The next round of reporting private payer rates for laboratory testing under the Protecting Access to Medicare Act (PAMA) is set to begin January 1, 2020, but many in the industry are advocating for a 1-year delay so they can ensure the data are reported are accurate.

Support in Congress appears strong for the Laboratory Access for Beneficiaries (LAB) Act (H.R. 3584), which was introduced in the House by a bipartisan group of lawmakers. The measure would delay the next round of PAMA data reporting by 1 year to ensure that all applicable laboratories that are required to report private payer data have the necessary time to do so.

The bill also calls for the National Academy of Medicine (NAM) to provide recommendations to Congress on less burdensome data collection methods and a more representative reimbursement rate calculation, with the ultimate goal of establishing a reliable, sustainable, market-based system as originally intended by Congress when it passed PAMA in 2014. AACC supports the bill and engaged members in a grassroots effort to write their congressional representatives to show their support through the association’s Laboratory Voice program.

The first set of Medicare payments for the Clinical Laboratory Fee Schedule (CLFS) established under PAMA resulted in cuts of about 10% per year for many laboratories between 2019 and 2021. However, the initial system for collecting lab payment data was considered flawed by most in the industry since hospital outreach labs were not required to report their payment data for lab tests. What’s more, even data that were submitted was not always accurate, thus potentially skewing the final CLFS reimbursement rates for 2019-2021.

Since many private payers tie their reimbursement rates to Medicare, the flawed payment amounts now are making their way into the private sector, according to Kyle Fetter, vice president and general manager of diagnostic services for XIFIN, a laboratory revenue cycle management consulting firm based in San Diego, California. “This is impacting far beyond Medicare patients,” he said. “You have commercial payers following suit. Much of the impact on the Medicare side is flowing through to commercial contracts.”

Data Collection Woes

In November 2018, the Center for Medicare and Medicaid Services (CMS) issued a new rule requiring nearly all hospital outreach labs to report their private payment data. Under the rule, any clinical laboratories that collect $12,500 or more in Medicare CLFS revenue in the first 6 months of 2019 are required to report their private-payer data to CMS between January 1, 2020, and March 31, 2020. This includes most independent laboratories, physician-office labs, and hospital outreach labs. Unless there is a delay, CMS will issue preliminary CLFS rates for 2021-2023 sometime next summer.

Despite the new requirement for hospital outreach labs, experts are concerned that some of these laboratories will fail to report their data to CMS, resulting in flawed payment rates, much like during the first reporting cycle. One of the problems is that too many outreach laboratories use their hospital’s billing system and thus do not have good figures on what they are being paid.

“Hospitals have a hard time getting a handle on laboratory data,” noted Elissa Passiment, senior partner at EP Clinical Consulting in Bluffton, South Carolina. “Even third-party billing systems might not be sophisticated enough to get at this data. There are some hospital outreach labs that have excellent data, but they tend to be in larger systems. The smaller ones are going to have trouble with data collection and reporting. Many of them just aren’t ready.”

But even with hospital outreach laboratories reporting their data, the final payment amounts for the next round of rate adjustments might not budge significantly, commented Michael Zwart, laboratory business manager for Avera Health Laboratory Service Line and a member of AACC’s Policy and External Affairs Core Committee.

“Many in the lab community state that the issue with PAMA is that by not allowing or requiring every lab that bills Medicare to submit their payment data, the data are flawed,” he explained. “I believe that this is part of the issue, but the real issue is the math used to calculate the rates.” CMS is using the weighted median of reported private payer rates, not the weighted average, to calculate payment under the CLFS. As a result, payments end up being much lower than they would be under a weighted average formula, said Zwart.

A Lawsuit Still Pending

As the LAB Act awaits Congressional approval, a 2018 lawsuit filed by the American Clinical Laboratory Association (ACLA) challenging the Department of Health and Human Services (HHS) over its definition of an “applicable laboratory” in August was sent back to Judge Amy Berman Jackson at D.C. District Court. ACLA has filed a motion for summary judgment.

While HHS is expected to argue that the exclusion of hospital outreach private payer data was addressed earlier this year when the agency amended its definition of applicable laboratory to include data from hospital 14x type billing forms, that change does not apply to the private payer data used to set the CLFS payment rates for 2018, 2019, and 2020.

Jackson is not expected to rule on the lawsuit before January. Meanwhile, Congress could pass the LAB Act. The best possible outcome, believes Passiment, is for lawmakers to approve the measure and for NAM to determine that the current method for determining payment under the CLFS is flawed and advise that the system be reformed.

Regardless of what happens in the appeal, a legislative solution remains necessary to eliminate the severe damage to laboratories and their patients caused by the flawed implementation of PAMA, according to ACLA President Julie Khani, who said she remains optimistic about both the lawsuit and passage of the LAB Act.

“A one-year delay would allow a more representative share of labs to report private market data and provide valuable time for stakeholders and policymakers to determine how to reform PAMA and ensure a truly market-based system that will protect Medicare beneficiary access as Congress intended,” Khani said.

A study that would assess how to improve data collection and provide concrete recommendations on appropriate statistical methods for rate setting is essential so that laboratories can meet their number one priority—patient access to diagnostic testing, she added.

Kimberly Scott is a freelance writer who lives in Lewes, Delaware. +Email: kmscott2@verizon.net