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1. No two pathologists carry out their practice in exactly the same way. 2. The demand for pathology services varies greatly from one day to the next and from one week to the next. This variation is related more to the type than to the amount of service.
3. Laboratories in different communities and in different hospitals have strikingly different workloads and patterns.
4. Individual pathologists have varying productivity capabilities.
5. Individual pathologists have different areas of professional expertise. This is related to subspecialization.
The College will continue this effort to develop appropriate criteria for pathologist's performance and criteria for determining a pathologist's reimbursement based on his performance.
Another active College effort is the study of local, regional, and state review mechanisms that can be used to resolve disputes, complaints, and problems relative to pathologists and pathologists' compensation. We know that these problems exist. However, because some problems have considerable community importance and may be sensitive in nature, the College believes that voluntary mechanisms should be established if they do not presently exist and where they do exist, be strengthened when necessary.
Essentially, we are talking about a "counseling service". The principal features of this service would be: (1) availability to any person or organization legitimately concerned about conflict in a hospital-pathologist relationship; (2) voluntary participation by the involved parties; (3) credibility; and (4) multiple mechanisms to choose from which would function at either the local, state, or regional level.
The College is developing materials and guidelines for use in these counseling and dispute-resolving activities.
It is hoped that cooperation can be developed between the College and other appropriate organizations which will help in effective implementation. This might include boards of trustees of hospitals, joint conference committees of medical staffs, county and state medical societies, medical specialty societies, local, regional, state hospital associations, and appropriate government agencies.
Mr. Chairman, in our testimony presented to this committee on S. 3205 in July of 1976 we went into a lengthy discussion on the need for multiple contractual options being available to the hospital-associated pathologist.
The testimony we offered was interpreted in some circlies as being a defense for the percentage contract as the best mechanism for the reimbursement of hospital-associated pathologists' services.
I would like to clarify the record. The College was not defending the percentage contract as a reimbursement mechanism to all superior others. We were supporting the concept that a hospital and a physician should have available to them multiple options for payment related to the delivery of pathology services. In our opinion, S. 3205 did not offer acceptable alternatives.
Mr. Chairman, the College in its Contractual Relationships Manual has attempted to offer pathologists guidance as to the advantages and disadvantages of different contracts without mandating any particular arrangement. In this manual the percentage contract is offered as an alternative to an item-by-item billing mechanism. The language of the manual recommends that the percentage be related to a specific fee schedule as a deterrent to excessive increases in the pathologist's income due to inflation alone.
The manual further cautions that in an inflationary period laboratory charges may increase and that in this situation the pathologist's income will increase out of proportion to time and effort dedicated to patient services.
I offer these comments only to illustrate the long-time recognition by the College of the problems inherent in a percentage agreement and our effort to point out these problems to pathologists.
It is our opinion that S. 1470 does offer an equitable alternative to percentage contracts to be utilized by those pathologists and hospitals who wish to avail themselves of the option contained in Section 15.
Mr. Chairman, I would now like to address specific sections of the bill.
Section 12-Hospital-Associated Physicians
Mr. Chairman, the College has carefully reviewed this section of the bill. This review has been conducted in an effort to find an equitable alternative to the present language in
Subsection (a) (1)—Definition of physician services;
Subsection (b) (1)—Amendments to Section 1861 (s) of the present law; Subsection (b) (2)-Amendments to Section 1842 (b) (3A) of the present law; and
Subsection (c)-Amendments to Section 1861 (v) of the present law. When the subsections of Section 12 are viewed collectively, they would appear to restrict and limit reimbursement options available to hospital-associated pathologists. When studied individually and related to the Relative Value Schedule section of the bill (Section 15) we believe that these overly restrictive provisions can be appropriately modified.
Mr. Chairman, we will discuss these subsections in the order in which they appear in the bill.
Subsection (a) (1)—redefinition of physician services
Mr. Chairman, the language of this subsection has been carefully studied by the College members. This review was aimed at determining how this redefinition might affect the administration of the act and how it would affect the quality of services provided to patients.
