Pathology/Lab Coding Alert

Conversion factor double dips to Jan. 1 low.

Medicare's conversion factor (CF), the multiplier that sets physician fees, takes a nosedive Dec. 1 and again Jan. 1 for a reduction of over 30 percent versus the peak rate for 2010 (at press time, Obama had not signed the one-month extension passed by the House and Senate that would delay the Dec. reduction). Coupled with a nearly 2 percent decline in pathology relative value units (RVUs), labs can expect to take a big pay hit next year unless Congress acts to override the change.

That's not all: The 2011 Physician Fee Schedule (PFS) Final Rule in the Nov. 29 Federal Register also outlines a new physician signature requirement for clinical lab test requisition forms, and the expiration of the "grandfather exception" for independent lab technical component (TC) billing.

To read the 2,023-page Final Rule in the Federal Register, visit www.ofr.gov/OFRUpload/OFRData/2010-27969_PI.pdf.

Get a Grip on Conversion Factor Drop

From a $36.8729 CF for June 1 through Nov. 30, 2010, CMS cuts the value to $28.3868 on Dec. 1, and again to $25.5217 on Jan. 1, 2011. This amounts to a dismal 30 percent overall cut.

"While Congress has provided temporary relief from these reductions every year since 2003, a long-term solution is critical," the PFS notes. "We are committed to permanently reforming the Medicare payment formula."

As most labs know, last June, Congress voted to not only to stave off a 21 percent cut to your Medicare pay, but also to increase your revenue by 2.2 percent. However, that vote only kept the cuts at bay through Nov. 30, and then the other shoe drops on Jan. 1 unless Congress intervenes to reverse the cuts.

Labs are currently in the dark about what, if anything, will take place to rescue Medicare pay. "We have no idea what will happen in Congress in January regarding the conversion factor," says Michael A. Ferragamo, MD, FACS, clinical assistant professor at the State University of New York at Stony Brook. Some newly elected Senators and House members will be in place in 2011, and it's unclear whether the current Congress willmake changes affecting 2011 pay before January, or whether they'll leave the issues for the new Congress to handle, he says.

What this means for you: "Our lab stands to lose approximately $300,000 for annual billable services if the 30 percent reduction remains," says Stan Werner, MT (ASCP), administrative director of Peterson Laboratory Services PA in Manhattan, Kan. "That's based on a service mix of approximately 20,000 Paps and 15,000 surgical pathology cases a year with 36 percent of patients being Medicare beneficiaries."

Pathology RVUs decline, too: In addition to the CF mulitiplier, the other part of the pay formula that dictates your Medicare pathology pay is the total RVUs assigned for a particular service. For instance, the global fee for 88385 (Array based evaluation of multiple molecular probes; 51 through 250 probes) drops from 24.03 fully implemented non-facility total RVUs in 2010 to 16.71 in 2011.

Based on such adjustments, pathology practices will see an overall pay drop by 2 percent in 2011. This number does not include the impact of the December 2010 and January 2011 conversion factor changes, the PFS confirms.

Watch Out for New Lab-Test Signature Requirement

The 2011 PFS adds a new requirement for clinical diagnostic lab tests paid under the Clinical Laboratory Fee Schedule (CLFS) that your lab needs to know about. If ordered with a paper requisition, CMS will require the signature of the ordering physician or non-physician practitioner (NPP) starting Jan. 1.

"That's a significant change from past policy that specifically did not require a physician signature for clinical lab test requisitions," Werner says.

No worries for 'orders': The PFS clarifies that the policy only applies to paper "requisitions," not "orders." "This policy does not affect physicians or NPPs who choose not to use requisitions to request clinical diagnostic laboratory tests paid under the CLFS. Such physicians or NPPs can continue to request such tests by other means, such as by using the annotated medical records, documented telephonic requests, or electronically," according to the PFS.

Questions remain: The policy singles out clinical lab tests paid on the CLFS, but be alert for any potential impact to CMS's surgical/cytopathology exception. "The new signature policy would be problematic if it required surgeons to sign a requisition for surgical pathology examination, because the specimen typically goes to pathology before the surgeon leaves the operating room," Werner says.

Back story: Past Medicare instruction has included surgical and cytopathology services under "clinical diagnostic tests" for physician signature requirements. Plus, the Medicare Benefit Policy Manual, chapter 15 section 80.6.5 declares that a surgical or cytopathology specimen "typically comes in a labeled container with a requisition form ... [with] no specific order from the surgeon or the treating physician/practitioner for a certain pathology service," -- paralleling the requisition versu versus order distinction that CMS champions in the 2011 PFS rule.

Watch future issues of Pathology/Lab Coding Alert for any further implications of this signature policy change. You can also access the Medicare Benefit Policy Manual at www.cms.gov/manuals/Downloads/bp102c15.pdf.

Beware Expiring 'Grandfather Exception'

If your independent lab is operating under arrangements with a covered hospital that allows you to bill Medicare directly for the TC of pathology services (the "grandfather exception"), prepare to change your billing starting Jan. 1, unless Congress takes action.

The PFS states, "Absent legislation that extends this provision, for services furnished after December 31, 2010, an independent laboratory may not bill the Medicare contractor for the TC of physician pathology services for fee-for-service Medicare beneficiaries who are inpatients or outpatients of a covered hospital."