This is a synopsis of a 2,120-word article in the July 1, 2019 issue of THE DARK REPORT (TDR). The full articles are available to members of The Dark Intelligence Group.

CEO SUMMARY: Anthem is making big changes to its relationships with anatomic pathology (AP) groups. Getting most of the attention at the moment are the insurer’s letters announcing price cuts for anatomic pathology CPT codes of 50% to 70% of Medicare fees. But another major change may also trigger negative consequences for pathologists. Anthem is moving pathology contracts out of its professional services unit and over to its ancillary services unit, which typically contracts with clinical labs.

IN RECENT WEEKS, anatomic pathology groups in a growing number of states received notices from Anthem, one of the nation’s largest insurers with 40.5 million beneficiaries, announcing major changes in the way Anthem contracts for anatomic pathology (AP) services.

Anthem’s first change is to cut the prices it pays for most anatomic pathology CPT codes 50% to 70% of 2018 Medicare fees. These fee cuts will get the most attention from pathology groups and their practice advisors.

But it is the other substantial change that Anthem is pushing on pathology groups that has the potential for serious negative consequences over the long term. That change is to move the contracts it has with pathology groups from the Anthem’s professional services division to its ancillary services division.

Effectively, Anthem will now treat physicians who are board-certified in pathology in the same way that it treats clinical laboratories and other ancillary providers. This change has interesting consequences, one of which is how pathologists will be accredited with the health insurer going forward.

Anthem’s latest effort to cut what it pays for anatomic pathology CPT codes started last fall. In November 2018, Anthem made significant cuts in payment rates for the professional component (PC) of lab services in Missouri, according to Vachette Pathology, a consulting firm in Sylvania, Ohio. At the time, Anthem slashed what it pays for the PC portion of certain tests in the 80000 series of CPT costs by as much as 70%, Vachette said.

Reporting on Anthem’s rate cuts to various anatomic pathology services, APS Medical Billing, in Toledo, Ohio, said in a letter to its clients that the rate changes Anthem was making vary widely by state and affect both the professional component and the technical component.

Last month, the American Academy of Dermatology Association (AADA) sent a letter to Anthem, expressing serious objections to the pathology CPT code reimbursement cuts. Writing on behalf of the more than 14,000 association members, AADA President George Hruza, MD, MBA, said the cuts will result in reductions in Anthem’s payment for lab services of 50% to 70%. Hruza based this estimate on a notice of a change in a contract that dermatopathologists in Ohio received on April 17, 2019.

“It is the AADA’s understanding that this material change in contract will reduce reimbursement for most office-based pathology lab services to 50% of 2018 Medicare rates, with 86 pathology tests being reduced to 70% of 2018 Medicare rates,” Hruza wrote. “In addition to the announced contract modification in Ohio, it is understood that similar reductions in dermatopathology reimbursement may be implemented in other Anthem states.”

Is this a Rate Realignment?

In correspondence with Anthem, pathologists have learned that the insurer calls the payment cuts it is making to AP services, a “rate realignment.”

Anthem said it wants its payments to be site-neutral—meaning payment will be the same regardless of whether the service is delivered in a hospital-based lab or an independent lab. The insurer’s aim is “to align compensation for lab rates in all settings so that its members would pay the same in out-of-pocket costs regardless of the site of service,” pathologists said.

“These steep cuts in the professional component for pathology services are a significant concern because they are unsustainable regardless of whether they affect hospital-based services or independent-lab services,” commented Vachette’s Vice President of Client Services Ann Lambrix.

“As the second-largest health insurance company with 40.5 million beneficiaries, Anthem had previously been among the best-paying insurers,” added Lambrix.

“Hospital-based labs may struggle more because hospital labs typically serve patients who are seriously ill and often have multiple conditions,” she explained. “That is why testing for hospital patients is more complex and comes with higher costs. Payers recognize that fact and have generally reimbursed hospital labs at higher rates for that reason.”

