December 2011 Clinical Laboratory News: Regulatory Profiles

Regulatory Profiles


Congress Ponders Lab Cuts to Pay Docs, Trim Deficit

More cuts to the lab fee schedule are once again on the table, this time as part of a strategy to fix the much maligned sustainable growth rate (SGR) system, Medicare’s formula for paying physicians, as well as in response to the July $1.5 trillion deficit-reduction law that raised the nation’s debt ceiling.

Established in 1996, the SGR formula is widely recognized as deeply flawed, and Congress has had to act each year to intervene to prevent massive cuts to physicians under Medicare. Now Congress wants a permanent fix to the SGR problem, but needs to come up with money elsewhere to keep physician payment at a reasonable level. The Medicare Payment Advisory Commission (MedPAC), an advisory group to Congress on Medicare payment, offered several scenarios to Congress. Under one proposal, cuts in lab reimbursement would account for 9% of the required offset savings. It would also cut payments for laboratory services that are included in the Medicare physician fee schedule. The proposal would mean a 10% cut to labs for 10 years, totaling $21 billion.

The American Clinical Laboratory Association (ACLA) wrote to MedPAC Chairman Glenn Hackbarth to protest the recommendation, noting that lab tests account for only 1.6% of Medicare spending, making the industry a poor target for cuts. “Payments have been reduced by about 40% in inflation-adjusted terms over the past 20 years. In addition, the Affordable Care Act cut Medicare reimbursement for laboratory services by an additional 19% over the next 10 years,” wrote ACLA President Alan Mertz.

Mertz also noted that lab fee schedule cuts are being considered by the so-called super-committee, the Joint Select Committee on Deficit Reduction. The super-committee must identify trillions of dollars in cuts under a last-minute deal cut by President Obama and Congress that allowed an increase in the U.S. debt ceiling. At CLN’s press time, the super-committee had not yet met its December 2 deadline to submit a report and legislative language to the president and Congress. Once the super-committee submits its report, Congress has until December 23 for both houses to vote on a common bill. If Congress fails, $1.2 trillion in automatic cuts kick in, affecting discretionary spending across the board, and including defense and Medicare providers.

FDA, CMS Launch Parallel Review Initiative

In an effort to reduce the time between Food and Drug Administration (FDA) approval of a device and a Medicare payment decision on the same device, FDA and the Centers for Medicare and Medicaid Services (CMS) have launched a pilot parallel review program.

The FDA and CMS are now accepting submissions for concurrent review and have issued procedures for voluntary participation and guiding principles that the agencies will follow during product review.

Often, device sponsors focus solely on obtaining FDA approval, only to find that Medicare coverage is not automatically forthcoming. Both agencies rely on clinical data in reaching their decisions, and while they have distinctly different regulatory responsibilities, parallel review can reduce the time between FDA approval and Medicare national coverage determinations, according to the FDA.

The voluntary pilot program, which will last for up to 2 years with the possibility for extension, will not change the existing separate and distinct review standards for FDA device approval and CMS coverage determination. It is only available for qualifying new medical device technologies and will only accept five devices per year.

In September 2010, FDA and CMS announced their intention to implement a parallel review process, and received 37 public comments, which can be found in the public docket.

More information is available in the Federal Register notice, online.

Accountable Care Organization Final Rule Released

The Department of Health and Human Services (HHS) released final rules for its Shared Savings Program, part of the Patient Protection and Affordable Care Act. The final rule explains how healthcare providers can form voluntary Accountable Care Organizations (ACO) that cooperatively manage care for Medicare patients beginning next year. Providers that form ACOs will get to share in financial savings with Medicare as long as they also meet quality of care performance standards. Financial savings are benchmarked against what Medicare would usually pay for an episode of care. Inspired by models such as Mayo Clinic and Geisinger Health System, the idea is that providers can hold down costs and improve quality at the same time due to the inherent benefits of coordinated care.

The final rule made several concessions to healthcare providers after some 1,300 comments that followed a draft rule issued in March 2011. Among other concerns, providers were worried that while they could keep up to 60% of the money they saved Medicare, substantial penalties would be levied for failure

According to the Kaiser Foundation, key changes in the final rule made to appease providers include: providers will be able to participate in an ACO without risk of losing money; quality measures that ACOs will have to meet to qualify for performance bonuses were reduced from 65 to 33; community health centers and rural health clinics will be allowed to lead ACOs; and groups may now apply throughout the 2012 calendar year.

Federal savings from this initiative could be up to $940 million over 4 years, according to HHS, and to get things started, the government will advance up to $170 million to physician-owned and rural providers to help them start ACOs.

The Shared Savings Program final rule is available online.

States, Vendors Agree on Standards to Connect EHRs

Aiming for plug-and-play connectivity among electronic health records (EHR) and health information exchanges (HIE), a collaborative of state governments and EHR vendors issued an initial set of technical specifications to standardize connections between healthcare providers, health information exchanges (HIE), and other data-sharing partners. The EHR/HIE Interoperability Workgroup built upon existing published standards for interoperability from the Office of the National Coordinator (ONC) in the Department of Health and Human Services. The group’s new specifications describe how encrypted health information can be transmitted over the Internet and how clinicians can query an HIE for relevant data on a specific patient.

The New York eHealth Collaborative helped form the group, which is comprised of its federally designated counterparts in seven states—California, Colorado, Maryland, Massachusetts, New Jersey, New York, and Oregon—and eight EHR vendor members, including Allscripts, eClinicalWorks, e-MDs, Greenway Medical Technologies, McKesson Physician Practice Solutions, NextGen Healthcare, Sage Healthcare Division, and Siemens Healthcare. In addition, there are three HIE services vendors participating, including Axolotl, InterSystems, and Medicity.

The new specifications are available at the organization’s website.

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