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Laboratory fee roll-in studied by HHS.

Laboratory fee rool-in studied by HHS While still recovering from last year's regulatory barrage, laboratory professionals now have a new bogeyman to worry about: the prospect that lab fees may be rolled into Medicare reimbursement for physician office visits.

The Health and Human Service Department's Office of Inspector General (OIG) raised the specter with a report on the approach, which officials described as "a promising strategy for curbing overuse" of lab services. Industry members concede the plan probably would reduce overall testing volume--but with disastrous effects on quality of care. Independent labs are also frustrated because, while they would no longer be billing Medicare, the OIG has not spelled out exactly how their payment might be handled under the model.

STill, Federal officials estimate a lab roll-in (LRI) would save $100 million a year in administrative costs. And while the concept is still only in its early study phase, such savings have a way of capturing close attention in Washington these days.

Fueling the interest, the OIG report noted that Medicare Part B payments for lab services (excluding those to hospital outpatient facilities) more than doubled between 1984 and 1988. Payments of about $800 million in 1983 rose to nearly $1.9 billion in 1988, and last y ear's bill was expected to register more than $2.5 billion.

What's more, investigators said the growth cannot be explained by increases in or by inflation. Rather, beneficiaries or by inflation. Rather, they said it results from the rising volume of testing and "billing idiosyncrasies inherent in the current fee-for-service system."

Under the new approach, the report explained, "Reimbursement for individual laboratory tests would no longer be made by the Medicare program. Clinical laboratory reimbursement would be rolled into Medicare's recognized charge for a physician office visit. Medicare would no longer process any claims for diagnostic clinical labora tory services (HCPC procedure codes 80000 through 89999)."

Lab payments, the report continued, would be a fixed amount added to physician office charges in the HPCC codes 90000 series, excluding inpatient services. The new recognized charge (including the LRI) would continue to be subject to deductibles and copayment--a factor officials believe will make beneficiaries more cautious consumers and possibly reduce demand for health services.

To show how a LRI might work, the OIG took 1988 Part B claims data and redistributed the $1.84 billion in lab payments across paid physician office visits (90000 series procedure codes). cal calculation produced a base LRI of $13.50 per office visit--that is, $1.84 billion in allowables divided by 1.37 million visits.

To determine the potential impact on physicians, researchers compared the $13.50 LRI with each of 42 specialties' average reim bursement for lab services under fee-for-service methodology.

The results showed that, on average, most specialties would be paid more under an LRI than they were under fee for service. Those that would lose money are dermatology, family practice, gastroenterology, internal medicine, oral and plastic surgery, psychiatry, radiology, urology, nuclear medicine, geriatrics, and nephrology, wouses would also be felt collectively by doctors in clinic or group practices.

Beyond its own data, the OIG based its findings on information from 21 randomly selected Medicare carriers. Seven national associations representing the medical and laboratory communities also provided their perspectives.

"Everyone we spoke to agrees that the use of laboratory procedures is likely to decline if Medicare's reimbursement for them is combined into a more comprehensive physician office visit package," the report stated. It added that bunding the payments would produce administrative savings by eliminating more than 25% of the line items currently processed by carriers.

The study noted, however, that many of the industry members contacted expressed concern that doctors would be motivated to cut corners, severely curtailing their use of lab services with a resulting decline in the quality of patient care.

Unfazed, OIG analysts stated: "WhWhile we agree that laboratory use will decline, we find the (possibility) that the decline would jeopardize the quality of patient care to be unlikely."

Officials reason that the threat of malpractice and the trend toward "defensive medicine" would continue to discourage undertreatment. They believe that the development of practice guidelines or protocols will set minimum testing requirements and provide boundaries for evaluating possible undertreatment.

Aside from the still-contentious issues, independent labs are dismayed that the report did not address how their reimbursement would be handled under an LRI. Ostensibly, labs would be left to negotiate their own reimbursement terms with physicians. But some observers believe that an LRI set at $13.50 would be so low it would leave little room for discussion.

STill, Federal officials say this approach to paying for clinical lab services is "not without precedent," citing HMO and hospital DRG reimbursements as examples. Other "less visible packages" include global surgical fees and demonstration projects on such high-volume procedures as cataract and coronary artery bypass surgery.

Investigators like the LRI approach because it tackles flaws they see as inherent in the fee-for-service syst em. Fragmented billing, customized profiles, upcoding, and procedure inflation are all "common methods" employed to manipulate the current system, according to the OIG. They add that the sheer volume and small dollar value of lab services render existing pre- and post-payment review mechanisms ineffective. (See related cover story beginning on page 24.)

Moreover, the report said other reform approaches do not fully address laboratory utilization concerns. That, at least, may provide future ammunition against some efforts widely opposed by the lab community. Among the limitations the OIG cited in other reform approaches:

* Direct billing and other restrictions on who can bill for lab services do not alter incentives for use. Utilization review problems are unchanged; "creative arrangements" such as shell labs continue to flourish and are difficult to police; and basic incentives affecting physician ordering decisions still exist.

* A reinstatement of deductible and coinsurance for lab services may reduce Medicare payments, but the effect on utilization would be uncertain. Those mechanisms are most effective when patients control decisions such as whether to visit a physician in the first place. For collection costs to labs are also a considerable burden and could meet or exceed the amounts recovered.

* Initiatives to prevent physician ownership of any laboratory may adversely affect access to services. That would be especially true in rural areas, where physician office labs (POLs) may be the main or only source of testing.

* Competitive bidding focuses on cost but raises questions about quality and may not control use. It is feared the approach might encourage clinical laboratories to cut corners and compromise patient care. Further, models under consideration that would exempt POLs undermine the savings potential.

* Practice guidelines may improve determinations of medical necessity but will not alter other problems with fee for service. Most guidelines set a floor but not a ceiling on services ordered and thus have little or no effect on incentives leading to excessive use.

* Volume performance standards that set aggregate pay and volume targets for Medicare may lower costs but not affect individual treatment decisions. Service-intensive physicians could continue to increase the level of services provided, penalizing doctors whose practice of medicine is more conservative.

Having explored the shortcomings of other approaches, the OIG report conceded that many questions remain to be answered before an LRI can be implemented. Chief among them is how hospital outpatient services could be included in calculating the base LRI. Analysts note that excluding those outpatient labs from the system would in all likelihood simply shift services to hospitals, thus undermining program savings.

Among other issues the OIG said it will address in a separate upcoming report: Should the base LRI be adjusted for geographic variations (e. g., urban versus rural)? Should the base be adjusted for certain physician specialties, or should some specialties be excluded from the system? Should certain tests be excluded? Would the quality of testing and/or patient care actually suffer under LRI methodology?

The answers to such questions will largely determine the LRI's appeal in Washington. Changes will, of course, require significant political will in Congress to depart from the carrier fee schedule system that has been in place since 1984. Still, sources representing the clinical lab community say monitoring and shaping the discussions will be among their top priorities for the year ahead.
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Title Annotation:Department of Health and Human Services
Publication:Medical Laboratory Observer
Date:Feb 1, 1991
Previous Article:Why do nurses earn more than technologists?
Next Article:The growing crackdown on laboratory fraud and abuse.

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