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HCFA still bent on competitive bidding trial.

Despite Congressional action toward a national fee schedule for Medicare laboratory services, Health Care Financing Administration policymakers are still keenly interested in a competitive bidding system.

At this writing, agency officials were poring over an outside consultant's final report on the options available for demonstration projects that could, theoretically, begin in a year.

HCFA officials have invested so much time and money in the program's design phase that their conversations often sound as though it were a fait accompli. Yet they invariably conclude with warnings that "nothing has been decided."

Paul Gurny, HCFA project officer for the competitive bidding effort, recently told MLO; "We're only just completing a very rudimentary part of the design phase. The rest will take a while. The truth is that as of today [early May', there hasn't even been a final decision on whether to conduct the competitive bidding demonstration."

But clearly, Gurny and his colleagues are proceedings as if they have the green light and consequently continue to tinker with experiment options that might prove or disprove some theories about bidding, At bottom, the Government wants to test ways to become a better buyer by capitalizing on its volume purchasing power and the compeition in the laboratory field.

"A major reason we want to go forward is that currently we have no idea where the marginal cost is for providing clinical laboratory services," Gurny noted. "A national fee schedule doesn't give that. We feel it's more likely that a lab in a competitive bidding situation will offer a very good price, one that reflects the cost of providing services."

Gurny's office has a number of other objectives in pursuing the demonstrations. Most important is cost containment, he said. "We obviously want to examine all methods of reducing Medicare lab expenditures."

Additionally, the agency would like to learn whether (or to what degree) new systems can promote more efficient laboratory service and reduce beneficiary out-of-pocket expenses, while maintaining a quality "product," insuring sufficient access to services for patients and physicians, and discouraging unnecessary testing.

Another goal is administrative efficiency. "Can we improve the entire billing and claims process?" Gurny asked rhetorically. "We want the least costly system so that the people who do the billing are not burdened by unnecessary tasks."

Improvements in Medicare, he continued, can also be good for the general U.S. health care system by providing greater price competition among laboratories and strengthening cost-effective performance.

In narrowing the demonstration to a pair of basic models--a contractual fee schedule and straight competitive bid--Gurny said his office has operated on two principles. First, because HCFA doesn't want to lay the groundwork for monopoly," any project will include multiple winning bidders. And second, the agency will try to avoid creating "dissatisfaction within medicine, especially where it might cause a decrease in assignment rates. We're hoping to spur an increase, if possible."

* Contractual fee schedule model. Under this system, HCFA would develop a relative value scale (RVS) for tests, to be used in conjunction with a lab's single average price. (A similar approach is proposed under competitive bidding.) The aim would be to have a pricing structure that pays less than the current prevailing rate in an area, yet is still fair. The Government would guarantee this price in exchange for a lab's agreement to accept mandatory assignment and the Federal fee as payment in full.

This model has two variations for dealing with noncontracting laboratories. First, the agency simply would not reimburse for services to Medicare beneficiaries. Second, HCFA would recognize the service but pay only a certain percentage of the RVS-pegged rate. In this case, the non-contracting lab might either be told to bill the beneficiary to any difference between the lab's price and the Medicare payment, or to bill the patient directly, with HCFA reimbursing the patient.

"For each variation in the fee schedule model, we've identified three types of labs--independent hospital, and physician office," Gurny said. "But only Medicare-certified could participate in a contract, which in effect leaves ou t physician office labs. Physicians generally treat their own patients, not referrals, and usually perform very basic tests and a relatively small volume of them."

* Competitive bid model. "I can't envision a demonstration with less than five laboratories in a region being designated" as bid winners, Gurny said. "My guess is that there will probably be more." A region could be any one of the following: a major city, a large county, a state, or a carrier area. It also might be "something else," Gurny hedged.

"We'll select at least one type of site per variation we want to test, and perhaps even two," he said. Among the deciding factors will be the number of beneficiaries in the area, the kind and number of eligible laboratories, and their location.

As in the fee model, Medicare certification would be a requirement, ruling out physician office lab partitipation "unless a doctor elected to seek certification," said Gurny.

"Physicians will always be paid for tests done for Medicare patients. But they won't receive more than the lowest bid price. And they'll only receive a portion of that because they will have to collect the deductible and coinsurance."

The agency's plans are purposely tough on physician office payment. "We're trying to create disincentives. We want physicians to get away from performing unnecessary tests," Gurny acknowledged.

Competitive bids would be submitted in the form of a lab's single price factor to be applied to a realtive value scale. Each bidding lab would receive HCFA's RVS for the tests being considered in the bidding process. A urinalysis might have an RVS weight of 1.5, while a CBC might carry a 3.5. That weight, times the lab's price for an individual procledure, would equal HCFA's payment. To participate, a lab would have to calculate an average price for all its tests, then submit a single bid of, for example, $2.46.

Bid winners would have to accept assignment, with Medicare always paying the lab directly. The labs could not bill patients or physicians.

Payments "would never be made to physicians for tests by nonwinning labs," Gurny said. An excluded lab could bill Medicare, but would only receive the same payment as the lowest winning bidder in the area.

Possible wrinkes in this model:

Medicare would not pay nonwinning labs for services to beneficiaries, thus effectively steering the to the victorious bidders.

Payments made to nonwinning labs would be significantly lower than even those to the lowest winning bidder.

Winning bidders could bill for the coinsurance if they so desired. "But this is probably the weakest option, and I doubt we'd go with it," Gurny said.

Currently, Congress is considering a national fee schedule that would use a percentage (probably near 60 per cent) of the usual, customary, and prevailing charge, in conrast to the demonstration project's RVS approach. Nevertheless, "if Congress accepts the fee schedule concept, we are likely to eliminate fee models from our options and concentrate on straight competitive bid scenarios," Gurny said.

His office's target date for pilot project kickoff, assuming the go-ahead is granted, would be July or August 1985. Agency letters would inform the labs, beneficiaries, and carriers in the selected sites about the time, size, and purpose of the demonstration, as well as how to participate and what rules will be in force. Prior to that, of course, the agency will have to hire a contractor to run the demonstrations and conduct a bidder's conference.

HCFA stands by its belief that Congressional approval isn't needed to run such a project. So, in short, labs, physicians, and beneficiaries worried about the project's impact can object, but if HCFA feels compelled to experiment, it will.

"All parties will have adequate time to make their points," Gurny said. "But if we choose to move, anyone who disagrees or who disputes how we'll do it will have to go to court to stop it."
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Publication:Medical Laboratory Observer
Date:Jun 1, 1984
Previous Article:A time to reexamine values.
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