—  SHORT COURSE #36  —

Management & Compliance for Large/Academic Pathology Practices

Part 1 - Introduction

Black-Schaffer & Johnson


Introduction [2, 3, 5, 7, 9, 10, 11, 12, 13, 14, 26, 28, 29, 30, 31, 32, 33, 34]
The leadership of a pathology practice has always been responsible for the equitable, efficient organization of their group. How has an increasingly competitive practice environment and an increasingly intrusive regulatory environment affected good management? It has put a premium on organization that encourages high diagnostic throughput without compromising the ancillary but very important practice of compliant billing. Since both diagnostic pathology and compliant billing are complex, sometimes even arcane professional activities, it is significant that management professionals consider that the only general way to increase efficiency in the provision of professional services is to decrease their variability. In all but the smallest pathology practices, a balance must be struck between the organizational simplicity of an absolutely homogeneous practice, in which each member shares proportionally in each practice activity, and the efficiencies of a more specialized allocation of responsibilities. For medium to large practices, both operational efficiency and efforts to assure compliance reasonably involve considerations of practice structure. To balance these choices requires an understanding of the benefits, both in ease of compliance and in enhancement of efficiency, of specialization, as well as of its complexities.

The practical essentials of managing an efficient pathology practice while encouraging compliance consist of recognizing the synergies of diagnostic services and billing operations. The extent of the activities necessary to accession, process, diagnose, report and bill specimens allows much opportunity to achieve efficiency as well as ensure compliance.



Whereas a clinical laboratory service has primarily an industrial model of efficiency, with the ratio of fixed to variable costs high and the incremental costs of additional business generally low, anatomic pathology operations essentially follow a professional services model. Operational efficiency in anatomic pathology, as in other areas of medical practice, relies primarily on decreasing variability to assure quality and increase throughput.

In structuring any part of a clinical operation for decreased variability, there is the need for the overall operation to accommodate the full range of necessary clinical services. Thus an early consideration is how specialized components of the operation can become without compromising service. At one extreme, a solo practitioner must be a jack of all trades, though the demands of accomplishing this may impair his or her ability to master of any of them. It is so natural to develop some degree of specialization in any practice with several practitioners that it would be exceptional to find a group of, say, three or four, in which there was not already at least a primary allocation of responsibilities among the clinical laboratory directorships, and with six or eight, it would be unusual not to have several pathologists quite clearly recognized as the "go to" individuals for hard cases in various subspecialty areas.

What are the factors that naturally limit this tendency, and what are the advantages that may make it worthwhile to pursue it further, even at the cost of increased complexity in management? The first impediment to subspecialization is also one of the most significant: the concern for equitable treatment of all members of the practice. This can clearly be served, to a first approximation at least, by having a rigorously symmetrical schedule, where each member of the staff has the same number of days or weeks on each service and off service for each of the reasons recognized by the practice. Even here there are difficulties, as some weeks are more valued for time off, and it is hard to be exactly equally accommodating to each member of the staff.

There are, even with this simplest model, at least two further complications, each of which is usually seen in relation to seniority: equity in compensation and balance in effort. The former is usually addressed in the time honored fashion by assuring the more junior, less well compensated, that their turn will come; the latter by (plausibly} asserting that the greater difficulty of the less experienced in accomplishing the same work is balanced by the greater responsibility of the more senior in supervising and consulting with their juniors.



What, then are the disadvantages of this reasonably simple, primal form of practice, and how do they relate to efficiency in management and ensuring compliance? Both in terms of the daily clinical events of the practice, and in the operational aspects of ensuring correct, consistent documentation of and billing for services provided, each practitioner is maximally called upon to know all about everything, and to handle it (diagnosis, documentation and billing} just the same way. We are all first and foremost physicians, and it is natural that our first impulse toward specialization should be motivated by our desire to maximize the diagnostic capabilities of our practices for our patients' benefit, but let us also consider the operational and compliance benefits of such specialization as well.

