New Law For Medi-Cal Aimed At Eliminating Retroactive Recoupments

by Jondavid Klipp | Aug 15, 2021 | Laboratory Regulations, Medi-Cal

New Law For Medi-Cal Aimed At Eliminating Retroactive Recoupments

On July 27, California Gov. Gavin Newsom signed a comprehensive health care budget trailer bill (AB 133), which prevents future retroactive reimbursement reductions and recoupments from labs and pathology groups that occur due to “a lack of timeliness in Medi-Cal updating their rates.” In the past, Medi-Cal fee schedule rate changes have been chronically delayed, which has often led the program to seek retroactive recoupments from labs and pathologists—a major administrative and billing headache.

In addition, the new law has made a minor adjustment to the methodology used for setting MediCal fee schedule rates for clinical lab tests and pathology services. Beginning on July 1, 2022, Medi-Cal rates will be based on the lowest of the following: 1) the amount billed; 2) the charge to the general public; 3) 100% of the lowest maximum allowance established by the federal Medicare program for the same or similar services; or 4) a reimbursement rate based on an average of the lowest amount that other payers and other state Medicaid programs are paying for similar clinical laboratory or laboratory services.

The California Department of Health Care Services (DHCS) will not adjust rates currently established on the Medi-Cal fee schedule that do not exceed the limitations mentioned above, according to a DHCS spokesman. Some labs and pathologists had hoped the new law would raise their Medi-Cal rates to 100% of Medicare rates next year, but it does not.

The DHCS spokesman confirmed that the DHCS will continue to conduct its triennial rate survey and adjust rates based on the average of the lowest amounts third-party payers are paying. The next rate survey will be based on third-party payer data collected from calendar year 2021, reported in 2022 and effective in July 2023.

Medi-Cal Seeks Approval To Slash Lab Rates

by Jondavid Klipp | Aug 15, 2020 | CLFS, Medi-Cal

Medi-Cal Seeks Approval To Slash Lab Rates

California’s Department of Health Care Services (DHCS) has completed its
latest private-payer lab rate survey and is seeking federal approval to lower
Medi-Cal fee-for-service (FFS) rates for more than 60 high-volume lab and pathology services (effective retroactive to July 1, 2020 upon federal approval). DHCS estimates that the proposed rate cuts will save Medi-Cal approximately $12 million annually from the $212 million per year it currently spends on FFS payments for lab and pathology services. If finalized, Medi-Cal rates for high-volume lab and pathology codes will fall to a range of as little as 17% current Medicare rates to a maximum of no more than 80%.

California’s Medi-Cal lab fee schedule has been pegged to private-payer rates since 2015. The new proposed rates are based on DHCS’s fourth private-payer rate survey, which required approximately 300 independent labs, hospitals and pathology groups in California to submit their 10 lowest private-payer rates received in calendar year 2018 for approximately 270 high-volume lab and pathology CPT codes.

Only 132 providers actually wound up submitting their pricing data, including 14 hospital labs and 118 independent labs. DHCS has the authority to suspend providers that don’t report. However, no lab suspensions have occurred to date.

DHCS took the submitted private-payer pricing data, threw out any rates higher than 80% of the current national Medicare rates, and then calculated its proposed Medi-Cal rates based on a weighted average of the remaining private-payer survey data.

The most severe rate reductions that will occur as a result of the latest survey include an 80% reduction in the Medi-Cal rate for CPT 84402 (Free Testosterone) to a proposed rate of $4.45. If finalized at $4.45, then Medi-Cal will be paying a rate equivalent to only 17% of the current Medicare rate of $25.47 for CPT 84402. This proposed rate is so low that it suggests a calculation error, notes Laboratory Economics.

Other codes with proposed Medi-Cal rate reductions so extreme that they may be erroneous include 84681 (C-Peptide), equivalent to 22% of Medicare; CPT 88307 (Surgical pathology-Level V), equivalent to 27%; and 88312 (Special Stains Group 1), equivalent to 25%.

California Clinical Lab Assn. Seeks Elimination of 80% Cap
In a letter to DHCS, the California Clinical Laboratory Association (CCLA) said that now is not the time to be substantially lowering reimbursements to labs which are playing a critical role in the fight against Covid-19. CCLA is supporting a bill (AB 1327) from California Assemblywoman Cottie Petrie-Norris that would eliminate the 80% of Medicare cap on Medi-Cal FFS rates for lab and pathology services. This bill was first introduced in February 2019.

