Dive Brief:

• The American Clinical Laboratory Association scored a partial victory Tuesday in federal court, when the appeals court ruled the Protecting Access to Medicare Act's data collection provision is distinct from the establishment of payment amounts, allowing judicial review of that provision. 

• The U.S. Court of Appeals sent the case back to the U.S. District Court for the District of Columbia to determine whether the rule was arbitrary and capricious in violation of the Administrative Procedure Act. But the appeals court rejected ACLA's argument that the final rule exceeded the scope of the agency's statutory authority.

• The trade group's lawsuit seeks to halt the implementation of HHS' Clinical Laboratory Fee Schedule lowering Medicare payment rates for lab tests.

Dive Insight:

The ruling is a blow to the government, which argued the collection of market data was inextricably intertwined with the ultimate payment rates and therefore not reviewable by the courts.

ACLA, made up of lab giants LabCorp and Quest but also some smaller independent labs, want hospital labs included in the labs from which data is collected. Such inclusion would likely bump up reimbursement rates.

The decision means the trial court will have the opportunity to issue a new ruling in the case and review whether the data collection portion of the rule was arbitrary and capricious in violation of the Administrative Procedure Act. The lower court had initially dismissed the suit, saying it didn't have the authority to hear it, but appeals court judge Cornelia Pillard said the statutory provision barring judicial review of payment amounts established by HHS didn't extend to the data collection portion of the rule.

"In view of PAMA's text, its structure, and the distinct nature of the processes of data collection and establishment of payment rates, we cannot conclude that the bar against reviewing the 'establishment of payment amounts' also prevents our review of the rule setting up a new and detailed process for collecting data on market rates that private insurers pay to laboratories," Pillard wrote.

ACLA President Julie Khani praised the court's ruling.

"We strongly commend the Court of Appeals' decision and are very encouraged that it recognizes that ACLA is entitled to challenge the harmful regulatory overreach by the HHS Secretary in his implementation of PAMA," Khani said in a statement. "HHS's continued flawed data collection process poses a direct challenge to the rule of law and PAMA's intent to support a sustainable, market-based laboratory market for millions of seniors."

ACLA continues to push Congress to delay the next round of data reporting for a year. 

"While today's decision is an important moment for millions of beneficiaries, we urge Congressional leaders to immediately halt the data reporting process and allow time to ensure that HHS is implementing PAMA in the right way," Khani said.