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Dermatopathology sits in healthcare reform crosshairs


If dermatologists don’t more effectively police themselves, experts say, they may lose their ability to perform in-office dermatopathology. Dermatopathology also faces competitive pressures and aggressive fee reductions, these experts add.

National report - If dermatologists don’t more effectively police themselves, experts say, they may lose their ability to perform in-office dermatopathology. Dermatopathology also faces competitive pressures and aggressive fee reductions, these experts add.

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Part of the Social Security Act, the Stark Law prohibits physicians self-referrals. However, an in office ancillary services (IOAS) exception allows dermatologists to do in-office dermatopathology, says Jane M. Grant-Kels, M.D. She is professor and chairman of dermatology, University of Connecticut School of Medicine. She also directs the department’s dermatopathology service, residency program and cutaneous oncology center and is a member of the American Academy of Dermatology (AAD) Board of Directors.

Between 2004 and 2010, though, the number of self-referred pathology specimens more than doubled - from 1.06 million to 2.26 million - while dermatologists’ referrals to outside dermatopathologists grew only 38 percent, according to a Government Accountability Office (GAO) report on Medicare’s data.

Concerned that physicians were abusing self-referrals, the GAO then studied dermatologists, urologists and gastrointestinal specialists and found that the number of biopsies performed by those who switched to performing in-house pathology grew 24 percent the following year, versus 0.3 percent for those who sent specimens elsewhere.1

“Although the study has flaws (please see INFOBOX),” Dr. Grant-Kels says, “we did not look good.”

Impact of PIMA

Within days of the study’s release, a group of House Democrats introduced the Promoting Integrity in Medicare Act (PIMA) of 2013.

“Its objective is to overturn the Stark exception that allows us to do in-office pathology. That is a great risk,” she says.

If PIMA becomes law, Dr. Grant-Kels says, “The technical component of slide preparation in a physician’s office - whether it’s a solo, group or dermatopathology office - would no longer be allowed through Medicare, because self-referral of specimens would be prohibited. So you would have to send the specimen out for the technical component alone, or the technical and professional components. However, you or the dermatopathologist in your practice could continue to perform the professional component.”

Similarly, Dr. Grant-Kels says that although standard Mohs surgery would probably remain unaffected, PIMA would prevent Mohs surgeons from doing any special stains or related dermatopathology work. Mohs services that require special stains/frozen sections (i.e., additional special dermatopathology work) would be prohibited since this type of service depends on slide preparation that will no longer be protected by the IOAS exception.

“This would mean that Mohs surgeons would no longer be able to perform a diagnostic frozen section to confirm a site or diagnosis,” Dr. Grant-Kels says. “This change would require many repeat visits, and be a huge time and travel burden on the elderly and their children who drive and accompany them.”

Academic centers whose physicians are state employees and groups over 50 would still qualify for the exception, Dr. Grant-Kels says. “But if, as in many programs, you don’t work for the larger institution but have an independent practice, PIMA would impact your practice.”

The Stark Law contains an exception for rural providers. But the law defines rural areas in such a way that virtually no physicians qualify.

In President Obama’s 2015 budget, “He is advocating that anatomic pathology be dropped from the Stark exceptions. So those of us who do dermatopathology in our offices, and those of us in academics, are at great risk of losing that ability,” she says.


Next: Dermatopathology at a discount



Discount dermatopathology

The competitive aspect of the services must also be considered.

“The big concern that most of us working in academics or small labs have is that some very large commercial labs want to put everybody out of business. And they’re doing a pretty good job of it, because they’re offering markedly discounted rates,” Dr. Grant-Kels says. “Blue Cross Blue Shield of Tennessee bought lab services from a large national lab at a rate of 50 percent of 2014 Medicare rates.”

Dermatopathologists also have been facing an onslaught of payment cuts, she says. In January 2013, the Centers for Medicare and Medicaid Services (CMS) cut the global value of the current procedural terminology (CPT) code 88305 - the most commonly used code for the dermatopathology technical component - 33 percent. In 2014, the professional component for code 88305 rose 3.8 percent, she adds, but the technical component decreased after a review of associated practice expenses, resulting in the overall reduction.

When making the above decisions, CMS did not consider the extraordinary cost to dermatopathology labs to dispose of formalin, solvent and specimens and to pay for specimen couriers and electronic medical record (EMR) communications between the lab and private offices, which are considered indirect overhead instead of direct expenses, Dr. Grant-Kels says.

“The cost for my lab to download the dermatopathology report into your EMR is astronomical. And none of this was considered by the government,” she says.

AAD President Brett Coldiron, M.D., adds that a key reason CMS tends to target dermatology is because 73 percent of the specialty’s income comes from procedures. However, he adds, this figure is misleading.

Although dermatologists may appear to make more money than some other specialties, he says that after office overhead, “We really don’t.” In fact, two-thirds of the typical dermatologist’s practice income goes toward his or her practice expenses, he says. Outside of dermatology, “Many procedures are done in facilities, which are reimbursed in addition to the physician. There is no specialty, other than radiation oncology, with higher practice expenses per hour than dermatology. When a surgeon charges $600 for a procedure in the hospital, he gets paid $600.  When a dermatologist gets reimbursed $600, they net about $200; the rest goes to overhead.”

