Advocacy - Lab Advocate
On June 23, 2016, the Centers for Medicare and Medicaid Services (CMS) published a final rule in the Federal Register (pages 41035-41101) that implements the clinical laboratory provisions of the Protecting Access to Medicare Act (PAMA). These provisions include rebasing payments for laboratory tests to reflect private sector rates, creating a new payment category for innovative tests, and establishing an advisory committee to assist CMS in making payment decisions. These changes are the most significant to the clinical laboratory fee schedule (CLFS) since its inception in 1984.
CMS adopted a number of AACC-backed improvements to the initial October 2015 proposed rule, such as:
Postponed the effective date for the initial cuts from January 1, 2017 until January 1, 2018 to give laboratories more time to make the necessary changes within their health systems to gather and report the data required by the agency.
Broadened the criteria for laboratories reporting private sector payment data to include some hospitals and physician office laboratories, which should more accurately reflect the variability in current payments and reduce the size of the expected cuts.
Reverted back to its earlier definition of an advanced diagnostic laboratory test (ADLT) to include proteins, which broadens the types of testing eligible for higher fees.
The most dramatic change is the new payment structure. Many private sector health plans pay less than Medicare for laboratory tests because they negotiate agreements, typically with large commercial laboratories that can offer lower fees in light of the high volume of testing associated with these agreements. Medicare does not enter into such agreements; thus, it pays the retail rate. The PAMA statute directs CMS to revise the CLFS to reflect the lower private-sector fees (without any volume arrangements). The agency estimates that implementing the new payment model will cut laboratory reimbursement by $3.93 billion over 10 years, which is less than the 5.14 billion initially estimated by CMS.
The law does limit the amount that a laboratory test can be cut in a single year. In the aggregate, the statute permits Medicare to cut reimbursement for a test up to 75 percent over a six-year period. Due to CMS’ delay in publishing the final rule, it is postponing implementation of the cuts for one year. From 2018 to 2020, CMS cannot reduce payments for a given test more than 10 percent a year. Whereas, from 2021 to 2023, the agency can cut fees by up to 15 percent a year. After 2023, there are no limits on how much CMS could reduce payments. The amount of the reduction will be based on the private sector payment data that the agency collects. PAMA does allow for test prices to increase if warranted. Below are specific items of interest to clinical laboratories:
Applicable Laboratories -- One of the key issues for clinical laboratories is which testing facilities are required to submit payment data to CMS. Many in the laboratory community, including AACC, urged the agency to ensure that it gathered payment information from a cross-section of testing facilities, including hospitals and physician office laboratories (POLs). Data skewed towards large commercial laboratories will result in even larger reductions in payment rates since hospitals and POLs generally do not offer volume discounts.
In the final rule, CMS did revise the definition of an applicable laboratory. Laboratories that meet the following criteria will need to report their private sector payment data to the agency:
Have a national provider identifier under Medicare; Bill more than $12,500 from the clinical lab fee schedule (CLFS) during the data collection period; and Receive at least 50 percent of its Medicare revenues from CLFS or the physician fee schedule (PFS) during the same reporting period.
Under the new definition, CMS anticipates that some hospital laboratories and POLs will now be subject to the reporting requirements. The agency estimates that it will still only affect a small percentage of all laboratories--45 percent of commercial laboratories and five percent of POLs will need to submit data. CMS points out that these reporting facilities receive in excess of 90 percent of the Medicare Part B payments made to commercial laboratories and POLs for laboratory services. The agency does not mention the percentage of hospitals affected by the requirements.
Timeframe for Submitting Data – The PAMA statute mandates that CMS acquire pricing and volume information every three years from applicable laboratories for each analyte they perform. This ongoing process would permit the agency to continually update laboratory payments. CMS states that the first data collection cycle will take place between January 1 and March 31, 2017 (covering payment and volume data from January 1– June 30, 2016). This information will be used to set 2018 laboratory fees. CMS would collect similar data in early 2020 (for 2019 calendar year) to set the 2021 rates.
Advanced Diagnostic Laboratory Tests – The statute also creates a new category of laboratory tests known as Advanced Diagnostic Laboratory Tests (ADLTs). CMS limits this designation to tests that are owned and furnished by a single laboratory/organization and meet one of the following criteria:
(1) the test is an analysis of multiple biomarkers of DNA, RNA, or proteins that utilizes an algorithm to predict whether an individual will develop a certain condition or respond to a particular therapy and provides new clinical diagnostic information that cannot be obtained from any other test or combination of tests (the test may also include other assays); or
(2) the test is cleared or approved by the Food and Drug Administration.
CMS had removed “proteins†from the language in the proposed rule, but at the urging of AACC and others in the laboratory medicine community, the agency reversed its position in the final rule. The requirement that the test provide new clinical diagnostic information was added by CMS and is not in the original statutory definition.
ADLT Reimbursement - CMS will reimburse existing ADLTs (those developed and utilized between April 1, 2014 and December 31, 2017) using the current crosswalk and gapfill payment methods. New ADLTs (those for which payment has not been made prior to January 1, 2018) will be paid at the laboratory list price for the first three quarters after the test is released while the agency collects payment data on the test. Afterwards, CMS will compare the new private-sector derived rate to the laboratory list price. If the list price is more than 130 percent of the rebased rate, the laboratory performing the ADLT will be required to refund the entire difference between the list price and the 130 percent rate.
Advisory Panel on Clinical Diagnostic Laboratory Tests
PAMA also created a new advisory panel to assist CMS in implementing the transition to a new CLFS. AACC member William Clarke, PhD, was nominated by AACC and serves as a member of the advisory panel. The agency convened the panel in August 2015 to assist in crosswalking and gapfilling payment determinations for calendar year 2016. CMS states that the advisory group will continue to assist in review of payment recommendations made for new codes. The next public meeting to review the new payment amounts for the 2017 CPT codes and of the PAMA advisory committee is July 18. AACC will provide public comments at the meeting.
Look for more information on PAMA and what it means for clinical laboratories in future editions of the Lab Advocate.
AACC will be conducting a timely webinar on the new PAMA rule on July 20. Please visit the AACC website to register.