August 2008
The laboratory industry has multiple reasons to celebrate the passage of the recent Medicare bill, which was pushed through by an overwhelming Congressional override of President Bush’s veto, notably the repeal of the competitive bidding demonstration project for lab testing services, the reversal of the 10.6 percent reduction in the physician fee schedule, as well as extension of the technical component (TC) grandfather clause for anatomic pathology services for 18 months.
But what may be the most astonishing development is the boost the bill gives to the lab fee schedule, over 4 percent for 2009, explained Alan Mertz, president of the American Clinical Laboratory Association (ACLA) at a July 23 LabLine audioconference.
Throughout their negotiating of the Medicare bill with lawmakers on Capitol Hill, ACLA and other industry leaders agreed to take a half of one percent reduction in the lab fee schedule over five years—which would save the Centers for Medicare & Medicaid Services (CMS) $600 million—as long as the competitive bidding demonstration project was repealed in the Medicare bill. During the negotiations, it was predicted that the lab fee update would be about 2 percent. With the .5 percent reduction proposed by industry leaders, this would net a 1.5 percent lab fee schedule increase in 2009.
"We thought this might give us some level of protection against further cuts in our update—we could say that we’ve already taken a little cut every year," said Mertz. "This turned out to be a great strategy because the day after competitive bidding was repealed, the Department of Labor put out the inflation statistics, on which they are going to base the update for labs in January, and it’s not 2 percent, but it’s now 5 percent. So we are going to get about a 4.5 percent update in January 2009."
Challenges Ahead
When Congress initially mandated CMS to conduct a competitive bidding demonstration project for laboratory services, it included a provision known as "conforming language" that gave the agency the authority to rebase the entire fee schedule on bids submitted in the demo, according to Mertz.
While this conforming language was repealed in this recent legislation, ACLA is concerned that those bids might be used by CMS in future initiatives, explained the group’s chief counsel, Peter Kazon, on the audioconference. "One of the key issues that everyone is concerned about is that the government not be able to use the bids that were submitted as part of the preliminary bid process," he said adding that attorneys working with labs in San Diego—the first demonstration site—are discussing with the government how to protect this bid information. "We expect there will be some determination of that in early August if not before," Kazon added.
Another issue is the physician payments, which averted an over 10 percent cut but will continue to be a target, according to another audioconference speaker, Denise Bell, director of federal affairs for the College of American Pathologists. "There have been predictions that over the next 10 years, physicians could see a cumulative cut of about 40 percent in their payment rates, while practice expenses are expected to go up about 20 percent during that same time period," she said.
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