The College is of the opinion that the redefinition as it appears in subsection (a) (1) would seriously impair the administration of the act. Defining the term "personally performed by or personally directed" would inevitably lead to a complex maze of regulations. For example, we wonder how these regulations would define "personally directed" in an equitable fashion assuring optimal patient care. We also believe that inevitably, complex regulations would result in so much red tape as to impair the quality of physician's services provided to patients.
Mr. Chairman, we would urge that this redefinition of physicians' services be deleted and that the current definition as contained in 1861 (q) of the Social Security Act be retained.
Subsection (a) (2)—“(3) pathology services"
Much of the testimony which we presented last year on S. 3205 and which is a part of those hearings, described what a pathologist is and what he does. We will not repeat this in detail today. However, a brief summary of those views appears appropriate.
Pathology is that specialty in the practice of medicine that deals with the causes and consequences of disease and with the diagnosis, treatment, and prognosis of patients, using primarily laboratory methods from the biological, chemical, and physicial sciences.
As the basic science most closely related to clinical medicine, the clinical discipline closest to basic science, pathology is often called the bridge between basic sciences and clinical medicine. It links the basic sciences of anatomy, biochemistry, genetics, microbiology, physiology, and pharmacology with such clinical disiplines as internal medicine, surgery, obstetrics and gynecology, and pediatrics.
The day-to-day functions of a physician/pathologist are broad and varied: 1. Patient care providing laboratory data and clinical pathological consultation essential for the assessment, diagnosis, and treatment and management of disease.
2. Education-teaching of new generations of medical students, future pathologists, other physicians, nurses, technologists, and other allied health personnel.
3. Research-expanding man's basic knowledge about the nature of disease and the possibilities of applying this knowledge to prevention and cure.
As these functions are normally provided concurrently during the pathologist's daily practice, they are usually inseparable.
Because pathology is a large and complex field, its practice is usually subclassifled by the following two major categories:
Anatomic pathology, which deals with the gross and microscopic structural changes caused in tissues by disease; and
Clinical pathology, which is concerned with the functional changes produced by disease as reflected in blood, urine, other body fluids, and tissue.
The close interrelationships between these areas consolidate the specialty in practice.
Mr. Chiarman, we are pleased with the changes in subsection (a)(2) which recognize the performance of autopsies and the supervision, direction, and quality control of the clinical laboratory as professional services.
There is actual medical judgment and the potential for medical judgment in every pathology service.
For example, the autopsy is medically indispensible. It is the ultimate quality assurance in the practice of medicine. It is an important monitor of the effects of treatment. It must not be classified as nonmedical, and it must be fairly compensated under any reimbursement program. The autopsy presents an excellent mechanism for evaluating the reliability, appropriateness, and benefit of the many clinical pathology tests which have been performed. Peer review, infection control, death review, utilization review, medical audit—none can be performed effectively without autopsies performed by pathologists.
Further, the classification of supervision and quality control as being "customarily performed by nonphysician personnel" recognizes only a small part (the manual-technical portion) of the responsibilities often performed personally by technical personnel without recognizing that the policy and procedure setting, standardization, evaluation, and action initiation must be the medical responsibility of the pathologist director of the laboratory. This is especially critical for the hospital laboratory.
In order that the definition of pathology services as contained in this section better reflect the fact that there is a physician's component in every clinical laboratory service, we would urge the following amendment:
Strike the present language contained in Section 12 (a)(2), “(3), Pathology services" and insert the following:
(3) Pathology services shall be considered physicians' services where the physician performs acts or makes decisions with respect to a patient's diagnosis or treatment which require the exercise of medical judgment. Exercise of this medical judgment includes operating room and clinical consultations, the interpretation of the significance of examination of any material or data derived from a human being, the aspiration or removal of marrow or other materials, the administration of test materials or isotopes, the performance of autopsies, and services performed in carrying out medical responsibilities for supervision, quality control, and the other aspects of a clinical laboratory's operations."
It is our understanding however, that although these are physician's services, some of them would not be reimbursable as physician's services under Part B of Medicare. We do not believe that elimination of these services as Part B items is appropriate. They should be recognized as physician's services under Part B in the same way as other physician's services.
