Comments Regarding the 2012 PFS Proposed Rule

August 30, 2011 Categories: Comments and Letters, Reimbursement and Coverage

August 30, 2011

COMMENTS OF THE AMERICAN CLINICAL LABORATORY ASSOCIATION ON THE MEDICARE PROGRAM; PAYMENT POLICIES UNDER THE PHYSICIAN FEE SCHEDULE AND OTHER REVISIONS TO PART B FOR CY 2012 PROPOSED RULE (CMS-1524-P)

The American Clinical Laboratory Association (ACLA) is pleased to have this opportunity to submit our comments on the Medicare Program; Payment Policies under the Physician Fee Schedule and Other Revisions to Part B for CY 2012; Proposed Rule (the “Proposed Rule”).1 ACLA is an association representing clinical laboratories throughout the country, including local, regional, and national laboratories. As providers of clinical diagnostic laboratory services to Medicare beneficiaries, ACLA member companies would be directly impacted by the Proposed Rule. ACLA’s comments will focus on the following proposals:

The Centers for Medicare & Medicaid’s (CMS) request for review of potentially misvalued CPT codes by the AMA’s Specialty Society Relative Value Scale Update Committee (“RUC”), specifically:

CPT 88305: Level IV surgical pathology, gross and microscopic examination; o CPT 88365, 88367 and 88368: In situ hybridization (e.g., “FISH” testing); and o Additional CPT codes in the 88000 series (pathology);

  • Expansion of the multiple procedure payment reduction (MPPR); and
  • Expiration of the “grandfathered” payment for the technical component (TC) of certain pathology services.

In addition to comments on the above proposals, ACLA is submitting comments regarding the absence of any discussion in the Proposed Rule of anatomic pathology self-referral arrangements—a longstanding concern of our members—and the new molecular pathology CPT codes being developed by the American Medical Association (AMA).
I. Request for RUC Review of “Potentially Misvalued Codes”

As part of its ongoing (and now statutorily mandated) effort to identify potentially misvalued codes, CMS has proposed to request that the RUC review several hundred CPT codes, including a number of codes that represent anatomic pathology services. Below, ACLA has provided comments and supporting data in response to these proposals.

CPT 88305: Level IV Surgical Pathology, Gross and Microscopic Examination

CMS has requested that the RUC review the practice expense (PE) and physician work values for CPT 88305 “as soon as possible”, based on the input from a “stakeholder” that “the AMA RUC relied upon an atypical clinical vignette in identifying the direct PE inputs for the service associated with CPT code 88305.” According to CMS, the stakeholder claimed that “in furnishing the typical service, the required material includes a single block of tissue and 1-3 slides. The stakeholder argues that the typical costs for the service amount is approximately $18, but the PE RVUs for 2011 result in a national payment rate of $69.65 for the technical component of the service.”2 CMS notes that, although the physician work for CPT 88305 was reviewed in April 2010, CMS is asking the RUC to review both the direct PE inputs and work values of this code “as soon as possible” because the direct PE inputs associated with this code have not been reviewed since 1999.

ACLA is concerned that CMS appears to conclude—based on the report of a single stakeholder—that the PE RVUs for 88305 are grossly inaccurate, thus necessitating RUC review “as soon as possible.” However, the stakeholder’s information is quite inconsistent with our members’ experience. ACLA disputes the assertion by the stakeholder that there exists a “typical” or “atypical” clinical vignette for CPT 88305 on which to base the PE and work values, and the assertion that the “typical” service would cost $18 when all the direct and indirect costs are taken into account.

First, there is wide variation in the number of tissue blocks per 88305, the number of slides per block, and the total number of slides per 88305, depending on the type and size of the tissue sample being tested and the patient’s condition, among other factors. The 88305 service involves a tissue biopsy, such as from the patient’s skin, gastrointestinal organs, breast, lymph node, prostate, or other part of the body. The physician takes one or more biopsies from the site and puts each tissue sample (specimen) in a jar for transport to the histology laboratory. Each specimen represents a single 88305 billing to Medicare, but the treatment of the specimen by the laboratory varies greatly depending on the tissue type. ACLA members have reported the following sample vignettes that demonstrate this variation:

