2012 CCLA Annual Conference Washington Update The Westgate Hotel San Diego, CA November 8, 2012 Dennis Weissman, President Dennis Weissman & Associates, LLC and Founder & Executive Editor, G2 Intelligence

Presentation Outline Analyze the 2012 election results and the impact on heath care policy and laboratory & pathology interests Discuss What’s At Stake for Labs and Pathologists In the Lame Duck Congress Project Medicare payment rates for labs and pathologists in 2013 Assess key policy issues for labs and pathologists in the year ahead

2012 Projected Presidential Results ELECTORAL VOTES POPULAR VOTE (%) BARACK OBAMA 303 leading 29 (FL) 50% MITT ROMNEY 206 48% THIRD-PARTY CANDIDATES 2% TOTALS 535 100%

Current Congressional Lineup 112th Congress, 2nd Session HOUSE SENATE DEMOCRATS 190 51 REPUBLICANS 240 47 INDEPENDENTS 2 VACANCIES 5

Projected 2013 Congressional Lineup 113th Congress, 1st Session HOUSE SENATE DEMOCRATS 195 (+5) 53 (+2) REPUBLICANS 234 (-6) 45 (-2) INDEPENDENTS 2 TOO CLOSE TO CALL 6

Election Impact: Key Questions What It means for future prospects of Affordable Care Act -- is repeal still possible or off the table? Assess the most likely implications for Medicare – does it make payment reforms more probable in the near term? Discuss how labs & pathologists are affected – does it matter who’s in the White House? Examine the changing political dynamics – will it change what happens in the lame duck session?

Lame Duck Congress Post-election session must deal with so-called “fiscal-cliff” which takes effect in 2013 when scheduled tax increases and spending cuts would spell trouble for U.S. economy Set to expire are Bush tax cuts, temporary payroll tax cuts, ending of marriage penalty relief, contraction of Earned Income Credit, lower child tax credit, and $1.2 billion in automatic spending cuts over 10 years divided between domestic & military programs Federal debt limit must be raised early 2013

Medicare Implications Without congressional action, deficit outlook would improve but CBO says double-dip recession & 9% unemployment would result Sequester would result in a $11 billion cut in Medicare via a 2% payment cut for providers including clinical labs FDA budget would be reduced by $318M while NIH would face a whopping cut of $2.5B Separately, 2013 Medicare payments for physicians would be cut 26% without SGR fix

Congressional Outlook GOP would extend Bush tax cuts if Romney wins but if Obama prevails look for tax increase for wealthy Expect moves to postpone automatic cuts particularly in defense to allow time to enact comprehensive deficit reduction plan Look for trigger to require implementation of deficit reduction plan if Congress does not act within a specified period (i.e., six months) Further Medicare revamping on the table only as part of long-term spending & tax overhaul

Medicare Reimbursement 2013 Update 2013 payment for laboratory services to be reduced by estimated -4.65% in under the Part B Clinical Laboratory Fee Schedule 2013 proposed Medicare physician fee schedule would cut physician fees by 26.5% which is triggered by the SGR Congress virtually certain to delete automatic cuts similar to previous years CMS proposes pay 7% increase for primary care, family physicians

2013 Medicare CLFS Update CPI Update…..;;…………….......1.7% Productivity Adjustment………-0.6% 1.10% 1.75% cut thru 2016)………. -1.75%. -0.65% 2% Fee Schedule Rebasing… -2.0% -2.65% 2% Sequester cut………….…-2.0% 2013 CLFS CPI Update Estimate……-4.65

New MDx Pathology Codes 101 new molecular diagnostic codes were introduced this year by the AMA to replace the “stacking” codes currently used to bill Medicare for MDx tests New codes include 92 Tier I analyte-specific codes for high volume tests (CPT 81200-81383) and nine Tier II resource-level codes for low volume tests (CPT 81400-81408) Medicare decides to begin paying under the new codes starting Jan. 1, 2013

MDx Coding for 2013 CMS opts to use gap-filling method for MDx codes and decides they should be payable under the Part B Clinical Lab Fee Schedule according to a final rule published Nov. 1 Agency claims that molecular pathology codes do not ordinarily require physician interpretation to produce a meaningful result However, CMS has created a temporary code in 2013 – G0452 – to describe a medically necessary physician interpretation and written report for molecular pathology tests

Major Cut for CPT 88305 In final Physician Fee Schedule rule, CMS cuts the technical component of the most frequently billed pathology code – CPT 88305 -- by 52% starting Jan. 1, 2013 Though the professional component is raised by 2%, the total Medicare reduction for the surgical pathology 88305 code will be 33% Overall, the cut represents a big financial blow to pathology groups, particularly since many private plans will reduce their fees too since they pay off the Medicare rate

Palmetto Update CMS announces that Nordian Administrative Services has been named the new Medicare Administrative Contractor for Medicare Part A and B in Jurisdiction E which includes California, Nevada & Hawaii , replacing Palmetto, GBA Palmetto has appealed the CMS decision and the earliest an administrative decision would be announced is either the first or second quarter of 2013

Federal Policy Briefs PT Referral: Legislation giving CMS leeway in enforcing sanctions on labs for violating proficiency testing referral rules passed the House (H.R. 6118) on Sept. 19 and has advanced in the Senate when the Health, Education, Labor and Pensions Committee reported out S.3391, for floor consideration ICD-10: CMS announces a one-year delay in the compliance deadline for use of the ICD 10th Revision, diagnosis and procedure code sets from Oct. 1, 2013 until Oct. 1, 2014