Physician office labs are under scrutiny

Physician office labs are under scrutiny

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This is the fifth article in a six-part series that focuses on areas where dermatology is vulnerable, and how members can take action to preserve the ability to practice the full scope of dermatology for the benefit of patients. Watch for the Adapt, Commit, Thrive (ACT) logo in the next issue of Member to Member to keep abreast of the critical issues facing the specialty in light of health system reform implementation. 

                Dr. Grant-Kels 
By Jane Grant-Kels, MD

It’s no secret that our use of dermatopathology is being scrutinized because utilization of pathology services — especially CPT 88305 —has skyrocketed.

As you know, the Government Accountability Office (GAO) published a report on July 15 stating that practices that bring dermatopathology in-house bill many more biopsies to Medicare than they did prior to bringing this service under one roof. The implication is that financial gain is a factor in overuse of office-based pathology services.

Although the AADA has expressed concerns about the methodology used to compile this report, there is no denying that Congress is considering restricting office-based pathology services as a way of controlling Medicare costs.

Client billing for financial gain is also placing dermatopathology at risk, and it threatens our ability to bill globally for pathology services. As we await the imminent release of the 2014 Medicare physician fee schedule, further devaluation of pathology codes is likely. Our very ability to practice dermatopathology may be threatened.

PIMA and the Stark law

Overuse of services has led to Congressional attempts to revise and amend the physician self-referral, or Stark law, through the removal of anatomic pathology from the law’s in-office ancillary services (IOAS) exception. These changes are being proposed via the Promoting Integrity in Medicare Act of 2013 (PIMA), which endangers our ability to provide dermatopathology services using our in-office labs.

If PIMA were to become law, the technical component (TC) of slide-preparation services in a physician’s office lab would be banned within Medicare because the ability to self-refer the biopsied specimen for slide processing would be prohibited.

Under this law, the only option for us would be to send specimens to a reference lab and either have the outside lab perform both the TC and professional component (PC), or just the TC, and we would be able to do the interpreting PC portion ourselves. The PC would still be protected under the physician services exception, which PIMA would leave intact. We would still be able to read and bill for our own slides for Medicare patients, because PIMA’s proposed gutting of the IOAS exception doesn’t affect slide interpretation.

A solo dermatologist would be able to provide his or her PC slide interpretation services for Medicare patients within the Stark physician services exception. In a dermatology group setting, the same would apply to the dermatopathologist, as either a group practice owner/partner, or employee/independent contractor, who would still be able to provide on-site PC services to his or her group practice. 

Dermatologists who meet the rural provider exception requirements under PIMA would be able to continue to provide the full range of self-referred dermatopathology services in their in-office labs.

Mohs surgery would likely be affected as well. Mohs services that require special stains or frozen sections (i.e., additional special dermatopathology work) would be prohibited because this type of service depends on slide prepping that no longer would be protected by the IOAS exception. However, standard Mohs (e.g., surgery, pathology, and repair), when billed using the Mohs codes (CPT 17311-17315), would not be affected because no pathology code (e.g., CPT 88305) is reported.

Unintended consequences

The bottom line is that the passage of PIMA would create unintended consequences that include constraining the ability of Mohs surgeons to provide full, timely, and appropriate care.

Although PIMA seeks to remedy concerns about self-referrals within specialty group practices and physician office labs that are driving utilization trends and cost increases in the Medicare program, it also carries potential threats to dermatology and dermatopathology. This includes creating clinical disruptions in the specialty, as well as compromising patient care.

This year, CMS began to address lowering Medicare spending through reforms to the physician fee schedule by reducing payment for anatomic pathology services, and we expect them to continue to target anatomic pathology services in the future. 

Solidarity or scrutiny?

As my colleagues have emphasized in previous articles in this series, we must have solidarity in our use of proper coding and utilization of health care resources. To ignore this call is to invite further scrutiny and regulation of the specialty. As you can see with the issues surrounding PIMA, these unintended consequences have the potential to not only change the way we practice, but compromise our ability to provide timely and quality patient care.

Dr. Jane M. Grant-Kels is founding chair of the Department of Dermatology at the University of Connecticut Health Center, as well as professor of dermatology, pathology, and pediatrics. She is director of the dermatology residency program, which she played a major role in creating in 2007, director of the dermatopathology laboratory, and director of both the Cutaneous Oncology Center and Melanoma Program. She is also assistant dean of Clinical Affairs. 

Email the Member to Member editor at members@aad.org.

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Dermatology trendsetters

Over the past several years, we have seen specialty practices form larger groups and begin to set up their own physician office labs, or both. This trend is being fueled by a combination of factors:

  • The confluence of a permissive regulatory environment that favors insourcing.
  • Economic opportunities that offset downward reimbursement pressures.
  • An increase in dermatology group practices.
  • Industry consultants who are advising and assisting with building in-office labs.

Dermatology has emerged as the leader in this trend. As an inadvertent result, we have seen a ballooning in the use of CPT 88305. These factors have fueled concerns about the propensity of physicians to self-refer patients that leads to overuse of certain services and drives up the cost of care.


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