The opportunity [6, 13, 28, 31]
Group size among pathology practices has been gradually changing, with practices of five or more pathologists increasing relative to smaller groups. Such changes have long been seen as a reasonable response to predictable business pressures on practices, with the benefits of increased economies of scale and subspecialization being key predictors of success in a competitive environment.

Compliance [1, 4, 7, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 27, 35]


There are four main issues to consider in ensuring compliant business practice. Two of these relate to the provider-patient interaction, and can be considered under the rubric of coding the provider's service (CPT-4} and the patient's condition (ICD-9-CM}. The other two relate to the insurance circumstances of the patient and his or her benefit structure, and of the provider and his or her credential status.

There are several ways to conceptualize how to organize your practice for compliance, and two are very useful from a managerial perspective. The first can be represented by a graphical image of the requirements for compliant billing:

This shows that successful (and legitimate} payment is obtained when, and only when the circumstances of the patient's insurance coverage, the provider's credentials, the patient's medical condition, and the provider's professional services, happily conjoin to document a payable benefit! Fortunately this is not so rare as a cynical reading of the multitude of rules would suggest, but neither is it a foregone conclusion in all cases.



The other way to look at compliance activities is as a process. The steps of this process are those of a compliance plan, and, since October 5, 2000, even the smallest physician practice has been subject to a "guidance" from the Health and Human Services Office of Inspector General (HHS OIG} to develop and operate under a compliance plan. Similar "guidances" had been issued previously from time to time, but, prior to this guidance, had addressed the OIG's concerns with larger organizations. All these plans have been structured around seven elements:





As always, pathology practices find that they must step carefully to keep their balance, and not just the usual balance between good hospital citizenship and medical staff membership, but also now balancing the requirements of compliance among four relevant OIG "guidances:" those for physician practices, for hospital services, for third party billing entities and for laboratory service providers. Fortunately, the College of American Pathologists (CAP} has issued its own guidelines for pathology professional practices. The CAP guidelines represent a fair synthesis of the current state of compliance activities for pathology practices, and their listing of necessary written policies and procedures for a pathology practice is particularly helpful.

The OIG's "guidance" for physician practices acknowledges that, at least for small practices, it is not necessary to implement all seven elements of a compliance program, but the program can rather be tailored to fit the particular needs of the practice as determined by a structured and documented audit process.

What are the compliance needs of a physician practice most likely to be? [23, 35]

Coding and Billing: a major part of any physician practice's compliance program is the identification of risk areas associated with coding and billing. The CPT and ICD-9-CM codes reported on the health insurance claims form should be supported by documentation in the medical record and the medical chart should contain all necessary information. Additionally, [CMS] and the local carriers should be able to determine the person who provided the services. These issues can be the root of investigations of inappropriate or erroneous conduct, and have been identified by [CMS] and the OIG as a leading cause of improper payments. The following risk areas associated with billing have been among the most frequent subjects of investigations and audits by the OIG:
  • Billing for items or services not rendered or not provided as claimed;

  • Submitting claims for equipment, medical supplies and services that are not reasonable and necessary;

  • Billing for non-covered services as if covered;
    (Physician practices should remember that ''necessary'' does not always constitute ''covered'' and that this [billing for non-covered services] is a misrepresentation of services to the Federal health care programs.}

  • Double billing resulting in duplicate payment;
    (Double billing occurs when a physician bills for the same item or service more than once or another party billed the Federal health care program for an item or service also billed by the physician. Although duplicate billing can occur due to simple error, the knowing submission of duplicate claims, which is sometimes evidenced by systematic or repeated double billing, can create liability under criminal, civil, and/ or administrative law.}

  • Knowing misuse of provider identification numbers, which results in improper billing;
    (An example of this is when the practice bills for a service performed by Dr. B, who has not yet been issued a Medicare provider number, using Dr. A's Medicare provider number. Physician practices need to bill using the correct Medicare provider number, even if that means delaying billing until the physician receives his / her provider number.}

  • Unbundling (billing for each component of the service instead of billing by using an inclusive code};

  • Failure to properly use coding modifiers;

  • Clustering;
    (This is the practice of coding / charging one or two middle levels of service codes exclusively, under the philosophy that some will be higher, some lower, and the charges will average out over an extended period (in reality, this overcharges some patients while undercharging others}.}
    and

  • Upcoding the level of service provided.


