Congress Freezes Conversion Factor, but Pathology Reimbursement Still Hit Hard
To: PSA Billing Clients and Affiliated Pathology Practices
From: John R. Outlaw, Chief Compliance Officer
Re: 2007 MPFS - Congress Freezes Conversion Factor, but Pathology Reimbursement Still Hit Hard
As you know, recently Congress passed legislation which freezes the Conversion Factor used in calculating the Medicare Physician Fee Schedule (MPFS) at the 2006 level, effectively eliminating what would have been a 5% across the board reduction in Medicare reimbursement that CMS had planned for 2007. The same legislation also extended the "TC Grandfather" clause one year which allows independent labs to continue to bill Medicare directly technical component services they provide for certain "covered" hospitals.
However, PSA wants to be sure that you also understand what the
Tax Relief and Health Care Act of 2006 does NOT do, and the impact that your practice will still face in the form of significant reductions in the 2007 MPFS which were not addressed by Congress. This action by Congress eliminates only 5% of what had otherwise been projected as an 11% reduction on the Medicare fee schedule for the laboratory industry. Still in tact even with the "freeze" passed by Congress are significant cuts (which some industry sources had estimated at about 6%) associated with two changes to the Relative Value Units (RVUs) that are used to calculate Medicare reimbursement for each procedure. The details of these changes are too complicated to address in this alert - but it is important to note that the 6% projections you may have heard about represent an average for the laboratory industry, and the impact to your practice may be very different based on your work mix. As a practical matter, the nature of these changes is such that independent labs will tend to net little or no adverse impact, but hospital-based pathology practices which bill primarily for professional component (PC) only services will still see reductions that could significantly exceed the 6% that is being referenced by other industry sources.
PSA has reviewed the impact of the changes that were not addressed by Congress, and we have estimated that the average PC-only reimbursement for the most commonly billed anatomic pathology procedures will still drop by 9-10%. While the exact 2007 MPFS amounts are adjusted by geographic area and will therefore vary slightly form state to state, here's an example of PSA's estimated impact of the 2007 changes before and after the "freeze" passed by Congress:
CPT Code 88305 88305-26
2006 MPFS $94.11 $40.04
CMS Proposed 2007 MPFS (before "freeze") $88.53 (- 5.93%) $34.14 (-14.74%)
Revised 2007 MPFS (after "freeze") $93.28 (- 0.88%) $36.16 (-9.69%)
We hope that you find this information helpful in trying to understand the 2007 MPFS in light of the recent action by Congress and the information being published by various sources which tends to address the impact to the laboratory industry on a larger scale. Please contact PSA for a more detailed explanation of the RVU changes or additional information as to the impact of the 2007 MPFS on your practice.