Subsection (b) (1)
Another method of compensation which the College supports in a variety of circumstances is a lease-type arrangement. Certain lease arrangements are the most effective means of providing laboratory services to numerous hospitals in this country. In our view, subsection (b)(1) of Section 12 recognizes the problems that some hospitals have in obtaining badly needed services. We believe this subsection allows for the lease-type arrangement which the College supports. For the benefit of those who may not understand the need for this type of arrangement, the following points may be of help:
1. Regionalization.-Lease contracts enhance the opportunity to reduce costs and charges by regionalization of specialized pathology services within groups of institutions and/or pathologists, thereby facilitating cost accounting and minimizing economic barriers which might exist. Cost containment through sharing of capital expenditures, such as large Autoanalyzers, computers, and other sophisticated equipment, may be easily and appropriately implemented thereby reducing the need for a large number of this expensive equipment often costing hundreds of thousands of dollars.
2. Small institutions.-Lease arrangements, especially when facilitated by regional cooperative agreements, will accommodate the needs for provision of services to small hospitals. A significant percentage of the seven thousand acute care hopitals in the United States have fewer than one hundred beds. These are in desperate need of clinical pathology consultation and specialized services which can be provided in many instances most appropriately and economically on a lease-based, fee-for-service arrangement. Development of transportation,
communication, and courier mechanisms can bring the patients in small hospitals comprehensive pathology services of high quality.
3. Fee-for-Service.-This system provides a mechanism for compensation of the pathologist on the basis of a fee-for-service and clearly identifies that fee to the patient as a fee for the total clinical pathology laboratory service provided. The pathologist is clearly identified to the public and must justify this fee to third party payors including government fiscal intermediaries.
4. Clerical and Billing Costs.-These costs can be minimized if the volume of the clinical pathology laboratory develops to a significant degree. This is often facilitated by cooperative regional arrangements combining laboratory facilities and services on a shared or cooperative basis among several institutions, some of which may be small. With appropriate medical managerial skills, an additional opportunity is offered to develop cost-saving mechanisms within the administrative section of the laboratory, for the patient's benefit. The day of the pathologist without these managerial skills is over because of the number and variety of skills necessary to render prompt and efficient service 24 hours per day.
5. Taxes.-The entire pathology department is maintained on local, state, and federal tax rolls. The amount varies but does contribute to the local tax rolls. The amount varies but does contribute to the local economy by paying appropriate sales and/or property taxes as do other independent practitioners of medicine.
6. Hospital Control.-It is often stated that hospitals lack appropriate controls under lease arrangements. This does not actually occur in practice. Pathologists are physicians on the medical staff with specified privileges, responsibilities, and duties. Quality and quantity of the medical services provided are under constant internal surveillance. In addition, the administration, board of trustees, and staff physicians can all act as "patient advocates". This is not a myth; it operates as a fact. In addition, a review with the patient, doctor, or hospital is promptly set in motion if the patient feels that the pathology fees are inappropriate for the services provided. Personnel policies and procedures can and should be made compatible with those of the hospital. Finally, contractual arrangements can be varied as appropriate locally to provide for adequate control without interfering with professional judgment.
These points touch upon the many advantages of a lease arrangement. It would appear appropriate for the Secretary to approve lease type arrangements under circumstances where a lease promotes regionalization of certain services; facilitates the availability of a wide variety of medical and nonmedical professional personnel; assists a hospital in maintaining the total fees for clinical pathology laboratory services well within the guidelines established for a region; or facilitates provision of services in locations and settings for which such services are not available or would not be available under alternative methods of arrangement and/or compensation. In addition, provisions should be included for continuation of presently existing lease arrangements which have been deemed acceptable by local medical staffs, boards of trustees, intermediaries and carriers, and others and would thereby be deemed "ordinarily" acceptable under the general guidelines. It would seem inappropriate for the Secretary of DHEW to become involved in receiving requests for permission to provide pathology laboratory services under a lease arrangement and act on such requests on an individual basis. The arrangements are best and most appropriately made locally. Many areas of local professional and fiscal review presently exist to ensure the appropriateness of such arrangements.
