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House panel approves $95 million cut in lab payments for 1990.

In a key step toward enactment of Medicare spending cuts for ,fiscal 1990, the House Ways and Means Committee has approved reducing clinical laboratory payments by about $95 million.

Those savings would be achieved two ways. First, laboratory fee caps would be reduced 5 per cent, down from 100 per cent to 95 per cent of the national median of local fee schedules. Second, the lab fee consumer price index (CPI) annual update would be limited to 2 per cent, rather than the previously projected 4.7 per cent.

Despite industry protests, the House Energy and Commerce Committee, which also holds jurisdiction over Medicare, appears likely to approve identical cuts. Lawmakers on that panel were still drafting their own package at press time, but lobbyists seemed resigned to the outcome.

Protests over the lab cuts may have become lost in the swirl of controversy regarding another Ways and Means decision to approve expenditure targets (ETs) for Part B physician payments. The plan puts an overall annual limit of $30.9 billion on most physician reimbursements. Surgeons would have a separate subtarget of their own.

If the targets were exceeded under the system, the Secretary of Health and Human Services would be authorized to reduce future payments in any way he deemed appropriate. This could be done, for example, through cuts for all specialties selected specialties, or selected services, or by geographic region.

Also approved in the three-part physician payment package: a provision restraining doctors from countering fee cuts by balancebilling patients more than 25 per cent above the Medicare allowable charge.

The third part of the package is a uniform national fee schedule to be derived from a resource-based relative value scale (RBRVS). The schedule, intended to take effect Oct. 1, 1991, would reflect differences in training and other resources required to deliver a given physician service.

As a step in that direction, lawmakers seek to give HHS latitude to trim more than $200 million in payments for a list of procedures that would be overvalued under the RBRVS. In a lobbying victory for the College of American Pathologists, the panel agreed to exclude services commonly delivered by those practitioners. Pathologists could, however, remain subject to pay reductions under the ET system.

Committee approval of ETs raised immediate howls of protest from other physician societies. At an American Medical Association (AMA) House of Delegates meeting, Executive Vice President James H. Sammons made the unusually blunt statement: "It's rationing, no matter what the hell they say."

In a subsequent editorial published in the Washington Post, Sammons wrote: "By any name, expenditure targets are simply an attempt by Congress and the Bush Administration to balance the budget on the backs of America's elderly. . . . Physicians will not abandon their role as the patient's advocate in order to provide the Government a quick and dirty fix to a budget problem that the elderly did not create."

The American Society of Internal Medicine, which favors enactment of the RBRVS, lined up with the AMA to oppose ETs. Officials say the concept i"not yet sufficiently developed" for Congress to decide on its advisability. ASIM says remaining questions include the scope of the targets' base, what services should apply, whether multiple targets are appropriate, and the effects on access to care.

The Administration, which has formally endorsed ETs, has rejected the premise that targets would cause physicians to curtail the delivery of necessary medical services. Health and Human Services Secretary Louis Sullivan said the plan would give doctors an opportunity to police their own ranks rather than provide incentives to deny treatments. He denounced the AMA's media blitz as misrepresenting the Government's intent.

The full Medicare reform package advanced by Ways and Means calls for nearly $3 billion in limits on projected program increasesa surprising $700 million more than what was sought in Congressional budget blueprints. Of the total restrictions, about 60 per cent would come from Medicare Part B and the rest from Part A hospital payments.

The weighting of these curbs apparently reflects Medicare's experience with cost inflation. Hospital payments have been allowed to rise only about 3 per cent in recent years, but physician expenditures have jumped 13 to 17 per cent annually. The committee plan allows for an annual physician payment increase in the 10 percent range.

Among the Part A hold-downs, large urban hospitals would receive a DRG update of "market basket" expenses minus 1.25 per cent. Other urban facilities would get market basket less 1.75 per cent, but rural facilities stand to gain 2 per cent over that index. Medicare capital payments would be cut about 15 per cent.

The DRG changes would close the gap in standardized amounts given rural and urban facilities from 12 per cent to 9 per cent, a level more accurately reflecting cost differences, according to Congressional budget analysts.

Approval of these overall parameters drew a sigh of relief from hospital officials, who fought long and hard to shift attention away from Part A cuts. Michael Bromberg, executive director of the Federation of American Hospitals, remarked: "Although the rates are still inadequate, it is clear that the hospital industry has had success in getting across the message that hospitals are in financial jeopardy."

Also approved by the House Ways and Means panel:

*Payment of Medicare claims would face a mandatory delay of 16 days, as opposed to the current delay of 14 days. *The Internal Revenue Service would be required to give Medicare information to determine whether beneficiaries also have private health insurance coverage. The program would act as "secondary payer" until such coverage is exhausted.

*Part B beneficiary premiums would increase to insure that revenues continue to offset 25 per cent of program costs.

Much of the deliberation over the Medicare package occurred behind closed doors, but it's clear that a number of bipartisan compromises took place.

Among them, Rep. Fortney "Pete" Stark (D-Calif.) amended his Ethics in Patient Referrals Act and succeeded in having it included as part of the budget package.

Under the plan, a physician would be prohibited from referrring a patient to a provider if the doctor or an immediate family member owns or has a compensation arrangement with the provider.

The bill, however, now excludes referrals to owned entities that wer"substantially in operation" by March 1, 1989. Similarly, referrals would be allowed for hospital services if the physician has admitting privileges, if the ownership is in the hospital as a whole, and if the position were established prior to March I.

Other exemptions include services from broad categories of providers such as in-office labs, pathologists and radiologists, prepaid health plans, large publicly held corporations, and rural providers.

To secure exemption Linder the March 1 "grandfather" clause, joint ventures would not be allowed to add new physician investors and would be required to report ownership information to HHS and to patients. Compensation arrangements are not subject to the grandfather clause.

Among the criteria that must be met for any exemption: Investments must not encourage increased referrals implicitly or by inference, participation must be open to non-physicians, and investors would have to bear the full risk of potential losses.

The Stark plan will be one point of discussion as health legislators on the Energy and Commerce Committee compare packages with their Ways and Means colleagues.

Significantly, it appears that Energy and Commerce leaders have decided not to pursue a requirement that laboratories offer Medicare the lowest prices available to preferred customers. However, Health Subcommittee Chairman Henry Waxman (DCalif.) has expressed concern over the wisdom of enacting physician ETs. At press time, sources indicated that members were searching for an alternative that would be more acceptable to organized medicine.

Procedure normally dictates that the two committees with Medicare jurisdiction reconcile their differences prior to floor debate by the full House. But the House has been known to approve both versions of a bill and allow differences to be ironed out in conference with the Senate.

On the Senate side, the Finance Committee has yet to take up Medicare reforms. And with Congress set for a recess most of this month, observers are not anticipating further action until September. n
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Title Annotation:clinical laboratories
Publication:Medical Laboratory Observer
Article Type:column
Date:Aug 1, 1989
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