Eyeing ‘questionable behavior’

That isn’t to say some scrutiny isn’t warranted.

“We do have questionable behavior in our midst,” Dr. Coldiron says.

For example, in a study that analyzed Mohs utilization by state, “There were dramatic differences,” he says.2 Regarding the trunk and extremities, “Many practitioners were doing very few cases. And at the other extreme, there were a few physicians doing impossible numbers. We suspect there were small tumors at the extremes that may not have needed Mohs surgery,” he says. “That is why the AAD developed appropriate use criteria (AUC) for Mohs surgery.3

“We need the insurance companies to adopt these AUCs for Mohs surgery. They have been slow on the uptake,” says Dr. Coldiron, who spearheaded the effort.

More notably, he says, former dermatologist Michael Rosin belongs in the dermatology “hall of shame.” He is serving 22 years in federal prison for telling 865 seniors they had skin cancer and performing unnecessary surgeries when their biopsies were negative or unreadable.

As a specialty, dermatology must confront such issues. Along with stoking mistrust among patients and the media, “Every time some scandal hits, regulators take away a little of our and our patients’ freedom. And it’s not good for patient care,” Dr. Coldiron says.


Next: Greater scrutiny



Increasing scrutiny

From the Affordable Care Act to changes already taking place before passage of the law, scrutiny of dermatology by non-dermatologists is increasing, says Jack Resneck Jr., M.D. Any media reports of fraud or malfeasance committed by dermatologists or dermatopathologists - while not representative - devastate the specialty.

“Obviously, these are extremely rare cases, but they make a big splash and have an outsized effect on how people view us. We have to do a better job of policing these rare outliers ourselves,” says Dr. Resneck, who is associate professor and vice chairman of dermatology, Philip R. Lee Institute for Health Policy Studies, University of California, San Francisco, School of Medicine, and a member of the AAD board of directors.

In the future, “Some - maybe all - diagnostic frozen sections, which are almost always done by Mohs surgeons, will have to be reviewed, or run in formalin, past another dermatologist to confirm the Mohs surgeon’s diagnosis,” Dr. Coldiron says. “And Mohs cases are going to have to be randomly audited and reviewed independently. This is already done by most Mohs surgeons.

“At some point, when we have the data, we may need appropriate use criteria for skin biopsies,” he says.

Unkind cuts

Other 2014 changes impacting dermatopathology include CMS’s decision to maintain the two-block assumption, Dr. Grant-Kels says.

“So when you excise a melanoma and you have 10 to 30 blocks, you get the same amount of money as for a seborrheic keratosis in one or two blocks,” she says. Also cut were reimbursement for special stains and immunohistochemistry (the latter by 33 percent).

Before 2014, “We had 88342 for each separate antibody that was used for the slide. And for each additional antibody, a separate code was added, so that when we had multiple antibodies on a single slide, which we do not infrequently, we got paid for each antibody,” she says.

After Jan. 1, CMS replaced these codes with codes G0461 and G0462, “And no matter how many stains you use, you only get paid for one stain. The 2014 cuts were, in my opinion, draconian.”

For 2015, dermatopathologists are concerned that CMS will reduce the two-block assumption to one, Dr. Grant-Kels says.

Additioanlly, “The fluorescence in situ hybridization (FISH) codes are being revalued,” she says. CMS also is considering reducing all lab fees to the level currently paid in the Hospital Outpatient Prospective Payment System, which would slash some lab fees 76 percent.

“For all those in practice, there is a big concern that (Congress) will do away with the Stark law in-office ancillary services exception,” Dr. Grant-Kels says.

The PIMA bill is being considered for the 2015 legislative session. Eliminating the IOAS exception could save the government up to an estimated $6 billion annually, but would prove very disruptive to physicians’ practices.

Dr. Coldiron suggests that to maintain dermatology’s Stark exception, dermatologists should stop both client billing (see sidebar) and technical-component-only laboratories.

Similarly, he says dermatologists must continue their correct coding educational efforts. “And we may need office accreditation,” which he says provides independent verification of quality protocols.

Along with organizing to oppose unjust Medicare reimbursement reductions, dermatologists must continue aggressively policing themselves so that a few unscrupulous physicians don’t bring ruin upon the specialty and its patients, Dr. Coldiron says.

Disclosures: Drs. Grant-Kels, Coldiron and Resneck report no relevant financial interests.


1. GAO Highlights (of GAO 13-445). June 2013. http://www.gao.gov/assets/660/655442.pdf; Accessed May 23rd, 2014.

2. Donaldson MR, Coldiron BM. Dermatol Surg. 2012;38(9):1427-1434

3. Conolly SM, Coldiron BM, Ad Hoc Task Force. J Am Acad Dermatol. 2012;67(4):531-550

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