The Outlook for Medicare CLFS Rates

by harrisonklipp@gmail.com | Jun 20, 2025 | CLFS, ACLA, CMS, Medicare

The Outlook for Medicare CLFS Rates

Without legislative action, Medicare rates for nearly 800 lab tests
will be cut by up to 15% effective January 1, 2026. “A lot of labs
have become complacent after five straight years of Medicare CLFS rate
freezes,” says Mark Birenbaum, PhD, Executive Director of the National Independent Lab Association (St. Louis, MO). “But they need to start thinking about the potential for rate cuts next year.”

Birenbaum says that NILA is working with the American Clinical Laboratory Assn. to introduce a new “PAMA-fix” bill within the next month or two. Any new bill would seek to delay the scheduled Medicare CLFS rate cuts for 2026 and ensure that hospital lab rates are correctly represented
in future private-payer payments surveys and rate calculations.
It’s too late to get a PAMA-fix into the Big Beautiful Bill currently being debated in the Senate.

The hope is that a PAMA-fix could get inserted into a major government funding or healthcare policy bill at the end of the year. But this will be a tough hill to climb, and time is running short.

Here’s an outline of three possible scenarios:

Scenario 1: PAMA Proceeds as Scheduled by Law
The first PAMA survey, which was based on private-payer lab rates from 2016, resulted in three straight years (2018-2020) of 10% cuts to most lab tests on the Medicare CLFS. A second PAMA survey and additional rate cuts were then frozen for five straight years (2021-2025).

Under current law, Medicare CLFS rates for approximately 800 lab tests will be reduced by up to 15% on January 1, 2026. See table on page 4.

In addition, the second PAMA survey is scheduled to begin on January 1, 2026. Independent labs, hospitals and large POLs are required to submit their private-payer volumes and reimbursement rates from the period January 1, 2019 to June 30, 2019 to CMS by March 31, 2026. CMS will use
this data to calculate new median private-payer rates to set the Medicare CLFS for 2027-2029.

Scenario 2: A PAMA-Fix is Introduced and Passed into Law
Despite widespread support from both Democrats and Republicans, the last PAMA-fix bill SALSA (H.R. 2377/S. 1000) failed to get passed into law. The culprit was cost. The Congressional Budget Office (CBO) had projected that passing SALSA into law would cost $6 billion over 10 years. A separate analysis by ACLA had estimated the cost at less than $3 billion.

ACLA is now crafting a new PAMA-fix proposal and seeking supporters to introduce it. A simpler and less costly alternative to SALSA is what’s needed.

There is little argument that current PAMA law pertaining to labs is unworkable. In particular, it will be nearly impossible for most hospital labs to dig up their private-payer volume and payment data from 2019 and report it to CMS, notes Josh Kramer, Managing Partner at the laboratory IT company Leap Consulting Group (Teaneck, NJ). Kramer says that many hospitals have gone through system upgrades and changes since 2019 and these hospitals may not have historical claims data readily available from legacy systems. In addition, PAMA does not allow hospitals to ignore paper claims data. And smaller hospitals may not have detailed lab data from paper claims loaded in their systems at all, according to Kramer.

A new PAMA-fix bill will need to include a mechanism (e.g., statistical sampling) to ensure that the higher rates paid to hospital labs are accurately surveyed and included in CLFS rate calculations.

Scenario 3: CLFS Remains Frozen and PAMA is Delayed Another Year
In previous scoring of one-year delays in PAMA payment cuts and reporting, the CBO assumed that private payers were adjusting their lab test reimbursement rates for inflation. Based on this assumption, the CBOconcluded that the suspension of PAMAwould result in cost savings. The CBO is no longer assuming private payer inflation updates. As a result, another one-year PAMA delay is unlikely to be scored to provide savings and thus unlikely to be passed into law.

Laboratory Economics Issues Research Report On U.S. Laboratory Demographic Trends

by harrisonklipp@gmail.com | Apr 23, 2025 | Laboratory Economics, CMS, Laboratory Market Research

Laboratory Economics Issues Research Report On U.S. Laboratory Demographic Trends

Laboratory Economics has just released The U.S. Laboratory Demographic Trends & Strategic Outlook 2025-2028. With this special report, you can tap into 200 pages of proprietary market research that reveals critical data and information about key business trends affecting the U.S. laboratory testing market.

