1. cap.org v. 3 Association of Pathology Chairs Meeting West and Midwest Chairs and Administrators Regional Conference Jonathan L. Myles, MD, FACP Richard C. Friedberg, MD, FCAP Donald S. Karcher, MD, FCAP John Scott, Vice President, Policy and Advocacy October 21-24, 2014

2. Overview Current Fee Schedule Payment Reform on CLFS 2015 Proposed Rule Value Based Payment ACOs Bundling of Payment CAP Guidelines 2 © 2014 College of American Pathologists. All rights reserved.

3. Payment Sources for Medicare Patients DRG Physician Fee Schedule (PC and TC) Clinical Lab Fee Schedule (CLFS) APC 3 © 2014 College of American Pathologists. All rights reserved.

4. CPT Describes the Service MPAG (Molecular Pathology Advisory Group) PCC (Pathology Coding Caucus) CPT Editorial Panel CPT is HIPAA required code set for all payers, but CMS can require use of Medicare-only G codes on a case-by-case basis. 4 © 2014 College of American Pathologists. All rights reserved.

5. Valuation of Services AMA-RUC (Relative Value Update Committee) makes recommendations for codes on the PFS, resource based system. CLFS codes are valued by crosswalking or gapfill process. CMS makes final determination 5 © 2014 College of American Pathologists. All rights reserved.

6. Medicare Payment Schedule What are the proposed rule and final rule? 6 © 2014 College of American Pathologists. All rights reserved.

7. Protecting Access to Medicare Act of 2014 (PAMA) President signed PAMA into law on April 1, 2014 Delays 24% physician fee cuts until March 2015 Represents 17 th temporary “fix” to SGR physician pay formula Ends hope of permanent repeal of SGR in 2014 Bipartisan, bicameral repeal proposal would have addressed pathologists’ challenges in current CMS pay-for-performance systems 7 © 2014 College of American Pathologists. All rights reserved.

8. PAMA a “Mixed Bag” for Laboratory Medicine PAMA temporarily delays the 24% SGR cut, which affects all physicians But expands the Misvalued Codes Initiative, will likely target more pathology services Significant changes to Clinical Laboratory Fee Schedule (CLFS) used as “pay-for” CLFS changes will have significant (unknown) impact on laboratories But may mitigate some challenges with payments for molecular pathology services 8 © 2014 College of American Pathologists. All rights reserved.

9. Expands Misvalued Code Initiatives Further expands CMS’ misvalued code authority starting in 2017 Threatens pathology by targeting: o Codes billed in multiple units o Codes with low RVUs billed together o Codes with payment differences across sites of service 9 © 2014 College of American Pathologists. All rights reserved.

10. Context for CLFS Reform CLFS payments based on 1984 prices, updated (rarely) for inflation 2013 OIG study: Medicare paid 18-30 % more than private payers for 20 high-volume laboratory tests 2014 Final Rule outlined CMS plan to re-value 1,200 laboratory tests paid on CLFS Payment revisions based on “technological changes” were to start January 2015, continue for five years 10 © 2014 College of American Pathologists. All rights reserved.

11. Payment Changes for Clinical Laboratory Tests PAMA stopped CMS plan for re-valuing CLFS New law limits clinical lab cuts to: o 10% for 2017-2019 o 15% for 2020-2022 Analysts estimate PAMA’s CLFS changes will save Medicare $2.5 billion over next decade. 11 © 2014 College of American Pathologists. All rights reserved.

12. Timeline for CLFS Reform Jan 1, 2016: “Applicable laboratories” must report data on private payer payment rates and test volumes Jan 1, 2017: New CLFS rates will apply; based on weighted median of private payment rates Proposed rule to be issued on the process by June 2015 12 © 2014 College of American Pathologists. All rights reserved.

13. “Applicable Laboratories” Required to Report Data All laboratories for whom CLFS or MPFS payments > 50% of Medicare revenue Hospital DRG, APC payments excluded Included: Physician practices, hospital outpatient as well as independent laboratories But reporting requirement refers only to CLFS tests, not payments for AP CMS has ability to set low-volume or low-spending thresholds Penalties of up to $10,000 per day for failure to report data; laboratory officer must certify 13 © 2014 College of American Pathologists. All rights reserved.

14. Advanced Diagnostic Laboratory Tests Law creates new “fast track” HCPCS codes “Advanced diagnostic laboratory tests” are sole- source tests that: o Analyze multiple biomarkers using unique algorithmic analysis or o Are cleared or approved by FDA or o May include other types (up to CMS) Tests will be paid market price from Jan to Sept, 2017 CMS will then determine rates based on lab’s annual reporting of private payer rates 14 © 2014 College of American Pathologists. All rights reserved.

