How CMS Plans to Save the Equivalent of Mongolia’s GDP on Pathology

October 15, 2015

Proposed Rule for Clinical Diagnostic Laboratory Test Payments Sets the Stage to Lower Pathology Fee Schedules

Over the past few years, CMS has been taking a good, hard look into the world of clinical pathology payments.  Like anything that CMS takes more than a fleeting glance at, they see this as a market where they can cut their budget.

Part of this good, hard look was a study that found they could save quite a bit of revenue by outsourcing all the clinical pathology work sent to CMS. How did they come to this calculation?  As they delved deep into the payment side, they found most commercial payers where paying less than the CMS rate. This is when they had their grand awakening; instead of paying 100% of their own rate, they could pay much less and save the equivalent of Mongolia’s GDP in the process.

They are not quite ready to roll out the single lab system just yet.  So in the interim, they are implementing a program where all applicable laboratories — labs which receive more than 50% of their Medicare income from either the Clinical Laboratory Fee Schedule (CLFS) or the Physician Fee Schedule (PFS) — must report what they are being paid by their payers to Medicare. This means Medicare wants to know exactly what their competition is paying for services.  Smart, huh?  Here is where it gets good.

All applicable labs who fail to report their payment figures will be fined to the tune of $10,000 PER DAY! Not only must these figures be reported, but there are very specific rules you must follow to meet the criteria.  One such demand, I mean criterion, is that the payment information must be certified by the lab’s President, CEO or CFO prior to submission to CMS.  For a list of the detailed rules and a great outline on this subject, read this excellent article at

The main issue here is that CMS is going to use these findings to lower your fee schedules. The lone silver lining in this storm cloud is that test compensation cannot drop more than 10% per year from 2017-2019, and no more than 15% per year from 2020-2022 (the equivalent of Chinese water torture on the pathology world).  In the end, though, this means drastic cuts for the CLFS.  I predict that by 2020 CMS will be paying 30% less per test than they are today.

I see this as a harbinger of even worse changes to come in the not so distant future.  Imagine this scenario with me.  First, CMS does the same study on anatomic pathology (AP) tests and finds that many groups are accepting less than CMS rates.  They then echo this process on the AP side and lower their rates to the commercial rates.  It is a slippery slope they are creating, and we will find ourselves precariously perched on it.  You may recall they used this same logic (the word logic seems out of place when referring to government decisions, but I digress) with the APC technical rate, then lowered rates drastically.

It is only a matter of time before you see these changes affecting your practice’s revenue. What is the next step?  What is your strategy to handle this attack on your revenue?  Who will be your Sherpa guiding you up this slippery slope on which we will undoubtedly find ourselves?

If you have questions or want to talk revenue strategy, please contact me, Mick Raich, at or directly at 517-403-0763.

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