2012 Outlook: Overreactive Legislature and Economic Uncertainty Bring Dark Cloud Over Advancing Lab Industry

The lab industry goes into 2012 with a great deal more uncertainty and anxiety than any prior year. Congress has left the building without fixing the sustainable growth rate (SGR) formula-driven cuts to the physician fee schedule which will reduce payments to providers by 27.4% effective Jan 1st 2012. CMS has issued a notice to contractors to hold claims for 10 days after Jan 1st in order to provide Congress with a last minute opportunity to pass a fix before claims are required to be paid by law. Congress also failed to address an extension to the moratorium allowing labs to bill for the technical component of pathology services furnished to hospitals (commonly referred to as the TC grandfather clause); and there is still a possibility of co-pays for clinical laboratory testing.

At the same time that the 5010 conversion penalty phase was delayed by CMS due to provider and contractor difficulties in meeting the 1/1/2012 conversion deadline, Palmetto GBA has launched a new MolDx program for J1 that becomes effective 3/1/2012 requiring the provision of a new Z code assignment on Molecular Diagnostic claims to avoid a front end rejection as well as two draft LCDs that will have great impact on coverage for new tests. Meanwhile, in competing guidelines, CMS has issued a policy altering the status of the new AMA MDx CPT codes from invalid to a request for their inclusion on claims alongside the stacking codes.

The intersection of the 5010 roll out; coupled with a contractor hold on tests subject to the PFS; provider hold on tests subject to the “TC grandfather clause” inclusion of the new AMA MDx codes on claims in parallel with the stacking codes; and a new Z code requirement on MDx claims for Medicare J1 probably has lab IT staff pulling their hair and cancelling the holidays while labs are left in the perilous position of not knowing the magnitude of the impact to their cash flow in January. Congressional paralysis and seemingly contradictory Medicare directives are yet another symptom of forced Medicare cuts resulting from deficit reduction requirements exacerbated by the Affordable Care Act.

To further complicate the matter, other payors, and contractors, are watching Palmetto GBA’s roll out of the MolDx program as they try to determine whether the Z codes will take hold or if they should begin to use the new MDx codes developed by the AMA which will be released in 2012 without reimbursement levels having been developed. Just as molecular diagnostics and genetic testing are poised to effectuate a technological paradigm change in healthcare delivery and outcomes, possibly the most significant impact to healthcare economics in our lifetime, an over reactive legislature is putting the brakes on. The lab industry has only one New Year’s resolution this year and that is to bring common sense and rational thinking back to Washington.