ASCP and In-Office Pathology Laboratories

ASCP issued a letter dated March 1, 2010 to the acting administrator of Centers for Medicare and Medicaid regarding “unintended flaws in the anti-markup rule on diagnostic services.” The letter is available on ASCP’s website. Captured in the “unintended flaws” are pod labs, self-referral of test ordering, in-office pathology labs, abusive Medicare billing, profitability of physician office anatomic pathology laboratories, and the proverbial kitchen sink. There are actually a few points in the letter I endorse and there are others that are simply misguided.

Let me start with those I endorse:

The fact that CMS allows technical-only anatomic pathology laboratories to operate outside of CLIA (no CLIA registration) is more than “nonsense,” it is criminal. I have written to CMS regarding this issue on several occasions to no avail. All laboratories processing tissue should be required to be CLIA registered and regularly inspected. And, they should all have a pathologist as medical director to review laboratory procedures. There is no wiggle room on this position.

Pod labs should not exist. I suspect my reason for that statement is far different from ASCP’s reason. I support the closure of pod labs because they are not in concert with CMS ’s “nexus” between clinicians who own the laboratory and pathologists who perform the professional diagnosis in that laboratory. “Pod lab” is a term used to describe an anatomic pathology laboratory that is remotely located from the clinicians’ practice rather than being in the building where the practice is located, a definition of an in-office laboratory. There is no “nexus” with pod labs; hence they should not receive any reimbursement from CMS .

There is no room in our health care system for abusive billing practices, such as fee splitting, kickbacks or markups. Any and all of these abuses should be stamped out at every turn and severe penalties meted out to those subscribing to them.

And for those I do not endorse:

Profit is raised as if it is a bad thing. What has to be considered is that clinicians who build their own in-office laboratory have invested their capital to do so, and they have hired staff and retained pathologists. They expect and deserve a return on that investment. If it is wrong for them to make a profit then it is wrong for all commercial laboratories and all hospital laboratories to earn a profit on their investment in anatomic pathology labs.

A point that can’t be lost on the profitability issue is that all laboratories. whether in-office or commercial, are paid the same fee for anatomic pathology testing (subject to proscribed geographic adjustments). It does not matter what sort of inflated fee an in-office laboratory bills CMS for a CPT 88305 because that laboratory will receive the same fee from Medicare as does the commercial laboratory located next door doing the same CPT 88305 test. The in-office lab is certainly not taking unfair advantage by charging the poor, uninformed, downtrodden Medicare patient some outrageous fee for its services. Medicare pays for those services and they only pay the amount in their published fee schedule. Abusive fees are not an issue here. And, the recently passed health care legislation will reduce the number of uninsured non-Medicare patients dramatically, which further lessens any opportunity for pricing abuses, if they exist.

The argument against in-office laboratories is the same I have heard for years from the College of American Pathologists ( CAP ), commercial laboratories such as LabCorp, Quest Diagnostics, etc., and now ASCP. They all want in-office testing stopped or derailed so the testing can flow through their laboratories in the case of commercial laboratories or into their members’ laboratories in ASCP’s case. Not surprisingly, that switch won’t save the health care system in this country one cent, assuming the same CMS fee schedule is in effect and relatively similar test volumes exist. All it will do is enrich the private pathology and commercial laboratories with the added testing volumes.

CAP , commercial laboratories and now ASCP apparently want the world to believe that overutilization occurs at in-office anatomic pathology laboratories. Let me address that issue by looking at a private urology practice. For that I will cite National Comprehensive Cancer Network’s (NCCN) protocol for the early detection of prostate cancer, available at NCCN’s website. Basically, this is a guideline on how a patient should be worked-up so that no laboratory testing, clinical or anatomic, is ordered until that phase of the guideline is reached. Anatomic pathology testing is addressed on page 24 (MS-9) of a 34 page document, long after clinical pathology testing is performed on the patient to determine if a prostate biopsy is needed. The areas of the prostate to be biopsied are clearly defined with a total of 12 tissue cores to be taken. It is difficult to envision overutilization in this example because all CMS has to do is monitor the number of tissue cores taken per patient. If it is consistently more than 12 cores per patient, an overutilization alert should be sounded. On the other hand, if it is consistently less than 12 cores per patient, a question of the standard of care offered to patients should be raised. NCCN has protocols for most cancers, and these or similar protocols should be enforced. That will minimize the possibility of overutilization.

While the pathology community is taking aim at in-office laboratories on the issue of overutilization, they should be mindful of their own unabashed overutilization. Take staining, for example. Staining is ordered almost exclusively by pathologists in their private laboratories and in the hospital and commercial laboratories where they work. It is not ordered by clinician-owners of in-office laboratories or clinicians in general. There are no standards for ordering staining. Furthermore, pathologists are paid for each stain they order. Recent CMS data was used to prepare the following table. No matter how you measure it, ordering of staining fits the description of overutilization, with the pathologist who ordered the stain being directly reimbursed for that order. This is clearly a self-referral issue. The compounded annual growth rate ( CGR ) in staining versus the growth rate in tissues is very telling, increasing more than 3.5x faster than the growth in tissues.