Reasonable and Necessary Services: a practice's compliance program may provide guidance that claims are to be submitted only for services that the physician practice finds to be reasonable and necessary in the particular case. The OIG recognizes that physicians should be able to order any tests, including screening tests, they believe are appropriate for the treatment of their patients. However, a physician practice should be aware that Medicare will only pay for services that meet the Medicare definition of reasonable and necessary. An area of concern for physicians relating to determinations of reasonable and necessary services is the variation in local coverage determinations (LCDs} among carriers. Physicians are supposed to bill the Federal health care programs only for items and services that are reasonable and necessary. However, in order to determine whether an item or service is reasonable and necessary under Medicare guidelines, the physician must apply the appropriate LCD. In order to determine if an item or service is covered for Medicare, a physician practice must be knowledgeable of the LCDs applicable to its practice's jurisdiction. Medicare (and many insurance plans} may deny payment for a service that is not reasonable and necessary according to the Medicare reimbursement rules. Thus, when a physician provides services to a Medicare beneficiary, he or she should only bill those services that meet the Medicare standard of being reasonable and necessary for the diagnosis and treatment of a patient.

There are two circumstances in which correct coding may be particularly complicated. The first is when it is governed by a local coverage determination (LCD}. Most Medicare coverage determinations are local, and these generally relate an allowable range of ICD-9-CM codes to each CPT-4 code; together with their associated articles, they may also apply other requirements, such as frequency limits, age and sex criteria, &c. The significance of these determinations is not only that payment may be denied, but that billing for services disallowed under such determinations, if "knowing," or in "deliberate ignorance," or with "reckless disregard," may implicate the federal False Claims Act (31 U. S. C. 3729-3733}. This is one among the several compliance benefits of restricting the particular services usually affected by LCDs (for example, flow cytometry}, to pathologists whose specialty interest keeps them cognizant of the special circumstances which surround billing for these services.

The other circumstance in which correct coding may be particularly complicated is when it involves National Correct Coding Initiative (NCCI} edits. These are pairs of CPT codes for which there are rules that govern when they may appropriately be billed together. Some of these edits never allow a particular pair of codes to be billed together, while others permit the edit to be overridden by use of a CPT code modifier. This latter circumstance requires special attention to the guidelines for these edits, as the intent of each edit is specific to the code pair, and the mere fact that both services were performed in not sufficient justification to override the edit. Determining what the intent of the edit is, and whether therefore the circumstances justify an override of the edit, requires knowledge of the NCCI Policy Manual, which, together with the code edit pairs themselves, is updated quarterly and available online at: http://www.cms.hhs.gov/NationalCorrectCodInitEd/

Subspecialization [2, 3, 8, 9, 10, 11, 12, 13, 14, 26, 28, 29, 30, 31, 32, 33, 34]


Finally to address the efficiency aspects of subspecialization, the Massachusetts General Hospital (MGH} diagnostic pathology services have been fully subspecialized for more than ten years. What does this mean? It does not mean a particular combination or number of services. It does mean that there is no default (or "wastebasket"} service for any sort of specimen, and that each specimen is therefore first examined and diagnosed by a pathologist for whom that specimen represents either their major or one of usually at most two minor areas of particular interest. This obviously dramatically minimizes the routine need for intradepartmental consultations, without diminishing (indeed, while enhancing} the level of expert attention brought to bear in each case. It encourages consistency, both in diagnosis and in diagnostic phraseology, it facilitates (especially pertinent in a large and academic institution} communication and collaboration between pathologists and their correspondingly subspecialized clinical colleagues, and it makes the routine clinical work of the staff and trainees more conducive to academic development. Last but not least, it has proven able to enhance service throughput by more than 50%, which efficiency is quite necessary in times of diminishing unit reimbursement, if one does not wish to work for a perpetually diminishing income!