  • Breast: Two masses measuring approximately 4 cm3 and 5 cm3 are excised from patient’s left breast. The first specimen is sliced for gross examination and 8 representative sections are fixed in formalin, embedded in paraffin to create 8 blocks, from which 1 glass slide each is prepared for microscopic evaluation by the pathologist. The second specimen, due to its larger size, is sliced into 10 representative sections, creating 10 blocks, from which 1 glass slide each is prepared for microscopic evaluation.
  • Result: (2) 88305 billings: first with (8) blocks and (8) slides, second with (10) blocks and (10) slides
  • Cervical: Endocervical polyp measuring approximately 3 cm in greatest dimension is removed. The specimen is sliced into 3 sections, fixed in formalin and embedded in paraffin to create 3 blocks, from which 3 glass slides each are prepared for microscopic evaluation by the pathologist.
  • Result: (1) 88305 billing; (3) blocks; (9) slides
  • Prostate: Four biopsies are taken from male patient with enlarged prostate. Specimens fixed in formalin and embedded in paraffin to create 4 blocks, from which 5 glass slides each are prepared for microscopic evaluation by the pathologist.
  • Result: (4) 88305 billings; (4) blocks; (20) slides
  • Gastrointestinal: Multiple rectal polyps and tissue fragments are submitted as a single specimen. Blocks are created for the following: (1) aggregate of tissue fragments; (2) polyp #1 (small); (3-4) polyp #2 (large, center section); (5-6) polyp #2 (large, side sections); (7) polyp #3 (large, center section); (8-9) polyp #3 (large, side sections); (10) two polypoid fragments; (11-16) polyp #4 (large, lobulated with margin of resection). Specimens are sectioned and embedded in paraffin to create a total of 16 blocks, from which 2-3 slides each are prepared for microscopic evaluation by the pathologist.3
  • Result: (1) 88305 billing; (16) blocks; (33) slides
  • Bone marrow: Core biopsy of patient’s bone marrow is fixed in formalin, embedded in paraffin to create 1 block, from which 2 sections are cut and placed on glass slides for microscopic evaluation by the pathologist.
  • Result: (1) 88305 billing; (1) block; (2) slides

As shown in the above examples, the number of tissue blocks and the number of slides produced—and thus the quantity of supplies and clinical labor time needed—varies significantly from case to case. To further demonstrate the wide variety in the number of tissue blocks and slides per billing, the table below shows one ACLA member’s averages by tissue type:

[see original PDF for chart]

Second, ACLA disputes the stakeholder’s assertion that an 88305-TC could cost $18 when all the direct and indirect costs are taken into account. Our members’ experience shows that the costs of labor (histotechnologists and histotechnicians), supplies and specimen transportation are all on the rise. In particular, salaries and training costs for histotechnologists have increased dramatically in recent years. In 2010, the average hourly wage for staff histotechnologists was $26.00 ($54,080/year) and for staff histotechnicians was $22.68 ($47,174/year).4 Supervisory level staff in each of these categories were paid $32.10 per hour ($66,768/year) and $29.48 per hour ($61,318/year), respectively. Based on these numbers, in RUC terms, staff-level histotechnologists’ per minute cost would be $0.43 and histotechnicians’ per minute cost would be $0.38, while the 2011 RBRVS uses a value of $0.37 per minute for a histotechnologist (and does not include histotechnicians in the clinical labor inputs). In addition, laboratories’ training costs have increased (which is not accounted for in the RUC’s estimates) as histology training programs have continued to close. These costs are exacerbated as technicians continue to retire in large numbers and labs must train new personnel to replace them.

Beyond the increase in labor costs, laboratories are also responsible for the costs related to the transportation of specimens to the laboratory, which have increased significantly in the last year, and supply costs. Many the supplies that are used by laboratories, including the kits provided to laboratory clients, are oil-based; therefore, these supply costs increase with the cost of oil.

ACLA urges CMS to disregard the “typical” clinical vignette reported by the stakeholder. A single block of tissue and 1-3 slides is not typical, or even average, based on our members’ experience. If CMS nevertheless intends to request that the RUC review CPT 88305, ACLA urges CMS to direct the RUC to take into account these wide variety of clinical cases for which 88305 is performed and the significant increases in direct input costs.

CPT 88365, 88367, 88368: In Situ Hybridization

CMS has also requested RUC review of the in situ hybridization codes 88365, 88367 and 88368 (typically called “FISH” testing for “fluorescent in situ hybridization), based on comments from the Large Urology Group Practice Association (LUGPA) regarding two new (2011) cytopathology codes that describe in situ hybridization testing of urine specimens— 88120 and 88121. CMS states that it shares LUGPA’s concerns regarding the potential payment discrepancies between the codes that describe the same test using different specimen media: CPTs 88365, 88367 and 88368 describe each probe and apply to non-urine specimens whereas the new codes’ descriptors account for approximately 4 probes and only apply to urine specimens.

