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Did market plunge aid clinical labs?

Did market plunge aid clinical labs?

It took the sharpest drop in the history of the Dow Jones industrial average, but when Wall Street violently expressed its displeasure, officials at both ends of Pennsylvania Avenue got the message that there was a new sense of urgency about reducing the Federal budget deficit.

Ironically, the 508-point drop in the Dow Jones average on Oct. 19 and its subsequent erratic behavior may have helped protect against further tinkering with clinical lab reimbursement schemes.

There was more than a little consternation in the lab industry when, in 1986, Medicare fee schedule caps were set at 115 per cent of the national median amount for tests reimbursed at both the 60 and 62 per cent levels. The cap was designed to drop to 110 per cent of the national levels beginning next year, with a 1.4 per cent increase tossed in as a Consumer Price Index update. Approaching 1988, it appears the original plan was the best alternative laboratories could have hoped for, given the political and financial realities that have emerged in the last two years.

In their initial committee work, lawmakers apparently decided to leave well enough alone regarding lab fees. Both the House and Senate approved packages that left the fee adjustments on track.

There were, however, two proposals endorsed by the House that had no immediate bearing on lab payment rates or the Federal budget. The first was to apply civil money penalties of up to $2,000 and/or to exclude from Medicare any physician who knowingly and repeatedly violates a requirement that all doctors accept assignment for clinical lab services.

A second unique element of the House plan called for an extension of the moratorium on a laboratory competitive bidding project sought by the Health Care Financing Administration. The agency's contractor has been ready to move ahead with the project for some time, but Congress, apparently more concerned about larger Medicare issues, has yet to give its approval.

As of early November, leaders in Congress and the Administration were still locked in hastily called "summit' meetings spurred largely by the stock market crash and the desire to reassure investors that something would be done about the deficit.

Negotiators were, in essence, locked in a game of political "chicken' as they rushed toward a Nov. 20 deadline for triggering the Gramm-Rudman legislation and automatic cuts of $23 billion from the budget.

The automatic, across-the-board spending curbs were drafted to trim $1.5 billion from Medicare provider payments. Estimated effect on clinical labs: a 2 per cent reduction in fees on top of any losses from the racheted-down national median cap, and elimination of the scheduled CPI update on Jan. 1.

At press time, Washington observers both inside the lab community and out were reluctant to go on record with any predictions. Two good reasons had emerged, however, for reaching a budget compromise prior to Nov. 20.

First, despite their rhetoric, few officials in either Congress or the Administration displayed any preference for the meat-axe approach embodied in Gramm-Rudman. For example, the legislative package initially approved by Congress contained Medicare savings equal to those promised by the automatic cuts, but the former were much more selective.

Second, allowing the Gramm-Rudman cuts to go into effect would essentially be a confession to financial markets and the rest of the country that the Federal government lacks enough discipline to balance its books at a crucial time. Neither political party could view that as an acceptable message to deliver, especially as the 1988 elections approach.

Meanwhile, another factor appeared to be working against any budget compromise that would further nick lab reimbursement: No one goes fishing for minnows when bass are the appropriate catch of the day. Government officials conceded they needed to come up with "something dramatic' to reach the targeted spending reductions, and, by Washington standards, clinical laboratory fees don't measure up.

That fact was brought into focus at a late-September hearing of the House Ways and Means Committee. At that session, HCFA Administrator William Roper explained why Medicare Part B premiums needed a whopping 38 per cent increase.

Roper's testimony included projections in program growth for 1987-88, which he said account for the largest share of the premium hikes. In them, he showed that payments for independent labs will likely increase 0.5 per cent during the period. That compares with 10.6 per cent for physician services, 4.3 per cent for outpatient hospital and other institutional charges, and 1.3 per cent for group practice prepayment plans.

When the Part B beneficiary increase was first announced, leading Congressmen predicted the gloves would come off in the struggle to enact physician payment reforms. But at this writing, the matter of what to do with those payment systems remained the biggest question mark on the Medicare portion of the budget ledger.

Other activities in limbo

The budget battles and other top priorities such as confirmation of a new Supreme Court Justice recently took center stage in Congress, pushing some other items of interest to laboratorians into the wings.

Among them, anticipated oversight hearings on the Clinical Laboratories Improvement Act (CLIA) have been put off until at least early next year. The minority staff of the Senate Governmental Affairs Committee had let it be known they are interested in holding review sessions because CLIA is now 20 years old. Topics for review include lab compliance with existing regulation and the implications of increased physician office lab testing.

According to a top staff aide, "We're still in the research stage, talking with lab groups and gaining as many different views as possible. We want to make sure we have as much information as we can get before we officially announce the hearings, and that probably won't be until the next session of Congress [which begins in January].'

Also missing on Capitol Hill: HCFA's report on possible standards for physician office testing. Senate Governmental Affairs and several key health care panels still await the report, which was due in April. Indications are now that it won't show up until the smoke from budget reconciliation has completely cleared.

GAO report due this month

One study that does appear to be on track is a report by the General Accounting Office on the success --or failure--of the Medicare lab fee schedule implemented in 1984.

A spokesperson for the Congressional watchdog agency says the much-anticipated report will be out this month, but declined to offer any details on preliminary findings.

By some accounts, GAO will conclude that the fee schedule has failed to deliver on projected three-year savings of nearly $900 million. Medicare beneficiaries may have gained from the mandatory assignment provision, but the Federal government has not benefited on the budget side.

HCFA officials, meanwhile, are reportedly conferring with GAO on its findings as they prepare to respond with their own conclusions. GAO studies are usually worded very cautiously, and this one might not fully please HCFA, which, despite some delays, has continued to favor competitive bidding or other risk-sharing forms of laboratory reimbursement.

Predictions for '88

With the year winding down, here are some prognostications about what lies ahead in the news emanating from Washington:

The buzzword will be "accuracy,' even rising above "cost containment.' The public mandates include expanded testing for AIDS and drug abuse in the workplace. The accuracy of both test procedures has been criticized in the lay press, and, right or wrong, the word will continue to ring in the ears of Federal officials.

Physician office testing will come under even greater scrutiny. In tandem with the accuracy issue, lawmakers will examine reports and consider whether the professed advantages to patients carry with them a need for additional legislation or regulation. Watch for laboratory associations to play a pivotal role in shaping this discussion.

The Government will pay close attention as it intentionally squeezes more money out of Medicare Part A (hospital payments) into the rapidly rising Part B component. The former is paid out of a trust fund, the latter out of premiums and general revenues. Ambulatory services, including lab testing, are generally perceived as more cost-effective. But utilization controls and corresponding incentives are definitely on the horizon.
COPYRIGHT 1987 Nelson Publishing
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Copyright 1987 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Washington Report - includes other information; Medicare fee schedules
Publication:Medical Laboratory Observer
Date:Dec 1, 1987
Words:1370
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