The report reveals that the U.S. laboratory testing market represented an estimated $137.5 billion of revenue in 2025 with a long-term annual growth rate of 3-5%. Growth is currently being driven mostly by increased PCR-based microbiology testing and next-generation sequencing (NGS) tests to analyze genetic changes in cancer cells

The fastest-growing geographic markets are all concentrated in the South
Central and Southeast regions, including Sarasota, FL, Austin, TX,
Raleigh, NC, Orlando, FL, and Jacksonville, FL.

The U.S. laboratory testing market faces big challenges, including
post-pandemic employee wage inflation combined with five straight years
of flat reimbursement rates from Medicare and commercial insurance
payers. “Despite these challenges, the U.S. lab industry has
demonstrated a long track record of consistent growth,” according to
Jondavid Klipp, President of Laboratory Economics.

CAP Lobbies for 6.6% Medicare Rate Hike

by Jondavid Klipp | Feb 18, 2025 | CAP, CLIA, CMS, College of American Pathologists

CAP Lobbies for 6.6% Medicare Rate Hike

The College of American Pathologists (CAP), as well as the American
Medical Association (AMA), are lobbying Congress to pass a bill that
would hike Medicare payments to pathologists and other physicians by
6.6%. The potential rate hike would become effective April 1, and would
more than offset the 2.8% rate cut that took effect January 1, 2025.

CAP Lo Co o 6.6% M R Hk (cont’d from page 1) The bipartisan bill is called the Medicare Patient Access and Practice Stabilization Act of 2025 (H.R. 879). This bill would raise the conversion factor (CF) used to set Medicare rates for all physicians by 6.6% to $34.49 effective April 1. It would reverse the 2.8% payment cut that took effect on January 1, while also granting a payment adjustment for inflation plus a bump to reflect the lower CF in effect during the first quarter of 2025.

With the federal government facing a March 14 funding deadline, the best opportunity for passage is for this bill to be packaged with a larger spending bill to keep the government open, CAP President Donald Karcher, MD, tells Laboratory Economics. He says that the House could certainly pass it as a standalone bill because representatives have overwhelmingly supported similar Medicare payment increases for physicians in the past. But getting it through the Senate by itself would be challenging.

In addition to CAP and AMA, dozens of other physician groups support the bill, including the Medical Group Management Association (MGMA), the California Medical Association and the American Society for Clinical Pathology (ASCP).

The bill was introduced by Rep. Greg Murphy (R-NC) on January 31 and currently has 49 cosponsors (25 Republicans/24 Democrats).

If passed into law, Medicare Physician Fee Schedule reimbursement for CPT 88305 (Level IV, tissue exam) would rise by 6.6% to a global rate of $74.14 from its current rate of $69.54. The Medicare rate hike would impact other pathology services as well as influence the rates paid by Medicaid and private health insurance plans.

Physician groups argue that a rate hike is needed to offset inflationary pressures. CMS has estimated that the Medicare Economic Index (MEI), a cumulative measure of the individual costs of running a practice, will increase by 3.5% this year after a 4.6% increase in 2024.

Next-Gen Sequencing Database

by Jondavid Klipp | Jul 26, 2024 | Laboratory Market Research, CMS, Next-Gen Sequencing, NGS

Next-Gen Sequencing Database

Laboratory Economics is offering a database of all 149 independent labs, 181 hospitals and 8 pathologists and other providers that perform Next-Gen Sequencing for 31 CPT and PLA procedure codes (e.g., 81432, 81433, 81435, 81437, 81450, etc.). The database includes annual Medicare Part B test volumes and allowed payments by test code for each provider (for calendar-year 2022). The database comes in easy-to-use and searchable Excel spreadsheets.