References:
  1. American Medical Association. Current Procedural Terminology (CPT™} 2006. Chicago, IL: AMA Press: 2005

  2. Black-Schaffer WS, Young RH, Harris NL. Subspecialization of surgical pathology at the Massachusetts General Hospital. Am J Clin Pathol 1996 Oct;106(4 Suppl 1}:S33-42

  3. Colgan TJ, Frable WJ. The cytopathologist: workload, regulations, and the forgotten professional. Diagn Cytopathol 1997 Nov;17(5}:313-4

  4. College of American Pathologists. Compliance Guidelines for Pathologists. Northfield, IL: CAP: Released December 1998; Reviewed August 31, 2005 [http://www.cap.org/apps/docs/pathology_practice/compliance_guidelines/compliance.html]

  5. College of American Pathologists. HIPAA Resources: Articles and Explanatory Documents [http://www.cap.org/apps/docs/hipaa/hipaa_articles.html]; HIPAA Resources: Performance Support Tools [http://www.cap.org/apps/docs/hipaa/hipaa_tools.html]

  6. College of American Pathologists. 2004 Practice Characteristics Survey Report. Northfield, IL: CAP: 2005

  7. College of American Pathologists. Professional Relations Manual, Twelfth Edition. Northfield, IL: CAP: 2003; Updated March 22, 2005 [http://www.cap.org/apps/docs/cap_press/prof_rel_manual/professional_12ed.pdf]

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  9. Freeborn DK. Satisfaction, commitment, and psychological well-being among HMO physicians. West J Med 2001 Jan;174(1}:13-8

  10. Furness PN. How much work do you do in a day? J Clin Pathol 1998 Sep;51(9}:642

  11. Green B, McDicken IW, Turnbull LS. Implications on laboratory workload of breast cancer screening. J Clin Pathol 1992 Jun;45(6}:521-3

  12. Griffiths DF. Workload measurement in histopathology. J Clin Pathol 1999 May;52(5}:398

  13. Haber SL. Kaiser Permanente. An insider's view of the practice of pathology in an HMO hospital-based multispecialty group. Arch Pathol Lab Med 1995 Jul;119(7}:646-9

  14. Johnson SJ, Wadehra V. KU activity. J Clin Pathol 1999 Jan;52(1}:78-9

  15. Medicare Carriers Manual, Department of Health & Human Services (DHHS}, Claims Process, Centers for Medicare & Medicaid Services (CMS}, Transmittal 1785, Date: JANUARY 17, 2003, CHANGE REQUEST 1820, SUBJECT: Section 4508.1, Coding for Non-Covered Services and Services Not Reasonable and Necessary.

  16. Medicare Program Final Rule, Department of Health and Human Services (DHHS}, Centers for Medicare & Medicaid Services (CMS}, 42 CFR Parts 400, 405, and 426 [CMS-3063-F], Date: OCTOBER 30, 2003, RIN 0938-AK60, SUBJECT: Review of National Coverage Determinations and Local Coverage Determinations. www.cms.hhs.gov/regulations/coverage/3063f-10-30-03.pdf

  17. Medicare Program Integrity, Department of Health and Human Services (DHHS}, Manual System Department, Centers for Medicare & Medicaid Services (CMS}, Transmittal 63, Date: JANUARY 23, 2004, CHANGE REQUEST 3010, SUBJECT: Benefit Improvement Protection Act (BIPA}, Pub. 100-08 Medicare. www.cms.hhs.gov/manuals/pm_trans/R63PI.pdf

  18. Medicare Program Memorandum, Department of Health and Human Services (DHHS}, Carriers, Centers for Medicare & Medicaid Services (CMS}, Transmittal B-01-61, Date: SEPTEMBER 26, 2001, CHANGE REQUEST 1724, SUBJECT: ICD-9-CM Coding for Diagnostic Tests.

