On June 15, 2021, the Medicare Payment Advisory Commission (MedPAC) released its semi-annual report to Congress, which assessed whether the laboratory payment methodology established under PAMA should be revised (see pages 301-333). While the panel’s findings confirm much of what AACC and others have claimed, the recommendations are disappointing.  

MedPAC agrees that that new payment fees are skewed as the new methodology reflects 85 percent of the Medicare payments made to independent labs, but only 22 percent of the payments made to hospitals and POLs.  The advisors added that by the time PAMA is fully implemented in 2025, lab fees will have been reduced in the aggregate by 24 percent.

The policy group also reports that the financial impact of the cuts is distributed unevenly among laboratories.  Overall payments to commercial laboratories between 2017 and 2019 increased by 16.1 percent due to high fees for new molecular tests.  However, hospitals and POLs, which perform more routine testing, saw their payments decline by 9 percent and 5.8 percent, respectively.  

MedPAC further investigated whether using a survey approach would address some of the concerns raised by labs.  The panel reported that the use of such a methodology would reduce the overall regulatory burden on laboratories and permit the Centers for Medicare and Medicaid Services (CMS) to garner data from more hospitals and POLs.  

MedPAC states, however, that such an approach would result in an increase of Medicare spending for laboratory testing in the range of 15-24 percent.  Therefore, the advisory panel suggests that “basing CLFS rates on a representative sample of private-payer rates may be undesirable in certain circumstances.”
The “circumstances” that should be excluded from the methodology, according to MedPAC, are:

•    Higher lab payments made to hospitals and POLs – MedPAC suggests that the higher fees are the result of “enhanced” negotiating leverage from the non-laboratory services they perform; and
•    New high-cost (molecular) tests are often sole proprietary tests not subject to competition and therefore reflect the arbitrary price established by the lab.

If adopted, the MedPAC recommendations would likely result in deeper cuts in Medicare spending for laboratory testing.  The group also adds that initial data indicates that the PAMA fee cuts are not affecting overall patient access to care (although there has been a slight shift in testing away from hospitals and POLs to commercial labs) and, therefore, is not a justification for increasing fees.

The advisory group report will be reviewed by Congress, which will determine whether any policy changes are warranted.  AACC will work with the broader laboratory community in developing a unified, consistent response to the MedPAC recommendations.