15. PAMA Addresses Some Concerns About Molecular Pathology MACs are required to abide by the existing local coverage determination (LCD) process when issuing coverage decisions effective Jan 1, 2015 Expert Advisory Panel will consult with CMS on coverage, payment decisions CMS must explain methods for the payment rates it determines under the crosswalking and gapfilling methods Intended to address stakeholder concerns about transparency of gapfilling in 2013 15 © 2014 College of American Pathologists. All rights reserved.

16. PAMA CONCERNS Who reports? Ease of reporting and how can this be done given existing statute? What is a payment? Medicaid managed care payments Consolidation of MAC’s Expert Advisory Panel 16 © 2014 College of American Pathologists. All rights reserved.

17. 2015 Proposed Rule CMS plans to streamline process for making local coverage decisions (LCDs); end Carrier Advisory Committee (CAC) reviews of every LCD. 17 © 2014 College of American Pathologists. All rights reserved.

18. Proposed 2015 Medicare Physician Fee Schedule CMS’ proposed fee schedule estimates 1% increase in pay to pathologists (PC, TC, global) in 2015 based on PE cuts proposed for other specialties. Independent laboratories, a 3% increase However, CMS’ estimates will likely change in the final fee schedule. © 2014 College of American Pathologists. All rights reserved. 18

19. CMS Initiative to Revalue High-Volume Services Passage of the Affordable Care Act empowered CMS to review reimbursement for all high-volume physician services. Allows agency to redistribute funds to primary care Review of high-volume pathology codes flagged by CMS in 2011 continues in 2015 and beyond. 1,200 codes, many from other specialties, have been reviewed. © 2014 College of American Pathologists. All rights reserved. 19

20. 2015 Fee Schedule: Specific Pathology Services Prostate biopsy codes o If accepted, proposal effective January 1, 2015 o CMS proposes to use one G code (G0416) to report prostate biopsy services, regardless of number of specimens o Applies to all prostate biopsy specimens, including 1-9 o Other prostate G codes and 88305 would no longer be used to report prostate biopsies o CMS believes the service is misvalued o CMS seeks input on future payment levels © 2014 College of American Pathologists. All rights reserved. 20

21. 2015 Fee Schedule: Specific Pathology Services Link pathology payment rates to hospital rates o CAP persuaded CMS to withdraw the proposal in 2013, but the agency plans to bring it back. o PAMA expands legal authority to review payments across sites of service. o No 2015 payment changes based on site of service, but CMS did request more information. o CMS seeks comment on utilizing hospital cost data for valuing payment for physician services. © 2014 College of American Pathologists. All rights reserved. 21

22. 2015 Fee Schedule: Specific Pathology Services CAP continues its opposition to linking payments to hospital rates o CMS review could cause 2015 TC/global payment changes o CAP to CMS – hospital cost data unworkable for determining PFS pay rates © 2014 College of American Pathologists. All rights reserved. 22

23. 2015 Fee Schedule: Misvalued Codes Pathologists already have had global payment for 28 codes revalued. Practice expense for TC of 22 additional codes also reviewed for 2015. CMS added 80 codes to its misvalued list 1 pathology service o 88185, add-on code used to bill the TC of flow cytometry © 2014 College of American Pathologists. All rights reserved. 23

24. 2015 Fee Schedule: Transparency in Ratesetting CMS proposes to alter process for changing reimbursement for codes identified in the misvalued code initiative. o Proposal would increase transparency o CMS would only set physician rates after the public had an opportunity to comment. This would avoid situations like the process for the IHC G code policy in 2014. 2016 implementation of transparency proposal anticipated. © 2014 College of American Pathologists. All rights reserved. 24

25. CMS Initiative to Revalue High-Volume Services Immunohistochemisty o CMS created G codes for 2014 o CAP advocating for alternative to G codes o Await final rule © 2014 College of American Pathologists. All rights reserved. 25

26. CMS Initiative to Revalue High-Volume Services In Situ Hybridization Services o Action deferred on revaluation for 2014 payment rates o Payment changes anticipated for 2015 o CAP is engaged in NCCI coding edit relief © 2014 College of American Pathologists. All rights reserved. 26

27. 2015 Fee Schedule: PQRS CMS proposes accepting three new pathology measures developed by the CAP to the Physician Quality Reporting System (PQRS). o Lung cancer reporting (biopsy/cytology) o Lung cancer reporting (resections) o Melanoma reporting Increases number of pathology measures to eight CAP will provide education on reporting 2015 PQRS measures after the final rule is published. © 2014 College of American Pathologists. All rights reserved. 27