The College fully offers its assistance to this committee and the Secretary in the development of guidelines, if required, for the appropriate application of the lease-type arrangement.
Subsection (d) (1)
In subsection (d)(1) of Section 12, it appears that the established procedure for reimbursing inpatient pathology services at the 100% payment level is being restricted to those physicians who accept assignment. We must oppose this restriction for the same reasons that prompted the Congress to amend the Medicare law in 1967 so as to clearly provide for 100% reimbursement for pathology and radiology services to hospital inpatients, provided by physicians specializing in pathology and radiology. (See Senate Finance Committee report #744, 1967). The problem is presently dramatized in those areas where fiscal intermediaries have arbitrarily reintroduced 80% reimbursement limits for clinical pathology
laboratory services provided to hospital inpatients by referral to an off-premises reference laboratory while continuing 100% reimbursement for work performed in the hospital's own laboratory. If the Committee so desires, we will provide details on this situation.
This arbitrary interpretation of Medicare regulations is especially discriminatory against patients in small hospitals. We urge that this practice be eliminated.
Mr. Chairman, we recommend the removal of subsection (d) (1).
Section 15-Use of approved relative value schedule
Mr. Chairman, in your speech before our group in Miami in March of this year, you said:
"One approach that I am actively pursuing is the use of relative value scales. I am aware of the activities of both the Department of Justice and the Federal Trade Commission in questioning the use of relative value scales. Nonetheless, such scales have been employed for years as a means of determining relative effort and time required in undertaking one service as compared with another. To my mind, the issue is whether the relative values attached to the different services are reasonable-and not whether we should have relative value scales. I have therefore, instructed our staff to work on a suitable amendment for inclusion in my bill specifically sanctioning, in law, properly-established relative scales. I would welcome the suggestions and comments of the College of American Pathologists in this work.”
We wholeheartedly support this statement and offer our assistance in developing such a system of properly established relative value schedules for clinical pathology laboratory services.
The College strongly supports the inclusion of Section 15 in S. 1470. The College has long been involved in the development of nomenclature for use in the clinical pathology laboratory. With the ever-increasing advancement and complexities in the provision of quality laboratory services, the need for a systematized, standard nomenclature increases. The College has taken the lead in developing such a system for the laboratory with the development of a Systematized Nomenclature for Pathology, (SNOP). This system has been in use since 1965. The success of SNOP has led to the on-going development of a Systematized Nomenclature of Medicine, (SNOMed). We will be pleased to offer our assistance to the Secretary in the development of procedural terminology for pathology.
The College long ago recognized the value of appropriate use of relative value schedules. As far back as 1961, the College developed a relative value schedule for pathologists' services and updated this schedule several times. Its use by the College was terminated by a consent decree signed by the College with the U.S. Department of Justice.
The College welcomes the inclusion of relative value schedules as a basis for establishing a method of reimbursement for physicians. Further, Mr. Chairman, the College maintains that such relative value schedules must contain a physician's component in every clinical pathology laboratory procedure.
A proper and equitable relative value schedule should recognize the following structure:
Three sets of variables are involved: (1) relative value schedule, (2) the physician's component of the relative value schedule and (3) the conversion factor (to convert to dollars).
The first variable, the relative value assigned to each item of clinical pathology laboratory service, should reflect the average total effort and expense required to develop the data and prepare a report appropriate for that service. Cost of supplies and equipment and of professional, technical, and support effort, all affect the relative value. If a given procedure becomes more complex, the relative value would necessarily rise, and, on the other hand, if it becomes simpler and less expensive, the relative value would decline.
The second variable, physician's component, is a specified part of the relative value of every item of clinical pathology laboratory service. The physician's component is not a uniform, "across-the-board" fraction but is determined separately for each item. Thus, it is not a disguised percentage arrangement. Items having a high physician's component often have a relatively low technical component. Items with a high physician's component almost invariably require more professional observation and interpretation by the pathologist. Conversely, items with a low physician's component require less professional observation and interpretation. Whatever the physician's component, it must include the pathologist's