Medicare Laboratory Payment Policy Now and in the Future (2000) / Chapter Skim
Currently Skimming:
2 Background and Environmental Trends
2 Background and Environmental Trends
Pages 29-57
The Chapter Skim interface presents what we've algorithmically identified as the most significant single chunk of text within every page in the chapter.
Select key terms on the right to highlight them within pages of the chapter.
From page 29... ...
Reliable descriptive data on the clinical laboratory industry are extremely limited, and any picture the committee attempts to paint will be frustratingly hazy.2 There are a number of factors that influence the quality of available data. First, no single industry association or public agency oversees all aspects of this industry, and there is no unique census Standard Industrial Classification (SIC)
|
From page 30... ...
Sites of Service In 1999, 170,102 laboratories conducted 5.7 billion laboratory tests for both inpatients and outpatients in the United States (Tables 2.1 and 2.24. There are three main types of laboratories that provide clinical laboratory services: hospital-based, independent, and physician office laboratories (POLs)
|
From page 31... ...
Total Hospital laboratories 2,958.2 52 Independent laboratories 1,514.2 26 Physician office laboratories 656.4 11 Other 597.1 10 Total 5,725.9 NOTE: Volume figures include both inpatient and outpatient tests performed for all public and private sector payers. SOURCE: Health Care Financing Administration, 2000a.
|
From page 32... ...
basis, payments for laboratory services provided in the inpatient setting are included within 5This includes both inpatient and outpatient testing services.
|
From page 33... ...
Trends in Expenditures for Laboratory Services The early 1 980s was a period of significant health care inflation, and during that time, clinical laboratories benefited from favorable payment policies. Beginning with implementation of the inpatient prospective payment system (PPS)
|
From page 34... ...
Also, many commercial independent laboratories, particularly relatively small laboratories, are not publicly held corporations and have no obligation to report financial data publicly. To assess the financial health of the industry, therefore, the committee reviewed a number of finance industry reports as well as recent market studies that provide some info~ation on the commercial laboratory industry's profitability, mostly for the largest laboratory firms (Donaldson, 1993; Lehman Brothers, 1993; Merrill Lynch, 1999; Smith Barney Research, 1990~.
|
From page 35... ...
, which changed inpatient payment and mandated a new payment methodology for outpatient services. The new prospective payment system for outpatient hospital services does not include laboratory services, but could affect the general financial status of hospitals.
|
From page 36... ...
This section describes Medicare as a segment of the outpatient clinical laboratory market. Medicare Part B Spending Laboratory services paid for under the Medicare Part B clinical laboratory fee schedule represent a relatively small component of the annual Medicare budget about 1.6 percent; however, they constitute a significant portion of the market for the laboratory industry, and Medicare's policies appear to influence the behavior of other payers.
|
From page 37... ...
Clinical laboratory spending as a percentage of total Medicare spending over time is presented in Figure 2.5. Payments for laboratory services per Medicare beneficiary in the FFS program declined during the mid 1990s, but, based on projections, have recently begun to rise (Table 2.4~.
|
From page 38... ...
NOTE: Percentages are for total Part B spending on clinical laboratory services, including hospital outpatient/outreach services. SOURCE: Health Care Financing Administration.
|
From page 39... ...
Although the Medicare Part B fee schedule for clinical laboratory services covers approximately 1,100 different test codes, which reflect an even greater number of tests,8 the top 10 test codes account for 24 percent and the top 200 account for more than half of Part B laboratory expenditures (GustaLson, 2000~.9 ENVIRONMENTAL TRENDS Various environmental trends during the past two decades have put pressure on the clinical laboratory industry to cut costs and improve quality. This section reviews government regulatory efforts to improve quality, protect workers, and reduce waste and abuse.
|
From page 40... ...
public and private payers, particularly new payment policies and aggressive managed care contracting. Although drawing broad conclusions is difficult because the laboratory industry is so diverse, it appears that overall, the quality of clinical laboratory testing has improved and Medicare spending for laboratory services has declined, even while the number of tests per beneficiary has increased.
|
From page 41... ...
was the most significant factor influencing the general regulatory structure of the laboratory industry in the United States during the past 20 years. In the mid-1980s, a series of Wall Street Journal articles exposed major deficiencies in cytology testing (Bogdanich, 1987a; 1987b; see also Inhorn et al., 1994~.~° The medical literature also reported deficiencies in the overall quality of clinical laboratory services (Rej and Jenny, 1992~.
|
From page 42... ...
