PAMA proposed to have heavy impact on 2018 clinical lab tests

The cuts many have long predicted for clinical lab tests paid under the Medicare Clinical Laboratory Fee Schedule are likely to hit bottom lines hard next year if preliminary 2018 rates released Sept. 22 don’t see significant changes prior to being finalized. However, CMS is already receiving significant pushback on its proposal from stakeholders who believe the private-payer data these changes are based off is skewed.

Quick hits:

• Total cuts proposed at roughly $670 million, a decrease of nearly 10 percent.
• 75 percent of tests will have price reductions, with 58 percent having phased-in decreases because of annual reduction cap.
• Automated tests taking the largest hit.
• Many high-volume tests also saw substantial cuts.
• Molecular tests not hit as hard as anticipated, with a few even seeing increases.
• Quest Diagnostics threatening a lawsuit.
• Public comments to be accepted through Oct. 23, with final rule expected in early November.

All proposed changes are derived from payer data CMS gathered earlier this year during the inaugural reporting period for the Protecting Access to Medicare Act (PAMA). Rate changes were based on data reported by 1,942 laboratories. Of those, 658 were independent labs, 1,106 were physician office labs, and 157 were urgent care centers, hospital inpatient labs, or “other.” Only 21 hospital labs were required to contribute to the total, due to the fact that an exemption was granted to labs that didn’t have a NPI that collects more than 50 percent of its Medicare revenue during the collection period under the MCLFS or MPFS.

It should also be noted that just over 90 percent of the total test volume reported came from independent labs.

As part of PAMA, cuts to individual tests are cap at 10 percent annually for the first three years (2018-2020) and will be capped at 15 percent annually over the program’s final three years (2021-2023).

Unsurprisingly, Quest Diagnostics has already issued a press release expressing their displeasure with the proposed rates.

“We are deeply disappointed that CMS has issued draft 2018 Medicare payment rates that are not market-based and derived from flawed market data collection that excluded key components of the lab market,” Steve Rusckowski, Chairman, President and CEO of Quest Diagnostics, said in the release.

Ruchowski went on to say he “fully supports” the American Clinical Laboratory Association’s plan to explore legal options, if necessary.

Labcorp Chairman and CEO David King also stated his company’s opposition, calling the PAMA reporting process “fatally flawed” in a press release. King particularly took issue with the fact that the data was pulled from a pool that represented just 1 percent of the overall labs in the U.S.

In short, while it would be a shock to see CMS admit fault and completely toss out the proposed rates, the pushback the agency is receiving may prompt significant changes from what is currently on the table.

Check out the chart below for a breakdown of the major proposed changes for the top 20 CLFS codes from 2016. (A full list of affected codes can be downloaded here: https://www.cms.gov/Outreach-and-Education/Outreach/FFSProvPartProg/Provider-Partnership-Email-Archive-Items/2017-09-28-enews#_Toc494273320)