28. 2015 Fee Schedule: PQRS In 2014, PQRS reporting activity will determine which physicians receive a payment penalty in 2016. CMS proposes to take a similar approach in 2015 with PQRS reporting affecting 2017 payments. 2017 PQRS penalty = 2% o Penalty is based on 2015 PQRS activity Eligible physicians must report on nine measures, or on all that apply to their practices, to avoid the penalty. © 2014 College of American Pathologists. All rights reserved. 28

29. 2015 Fee Schedule: Value-Based Modifier Apply to all physicians in 2017 o However, modifier is based on 2015 performance Penalty increases to 4%; bonuses up to 4% or higher No negative adjustment to physicians in groups < 10 if they successfully report PQRS measures Groups with 10 or more eligible professionals subject to quality tiering. CAP has proposed an alternative methodology © 2014 College of American Pathologists. All rights reserved. 29

30. 2015 Fee Schedule: Value-Based Modifier CMS alluded to the CAP proposal in the fee schedule CMS is considering allowing hospital-based physicians to use the hospital value-based purchasing program in future years. o The hospital value-based purchasing program could be a component of the VBM calculation. CMS would propose any changes in future rulemaking. o How hospital performance would be included? © 2014 College of American Pathologists. All rights reserved. 30

31. 2015 Fee Schedule: 2017 PQRS and VBM Penalties -2% -4% -6% © 2014 College of American Pathologists. All rights reserved. 31 Failure to report PQRS in 2015 could mean a -6% payment adjustment in 2017 for eligible pathologists. Reporting PQRS measures stops the VBM and PQRS penalties

32. 2015 Proposed Rule CMS considers expanding processes of the MolDx program to making decisions on all clinical diagnostic laboratory tests. © 2014 College of American Pathologists. All rights reserved. 32

33. Continuing Challenges Integration into Value Based Payment System What will be the role of Fee for Service? ACOs Bundling 33 © 2014 College of American Pathologists. All rights reserved.

34. What can I do? Know what tests you perform and what fee schedule they are billed under. Be involved 34 © 2014 College of American Pathologists. All rights reserved.

35. Meeting Practice Challenges: Overview of CAP Initiatives CAP Guidelines Policy Roundtable ACO Network Engaging with Medicare Contractors and Private Insurers Blood Utilization © 2014 College of American Pathologists. All rights reserved. 35

36. Publications expected in Q1 2015 o CAP/NSH Uniform Labeling Requirements for Blocks and Slides in Surgical Pathology o CAP/ADASP Interpretive Diagnostic Error Reduction in Surgical Pathology and Cytopathology Open Comment Periods o CAP/ASH Algorithm for the Initial Work-up of Acute Leukemia (Q4 2014) o ASCP/CAP/AMP/ASCO Molecular Markers for the Evaluation of Colorectal Cancer (Q1 2015) CAP Guidelines – Coming Soon 36 © 2014 College of American Pathologists. All rights reserved.

37. Published by the CAP Pathology and Laboratory Quality Center Improve and standardize laboratory practices, leading to better patient outcomes Collaborate with other pathology and medical associations, such as ASCO, AMP, and ADASP Published seven guidelines with 11 in development Visit cap.org CAP Reference Resources and Publications > CAP Guidelines CAP Reference Resources and PublicationsCAP Guidelines CAP Evidence-Based Clinical Practice Guidelines © 2014 College of American Pathologists. All rights reserved.37 Pathologists can take the lead by implementing CAP guidelines at their institutions.

38. CAP Guidelines: Extending the Reach Received grant for $1.25MM from the CDC to improve guideline adoption Endorsed by ASCO: CAP/IASLC/AMP lung cancer biomarker guideline o Published in the Journal of Clinical Oncology (JCO) on Oct. 13, 2014 © 2014 College of American Pathologists. All rights reserved. 38

39. Policy Roundtable 3-to-5 Year Research Agenda Data Collection and Analysis Policy Research GME o Workforce Demand Paper © 2014 College of American Pathologists. All rights reserved. 39

40. PRT Survey Efforts © 2014 College of American Pathologists. All rights reserved. 40 Practice Characteristics Survey Pathologist Training Survey Practice Leaders Survey Economic and practice patterns of individual pathologists Assess how well training meets needs of new pathologists and their employers Economic and practice patterns of pathology practices

41. For each of 40 different pathology practice areas, respondents are asked to rank: How important is knowledge/skill in the practice area to performance in your current role? Considering your responsibilities in the area, how would you rate the amount of training you received in your residency training program? Pathologist Training Surveys Critically ImportantVery ImportantImportant Slightly importantUnimportantNA/No responsibilities Much more than practically useful Somewhat more than practically useful About Right Somewhat less than practically useful Much less than practically useful No Training 41 © 2014 College of American Pathologists. All rights reserved.

