PAMA Reporting Period Delay Is Welcome News For Labs

PAMA Reporting Period Delay Is Welcome News For Labs

PAMA Reporting Period Delay Is Welcome News For Labs

On December 20, President Trump signed into law a spending package that included provisions of The LAB Act. The legislation delays the PAMA
private-payer data reporting schedule by one year, in order to give more time for all labs, especially hospital outreach labs, to gather and report data. The new schedule does not change the data collection period (Jan. 1 to June 30, 2019), but does delay the reporting of that data to CMS until Jan. 1 to March 31, 2021.

The reporting delay comes as a big relief to hospital outreach labs. Even the nation’s more sophisticated hospital outreach labs were planning to devote substantial billing and IT staff to meet the original deadline. The delay should allow more labs to report more complete and accurate payment data.

Furthermore, the delay will give ACLA a fighting chance to get something out of its PAMA lawsuit with CMS, notes lab industry consultant Dennis Weissman. “The original reporting schedule might have rendered the lawsuit moot. Now it has more time to move through the courts,” notes Weissman.

Julie Khani, President of the American Clinical Laboratory Assn., notes that there was broad bipartisan support for The LAB Act in both the House and Senate. In particular, she cites Rep. Scott Peters (D-CA), who introduced the House bill and raised The LAB Act with Energy & Commerce Committee Chair Frank Pallone (D-NJ) at a committee mark-up meeting earlier this year.

In addition to the delayed data reporting, The LAB Act directs the Medicare Payment Advisory Commission (MedPAC) to conduct a study to review how CMS has implemented the privatepayer-based Clinical Lab Fee Schedule (CLFS) under PAMA. As part of this study, MedPAC is to consider the least disruptive ways for CMS to collect data from labs and the most accurate and representative methods to determine payments rates, including the use of statistical methods for estimating rates that are representative of the whole lab market. MedPAC must report its findings to CMS and Congressional committees no later than 18 months from the enactment of The LAB Act (i.e., by late June 2021).

MedPAC is an independent U.S. federal body comprised of 17 members appointed by the Comptroller General of the United States. MedPAC’s Chair is Francis Crosson, MD, a former executive at the integrated managed care plan Kaiser Permanente. Its Vice Chair is Paul Ginsburg, PhD, a professor of health policy at the University of Southern California.

Of course there is no guarantee that MedPAC’s study recommendations will be favorable or that they will be acted upon by CMS or Congress.

Furthermore, using statistical sampling methods to capture a representative share of all sectors of the lab market (independents, hospital outreach and POLs) may be extremely complicated, notes Laboratory Economics. That’s because provider market share can vary widely for each of the 1,000+ CPT test codes on the CLFS.

Delayed Reporting Guarantees a Fourth Year of Cuts in 2021

The one-year delay in reporting means that CMS will continue to use pricing data from the initial PAMA survey to formulate CLFS rates for 2021. This guarantees rate cuts averaging 10-15% for most high-volume tests next year when the max reduction cap becomes 15%.

As highlighted in the last issue of Laboratory Economics, three straight years of 10% annual rate cuts (2018-2020) have not fully lowered many high-volume lab tests down to the median CLFS rates set by the initial PAMA survey. For example, after three years of the max 10% annual rate reduction, the comprehensive metabolic panel (CPT 80053) will still need another 14% cut next year to reach the median rate determined by the initial PAMA survey.

Any potential benefit from delayed PAMA reporting and the inclusion of more hospital outreach labs won’t occur until 2022.

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Top Hospital-Based Outreach Labs by Medicare CLFS Payments

Top Hospital-Based Outreach Labs by Medicare CLFS Payments

Top Hospital-Based Outreach Labs by Medicare CLFS Payments

The vast majority of hospital laboratory outreach programs uses its hospital’s NPI and finance department for billing and is now required to report their private-payer data to CMS under PAMA. The table below lists the top 25 hospital-based labs based on their Medicare CLFS payments for outreach lab testing in calendar-year 2018. Medicare CLFS payments typically represent roughly 20% to 30% of total revenue generated by hospital-based outreach labs.

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Latest Medi-Cal Private-Payer Payment Survey Underway

Latest Medi-Cal Private-Payer Payment Survey Underway

Latest Medi-Cal Private-Payer Payment Survey Underway

California’s Medi-Cal lab fee schedule has been pegged to private-payer rates since 2015. California’s Department of Health Care Services (DHCS) is currently in the midst of its fourth private-payer rate survey, which will be used to set Medi-Cal reimbursement rates for clinical lab and pathology services next year.

Approximately 300 independent labs, hospitals and pathology groups in California are required to submit their 10 lowest private-payer rates received in calendar year 2018 for approximately 270 high-volume lab and pathology CPT codes. The deadline for reporting the data to DHCS is June 30, 2019. The newly calculated Medi-Cal rates will be announced in June 2020 and will become effective July 1, 2020.

Labs are required to report if they have Medi-Cal paid claims volume of 5,000 or more per year, or Medi-Cal payments of $100,000 or more. Over the past three surveys, an average of about 100 labs per survey actually reported, representing less than 30% of the required labs. DHCS has the authority to suspend providers that are required to report, but fail to do so. However, no lab suspensions have occurred to date.

