date:Feb 1, 1986
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