PAMA Final Rule: What to know and who it affects

September 18, 2016

In July, CMS finally released the long awaited final ruling for the Protecting Access to Medicare Act of 2014 (PAMA), which implements largescale change to the process of establishing rates under Medicare’s fee schedule for clinical labs. The rule came nine months after CMS first released its proposed PAMA ruling. Expect repricing under the rule to potentially have a significant impact on your revenue given that CMS has estimated Medicare Part B payments for clinical diagnostic lab tests will be lowered by $390 million during the 2018 fiscal year (and by a total of $3.9 billion during the subsequent 10 years).

Some quick highlights:

  • New reimbursement rates won’t take effect until Jan. 1, 2018 as opposed to Jan. 1, 2017 as initially proposed.
  • The data collection period was reduced from one year to six months. Additionally, dates for data collection and submission were also amended.
  • Labs do not need to report if they receive $12,500 or less in Medicare Clinical Laboratory Fee Schedule (MCLFS) revenue during the data collection period, down from the $50,000 reporting threshold put forth in the proposed rule.
  • Advanced diagnostic lab tests (ADLTs) have been expanded to include protein-only tests. Additionally, the requirement calling for ADLTs to be performed at a single-lab facility has been removed.
  • The definition of “applicable labs” will be based on a lab’s national provider identifier (NPI) rather than its taxpayer identification number (TNI). The change means some hospital outreach labs should now also have reporting obligations.

Under PAMA, CMS will be required to update the MCLFS through rates paid by private payers for lab tests reported by “applicable laboratories.” The rates will be established by determining the weighted median of the reported rates, although the rate a test can be decreased each year will be limited. Since data collection for CDLTs is already underway, labs that stand to be affected by PAMA should be sure to have systems installed for collecting the required data, which they will be required to report to CMS during the first quarter of 2017. This means that labs that stand to be affected should already have a data-collection system in place in order to comply with the reporting requirement.

Affected Laboratories

In the final rule, CMS defines an applicable lab as one that bills Medicare Part B under its own NPI and collects more than 50 percent of its Medicare revenue during the data collection period under the MCLFS or Medicare Physician Fee Schedule and receives at least $12,500 in MCLFS revenue during the data collection period. The change came as a result of concerns that defining applicable labs based on TINs would exclude hospital outreach labs from reporting obligations and could in turn skew pricing due to the significant amount of Medicare Part B testing performed by those labs. The fear being that this would lead to lower reimbursement rates across the board.

Despite this change, labs will still be technically report to CMS through their TIN. This means each unique corporate entity with its own TIN that operates a facility that meets the definition of an applicable lab must consolidate reports of its eligible labs into a single aggregated report.

Timeline

While the proposed rule called for the first data collection period to last for six months and for future collection periods to last a full calendar year, the final rule instead outlines that every collection period will last only six months, from Jan. 1 to June 30. Applicable labs will then submit data collected the previous year during a three-month collection period window from Jan. 1 to March 31. Since data now won’t first be submitted until Jan. 1 of next year, the first PAMA rate adjustment was pushed back from Jan. 1, 2017 to Jan. 1, 2018.

CMS has stated the six month gap between data collection and reporting will allow time for labs to both organize data and to determine whether they are exempt from reporting due to the low expenditure threshold established by CMS. As noted above, the exemption states that labs do not need to report if it received $12,500 or less in MCLFS revenues during the data collection period, which is down from the $50,000 threshold put forth in the proposed rule.

It’s important to note that information regarding CDLTs must only be reported every three years, which means the next reporting period for CDLTs will stretch from January through June 2019. Revisions to the CLFS would then become effective on Jan. 1, 2021. Conversely, ADLT data must be reported each year. This does not apply to ADLTs.

  • Jan. 1, 2016 – June 30, 2016: Inaugural data collection period for CDLTs.
  • July 18, 2016: Advisory Panel on Clinical Laboratory Diagnostic Tests Meeting on ADLT Designation and Coding.
  • Prior to Jan. 1, 2017: CMS will issue sub-regulatory guidance on the list of specific HCPCS codes for which laboratories must report data, and the application for ADLT designation.
  • Prior to Jan. 1, 2017: Assign unique HCPCS codes and publish payment rates for existing ADLTs and existing FDA-cleared or approved CDLTs.
  • Jan. 1, 2017 – March 31, 2017: Initial data reporting period for CDLTs.
  • Sept. 2017: CMS publishes preliminary CLFS rates for CY 2018.
  • Nov. 2017: CMS posts final CY 2018 CLFS rates.
  • Jan. 1, 2018: Market-based payment rates effective.
    • ADLTs are on an annual cycle of collection, reporting, and payment
    • The CDLTs cycle takes place every three years.
  • Jan. 1, 2018: Payment system for new ADLTs effective.
    • Three quarters at Actual List Charge.
    • Private payor data collected during Q1 and Q2 must be reported by the end of Q2.
  • Jan. 1, 2019 – June 30, 2019: Next Data Collection Period for CDLTs.

What to report

The final rule also offers additional information concerning how affected labs should categorize private payer rates when reporting. An extensive list of HCPCS codes that labs must report private payer rates for has been published by CMS and can be downloaded here. Reporting will not cover unlisted or unclassified CPT codes.

Here are a few key items that should be included:

  • Medicaid managed care plan payments.
  • Patient cost-sharing obligations.
  • Non-contracted, out-of-network payments.
  • Tests performed and paid for during the data collection period.
  • Medicare Advantage payments.
  • Price concessions.

Do not include:

  • Denials.
  • Tests paid for on a per capita basis.
  • Claims subject to appeal.

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