CCLA attorney Kristian Foy says that there is no justification for the 80% cap given that Medicare CLFS tests were reduced by 10% per year between 2018 and 2020 under PAMA. Removal of the cap might allow Medi-Cal rates for some lab and pathology test codes to rise to up to 100% of current Medicare rates. Foy says that the 80% Medicare cap applied to California’s pricing data survey is undermining the purpose behind developing Medi-Cal’s California-specific market-based rates.

Furthermore, Quest Diagnostics, which is the biggest Medi-Cal lab provider (see page 4), has argued that national Medicare rates should not dictate rates in California because the implementation of PAMA relied on flawed and incomplete survey data. Other organizations supporting the Petrie-Norris bill include the California Association of Public Health Lab Directors, California Medical Association, LabCorp and Planned Parenthood Affiliates of California.

Finally, CCLA is also asking that the Assembly Bill 97 (AB 97) 10% reduction to Medi-Cal lab and pathology rates be eliminated. The AB 97 10% payment reduction, which applies to most Medi-Cal providers, was enacted during the California’s budget crisis of 2011 and has no sunset date.

A decision from CMS on the current proposed Medi-Cal lab and pathology rates is expected soon. The next DHCS private-payer data survey is scheduled to occur in 2022, and will be used to establish the July 1, 2023, Medi-Cal lab and pathology rates.

Meanwhile, Medi-Cal’s transition to using private-payer lab rates has helped it reduce its expenditures on lab testing for its two million fee-for-service (FFS) members from $314 million in 2012 to $212 million in 2019. 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 10.3 million Medi-Cal members covered by managed care plans.

Medi-Cal Rates for Covid-19 Testing
Medi-Cal reimbursement rates for the new Covid-19 testing codes, including diagnostic testing (U0003 and U0004) and antibody testing (86328 and 86769), has been established at 100% of corresponding Medicare rates. In addition, the AB 97 10% reduction has been waived for the duration of the coronavirus crisis. Upon expiration of the public health emergency or national emergency, Medi-Cal rates for these codes will be lowered to 80% of Medicare and the AB 97 10% reduction will be applied.

Top 20 Medi-Cal Laboratories
The largest Medi-Cal lab provider is Quest Diagnostics, which received $32.5 million of Medi-Cal FFS payments in 2019, up 10.3% from $29.4 million in 2018, according to data from DHCS.

Planned Parenthood, which tests for sexually transmitted diseases, received $29.6 million, up 19.8% from $24.7 million in 2018.

The Genetic Disease Screening Program (GDSP) of the California Department of Health is the third largest, with $27.6 million, down 6.5% from $29.5 million in 2018.

The Genetic Disease Screening Program provides prenatal and newborn testing services to Medi-Cal recipients.

LabCorp received $10.3 million of Medi-Cal payments in 2019, up 16.6% from $8.8 million in 2018.

The fastest-growing laboratory was Regents of the University of CA (aka UCLA Outreach Lab), where Medi-Cal payments jumped by 180% to $3.5 million in 2019. In total, the top 20 lab organizations collected $135.1 million of Medi-Cal lab test payments for FFS patients in 2019, up 6.7% from $126.6 million in 2018.

Top 20 Medi-Cal Laboratories

by Jondavid Klipp | Jun 15, 2019 | Laboratory Market Research, Medi-Cal

Top 20 Medi-Cal Laboratories

The largest Medi-Cal lab provider is The Genetic Disease Screening Program (GDSP) of the California Department of Health, which received $29.5 million of Medi-Cal FFS payments in calendar year 2018, according to the latest available data from DHCS. The Genetic Disease Screening Program provides prenatal and newborn testing services to Medi-Cal recipients.

Quest Diagnostics is second largest, with $29.4 million of Medi-Cal FFS payments. Planned Parenthood, which tests for sexually transmitted diseases, received $24.7 million, followed by LabCorp at $8.8 million.

The largest academic medical centers and hospital outreach labs on the list are Dignity Health, with $3.3 million of payments, followed by Children’s Hospital of Los Angeles, $2.5 million, and Loma Linda University, $2.2 million.
In total, the top 20 lab organizations collected $127.9 million of Medi-Cal lab test payments for FFS patients in 2018.

Latest Medi-Cal Private-Payer Payment Survey Underway

by Jondavid Klipp | May 15, 2019 | CLFS, Medi-Cal

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.