42. Practice Leader Survey Understand Practice Level data on Key issues Facing Pathologists Understand how those issues vary by o Type of setting o Type of practice o Practice Size o Other key variables Establish baseline for identifying trends over time © 2014 College of American Pathologists. All rights reserved. 42

43. Accountable Care Organizations Health care organizations that accept accountability for the... o Quality of care o Health of the population served o Per capita cost of care for a designated population Formed by combination of providers and/or hospitals 43

44. Accountable Care Organizations HMOs by another name? HMO ACO 1. Better quality care for individuals* ?? + 2. Improved health for the population* ? + 3. Lower costs* + + * HIT can now facilitate all three 44

45. Accountable Care Organizations Total Number of ACOs – 1/14 45

46. Accountable Care Organizations Structure of ACOs – 1/14 46

47. Accountable Care Organizations Total Covered Lives in ACOs – 1/14 47

48. Accountable Care Organizations % Covered Lives in ACOs by Hospital Region – 1/14 48

49. Accountable Care Organizations Different Models – 6/14 CMS Medicare Shared Savings Program (MSSP) ACOs……………………………..338 CMS CMMI Pioneer ACOs……..23 Medicaid ACOs……………………7 states Private sector ACOs…………...250+ Total 620+ 49

50. Pathologists and ACOs Challenges: Establish value-added roles in support of ACOs Gain recognition for these roles Get paid fairly for these roles © 2014 College of American Pathologists. All rights reserved. 50

51. Pathologists and ACOs From the 2014 CAP Practice Characteristics Survey: Number of pathologists currently participating or negotiating to participate in one or more ACOs o 20% (8% in 2011) Does your ACO provide you with distribution of shared savings and/or incentive payments? o Yes – 38% o No – 31% o Don’t know – 31% © 2014 College of American Pathologists. All rights reserved. 51

52. CAP’s ACO Network CAP launched the ACO Network over three years ago Serves as vehicle for bi- directional communication among pathologists in ACOs CAP ACO Network continues to grow Triple the size at launch New resources and tools being developed © 2014 College of American Pathologists. All rights reserved. 52

53. CAP’s ACO Network CAP Tools Available o Case studies o Best practice webinars o CAPconnect community Join the network by sending us an email o ACO@cap.org ACO@cap.org ACO Resource Center: www.cap.org/accountablecare © 2014 College of American Pathologists. All rights reserved. 53

54. Advocacy with Local Medicare Contractors and Private Payers Longstanding CAP advocacy work with local Medicare contractors and private payers regarding coverage decisions Palmetto Palmetto Removes Special Stains, IHC Article After Discussions With CMS United UnitedHealthcare Moves Ahead, But Delays Beacon Pilot Enforcement Date © 2014 College of American Pathologists. All rights reserved. 54

55. Test Utilization Utility and Cost-Effectiveness of H.pylori Immunostains vs Special Stains is currently in development and is among first of CAP’s Pathology Practice Guidances (PPG). Council on Scientific Affairs Working Group Exploring best practices & developing recommendations Created preliminary needs assessment survey © 2014 College of American Pathologists. All rights reserved. 55

56. Test Utilization © 2014 College of American Pathologists. All rights reserved. 56 Quality Practices Committee examining Current CAP member test utilization practices CAP collaborating with the Clinical Laboratory Standards Institute on joint publication

57. Laboratory-Developed Test (LDT) Oversight CAP principles for LDT oversight: o Assure quality laboratory testing for patients o Allow for innovation o Prevent undue administrative or regulatory burdens Principles captured in the CAP’s oversight proposal FDA proposed its oversight guidance on Sept 30 The CAP will continue to be engaged with the FDA during a four-month comment period © 2014 College of American Pathologists. All rights reserved.57

58. Laboratory-Developed Test (LDT) Oversight Similarities: Analytic, clinical validation o Addresses public health concerns FDA proposes three-tiered approach to oversight o Based on risk (low, moderate, high) CAP called for enforcement discretion for low-risk LDTs FDA oversight focuses on high-risk LDTs © 2014 College of American Pathologists. All rights reserved.

59. Laboratory-Developed Test (LDT) Oversight Differences: CAP proposed that moderate- and low-risk LDTs be regulated by CMS o FDA proposes it assumes all authority FDA definition of LDTs is narrower o Forces more tests to go through clearance FDA definition of high-risk is broader o Subjecting more tests to premarket approval © 2014 College of American Pathologists. All rights reserved.59