Dive Brief:

• The American Clinical Laboratory Association is pushing back ahead of the Medicare Payment Advisory Commission's expected recommendations due to Congress next year on Medicare's Clinical Laboratory Fee Schedule rates, which ACLA worries could be "overly burdensome" and not reflect the market for all such lab services.  
• ACLA sent a letter Friday to MedPAC in response to a Sept. 3 public meeting on the congressionally mandated report, due in June 2021, that will include CLFS changes. The 2014 Protecting Access to Medicare Act required CMS to establish those rates based on what private payers paid.    
• ACLA's letter argues that "flaws" in PAMA’s implementation led to a CLFS that did not reflect private market rates and contributed to "unrepresentative" data collected from labs. The group also contends that including a broader variety of labs in data reporting will "not have an appreciable effect" on rates, and competitive bidding and other commodity-focused pricing mechanisms are not appropriate lab services.

Dive Insight:

CMS in 2018 implemented new private payer-based CLFS rates resulting in substantial payment rate reductions for some laboratory tests, according to MedPAC. Prior to 2018, Medicare's payment rates were set based on local, historical laboratory charges, updated for inflation, and capped at certain amounts.  

Congress in the Further Consolidated Appropriations Act of 2020 mandated the Commission to examine the methodology CMS used to set the private payer-based rates and deliver a report to lawmakers in June 2021. The legislation requires MedPAC to make recommendations on the least burdensome data collection process that results in a representative sample of all lab market segments.  

At MedPAC's meeting this month, the Commission reported that Medicare in 2019 spent about $7.5 billion on 428 million CLFS tests, which were almost entirely provided by three types of laboratories: independent labs (including large commercial chains such as LabCorp and Quest), hospitals and physician offices.

Based on data from almost 2,000 laboratories reporting private payer rates they received for 248 million individual tests, MedPAC said independent labs such as LabCorp and Quest were "overrepresented" while hospital and physician offices were underrepresented.

"We found that volume increased by 2.4% for independent laboratories and decreased by about 1% for both hospital and physician office laboratories. This shift is part of a longer-term trend of large, independent laboratories growing their market shares," according to MedPAC.

Nonetheless, MedPAC said that CMS analyses suggested payment rates would only have increased modestly with greater hospital and physician office laboratory reporting. The second round of data reporting has been delayed until 2022. 

The Commission also found in the first round of data reporting that Medicare spending increased from $7.1 billion in 2017 to $7.5 billion in 2019, driven by technical changes under PAMA and increased use of new high-cost molecular pathology tests by labs.

However, fearing a future policy recommendation on these high-cost tests, ACLA in its letter to MedPAC said it is "unwise" for the Commission to "rush and consider policies which would erect barriers to patient access for molecular pathology tests" that would "delay earlier cancer detection and earlier avoidance of ineffective drug treatments, reversing the recent improvements to patient care." 

The lab group also argued that MedPAC's examination of such utilization policies is "outside the scope of the current study" and the Commission "should remain focused on less burdensome and more representative private market data which will result in a more stable and sustainable Medicare CLFS."

ACLA President Julie Khani in a separate statement called for a "fair and predictable" reimbursement system that provides cost savings for the health system at large through early disease diagnosis and treatment. At the same time, Khani said CLFS rates must be representative of the marketplace to ensure "robust and sustainable access" for Medicare beneficiaries.

"Such access is all the more important when taking into account how millions of patients have delayed regular care due to the pandemic,” she added.

MedPAC acknowledges some stakeholders suggested that inappropriately low payment rates could lead to access issues, which would be reflected in the utilization data. Still the Commission reported at its meeting that, based on its analysis of the first two years of Medicare payment rates using private payer data, utilization has been stable.  

"Overall, we found that utilization increased from 12.8 to 12.9 tests per beneficiary from 2017 to 2019. These results suggest beneficiaries had stable access to laboratory tests," according to MedPAC.