GAO Warns Of Increased Costs From Unbundling Panel Tests

GAO Warns Of Increased Costs From Unbundling Panel Tests

GAO Warns Of Increased Costs From Unbundling Panel Tests

 A new report from the U.S. Government Accountability Office (GAO) has zeroed in on the unbundling of common panel tests as a practice that could cause Medicare to overpay billions under PAMA’s new market-based CLFS.

The potential for overpayment stems from a loophole that enables labs to charge significantly more for common panel tests by billing for each component test individually (see LE, December 2017). Previously, Medicare had paid a lower bundled rate for routine panel tests such as Comprehensive Metabolic Panel (CPT 80053) and Lipid Panel (CPT 80061).

But starting January 1, 2018, PAMA limited CMS’s ability to automatically combine individual component tests into groups for bundled payment. Labs now have the ability to game the system for higher reimbursement by billing individually for tests in a panel. The GAO report has estimated that this practice could potentially increase Medicare expenditures by as much as $10.3 billion from 2018 through 2020.

The Department of Health and Human Services (HHS) commented that it is taking steps to address this issue. More specifically, HHS is developing an automated process to identify claims for panel tests that should receive bundled payments and anticipates implementing this change by the summer of 2019. In addition, HHS posted guidance on November 14, 2018, stating that for panel tests with billing codes, laboratories should submit claims using the corresponding code rather than the codes for the separate component tests beginning in 2019.

In addition, CMS says that it has been monitoring changes in panel test utilization, payment rates, and expenditures. CMS says that preliminary data indicates that Medicare payments for individual component tests of panel tests have, in fact, increased substantially in 2018.

UltraClinics Aims to Spread Telepathology

UltraClinics Aims to Spread Telepathology

UltraClinics Aims to Spread Telepathology

UltraClinics Inc. (Tucson, AZ) has begun marketing a telepathology service that will allow diagnostic imaging centers and outpatient surgery centers to offer their patients same-day anatomic pathology reports from on-site tissue biopsies, Ronald Weinstein, M.D., 67, chairman of UltraClinics, tells LE. UltraClinics is a for-profit spin-off company of the University of Arizona and its renowned telemedicine program.

Weinstein says the system is currently in use at two locations in Arizona. The University Physicians Tucson Breast Center is offering same-day pathology reports for breast cancer biopsies. And the University Physicians Hospital at Kino (Tucson) is offering the service for both breast and prostate cancer biopsies. Both sites have connected with University Physicians Healthcare for professional services. Weinstein says UltraClinics will add a dermatopathology service soon as well.

The service requires each outpatient site to invest roughly $200,000 to set up a rapid histology lab, microtome, digital slide scanner, and electronic medical record (EMR). The outpatient site prepares a patient biopsy slide, and then electronically transmits a high-resolution image of the entire slide to an off-site pathologist for professional interpretation. The pathologist transmits the lab report into the patient’s EMR. The whole process is usually completed within five hours versus more than two weeks for traditional anatomic pathology reports, according to Weinstein.

He says the service allows referring physicians to consult with their patients about the pathology results on the same day as the biopsy procedure. It also makes it easier to obtain a second opinion on the pathology report, he adds.

Weinstein, who is also head of pathology at the University of Arizona and co-founder of the digitalslide-scanning company DMetrix (Tucson), is hoping to install the UltraClinics’ system at more than 500 outpatient sites in the United States over the next five years. He views UltraClinics as a “turnkey solution” that can connect any pathologist with any hospital or outpatient clinic in the world.

In fact, Weinstein says that foreign-born pathologists on the faculty at the University of Arizona are already making plans to link with their American-boarded pathologist colleagues in India and Shanghai, China. “Telemedicine will enable international group practices to form,” he says. “You’ll have a conference where three world experts can look at the slide at the same time.” He says UltraClinics will leverage time zone differences so that women who have breast biopsies late in the afternoon will be able to receive their lab reports the same day. He expects this service to be available in the near future.

But what about the controversy that outsourcing pathology work overseas is sure to bring? “I believe every American should have access to sub-specialty pathology. It’s quality that we should be focused on,” answers Weinstein.

Weinstein believes the movement towards cosumer-driven healthcare will minimize third-party reimbursement issues. “As we move from insurance company referrals toward HSAs [health savings accounts] that let patients determine where their specimens go, fast test results and second opinions will bring people to UltraClinics,” he says.

Redwood Toxicology Sold For 3.3x Revenue

Redwood Toxicology Sold For 3.3x Revenue

Redwood Toxicology Sold For 3.3x Revenue

The investment firm American Capital Strategies (Bethesda, MD) has paid $79.5 million for a 67% stake in Redwood Toxicology Laboratory (Santa Rosa, CA). Redwood’s management team, including chief executive and founder Bob Mount, owns the remaining 33%. The deal, which closed on February 27, put a value on Redwood of $119 million ($79.5M ÷ 67%=$119M), an amount that is equal to 3.3 times Redwood’s revenue of $36 million in 2005.

Mount, age 62, tells LE that he sold because he is nearing retirement and the price was right. He says that he will continue to manage Redwood for a few more years. With the backing of American Capital, Redwood Toxicology will become more aggressive in its sales and marketing efforts, and is now looking for acquisitions, adds Mount.

Redwood has three divisions. Its drug screening lab tests more than 30,000 urine specimens per day, primarily for prisons, jails, and drug rehab centers; annual revenue is $23 million. Redwood Biotech sells point-of-care drug test kits and had revenue of $12 million last year. And Redwood’s PerMaxim unit sells rapid tests for pregnancy, strep, fecal occult blood, etc. and has annual revenue of $1 million. Altogether, Redwood has 173 employees.

Mount says overall revenue at Redwood grew by 24% in 2005. Its fast-growing unit was Redwood Biotech, which increased by more than 30%. Sales were driven by the company’s patented RediCup, which has a panel of drug tests integrated into the screw-on top of the specimen cup. The rapid test is activated simply by turning the cup upside down, thus eliminating the chance for test administrators to come in contact with the urine specimen. Average sales price is about $4.50 per cup.