HR3630 and CMS: the small print and small labs

June 1, 2012

Attention laboratorians: in February, the two houses of Congress passed and President Obama signed into law policy changes that you might not yet have heard about, but that have potentially far-reaching implications for clinical labs, especially smaller labs.

The new law in question, The Middle Class Tax Relief and Job Creation Act of 2012 (HR 3630), was the result of months of partisan wrangling in Congress over issues such as extending the payroll tax cut and finding a solution to the so-called “doc fix” issue affecting Medicare reimbursements to physicians. These issues dominated news coverage of the bill, but the legislation also contained two less-reported, lab-specific provisions.

President Obama signs H.R. 3630, The Middle Class Tax Relief and Job Creation Act of 2012, in the Oval Office on February 22, 2012.

The first resets Medicare payment rates for clinical laboratory services, reducing them by 2% in 2013. The cuts are intended to help offset the extended freeze through December 31, 2012, in Medicare physician payment rates, which has a price tag of $18 billion. The cuts reduce Medicare payments to laboratories by an additional 2.4% over the cuts imposed by the Affordable Care Act. The Congressional Budget Office estimates this provision will reduce spending by $2.7 billion from 2012 through 2022.

The other lab-centered provision of The Middle Class Tax Relief and Job Creation Act of 2012 extended a grandfather provision allowing independent clinical laboratories that have an arrangement with eligible hospitals to bill Medicare directly, as opposed to billing the hospital, for anatomic pathology, cytopathology, and surgical pathology services. (The earlier grandfather provision expired on February 29, but received a four-month extension, through June 30.)

Independent labs receive direct payments from Medicare for both their specimen preparation–known as the “technical component”–and the diagnostic–known as the “professional component”–of their services. There is a Center for Medicare and Medicaid Services (CMS) regulation which would block direct payments for the technical component of these services. Congress has blocked its implementation since 2001. However, any future extension of the provision blocking the CMS regulation beyond June 30 is unlikely.

Debate over the wisdom of letting the CMS regulation take effect continues in Congress.

In a bipartisan letter to conference committee chairmen Sen. Max Baucus (D-MT), head of the Senate Finance Committee, and Rep. Dave Camp (R-MI), head of the House Ways and Means Committee, some 30 members of Congress argued against the change. “About three-quarters of states would be impacted,” the cosigners asserted, “with smaller and rural hospitals being affected the most.”

Meanwhile, bipartisan legislation has been introduced in both the House and the Senate which would permanently exempt labs from the CMS regulation. Sen. Thad Cochran (R-MS), cosponsor of the Senate legislation along with Sen. Tim Johnson (D-SD), states that, “Rural healthcare delivery presents unique challenges for both patients and providers. Our legislation would give rural hospitals certainty that they would not face the regulatory burdens and costs that would arise if the current exemption lapses.”

In addition to these lab-specific policy developments, it is possible that future changes in policy are coming as well, especially as Congress and President Obama work to reach agreement on $1.2 trillion in cuts during 2012. These cuts, part of the deal reached during the debt ceiling debate last year, would begin to take effect in January 2013 and extend over the ensuing decade.

In other words, final action on some of the deficit reduction ideas debated by the so-called “super-committee,” which failed to reach a compromise on reducing the federal deficit last year–including possible long-term reductions in reimbursements to Medicare providers and various proposals to establish a patient copay for lab services under Medicare Part B–may resurface as part of a grand budget bargain.

My purpose here is not to opine about the wisdom of any of these recent or possible changes. Rather, it is to impress upon you the importance of staying abreast of what’s happening in Washington during a time of such dynamic, late-breaking change.

Going forward, the industry should continue to remain engaged in the Washington policymaking process. We must continue to be knowledgeable and outspoken advocates for ourselves and lab quality. By doing so, we will be advocates for the interests of the patients we serve as well.

Douglas Beigel, MA, MBA, is CEO of COLA, a leading independent laboratory accreditor, as well as member of the American Association of Medical Society Executives and the American Society of Association Executives. He is the 2010 recipient of The American Society for Quality Edwards Medal, presented to individuals who have “demonstrated the most outstanding leadership in the application of modern quality control methods, especially through the organization and administration of such work.”