TABLE 2.5 Waived versus Nonwaived Test Volume, 1999-Early 2000 Test Volume (millions) Waived Nonwaived Waived as a Type of Facility Testsa Tests Total % of Total Hospital laboratories 95.4 2,862.8 2,958.2 3.2 Independent laboratories 15.1 1,499.1 1,514.2 1.0 Physician office laboratories 160.0 496.4 656.4 24.4 Other 112.5 484.6 597.1 18.8 Total 383.0 5,342.9 5,725.9 6.7 a According to the CDC Web site, there are almost 750 testing products that the FDA (previously the CDC)
|
From page 43... ...
CLIA requires that clinical laboratories identify the impact of errors by reporting incidents of errors that harmed, or had the potential to harm, the patients i3Laboratories receive one of five different certification types: 1. Certificate of Waiver: This allows a laboratory to perform only waived tests.
|
From page 44... ...
. Many physicians believed that CLIA increased the cost and administrative burden of providing laboratory services, but many also believed that CLIA contributed to higher-quality testing (Binns et al., 1998; Born and Thran, 1998; Roussel, 1996; Strauss et al., 1995~.
|
From page 45... ...
Still others speculate that the rise may be due in part to pressure from HCFA to register previously unregistered POLs that are attempting to bill Medicare (Auxter, 1999~. CLIA increased the cost of providing laboratory services in independent and hospital-based laboratories, but there is no clear evidence that CLIA has created barriers to beneficiary access.~7 Minor declines in the numbers of hospital-based and independent laboratories are likely the result of the con~6Nipp (2000)
|
From page 46... ...
In order to learn more about CLIA's effect on physician practices, the OIG collected and analyzed survey data from physicians, including those in rural practices that had discontinued providing clinical laboratory services. Although hospital outpatient data are incomplete, the OIG found continued growth in the overall volume of tests, the number of tests per patient, and expenditures for clinical laboratory services since the implementation of CLIA in 1992.
|
From page 47... ...
regulations protect the safety of workers, but also increase the cost of providing laboratory services. They touch almost every aspect of the provision of laboratory services.
|
From page 48... ...
There are few data on the cost of compliance with OSHA regulations for the laboratory industry; however, tighter regulatory control usually means an increased financial and administrative burden. This burden has likely affected hospital-based, independent, and physician office laboratories and has implications for the cost of providing laboratory services.
|
From page 49... ...
Several members of Congress have introduced legislation to bring the supervision requirement more in line with CLIA, but Congress has not acted on these proposals. OIG Investigations Spurred by concern during the last decade that laboratories were improperly billing the federal government, the OIG has conducted several major investigations that have resulted in significant settlements against providers of clinical laboratory services.
|
From page 50... ...
As a result, laboratory representatives testified that the current approach to assessment of medical necessity is misguided and results in an unfair financial burden on clinical laboratories. PAYMENT TRENDS Medicare payment trends for both inpatient and outpatient services, as well as some shift to capitated payments by both public and private payers, have squeezed the profit margins of the laboratory industry and limited the industry's ability to shift costs from payer to payer and test to test.
|
From page 51... ...
Beginning in 2000, payments for outpatient services were also to be based on prospectively determined rates for bundled services. Clinical laboratory services provided under the clinical laboratory fee schedule are excluded from this change in payment methodology; however, significant payment policy changes were made in the way independent laboratories will be paid for pathology services.
|
From page 52... ...
receive capitated payments for provision of care to patients, independent laboratories have little control over the volume or type of laboratory tests that are ordered and covered by the capitation rate. Capitation of laboratory services first began in the mid-199Os and by the end of 1998 accounted for 20-25 percent of testing volume at the three largest national independent laboratories (Klipp, 2000~.
|
From page 53... ...
These changes also have led to consolidation in both the independent and the hospital-based segments of the laboratory industry. In addition, hospital-based laboratories and independent laboratories have become engaged in head-to-head competition for market share as they strive to achieve levels of efficiency and critical mass that will allow them to compete effectively for outpatient, physician, and managed care business.
|
From page 54... ...
The numbers of POLs initially declined in response to federal regulatory policies designed to improve the quality of laboratory testing but are now increasing, partially in response to an increase in the number of waived tests available. Overall, test volume is up, but revenue per test and aggregate Medicare Part B spending for outpatient laboratory services are down.
|
From page 55... ...
Demand for laboratory services is likely to grow as the population ages and innovation makes new tests possible. In many laboratories, innovative technologies and increased regulatory requirements have reduced the length of time it takes for the physician to receive laboratory test results and have improved quality and patient convenience.
|
From page 56... ...
Testimony before the IOM Committee on Medicare Payment Methodology for Clinical Laboratory Services: Medicare payments for clinical laboratory services: Vulnerabilities and controls. Washington, DC.
|
From page 57... ...
1990. The Clinical Laboratory Industry, Investment Outlook.
|
Key Terms
This material may be derived from roughly machine-read images, and so is provided only to facilitate research.
More
information on Chapter Skim is available.