  19. Medicare Program Memorandum, Department of Health and Human Services (DHHS}, Intermediaries, HEALTH CARE FINANCING ADMINISTRATION (HCFA}, Transmittal A-00-43, Date: JULY 27, 2000, CHANGE REQUEST 1192, SUBJECT: Advance Beneficiary Notices (ABNs} for Services for Which Institutional Part B Claims Will be Processed by Fiscal Intermediaries.

  20. Medicare Program Memorandum, Department of Health and Human Services (DHHS}, Intermediaries/Carriers, HEALTH CARE FINANCING ADMINISTRATION (HCFA}, Transmittal AB-00-116, Date: NOVEMBER 24, 2000, CHANGE REQUEST 1021, SUBJECT: Local Medical Review Policy (LMRP} Development and Format.

  21. Medicare Program Memorandum, Department of Health and Human Services (DHHS}, Intermediaries/Carriers, HEALTH CARE FINANCING ADMINISTRATION (HCFA}, Transmittal AB-00-73, Date: AUGUST 11, 2000, CHANGE REQUEST 1309, SUBJECT: Proper Billing of Outpatient Pathology Services under the Outpatient Prospective Payment System (OPPS}.

  22. Office of Inspector General, HHS, 06/27/01 Special Advisory Bulletin: Practices of Business Consultants. http://oig.hhs.gov/fraud/fraudalerts.html

  23. Office of Inspector General, HHS, Publication of the OIG's Final Compliance Program Guidance for Individual and Small Group Physician Practices (65 FR 59434; October 5, 2000}. http://www.os.dhhs.gov/oig/oigreg/physician.htm

  24. Office of Inspector General, HHS, Publication of the OIG's Provider Self-Disclosure Protocol [Federal Register: October 30, 1998 (Volume 63, Number 210}] [Notices] [Page 58399-58403]. From the Federal Register Online via GPO Access [wais.access.gpo.gov]. [DOCID:fr30oc98-95]

  25. Office of Inspector General, HHS, Publication of the OIG's Special Fraud Alerts [Federal Register: December 19, 1994]. http://www.os.dhhs.gov/oig/frdalrt/121994.html

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  27. Practice Management Information Corporation. International Classification of Diseases, Ninth Revision, Clinical Modification, Sixth Edition, 2005. Los Angeles, CA: PMIC: 2004

  28. Sahney VK, Warden GL. The quest for quality and productivity in health services. Frontiers of Health Services Management. 1991;7(4}:2-40

  29. Suvarna SK, Kay MS. KU activity: a method for calculating histopathologists' workloads. J Clin Pathol 1998 Jul;51(7}:530-4

  30. Tomaszewski JE, Abraham S, Bell K, Mourelatos Z, Reynolds C, Seykora J, LiVolsi VA. The measurement of complexity in surgical pathology. Am J Clin Pathol 1996 Oct;106(4 Suppl 1}:S65-9

  31. Wilkes JD. Pathology group management. Dealing with growth. Arch Pathol Lab Med 1995 Jul;119(7}:635-9; discussion 639-41

  32. Winter S, Cox GJ, Corbridge R, Chaplin AJ, Millard PR, Shah KA. Effects of clinical service reorganisation on cellular pathology workload. J Clin Pathol 2004 Jan;57(1}:22-6

  33. Maung RTA. What is the best indicator to determine anatomic pathology workload? Canadian experience. Am J Clin Pathol 2005 Jan;123(1}:45-55

  34. Royal College of Pathologists. Guidelines on staffing and workload for histopathology and cytopathology departments (2nd edition}. London, England: The Royal College of Pathologists: June 2005 [http://www.rcpath.org/resources/pdf/GuideHistoCytoWorkload0605.pdf]

  35. Centers for Medicare and Medicaid Services, NCCI Policy Manual for Part B Medicare Carriers [http://www.cms.hhs.gov/NationalCorrectCodInitEd/]; Medicare Claims Processing Manual (Sec. 20.9} [http://www.cms.hhs.gov/manuals/downloads/clm104c23.pdf]; Modifier 59 Article: Proper Usage Regarding Distinct Procedural Service [http://www.cms.hhs.gov/NationalCorrectCodInitEd/Downloads/modifier59.pdf]