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Congress, HCFA race toward new lab regulation.

A flurry of activity during the waning days of summer made it clear the Government is serious about sweeping revisions in clinical laboratory regulation. But it remained uncertain whether Congress or the Administration would be first to impose its will on the industry.

At press time, key committees on both sides of Capitol Hill had combined and approved various proposals introduced last spring. But neither side had scheduled a floor vote on the programs, and it appeared unlikely the two chambers would agree and complete the legislative process prior to adjournment Oct. 7. That would effectively postpone action until next year, since Congress is not expected to convene a lame-duck session after the fall elections.

In the House, the emerging vehicle for change was the bill introduced by Rep. John Dingell (DMich.). Reflecting agreement among key lawmakers, the bill in part would extend licensing, proficiency testing, quality control, and inspection requirements to all lab testing sites. But the approved version dropped a controversial provision banning referrals by physicians to laboratories in which they have a financial interest.

That restriction is still alive in the Senate's combined version of a regulatory overhaul sponsored by Sens. Barbara Mikulski (DMd.) and Brock Adams (DWash.). Like the House proposal, the Senate plan calls for licensing, proficiency testing, quality control, and inspection requirements. Still, it appeared the referral ban would be the most sensitive area of discussion when the two houses met to compare notes.

The wild card in all of this was played in mid-August by Rep. Pete Stark (D-Calif.). His Ethics in Patient Referrals Act attempts to create a so-called "bright line" rule, which Stark says would "give providers and physicians unequivocal guidance as to the types of arrangements that are permissible and the types that are prohibited."

The bill attacks two forms of f'inancial arrangements that are said to be frequently used by physicians and providers of clinical laboratory services, diagnostic and therapeutic radiology, and home health care.

The first type of arrangement involves the creation of a partnership. Referring physicians hold limited partnership shares but are not actively involved in management. The provider serves as general partner and is responsible for organizing and managing the business.

The second arrangement involves formation of a franchise corporation wholly owned by physician investors. The promoter is an ancillary-service provider that organizes and manages the corporation for the physicians. The corporation serves primarily as a passive billing entity and depends heavily on contractual arrangements for the actual delivery of service.

According to Stark, "Because of the resulting economic alliance between physicians and providers, physicians are unlikely to exercise unbiased judgements in making referral decisions. As a result, patients may not be referred to the highest-quality provider available."

Stark adds that separate studies conducted in the early 1980s by the Government and Blue Shield of Michigan show physician ownership creates a "substantial risk" of overutilization of laboratory services.

In general, the Stark bill prohibits the provider of any Medicare-covered service from accepting referrals from any physician who has a direct ownership or other indirect or financial interest in the provider, or who receives compensation from the provider. The penalty would be fines of up to $15,000 per infraction. Exceptions would include:

Physician ownership of publicly traded investment securities such as stock, bonds, or debentures.

Services provided by a sole community rural provider.

Services provided by a hospital or ambulatory surgery center with which the physician has a staff appointment, provided the ownership interest is in the facility as a whole.

Services provided by prepaid health plans, such as HMOs, that have risk-based contracts with Medicare.

No action is expected on the Stark bill until early next year. But the proposals should serve as an interesting counterpoint to discussions about overall lab rule changes. Moreover, private insurers who smell cost savings have stated they are anxious for Medicare to take a lead in policing referral abuses.

(On a related front, Health and Human Services Department Inspector General Richard Kusserow released a draft proposal on "safe harbors" in physician referral practices. The draft, however, is much less stringent than thc Stark bill, and sources suggest Kusserow may indefinitely hold off issuing formal guidelines.)

In early September, some observers noted that if Congress failed to beat the clock with legislation, the Health Care Financing Administration would have more room to advance its own laboratory proposals. HCFA Chief William Roper has opposed new legislation, stating that his agency's plan will be sufficient to address concerns over the quality ot- laboratory testing.

The HCFA proposals, spelled out in an Aug. 5 Federal Register notice, revise regulations for all Medicare, Medicaid, and Clinical Laboratory Improvement Act labs. They would apply to hospital-based and independent labs, intermediate care facilities for the mentally retarded, skilled nursing facilities, ambulatory surgical centers, rural health clinics, and physician office labs performing tests on referral.

Among the key regulatory changes, HCFA would:

Develop a specialty and subspecialty proficiency testing grading system with standardized passing scores, identical for Medicare and CLIA laboratories. Labs would have to pass in PT for each of their specialties and subspecialties. Failure to do so would force labs to enroll in an "enhanced" PT program or face Medicare program termination. Failing the enhanced program would result in termination, with reinstatement contingent on successful performance in three consecutive rounds of testing.

The revised regulations would not include a Federally operated PT program, such as thc one administered by the Centers for Discase Control prior to 1986. Instead, HCFA would rely on private-sector and state-operated programs to provide PT.

Require laboratories to establish and follow protocols that assess the effectiveness ot' their own operations. Labs would have to have procedures to monitor the quality of testing and staff performance. Responsibility for establishing and implementing the quality assurance program would fall to the laboratory director,

Provide personnel standards for laboratory directors, supervisors, and cytotechnologists but not for other technologists and technicians. Persons who currently qualify for lab director provisions would retain that status. HCFA would continue to recognize private-sector certification programs for directors, as an alternative mechanism for qualification.

Require laboratories to perform satisfactorily on quality control and PT prior to inspection or approval. The Government would be able to inspect a laboratory during any of its hours of operation and gain access to all records necessary for a determination. The regulations would extend HCFA's authority requiring laboratories to test specimens or undertake quality control actions on patient materials during the inspection.

Provide several options for proficency testing on Pap smears along with more stringent rescreening requirements for negative smears. The agency is still considering whether workload restrictions should be adopted for personnel performing the smears.

Among the more controversial elements of the plan, HCFA is clearly placing the onus for quality assurance on laboratory directors and outcome measures rather than detailed personnel requirements. Officials say the proposals give laboratory directors maximum flexibility in choosing personnel to meet their quality objectives.

According to the agency, "Although it is generally believed that degreed individuals are better prepared to assume technical responsibilities to assure quality, there is limited evidence available to correlate thc degree level of an individual with the quality of the test results produced."

Laboratory workers would still have to meet state standards where they exist. The director would have to insure that personnel have the necessary training, experience, continuing education, and ongoing performance evaluations to meet state licensing requirements.

HCFA is accepting public comment on its proposals through Nov. 3. While the review process could stretch on for some time, it is also conceivable that the Administration will push through final rules prior to Congressional action.
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Title Annotation:Health Care Financing Administration
Publication:Medical Laboratory Observer
Date:Oct 1, 1988
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