The data is in a user-friendly-excel spreadsheet that includes:
• National Provider Identifier (NPI)
• Provider Name & Complete Address + Phone
• Specific Annual Medicare Part B Test Volume for 31 NGS CPT Codes for all Independent Labs, Hospitals,
• Pathologists and Other Providers (2022)
• Specific Annual Medicare Part B Allowed Payments for 31 NGS CPT Codes for all Independent Labs, Hospitals,
• Pathologists and Other Providers (2022)
• Overall Annual Next-Gen Sequencing Test Volume and Revenue Estimates for each Provider (2023)

Provide your sales rep with the data they need to succeed!
• Data for all 50 states and Puerto Rico
• Find NGS labs, hospitals and pathologists who can become your clients
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Is Alzheimer’s Testing the Next Big Lab Market?

by Jondavid Klipp | Jul 23, 2024 | FDA, CLFS, CMS, Labcorp, Quest Diagnostics

Is Alzheimer’s Testing the Next Big Lab Market?

The FDA cleared the Alzheimer’s drug Leqembi (lecanemab) in July 2023. The drug marked the first treatment for slowing Alzheimer’s progression and cognitive decline to make it through the agency’s traditional pathway. But Leqembi, which was developed by Eisai (Tokyo) and Biogen (Cambridge, MA), has fallen far short of its goals for patient prescriptions. That’s partly because the current methods for diagnosing Alzheimer’s—ex- pensive brain imaging scans and invasive cerebral spinal fluid (CSF) tests— are acting as bottlenecks. However, new blood tests for Alzheimer’s are
being introduced that could give more patients access to treatment.

An estimated 6.9 million Americans aged 65 and older are currently living with Alzheimer’s disease, according to the Alzheimer’s Association (Chicago, IL). And an estimated 500,000 new cases of Alzheimer’s will be diagnosed this year. The new Alzheimer’s treatment Leqembi has a list price of $26,500 per year.

In addition, the FDA recently cleared Eli Lilly’s Alzheimer’s drug Kisunla (donanemab), which has a list price of $32,000 per year. Both drugs are intravenous infusions that attack a protein (amyloid) that clumps into plaques in the brains of people with Alzheimer’s. Both drugs slow disease progression (e.g., memory loss or other cognitive problems) but do not stop or reverse it. In addition, at least nine pharmaceutical companies have clinical trials underway for new Alzheimer’s drugs. Those in late-stage trials for oral pill treatments include BioVie (NE3107) and AB Science (masitinib).

But these drugs rely on PET scans and CSF tests to identify Alzheimer’s patients for treatment. “The availability of more affordable and minimally invasive diagnostic tools will help support broad access for the management of Alzheimer’s disease,” according to Eisai’s global Alzheimer’s disease officer, Keisuke Naito.

New blood-based immunoassays that identify the proteins associated with Alzheimer’s are likely to become the new standard for screening and monitoring the disease. The potential lab market could reach $500+ million per year. This estimate assumes 4 blood tests to identify and monitor each of the 500,000 new cases of Alzheimer’s each year at an average reimbursement of $260 per test (for two protein markers per test).

At the June 25th Annual CLFS Meeting with CMS to address rate setting for new codes, ACLA requested a Medicare rate of $130 per Alzheimer’s protein marker. Thus, a two-protein test (e.g., pTau181 & Abeta42) would be reimbursed $260. This level of reimbursement would match the Medicare rate of $260 for Fujirebio’s FDA-cleared Lumipulse test. Coding and final rates will be announced by CMS later this year for an effective date of January 1, 2025.

There are currently at least six Alzheimer’s lab tests on the market (see table). In addition, Danaher’s Beckman Coulter is developing a blood test for its immunoassay analyzers. Beckman is expected to release a two-protein test (pTau217 & Abeta42) in RUO format later this year. Clinical data from the RUO test will be used to support an eventual FDA application.

How to Keep Your Existing LDTs on the Market

by Jondavid Klipp | Jul 11, 2024 | Lab Developed Tests (LDT), AI, CMS, Digital Pathology

How to Keep Your Existing LDTs on the Market

Labs have some tough decisions to make now that the FDA has issued a final rule giving it authority to regulate LDTs. Labs offering LDTs prior to publication of the final rule on May 6 have three choices: 1) comply with the new FDA regs and keep their LDTs on inhouse test menus; 2) switch to an FDA-cleared test kit (if available); or 3) ignore the FDA regs and risk potential enforcement actions and fines. For expert advice on option 1 from regulatory attorney Christine Bump.

