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Uniform fee schedule to affect all labs.

A uniform fee shcedule for Medicare Part B outpatient services is about to land on clinical laboratories. The forces favoring the fee schedule are aligned and poised for a successful legislative move, and the few remaining opponents nos appear resigned to their fate.

Indeed, most observers agree that the only suspense left is not whether Congress will vote a fee shchedule but rather what form it will take.

Certainly, the fee schedule proposal isn't new to Congress. Rep. Ron Wyden (D-Ore.) and Sen. John Heinz (R-Pa.) introduced the Fair Laboratory Payment Act last year as their solution to the so-called "dual price structure" that allegedly contributed to massive Medicare spending waste (see Washington Report, MLO, September 1983). Responding to the early criticism of the bill, the sponsors refined provisions and consequently turned some key initial opponents, such as the American Clinical Laboratory Association, into backers.

At this writing, the House and Senate bills had several differences, but none was considered crucial by most observers.

The House measure sets the fee schedule at 60 per cent of the prevailing charge for the procedure and requires all clinical labs to bill Medicare directly. It requires independent labs to accept assignment and forbids hospital labs from charging Medicare outpatients for diagnostic tests.

Physicians could bill the Government lab work only if they personally performed or supervised the testing in their offices. For physicians, assignment would be optiona. But where a doctor accepted assignment, he would receive the same benefits that would apply to clinical labs and hospitals, that is, payment at 100 per cent of the fee schedule and waiver of the coinsurance and applicable deductible.

The bill also provides nominal payment for drawing patient specimens, but limits this to one charge per patient encounter. It further directs HCFA to move to simplified billing requirements, such as eliminating the demand for a patient diagnosis on a bill, insuring prompt Federal payment to providers, minimizing claim information, and facilitating bulk or periodic billing for multiple beneficiaries.

Meanwhile, the Senate version, which originally exempted hospital outpatient facilities from the fee schedule, now includes all providers. The exemption had been a major issue for independent clinical labs. But in a compromise, the Senate Finance Committee recently agreed to set the fee schedule for the hospital-based providers at 62 per cent of the prevailing charges, while pegging it at 60 per cent for independent and physicians' office labortories.

Unlike the House version, the Senate measure would make assignment optional for all providers. It would, however, require direct billing of either Medicare or the patient. Further, reimbursement for assigned claims would also be 100 per cent of the fee schedule, with coinsurance and any deductible waived. This bill also allows for a drawing fee and encourages a streamlined system for billing requirements.

A few years ago these provisions might not have been palatable either to lawmakers or providers. But the plight of Medicare and the massive $200 billion national deficit, along with the more frightening (for laboratorians) alternative, have brought them to the forefront. The fee schedule measure, after all, has had most of the controversy distilled out through lobbying efforts the last nine months, and it promises savings of $115 million to $145 million for fiscal year 1985 and $570 million to $600 million by fiscal 1989.

Providers, meanwhile, have their own grim specter with which to contend. Competitive bidding, introduced last year by the Reagan Administration as part of its health incentives legislation, was killed in committee after sotrms of protest. But it still hangs ominously in the background at HCFA. The agency acknowledged last year that it wanted to run demonstration projects for multiple models of bid arrangements. And, despite hints of legal action and the advance in Congress of the fee schedule alternative, HCFA remains wedded to experimenting with the competitive bid approach. An agency spokesman told MLO that protocols are being redesigned and that field testing is slated to begin in a year. For most laboratorians, the choice between a uniform fee schedule and competitive bidding is no contest.

Even within HCFA, strong sentiment exists for the former, as evidenced in the HCFA laboratory task force's recently released final report. This panel, created in 1982 to assess possible reimbursement reforms for Part B diagnostic lab service payments, formally recommended to agency administrator Carolyn Davis that the fee schedule become the basis for reimbursement.

If Congress seeks any further justification for a fee schedule, it could find all it needs in this task force document. But in many respects, the report reflects the arguments already aired in the legislative debate, and it may prove more valuable in determining what shape a fee schedule law takes.

The task force recommendations differ in several ways from those in its draft document released last fall (see Washington Report, MLO, October 1983). Its conclusions:

* A fee schedule should be the basis of payment and "should apply equally" to tests performed in all settingS. This is more emphatic than the draft's suggestion that the fee schedule "apply equally to physicians' and independent labs and should be considered in determining reasonable cost for hospital lab services."

* In the most significant departure from the draft, the task force recommends using "a fixed percentage (i.e., 60 per cent)" of carrier-wide prevailing charges to set the fee. The draft recommended establishing the fee at the 75th percentile of the weighted averages of laboratory charges to physicians. But the final report notes that little "good data" on laboratory-to-physician charges exist, and that, without them, HCFA could not "readily select the appropriate percentage of the prevailing charge . . ." Pointing out that the ACLA believes that "two-thirds" of the prevailing is "acceptable," and that "fees have continued to increase during our and Congress's deliberations," the task force concludes that 60 per cent of prevailing "is an appropriate starting point."

* While the draft firmly recommended that assignment "not" be mandatory, the final report says it "need not but could be mandatory." The primary reasons for mandating assignment, says the final report, "were to enhance beneficiaries' financial protection and to subject physicians to the same economic constraints operating on independent and hospital labs." But "absent any means of affirmatively requiring physicians to participate in the Medicare program, at least with respect to lab tests, the task force is divided on the merits of limiting reimbursement to assigned claims only." One reason: Under a mandatory system, unassigned claims are not paid, to the harm of beneficiaries. The task force said its "sole recommendation" on assignment is that HCFA policy be uniform for both physicians' and independent laboratories.

* The final report underscores, as the draft did not, that direct billing be required as a condition for reimbursement.

* The task force concluded that if assignment is optional, program reimbursement should be at 100 per cent of the fee schedule amount, with deductibles and coinsurance waived. "Unassigned claims should be paid at 80 per cent of the fee schedule and be subject to the beneficiary cost sharing provisions.

* As in its draft, the task force again recommended that Medicare pay a nominal specimen collection, drawing, and handling fee (e.g., $3) per encounter to whomever draws the specimen.

* The draft urged simplified information requirements for claims and specifically advised an end to including the diagnosis on all bills, provided the prescribing physician is identified. The final report also urges simplification so that HCFA might "better capitalize on its role as a volume payer." Toward that end, HCFA "may" choose to eliminate the diagnosis requirement (but identify the prescribing doctor), minimize patient-specific information on assigned bills, and return to the lab "its specimen accession numbers along with the explanation of Medicare benefits."

The fee schedule evolution in HCFA, on Capitol Hill, and among labs has been a matter of compromise that most observers agree can achieve improvements for both sides. Lab interests are conceding a new legislative/regulatory scheme to save Medicare dollars in exchange for an approach that will preserve the present structure of the industry and reduce red tape in a way that should counterbalance Medicare payment reductions.

At this writing, it appeared that the only surprise that could come now would be if the fee schedule isn't passed into law this year.
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Publication:Medical Laboratory Observer
Date:May 1, 1984
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