Medicare Laboratory Payment Policy Now and in the Future (2000) / Chapter Skim
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To this end, the committee recommends that the Medicare program implement a single, national, rational fee schedule that reflects the resources used to produce the services, simplify and open its administrative procedures, and collect data to monitor and assess the impact of the recommended changes. INTRODUCTION Clinical laboratory tests are a key component of modern health care.
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The Medicare Part B fee schedule for outpatient laboratory services accounts for approximately one-third of what Medicare spent for laboratory services, or 1.6 percent of its total annual budget, in 1998 (GustaLson, 20009. Although outpatient clinical laboratory tests are only a small portion of the Medicare budget, Medicare payment policy for laboratory services is significant because it influences state Medicaid and private payers' policies and payment rates.
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conducted almost 3 billion laboratory tests (Table 2) , pro2Generally, when this report refers to the clinical laboratory industry, it includes the three types of laboratories discussed below: hospital-based, physician office, and independent laboratories.
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4. Other laboratories: Laboratory tests performed at end-stage renal disease centers, home health agencies, and nursing homes are frequently not paid out of the Medicare outpatient laboratory benefit.
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The lack of appropriate billing codes, Medicare coverage decisions, and payment barriers could delay beneficiary access to new technology. If it becomes more difficult to absorb reduced payments, the industry might no longer offer tests when costs exceed payments.
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The following five goals are broadly applicable to the Medicare payment system and are specifically relevant to payments for outpatient clinical laboratory services.
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ASSESSMENT OF THE CURRENT MEDICARE PAYMENT SYSTEM The committee conducted an extensive examination of the Medicare payment system for outpatient laboratory services and assessed the current methodology in light of the committee's goals.4 . Beneficiary access: The committee found no evidence that beneficiaries have difficulty obtaining outpatient clinical laboratory services.
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The committee recommends that HCFA, the administration, and the Congress work together to develop the necessary enabling authority and funding. RECOMMENDATION 1: Medicare payments for outpatient clinical laboratory services should be based on a single, rational, national fee schedule.
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RECOMMENDATION 2: On an interim basis, relative payments for Medicare outpatient clinical laboratory services should be based on the current National Limitation Amounts. The NLAs are an appropriate starting point for the national fee schedule, but HCFA should move quickly to refine them.
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RECOMMENDATION 3: A data-driven consensus process for refining the new Medicare national fee schedule for outpatient clinical laboratory services should be developed. HCFA should explore alternative methods for gathering data to be used in the process.
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Qualified laboratories in sole community hospitals: 6 These providers currently receive slightly higher Medicare outpatient laboratory payments. HCFA should study the implications for sole community hospitals of a new national fee schedule.
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The committee concluded that a consistent, public process for developing interim values for new laboratory services is essential for an effective payment system. HCFA should create a committee of laboratorians, pathologists, other physicians and scientific experts, health care policymakers, and economists to advise on setting interim relative values or national fees for new technologies.
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RECOMMENDATION 8: The current policy of not requiring beneficiary cost sharing for Medicare outpatient clinical laboratory services should continue. Cost sharing is unlikely to significantly reduce overuse or increase the detection of fraud and abuse; it could create barriers to access for the most vulnerable Medicare beneficiaries; and it would be financially and administratively burdensome for laboratories, patients, and the Medicare program depending on its design.
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In addition, experience has shown that the use of ICD-9 codes is not a sound basis for making judgments regarding the medical necessity of particular laboratory tests in specific patients.~° One of the fundamental problems with the approach that the contractors currently use to make a determination of the medical necessity of a particular laboratory test for a particular beneficiary at a particular time is that, in many circumstances, it is likely to give the wrong answer. Moreover, the current system is easily gamed, is administratively burdensome, and does not place sufficient responsibility on the physician.
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RECOMMENDATION 11: HCFA should move promptly to consolidate the number of contractors processing all Medicare outpatient clinical laboratory claims, including claims from physician office laboratories (POLs) and hospital-based laboratories.
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Possible measures include monitoring Clinical Laboratory Improvement Amendments (CLIA) certification and performance status and claims denial rates, reasons for the denials, and the percentage of claims ultimately paid.
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Testimony before the IOM Committee on Medicare Payment Methodology for Clinical Laboratory Services. Washington, DC.
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