ACLA is concerned about CMS’ reliance on, again, a single stakeholder’s report of mispriced CPT codes. ACLA believes that the discrepancy in the payment rates for FISH testing of urine samples as compared to other specimens is justified by the higher complexity and lower rates of automation involved in specimens such as blood and tissue. These latter types of specimens require more highly trained technicians to perform more complex assays (which also cost more to obtain than assays for urine testing), while FISH testing on urine samples is, in many laboratories, fully automated. One ACLA member provides the following comparison of the number of urine cases that a technician can complete per day as compared to blood and tissue cases:

Screen Shot 2013-12-13 at 2.12.59 PM

These numbers demonstrate the large differences in the time that is needed for the technical preparation of a tissue or blood specimen as compared to a simpler urine specimen. Thus, ACLA believes that the difference in RVUs is appropriate. We ask that, if CMS intends to submit these codes for RUC review, the agency ensure that these key differences in technical component are taken into account as the RUC undertakes its review.

Additional Codes for RUC Review

Finally, CMS has requested that the RUC review a list of 70 “high PFS expenditure procedural codes representing services furnished by an array of specialties” that have not been reviewed since 2006 and “have CY 2010 allowed charges of greater than $10 million at the specialty level.”5 This level of spending appears to be the primary reason for the requested RUC review. Among the selected codes are pathology codes 88342 (Immunohistochemistry), 88112 (Cytopathology, cell enhancement technology) and 88312 (Special stains group I). ACLA believes that these codes have experienced unit of service changes over the years and, for CPT 88342, a distinct expansion in the therapeutic applications. This would explain, at least in part, the level of spending in 2010. It is important to understand that technological advances in many types of laboratory testing—and related increases in utilization—may explain higher spending, rather than a misvaluation of the service.

For CPT 88342, immunohistochemistry (IHC), the science is constantly evolving, with new antibodies consistently being produced for diagnostic, theranostic and prognostic applications. These stains provide oncologists with information about the specific molecular characteristics of a tumor, which bears significantly upon their clinical treatment decisions. In addition to providing higher precision in diagnosis and, in turn, better clinical care, IHC markers reduce the need for other types of tests and trial-and-error treatments. For example, in some cases clinicians can perform panel testing to analyze malignancies of unknown origin whereas, in the past, patients had to go through a large number of clinical and imaging tests to discover the origin. With IHC, a malignancy can by subclassified with precision and, at the outset, the oncologist can select the most appropriate treatment protocol as opposed to subjecting the patient to trial-and-error protocols. These advantages have led to a justifiable increase in the utilization of IHC services, with a concomitant reduction in unnecessary testing and treatments and an overall reduction in treatment costs.

It is also important to remember that independent laboratories are not represented on the RUC and, therefore, the impact on clinical laboratories of any future changes to the relative values for these codes may not be readily apparent to the RUC. ACLA would be pleased to supply information from our members to assist the RUC in its review of all the codes with which we have experience.

II. Potential Expansion of the Multiple Procedure Payment Reduction (MPPR)

CMS has proposed to expand the MPPR policy that has historically reduced the technical component (TC) payment for the second and subsequent advanced imaging service performed in the same session to also apply to the professional component (PC). Although this proposal does not impact clinical laboratory services, CMS states in the Proposed Rule that it is “aggressively looking for efficiencies” in other sets of codes and is considering expanding the MPPR policies in CY 2013 and beyond. In particular, CMS is considering applying the MPPR to the TC for the second and subsequent test for all diagnostic tests furnished in the same encounter. The examples CMS gives are radiology, cardiology and audiology services; thus, it is unclear whether CMS would consider applying this policy to pathology services.

As CMS has only briefly noted that the agency is considering such a policy, we are not submitting extensive comments at this time. However, it is important for CMS to understand at the outset the fundamental differences between performing the TC for pathology services and performing the TC for other services, such as radiology and cardiology. Specifically, whereas there may be duplication of clinical labor activities, supplies and equipment time for other TCs, pathology TCs involve a fixed amount of labor, supplies and equipment for every service and there are no efficiencies gained in the performance of multiple pathology TCs at once. The preparation of a glass slide for review by a pathologist always involves a complex series of steps, including cutting, sectioning and fixing the tissue or other specimen. For any given patient, therefore, performing additional services does not yield any efficiencies in terms of the time spent by the histotechnologist, the quantity of supplies used, or the repeated use of laboratory equipment. ACLA wishes to ensure that CMS keeps in mind these clear distinctions as the agency considers adopting such an MPPR policy in future years.

