Cervical Cytology Practice Guideline
Approved by the ASC Executive Board November 10, 2000
XI. Laboratory Cost Accounting and Financial Management
XI.A. Methodology for Cost Accounting
The need for comprehensive cost-accounting data reflecting the true direct and indirect costs of laboratory cervical cytology testing services was recently highlighted by an “Inherent Reasonableness Review of Payment Rates for Pap Smears” conducted in early 1999 by the Health Care Financing Administration.127 HCFA acknowledged that the $7.15 Medicare Pap smear reimbursement rate in place in early 1999 was based on a survey of a single laboratory in 1984, with no intervening cost adjustments.128 In responding to HCFA’s request for valid cost data, it became apparent that many laboratories did not know how to correctly determine their total costs for Pap testing. Full cost accounting must include indirect as well as direct costs of testing in order to avoid underestimates, which represent only partial testing costs. Reimbursement or pricing policies based on such incomplete cost estimates may prove inadequate to enable continuation of quality testing in the future.
Several descriptions of cervical cytology cost accounting have been published or presented in public forums. Spires recently published a detailed study of cost allocation per case.129 Cost allocation categories broadly included: Supplies, Equipment, Depreciation, Maintenance, Specimen/Report Transportation, Non-MD Personnel Expenses, QA, Physician expenses, Laboratory Information Systems, Overhead, Other, and Billing/Bad Debt Expenses. Another relatively detailed Pap cost accounting scheme was presented at the April 1999 ASC Cytopathology Review in Columbus, Ohio.130 Broad cost categories included: 1) Accessioning, history match, staining, cover-slipping, and clean-up; 2) Cytotechnologist review; 3) Result data entry; 4) Pathologist review; 5) Facilities; 6) Billing and collection costs; 7) Malpractice costs; 8) Logistics, and 9) Administrative costs such as sales, general management, finance and other support functions. Omission of any cost category will significantly underestimate the true cost of cervical cytology. Important QA functions such as training and continuing medical education are unfortunately and inappropriately omitted from cost analyses.
Each laboratory should establish its own cost for providing cervical cytology services, recognizing that costs are dynamic. Ideally, cervical cytology costs should be monitored and adjusted as needed. New technologies, availability of cytology professionals, and expectations for performance of cervical cytology screening will continue to affect cost.
Recent testimony, by the American Society for Clinical Pathologists on March 16, 1999 before the US House of Representatives Commerce Subcommittee on Health and the Environment, estimated the actual laboratory cost of testing a conventional cervical cytology smear in the range of $13 to $17. This included cytotechnologist salaries as well as overhead costs, CLIA-mandated quality control, laboratory supplies, and supplies given to health care providers who obtain the smear.131 This range of cost reflected a consensus of a broad coalition of professional organizations, including the ASC, which was presented to HCFA during a meeting held in Baltimore, Maryland in February 1999.128, 132, 133 Professional organization efforts to improve cervical cytology reimbursement to more realistic levels culminated in passage of legislation in late 1999 with Medicare reimbursement for the conventional Pap smear increasing to $14.60.134
XI.B. Cost Accounting Issues
To date, only limited cost accounting data in relation to the new cytology technologies are available. This is not surprising, since these products have only been on the market for several years, with variable market penetration. Several recent technology assessment reviews have published estimated costs associated with the new cytology enhancements.12, 135, 136 There has been considerable debate over the accuracy of the estimates. Accurate cost accounting of the new cytology technologies is needed, since each of the currently available devices increases the cost of testing. Reasonable reimbursement by third-party payers is needed if these technologies are to become available to large groups of patients, especially the underserved.
To the extent that cytopathology laboratory directors understand and communicate testing cost data and rely on accepted accounting principles, the chronic problem of below-cost reimbursement for cervical cytology services may gradually be alleviated; the incentive to offer a wide variety of quality enhancements will increase commensurately. Many laboratories have incomplete knowledge of their actual direct and indirect costs for offering this service, which has contributed to unrealistically low pricing. Offering cervical cytology services as a below cost “loss leader” in order to procure other profitable business may represent an ethically questionable practice and from a legal perspective may be considered inducement. It has the effect of discouraging expenditures needed for optimal cytology practice and hinders long-term development of the specialty. Below-cost reimbursement practices have delayed the introduction of more expensive new technology enhancements. Efforts to achieve adequate reimbursement represent a major quality-related issue for gynecologic cytology in the twenty first century.
12 McCrory DC, Matcher DB, Bastian L, Datta S, Hasselblad V, Hickey J, Myers E, Nanda K. Evaluation of Cervical Cytology. Evidence Report/Technology Assessment No.5. (Prepared by Duke University under contract No. 290-97-0014.) AHCPR Publication No. 99-E010. Rockville, Maryland: Agency for Health Care Policy and Research, February 1999.