Medi-Cal’s transition to using private-payer lab rates has helped it slash its expenditures on lab testing for its 2.3 million fee-for-service (FFS) members from $265 million in fiscal year 2014 (ended June 30) to $205 million in fiscal year 2018. Medi-Cal lab expenditures have also been tempered by a steady movement toward Medi-Cal managed care plans. Managed care plans are
paid on a capitated basis, and they manage member care and negotiate and establish their own rates with their contracted providers. There are currently 10.7 million Medi-Cal members covered by managed care plans.

Medi-Cal currently reimburses clinical lab tests for FFS members at an average of approximately 79% of the Medicare CLFS for 2019. Medi-Cal rates for anatomic pathology services (i.e., CPT 88305) are set at approximately 60% of current Medicare Physician Fee Schedule rates.

The current Medi-Cal private-payer survey is especially interesting because it may provide an early glimpse into future Medicare CLFS rates. It will provide an early indication of the extent to which private health insurance plans in California were influenced by the first PAMAdirected 10% rate cut to the Medicare CLFS that took effect January 1, 2018.

It should also be noted that most
Medi-Cal providers, including labs,
remain subject to the Assembly Bill 97 (AB 97) 10% payment reduction that was enacted during the California’s budget crisis of 2011. Because AB 97 is a payment reduction, not a change to the actual rates, the 10% cut comes
off the listed Medi-Cal fee schedule rates. The 10% payment reduction authorized by AB 97 has no sunset date.

Many Hospital Labs Still Don’t Know They Must Report PAMA Data

Many Hospital Labs Still Don’t Know They Must Report PAMA Data

Many Hospital Labs Still Don’t Know They Must Report PAMA Data

On January 22, the Centers for Medicare & Medicaid Services (CMS) hosted a teleconference that focused on a new rule that requires nearly all hospital outreach labs to collect their private-payer payment data from January 1 to June 30, 2019, and report it to CMS in early 2020. This data, along with private-payer data from independent labs and physician office labs, will be used to set new rates for the Medicare CLFS in 2021.

Although the new rule was published in early November 2018 and the data collection period is already underway, the teleconference Q&A showed that many hospital outreach labs are unaware that they are required to report. Broad participation from hospital outreach labs in the current data collection cycle is critical to stabilizing Medicare CLFS rates in 2021.

The Final Medicare Physician Fee Schedule for 2019 states that hospital outreach labs that bill for their non-patient lab services using the hospital’s national provider identifier (NPI) must now use Medicare revenues from the Form CMS-1450 14x Type of Bill to determine whether they meet the majority of Medicare revenues threshold and low expenditure threshold.

During the teleconference, CMS confirmed that this will require most hospital outreach labs to collect and report their private-payer data.

Laboratory Economics notes that in simplest terms, the rule requires any hospital outreach lab that collects $12,500 or more in Medicare CLFS revenue during the first six months of 2019 to report their private-payer payment data to CMS. Of course, all independent labs and physician-office labs meeting the $12,500 threshold must also report.

Based on an analysis of Hospital Cost Report data from 2018, Laboratory Economics has identified more than 1,000 hospital outreach labs that will meet the $12,500 threshold and are therefore required to report.

The PAMA law authorizes CMS to impose civil monetary penalties of up to $10,000 per day on labs that are required to report, but fail to do so. However, CMS did not enforce this law during the first reporting cycle (2016-2017) and it has not threatened to do so in the current cycle.

The cost and complexity involved with collecting private-payer payment data combined with CMS’s unwillingness to impose penalties on non-reporting labs lead Laboratory Economics to the unfortunate conclusion that most hospital outreach labs, as well as smaller independent labs and POLs, will dodge their reporting responsibility.

This likely scenario will have devastating long-term consequences for all laboratories. It means that lab test codes paid through the Medicare CLFS—already scheduled for three straight years (2018-2020) of 10% rate reductions—may suffer reductions of as much as 15% in 2021.

Note: This is an excerpt from an article in the February 2019 issue of Laboratory Economics.

GAO Warns Of Increased Costs From Unbundling Panel Tests

GAO Warns Of Increased Costs From Unbundling Panel Tests

GAO Warns Of Increased Costs From Unbundling Panel Tests

 A new report from the U.S. Government Accountability Office (GAO) has zeroed in on the unbundling of common panel tests as a practice that could cause Medicare to overpay billions under PAMA’s new market-based CLFS.

The potential for overpayment stems from a loophole that enables labs to charge significantly more for common panel tests by billing for each component test individually (see LE, December 2017). Previously, Medicare had paid a lower bundled rate for routine panel tests such as Comprehensive Metabolic Panel (CPT 80053) and Lipid Panel (CPT 80061).

But starting January 1, 2018, PAMA limited CMS’s ability to automatically combine individual component tests into groups for bundled payment. Labs now have the ability to game the system for higher reimbursement by billing individually for tests in a panel. The GAO report has estimated that this practice could potentially increase Medicare expenditures by as much as $10.3 billion from 2018 through 2020.

The Department of Health and Human Services (HHS) commented that it is taking steps to address this issue. More specifically, HHS is developing an automated process to identify claims for panel tests that should receive bundled payments and anticipates implementing this change by the summer of 2019. In addition, HHS posted guidance on November 14, 2018, stating that for panel tests with billing codes, laboratories should submit claims using the corresponding code rather than the codes for the separate component tests beginning in 2019.

In addition, CMS says that it has been monitoring changes in panel test utilization, payment rates, and expenditures. CMS says that preliminary data indicates that Medicare payments for individual component tests of panel tests have, in fact, increased substantially in 2018.