III. Expiration of “TC Grandfather” Payment for the TC of Certain Pathology Services

As in the 2011 proposed rule, CMS is planning for the expiration of the “TC grandfather” clause, which Congress has legislatively extended for the last several years. This provision has historically permitted independent laboratories to continue to bill Medicare for the TC of a service furnished to hospital inpatients and outpatients if the hospital had a prior relationship with an independent laboratory for such service. The most recent extension of this provision occurred last year in the Medicare and Medicaid Extenders Act of 2010, which extended the payment through CY 2011. Thus, CMS has proposed to amend the regulations to reflect the expiration of this provision effective January 1, 2012.

ACLA, once again, requests that CMS implement the grandfather provision on a permanent basis, as we do not believe the TC is already included in either the diagnosis-related group or hospital outpatient prospective payment system payment made to the hospital for the service. Implementing the provision on a permanent basis would also eliminate the billing issues that occur each time the provision is set to expire.

IV. Issues Not Addressed in the Proposed Rule

Anatomic Pathology Self-Referral Arrangements

ACLA is very concerned that CMS has again failed to include in the Proposed Rule any discussion of the longstanding and growing problem of abusive anatomic pathology self-referral arrangements. As we have discussed with CMS staff on a number of occasions over the last several years, physician specialists are increasingly taking advantage of gaps in the anti-markup and self-referral rules, and entering into business arrangements that permit them to order, bill and be paid the full fee schedule rate for anatomic pathology services, even though the services are actually furnished by physicians who have little or no relationship with the ordering physician and his or her group. Although CMS expressed concern about such arrangements in the 2008 and 2009 Physician Fee Schedule rulemakings, the agency has not addressed the problem (and in fact exacerbated the issue through changes to the anti-markup rule that became effective January 1, 2009), and has declined to take any action in the last three years. As a result, these arrangements have become even more prevalent. We have seen dozens of examples, including direct advertising materials sent to physicians, medical specialty newsletters and displays at conferences, touting in-house labs and contract arrangements as legal ways to profit from anatomic pathology services.

Once again, ACLA urges CMS—at a minimum—to include a discussion of abusive self- referral arrangements and the IOAS exception in the final rule as a deterrent to physician groups that are considering entering into such arrangements and as a signal to those currently involved in such arrangements that CMS is preparing to take action. Each year that CMS remains silent on this issue is like a “green light” for these arrangements to continue. We wish to continue to work with CMS to amend the Medicare regulations—whether the IOAS exception, the anti- markup rule or another section—to curtail these abuses for the protection of the Medicare program and Medicare beneficiaries.

Molecular Pathology CPT Codes

The AMA has developed more than 100 new CPT codes for molecular diagnostic testing, to be published in the 2011 CPT manual in October. CMS announced at its July 18, 2011 public stakeholder listening session that it would not place or price any of the new AMA molecular pathology CPT codes on the 2012 Clinical Laboratory Fee Schedule (CLFS) and that the earliest that CMS will solicit recommendations on the assignment of payment levels for these new CLFS codes will be at next year’s laboratory public meeting. CMS was less clear, however, when asked if the delay will extend to new AMA CPT molecular pathology codes being placed on the 2012 Physician Fee Schedule. Although no codes were included in the Proposed Rule, we are concerned that CMS could decide to add some of the new codes to the Physician Fee Schedule when the final rule is issued in November (following the official publication of the 2011 CPT manual).

At the listening session, among other comments, ACLA reiterated our recommendation that CMS finalize no action in this area until 2013 to allow for sufficient stakeholder input and the necessary clinical laboratory operations transition in order to minimize the impact on Medicare beneficiaries. It is critical that CMS implement and price these new codes thoughtfully so that unintended consequences, such as disruptions in clinical operations and patient service, do not result. As CMS reviews the proposed new codes, we also believe it is important to keep in mind that these services are often performed and interpreted by qualified nonphysician health care professionals. ACLA’s membership survey results show that 90 percent of the time testing interpretation is performed by a Ph.D. Assuming that the Physician Fee Schedule cannot accommodate a payment mechanism to reimburse providers for services interpreted by qualified health care professionals other than physicians, these facts would suggest that these services belong on the CLFS, although a case-by-case analysis is still warranted.

Furthermore, we believe that CMS should implement all the new codes at the same time in order to minimize confusion for providers and laboratories. Therefore, we again recommend that CMS not include any of the new codes in the 2012 final Physician Fee Schedule. In the meantime, ACLA will be pleased to continue working with CMS to ensure a seamless transition to the new codes.

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