Though a 10.6 percent cut in fees took effect July 1, Medicare is delaying payment on physician claims, anticipating congressional action to reverse the cut.

At press time, as Congress reconvenes after the Independence Day recess, the Senate is set to consider Medicare legislation that would roll back the July 1 cut of 10.6 percent in pathology and other physician fees and grant payment increases through 2009, extend the pathology "grandfather" protection for independent clinical laboratories, and repeal the lab competitive bidding demonstration.

The House, before recessing last month, passed its Medicare legislation containing these provisions (H.R. 6331) by a wide bipartisan margin (355-59). The bill would pay for the physician fee increase by reducing payments for Medicare managed care, a move opposed by the president who has said he would veto it.

Senate Finance Committee chairman Max Baucus (D-Mont.) told reporters July 7 he is optimistic that there will be enough votes to block a GOP filibuster and get a Medicare bill to the floor for a vote. A bid to pass H.R. 6331 before the recess failed to garner the 60 votes needed for cloture. Meantime, unable to reach a compromise, Baucus and the ranking Republican on Finance, Charles Grassley (Iowa) introduced rival Medicare bills.

The good news for pathologists and clinical labs is that all the bills before the Senate incorporate their key legislative priorities this year:

• Blocking the July 1 cut of 10.6 percent in pathologist and other physician fees under the SGR formula, continuing the 0.5 percent increase in effect since the start of this year through Dec. 31, and granting an additional 1.1 percent increase for 2009.
• Extending for 18 months the "grandfather" protection that allows independent clinical labs to bill Medicare Part B directly for the technical component of anatomic pathology services to hospital inpatients and outpatients. This protection, which expired June 30, applies to hospital-lab arrangements in effect as of July 22, 1999, the date when the Centers for Medicare and Medicaid Services first proposed to end such billings on grounds that the technical component is reimbursed as part of the hospital’s Part A inpatient payment.
• Repealing the Part B competitive bidding demonstration for independent laboratory services. The planned launch of the demo in San Diego on July 1 is on hold following a court order in a lawsuit filed by local labs.

But for labs, the bills also would reduce their fee schedule update for 2009––the first update in five years––by 0.5 percent. The CPI update for next year is currently projected at 2 percent. The five-year freeze on lab fee updates, which kept the rates at their 2003 level, expires at the end of this year.

With Congress expected to act soon to restore physician fees, CMS is holding Medicare payment of physician fee-for-service claims as of July 1. The hold is designed to avoid disruption in the delivery of services and claims processing, CMS said. "This should have minimum impact on provider cash flow because, under current law, electronic claims are not paid any sooner than 14 days (29 days for paper claims) after the date of receipt. Meanwhile, all claims for services delivered on or before June 30 will be processed and paid under normal procedures."

After 10 business days, contractors will begin releasing claims with a date of service of July 1 and later for processing, and this could result in payments reflecting the 10.6 percent cut, CMS cautioned. But if a new law is enacted reversing the cut retroactive to July 1, CMS said it is prepared to automatically reprocess most of those claims that have already been processed.

Claims with dates of service July 1 and later billed with a submitted charge at least at the level of the Jan. 1-June 30, 2008 fee schedule will be automatically reprocessed if Congress retroactively reinstates the update that was in effect for that time period. Any lesser amount will likely require providers to resubmit a revised claim.

"To the extent possible, providers may hold claims in-house until it becomes clearer as to whether new legislation will be enacted or until cash flow becomes problematic," CMS said. This will reduce the need to reconcile two payments (the initial claim and the reprocessed claim) and will simplify provider billings of beneficiary coinsurance and payment calculations for payers that are secondary to Medicare.

Though legislation pending in the Senate and already approved by the House would extend the pathology "grandfather" protection, which expired June 30, for 18 months, through 2009, CMS was prompt in notifying Medicare contractors that the provision had expired.

In Change Request 6088 (July 7, 2008), CMS said independent labs that had qualified to bill for the technical component of anatomic pathology to hospital inpatients and outpatients may no longer bill for these services with a date of service on or after July 1.

July 9, 2008 - Table of Contents

NIR July 9, 2008 (full PDF issue)

Senate Set for Showdown on Medicare Physician Fee Fix

CMS Proposes 2009 Physician Fee Schedule Rule

CMS Invites Input on Pricing New Lab Codes for 2009

‘You Still Have Time to Sign Up for 2008 Quality Reporting’

CMS Finalizes Rule on Hepatitis C and Transfusion Safety

CMS Lowers Fee for Metabolic Panel Code 80047

Medicare Preventive Service Update

Protest Halts MAC Contract to National Heritage Insurance