In This Issue...

Congress Passes SGR Patch – Lab Payment System Changed

The House of Representatives and the Senate have enacted legislation, H.R. 4302, Protecting Access to Medicare Act of 2014, to postpone for one-year a 24 percent cut in physician fees resulting from the physician sustainable growth rate formula (SGR).  Enacted in 1997, the SGR was expected to rein in physician spending.  However, a flaw in the formula routinely results in scheduled cuts in physician fees often ranging between 20 to 30 percent.   Congress typically intervenes to prevent these cuts from taking effect, however.

The current $21 billion ‘patch’ includes cuts to other health care providers, including clinical laboratories.  Rather than an across-the-board cut, as in the past, Congress ‘modernized’ the clinical laboratory fee schedule, making significant changes to how fees are set.  By updating fees to reflect private sector payments, reimbursement is likely to decline for many tests. 

This law creates a new market-based laboratory fee schedule that reviews existing test fees every three years.  The payment rates will be based on price data submitted by labs, including discounts.  Congress did place limits on how much a single test payment can be reduced annually – no more than 10 percent annually between 2017-2019, and no more than 15 percent a year between 2020-2022.

In response to these cuts, Congress eliminated the Center for Medicare and Medicaid Services (CMS) authority to adjust laboratory payments based on technology as the agency was poised to make significant cuts in existing tests.  The new law also eliminates the annual laboratory consumer price index (CPI) update as Congress is requiring CMS to update the fee schedule every three years.

In addition to establishing a formal process for new tests, legislators created a new category of tests, the Advanced Diagnostic Laboratory Test (ADLT) that will be paid, initially, at its list price.  To receive this higher fee, the test must be offered and furnished only by a single laboratory and not sold by a laboratory other than the original developing laboratory (or successor owner) and meet one of the following criteria:

  • Is an analysis of multiple biomarkers of DNGA, RNA, or proteins combined with a unique algorithm to yield a single patient specific result;
  • Be cleared or approved by the FDA; or
  • Meet other criteria set by the Secretary;

The new laboratory fees are expected to take effect in 2017.  AACC is holding a webinar on this significant revision of the clinical laboratory fee schedule and its implications for the community on May 7th.

House Budget Committee Approves FY'15 Budget Blueprint

The House Budget Committee, under the tutelage of Chair, Rep. Paul Ryan (R-WI), passed a fiscal year (FY) 2015 budget plan that proposes to cut federal spending by $5.1 trillion over the next ten years.   To achieve these cost savings, the GOP would repeal the Affordable Care Act while leaving in place the Medicare cuts included in the law.  The budget proposal would also cap Medicaid expenditures and provide the funding to states in the form of a block grant.  Much of the budget proposal mirrors Rep. Ryan’s previous budgets that passed the House, but were rejected by the Senate.