CAP , commercial laboratories and now ASCP are pointing to the escalating volume of anatomic pathology testing performed in physicians’ offices as a very clear example of overutilization. On the other hand and at the same time, the largest commercial laboratory, Quest Diagnostics, is telling the investment community that the reason its anatomic pathology testing volumes are down is because of the growing number of physician in-office pathology laboratories. That is true. Anatomic pathology testing is being moved from hospital and commercial laboratories into physicians’ in-office laboratories. The transfer of testing sites does not imply overutilization by the receiving site. It is as simple as the receiving site seeing an increase in volume but the sending site seeing a corresponding decrease in volume. Furthermore, from the table above, tissue specimen growth over the 2005 through 2008 period averaged 2.5% per year, hardly the explosive growth rate suggested by the paranoia surrounding this issue. The transfer trend will continue and is not an unhealthy one or one tied to overutilization. The ability to have a pathologist in a clinician’s office discuss a patient’s tissue results directly with the clinician is much preferable to having an unknown pathologist across the country explain to the clinician via telephone or e-mail the testing results performed in an unknown laboratory for the clinician’s patient.

What baffles me about the overutilization rallying cry from CAP and now ASCP is that licensed and boarded pathologists are retained by in-office laboratories to provide professional services and to serve as medical directors. You would think that if gross overutilization were occurring these individuals would rise to the call and blow the whistle, particularly with their professional organizations aggressively pushing this message. I know of no instance where this has occurred. Could it be that there truly is no overutilization, or are these same pathologists themselves entwined in the claimed overutilization scam? I seriously doubt that it is the latter. If ASCP and/or CAP are so convinced about this overutilization issue at in-office laboratories, their pathologist members should be stepping forward in droves to point out the overutilizers. And, as most know, they can do that in confidence with the OIG to conceal their identities. Yet this has not happened.

Besides eliminating CMS payments to pod labs, I advocate eliminating CMS payments to any in-office anatomic pathology laboratory that is not performing BOTH the technical (TC) and the professional (PC) work on-site. What I advocate is for CMS not to pay any in-office anatomic pathology laboratory performing only TC work. I am advocating the same no-payment policy to in-office anatomic pathology laboratories performing only PC work, and there are lots of those laboratories in existence. The bright light dividing line for CMS payment should be determined by whether or not the in-office anatomic laboratory is performing global work (TC + PC) on-site. It is in these global work laboratories where the patient gets the best of care—a clinician and a pathologist working side by side for the benefit of the patient.

I suspect whoever wrote the requested requirement in the ASCP letter that “supervision must be provided on-site during the performance of the TC” has never worked in an anatomic pathology laboratory. I also assume in fairness to all parties that this rule, if adopted, would apply to all CLIA registered anatomic pathology laboratories. With that, I wonder how many pathologists would be in a hospital laboratory at 4 a.m. when the histotech arrives to begin technical processing of tissue specimens (the TC work). Or how many pathologists would be providing supervision on the graveyard shift in a commercial laboratory that operates 24/7? And what happens when a pathologist is doing frozen sections and not in the laboratory? Does all technical processing of tissues cease until the pathologist returns? This requirement is unrealistic and unnecessary because every tissue slide prepared for diagnosis is reviewed by a pathologist who can quickly determine if tissue cuts, staining, processing or any other issue exists with tissue slide preparation. Any experienced laboratorian will quickly dismiss this requirement into the hysteria pile where it belongs.

We should not forget that pathologists work in these in-office anatomic pathology laboratories. This is their livelihood. They range from top-notch university pathologists at a medical college to one of the largest pathology groups in the country, and from CAP elected leaders to a local hospital pathologist. Every situation I have been involved in has utilized local community pathologists to provide in-office professional pathology services. Local pathologists are happy to gain this work because they have seen such work move from their hands to a myriad of out-of-town specialty laboratories competing for that work. Now they have a chance to get it back at reasonable fees. Somehow the campaign against in-office laboratories seems to forget the local pathologist. If all in-office pathology laboratories were closed tomorrow, the local pathologist would be hurting financially because the large commercial laboratories would scoop up the work with their sales forces, computer systems, couriers, and very aggressive pricing on non-Medicare work. Someone in ASCP ought to wake up to this fact.

It is curious to me why CAP and ASCP insist on the removal of anatomic pathology services from the list of services exempt from Stark prohibitions but don’t raise the issue of clinical pathology testing being performed in physicians’ offices. After all, there are about 100,000 CLIA registered physician office laboratories in the country doing clinical pathology testing but only 15,000 physician in-office anatomic pathology laboratories. Yet both organizations focus on in-office anatomic pathology testing. I believe the answer is as simple as this: CMS does not pay a professional fee for clinical pathology testing; hence there is no financial incentive to rail against such testing. Moreover, what should not be forgotten is that the agenda for CAP and ASCP is focused and skewed primarily toward their members. There is nothing wrong with that as long as the proper caution is taken when considering comments from these organizations.

If CMS can control utilization and the fee schedule, they are almost home. Utilization can best be controlled by protocols for all medical services, whether or not the testing is done at an in-office pathology laboratory or in a hospital or commercial laboratory. As for ASCP, it ought to be developing protocols and getting them adopted by its members rather than charging down a road that screams of self-interest.

Joe Plandowski

April 3, 2010