However, Anthem’s deep price cuts ignore this reality. It is why THE DARK REPORT believes that a growing number of pathology groups are sending termination notices to Anthem. These groups recognize that Anthem’s price cuts—coming on top of Medicare price cuts—will erode the financial stability required for groups to sustain accurate, high-quality services.

Details of Anthem’s Pathology CPT Code Reimbursement Price Cuts by State

After introducing the lower pathology CPT code rates for the professional component in Missouri last fall, Anthem next introduced lower prices on Jan. 1, 2019, in Alaska and Washington. Based on letters sent to its pathology group clients, Vachette said Anthem is scheduled to cut AP rates as follows:

July 1: California, Georgia, and Indiana.

California, Georgia, and Indiana. July 10: Ohio.

Ohio. Aug. 1: Wisconsin.

Wisconsin. Sept. 1: Kentucky, Virginia and West Virginia.

Kentucky, Virginia and West Virginia. Jan. 1, 2020: New York.

New York. No date yet: New Hampshire.

“Providers in Kentucky, Colorado, Connecticut, Maine, and Nevada are expected to experience similar cuts in the near future,” Lambrix added.

In a note on its website, Vachette explained that many of the new rates reflect a roughly 70% drop from previously-negotiated reimbursements for many groups and are a significant reduction from 2019 Medicare rates published in the Physician Fee Schedule and Clinical Laboratory Fee Schedule.

Anthem CPT Code Cost Plans in Ohio

In the same note, Vachette quoted from a letter Anthem sent to pathologists in Ohio. “The 80000 to 89999 pathology CPT codes are involved, although certain in-office testing will be exempt from these changes,” the letter said. “Rates for 0362T and 0373T will be reduced to be consistent with the recent changes to those code definitions that reduce the time per unit from 30 minutes to 15 minutes. The rate for 97153 will be reduced to reflect an update to the manner in which adaptive behavior services may be billed.”

The new rates will differ from one state to another. “For example, in Kentucky 88300 to 88309 will not be impacted, possibly as a concession to those [pathologists] who have already pushed back against these changes in other states,” Vachette said.

Pathology groups that disagree with these changes must send a Notice of Objection within 10 days of receiving Anthem’s notice, Lambrix said. This short time to object is a source of contention.

APS Medical Billing encouraged its clients to object to the rate changes each time a lab or group gets a notice. “In many cases, groups have objected and sent notice of termination for the impacted plans,” the biller said.

Lambrix agreed, saying some groups have said they will end their contracts rather than take drastic cuts in payment that do not cover their costs. She could not estimate how many labs and pathology groups would end their Anthem contracts.

Payment Cuts of 70%

“As a result of the changes, Anthem is instituting a decrease in payment of about 70% in the most extreme instances,” she added. “At that point, I called Anthem and said, ‘These numbers must be wrong,’ but I was told they were correct,” Lambrix explained. “At the same time, I was told that a lot of pathologists in Missouri had called to complain and that Anthem was reconsidering.

“One pathology group we work with in Ohio had a reduction from Anthem of roughly 42% of Medicare on all pathology CPT codes in the 80000 series except for 88305, which got a $7 increase,” she explained.

In Missouri, pathologists were not much concerned when Anthem announced that new lower rates were coming, Lambrix said. “In November, the letters from Anthem indicated there would be changes to the fee schedule in Missouri,” she explained. “But the way the letters went out didn’t raise any alarms until the pathologists there started getting paid at the lower rates and noticed that the fee schedules had changed significantly.

“Previously, pathologists in Missouri had been getting paid about $66 for the PC under the old rates, but under the new rates, the fee schedule calls for paying less than $15 for the professional component,” she added. “That’s a $50 cut in payment— a 78% decrease—for the PC portion of CPT88305.”

Anthem Responds to Contract Questions

In response to a question from THE DARK REPORT, Anthem provided a brief statement describing what it refers to as “routinely analyze and rebalance professional fee schedules for medical services, including lab services.”

Contact Ann Lambrix at (517) 486-4262 or alambrix@vachettepathology.

How will your group respond to these reductions in payments for pathology CPT codes? Have you received a rate-change letter from Anthem? Please share your thoughts with us in the comments below.