New Analysis Finds Contradictions and Flaws in CMS Rationale for Cutting Anatomic Pathology Services for Medicare Beneficiaries


WASHINGTON D.C. – Today the American Clinical Laboratory Association (ACLA) released a report prepared by The Moran Company, a research firm with expertise in Medicare, that found serious contradictions and flaws in a recent proposal from the Centers for Medicare & Medicaid Services (CMS) to drastically cut Medicare reimbursement for anatomic pathology services.

On July 8, CMS issued a rule proposing to cut some anatomic pathology (AP) services by as much as 75% by applying lower rates from the Outpatient Prospective Payment System (OPPS) to the Physician Fee Schedule (PFS) where AP services are currently reimbursed. ACLA opposes these draconian cuts to services that are the standard of care for diagnosing deadly cancers (e.g. breast cancer) and commissioned The Moran Company to assess CMS’ rationale.

The Moran Company report analyzed CMS data and surveyed clinical laboratory companies about direct and indirect costs. It found that CMS’ proposal to use OPPS data would not result in accurate payments for anatomic pathology services due to imperfect, incomplete claims data, substantial overlap in the cost findings between care settings, and cost data from hospitals that do not capture the differences in the way hospitals allocate costs as compared to other care settings. It also concluded that the data were insufficiently granular to be reliable at the level of individual codes for anatomic pathology services.

Further, the analysis points out that for years CMS has described the procurement of OPPS data as an “imperfect” system, in which relative weights and payments are based on often flawed hospital reports and claims data. The current position taken by CMS directly contradicts repeated assertions in prior comments published by the agency.

“CMS’ rationale for using OPPS data explicitly contradicts long-standing CMS judgment regarding accuracy as well as the utility of cross-system comparisons of absolute payment amounts,” said Alan Mertz, President of ACLA. “In fact, CMS has repeatedly said that relative resource-intensiveness of a procedure is more important than determining the exact cost of the procedure. The OPPS methodology simply will not allow for comparisons to services outside the OPPS and should not be applicable to labs that will be impacted by this proposal.“
Key findings in the analysis also include the following:

  • The cost accounting data CMS is exclusively relying on in making these cost comparisons for the 38 anatomic pathology services impacted by the proposal is insufficiently granular to be reliable at the level of individual codes. For example, the low cost-to-charge ratio reflected when hospitals apply costs for performing services that they “package” into a payment code for anatomic pathology services suggest that hospitals are applying very large charge markups to these services and the resulting low ratio is likely artificial.
  • The cost findings on which CMS is relying to set OPPS payment rates that will be used to cap PFS rates are based on averages across data submitted by thousands of hospitals. Substantial overlap was found in the range of cost findings between care settings, calling into question whether costs are, in fact, sufficiently different in both settings to justify capping one set of payment rates with another.
  • Policymakers evaluating policies that rely on OPPS payment rates as a benchmark for payments in other settings should, at least in the case of anatomic pathology services, approach such policies with healthy skepticism.

Anatomic pathology services, which include biopsies, are critical to the timely and effective treatment of millions of patients who either have or are suspected of having cancer. By CMS’s own estimate, their proposal would cut clinical laboratories by 26% and some individual AP services by as much as 75%. However, as found by The Moran Company, their rationale is dangerously flawed, particularly for cuts of this magnitude.

These unjustified proposed cuts would severely harm patient access for Medicare beneficiaries who need timely and high quality anatomic pathology diagnostic services. ACLA calls on CMS to withdraw this proposal and to work with ACLA to modernize Medicare reimbursement for clinical laboratory services.

To view report, please visit the American Clinical Laboratory Association website or click here.

ACLA represents the nation’s leading providers of clinical laboratory services, including local, regional, and national laboratories throughout the United States.

Print page / Save as PDF