Data for New Payment System Excludes Hospitals, Small Labs

A proposed rule implementing key provisions of the Protecting Access to Medicare Act of 2014 (PAMA) would likely exclude hospital laboratories, physician office laboratories, and even small independent labs in its formula for averaging market-based prices. Many in the lab community believe this provision of the proposed rule could skew new payment rates even lower, with Medicare market data coming almost exclusively from large independent labs that heavily discount their prices.

The Centers for Medicare and Medicaid Services itself states in an online question-and-answer that 94% of physician office laboratories and 52% of independent laboratories would not be required to report payment data under the proposed rule. Beginning in 2017, the CMS weighted median rates will apply to Medicare reimbursement for all clinical laboratory tests, with updates every 3 years to keep payment closely aligned with the market.

A new report from the Government Accountability Office may provide ammunition to critics of this provision in the proposed rule. PAMA requires OIG to release an annual analysis of the top 25 lab tests based on Medicare payments. The 2015 report found that hospitals perform 24% of all lab tests under Medicare—about $1.7 billion out of $7 billion—and physician office labs and independent labs perform 19% and 57%, respectively. But the OIG analysis only captures testing paid on the clinical laboratory fee schedule. Medicare pays for most lab tests provided to hospital inpatients under the hospital inpatient prospective payment system.

Those that CMS deems “applicable laboratories” under the final rule will be required to pull private payer data from July 1, 2015 through December 31, 2015 and report it to CMS by March 31, 2016. CMS will post the new Medicare rates by November 1, 2016, with an effective date of January 1, 2017. The proposed rule is posted on, document number 2015-24770.

Federal Health IT Plan Focuses on Patients

The Department of Health and Human Services’ Office of the National Coordinator for Health Information Technology (ONC) released its final interoperability roadmap, aimed at coordinating public and private sector efforts to advance the exchange of electronic health information. The roadmap lays out the government’s thinking on the use of interoperable health information technology (IT) with a focus on person-centered and self-managed care.

“This roadmap has been developed in partnership with the private sector and provides a clear, strategic approach to see that we successfully achieve seamless interoperability by creating the right financial incentives, establishing shared and explicit standards, and developing a trusted environment for data flow that enables patients to make their health records accessible anywhere they choose to seek care,” said Karen DeSalvo, MD, national coordinator for health IT. The plan follows months of comment and feedback from health and health IT experts.

The near-term goals for 2015–2020 focus on the steep technical challenges that remain for actually exchanging information. For laboratories, ONC wants to makes sure that laboratory data not only is included in essential data sets, but also that labs are using Logical Observation Identifiers Names and Codes (LOINC). LOINC is a universal code system for tests that standardizes laboratory and other clinical observation values. This enables systems to communicate electronically without having to map data elements from one proprietary IT vocabulary to another.

Long term, the ONC plan emphasizes that the usefulness of health IT will be limited by how quickly payment systems evolve, and urges that the government “rapidly shift and align federal, state, and commercial payment policies from fee-for-service to value-based models.” For example, ONC contends that providers are not incentivized to check for existing lab tests shared in an electronic record if payment depends on the volume of testing. The full plan is available on