In an effort to cut national healthcare costs, a number of changes have been put in place that will negatively affect laboratory reimbursement – and as a result, laboratory profits. Three major changes are occurring – the expiration of the TC Grandfather Clause, changes in Molecular Pathology CPT Codes from the Clinical Laboratory Fee Schedule to the Physician Fee Schedule, and an overall decrease in clinical laboratory payments.
With these reimbursement cuts, it is essential for clinical & anatomic pathology labs to adopt solutions that allow for quick access to the quality, operational, clinical, and financial data they need to make winning decisions. A proactive approach to lab management is essential to ensure the future success of your laboratory.
TC Grandfather Clause Expiration
On June 30, 2012, the TC Grandfather Clause expired. This Clause affects hospitals that outsource the technical component of some pathology services to a third party laboratory. The third party laboratory subsequently bills Medicare directly for the pathology services performed. Because the TC Grandfather Clause expired, hospitals must bill Medicare directly, resulting in the laboratories billing the hospitals. In addition, the Technical Component of code 88305, the most commonly ordered surgical pathology code, has experienced a 52% reduction.
The bottom line is that laboratories or pathology practices that provide TC Services for hospital patients now need to negotiate with hospitals for reimbursement levels for their TC Services. This may or may not result in lower reimbursement rates for pathology laboratories and practices, depending on the results of negotiations with their hospital clients.
Molecular Pathology CPT Code Changes
The Center for Medicare & Medicaid Services (CMS) has also proposed changes to the Physician Fee Schedule (PFS) for CY 2013, in particular to payment for molecular pathology services. For the last twenty years, CMS has reimbursed clinical laboratories for molecular pathology tests under the Clinical Laboratory Fee Schedule (CLFS). CMS is proposing adding new codes to describe molecular pathology tests and shifting some of those tests to the PFS.
Molecular pathology tests often require a degree of interpretation, which is typically performed by a Ph.D. geneticist – not a physician. In some cases (approximately 20%), a pathologist may add interpretation. If the molecular pathology test CPT is shifted to the PFS from the CLFS, a certain amount of reimbursement is shifted from the laboratory to physicians, even if the physicians are not involved in actually interpreting the test (only ordering it). The American Clinical Laboratory Association (ACLA) conducted a survey and found that approximately 80% of services did not require a physician interpretation.
It should be pointed out that the molecular pathology tests represented by the new CPT codes are not new tests – only the codes are new. CMS states: “Molecular pathology tests are currently billed using a combination of longstanding CPT codes that describe each of the various steps required to perform a given test. This billing method is called ‘stacking’ because different ‘stacks’ of codes are billed depending on the components of the fundamental test. Currently, all of the stacking codes are paid through the CLFS.” But they will be replaced as of January 1, 2013 with more specific codes, which will require that CMS determine how to pay for these new codes.
Clinical Lab Payment Rates
These major changes coincide with an overall change in clinical laboratory payment rates. Effective January 1, 2013, there was a 2.95% rate cut in clinical laboratory payments. It is expected to save Medicare $2.7 billion over 10 years. This cut was part of the Affordable Care Act (ACA). There is also the possibility of another 2% cut as part of federal budget balancing. Together, these have the potential to total a 23% decrease in laboratory fee cuts over 10 years.
Doubling Down On Business Intelligence
Faced with significant downward pressure on reimbursement, laboratories are increasingly looking at ways to cut costs and improve laboratory efficiency. One method that can have a major impact on a laboratory’s efficiency is the adoption of a business intelligence (BI) solution. Clinical laboratories and pathology groups are under pressure to improve quality and deliver a higher level of service, all while squeezing out every unnecessary cost.
By utilizing a lab specific business intelligence platform, such as Viewics, laboratories can drive key clinical, financial, and operational improvement opportunities. Insight into the following analyses right out-of-the-box enables organizations to proactively manage costs and realize an immediate ROI:
|~ Detailed Workload and Volume by Hour, Day, Month, etc.
~ TAT Outliers and Root Cause Analyses
~ Physician/Tech Productivity and Staffing Analyses
~ Client Revenue Monitoring and Alerting
~ Cost Per Test Breakdown by Department
|~ Billing/Revenue Cycle Analyses
~ Client Utilization/Practice Patterns
~ Critical Value Call Back Performance
~ And many more…
Innovative laboratories, such as PAML of Spokane, Washington, are implementing informatics tools to track and manage numerous performance elements. Rosalee Allan, Senior Vice President and Chief Operations Officer at PAML said “Being able to customize this data in different views has been huge for us and, at a glance, gives us a better sense of where the business is every day, a better ability to detect dangerous trends, and an ability to respond faster. Not a day goes by without one of my leadership stopping and showing me another solution or a dashboard that has been created. This rapid adoption combined with our penchant for innovation is quickly enhancing the business strategy for which PAML is nationally recognized.”
Viewics provides Data Mining and Dashboarding solutions that enable Clinical and Anatomic Pathology laboratories to drive enhanced operational, clinical and financial outcomes.