Christine Bump, a regulatory attorney at Penn Avenue Law & Policy (Washington, DC), has been guiding laboratories and test manufacturers through the FDA’s premarket clearance process and post market compliance requirements for 20 years. Below we summarize Bump’s
advice for keeping existing LDTs on the market.

FDA Stage 1 requirements for currently marketed LDTs
Nearly all LDTs, including currently marketed LDTs (prior to May 6, 2024), “unmet need” LDTs performed by “integrated” health systems and NYS CLEP-approved tests, must meet Stage 1 requirements by May 6, 2025.

Stage 1 includes FDA Medical Device Reporting (MDR), which will require laboratories to report adverse events for any LDT that they perform. Under FDA’s regulations, an adverse event is any event that reasonably suggests that a device has or may have caused or contributed to a death or serious injury, or would be likely to cause or contribute to a death or serious injury if the event happens again. An adverse event report would therefore be required for an incorrect test result that has, may, or could cause such consequences. The incorrect test result could be caused by instrument malfunctions as well as mislabeled or contaminated specimens.

An adverse event report must generally be reported to the FDA within 30 days after the lab became aware of the error. The regulations require specific information be included in the report, and labs will also need to file\ a report that describes what corrective action they took, or if they chose to remove that LDT from their test menu.

An adverse event report could prompt the FDA to ask follow-up questions or schedule an on-site inspection.

The FDA is especially sensitive to incorrect test results that delayed patient treatment or caused
unnecessary treatment (or had the potential to do so).

Stage 1 also requires labs to maintain complaint files for each LDT they offer, including the date the complaint was received; the name, address, and phone number of the complainant; the nature and details of the complaint; any corrective action taken, etc. Specific records and reports
must also be maintained and submitted regarding corrections and removals of tests, including for
repairs, adjustments, relabeling, etc.

FDA Stage 2 requirements for currently marketed LDTs
Once again, Stage 2 requirements apply to nearly all LDTs and become effective May 6, 2026.

Stage 2 requires each laboratory to be registered with the FDA and list all of the LDTs they perform.

Stage 2 also requires labs to submit labeling for each LDT they offer. Labeling includes test performance information and a summary of supporting validation. As part of its review of labeling, the FDA plans to look closely at claims of superior performance and whether those claims are adequately substantiated. This includes any test claims made on a lab’s website, brochures or by sales reps.

Labeling information is typically included as a package insert or affixed to test kit box for FDA-cleared or approved IVD tests. However, since LDTs are not distributed in boxed test kits, it is unclear exactly where the label for an LDT will need to be placed. Labels might be required on the LDT test requisition form, but this hasn’t been confirmed yet. We’re waiting for the FDA to issue more guidance on label requirements.

FDA Stage 3 requirements for currently marketed LDTs

By May 6, 2027, currently marketed as well as “unmet need” LDTs developed and used within “integrated” health systems need to be in compliance with the records requirements of the quality system regulation. These records relate to the device master record, the device history record, and the quality system record. (Note: Complaint file record requirements are already covered under Stage 1.)

The device master records must include information about device specifications, production process specifications, quality assurance procedures and specifications, packaging and labeling specifications, and procedures and methods for installation, maintenance, and servicing.

The device history records must include information about the dates and quantity manufactured, the quantity released for distribution, acceptance records, information to identify each production unit and device identifiers.

Labs must have the required information compiled, documented, and in a records system that is accessible and readily available to FDA investigators during inspections.

FDA On-site Inspections
All registered lab facilities performing LDTs are subject to scheduled on-site inspections by the FDA every two years. FDA inspections are completely different than and are independent of CMS CLIA and CAP inspections. FDA inspectors will be focused on reviewing LDT test records and files. However, the reality is that the FDA already lacks the resources to perform regularly scheduled on-site inspections of existing test kit manufacturers. The agency may have difficulty keeping up with the thousands of new lab facilities that fall under its purview as a result of its final rule.