Dive Brief:

• CMS is proposing to change its collection of clinical laboratory fee data used to determine reimbursement payments for diagnostic tests by expanding the number of labs that would report their data to the agency.
• The proposed change, in the Medicare Physician Fee Schedule (PFS), would mean more laboratories, serving a significant population of Medicare Advantage beneficiaries, could meet revenue thresholds to qualify as an “applicable laboratory” for data reporting, CMS said.
• CMS also is asking for public comments on alternative approaches for defining an applicable laboratory. The agency said it wants to hear from physicians and small independent laboratories in particular on how changes to the “low expenditure threshold” in the definition of applicable laboratory would affect their administrative burden.

Dive Insight:

The agency's current interpretation of what constitutes an applicable lab that is required to report rates has resulted in steeper payment cuts than most had anticipated, according to Cowen Washington Research Group's Eric Assaraf. The proposed rule change “appears to be a modest positive for clinical labs such as Bio-Reference, LabCorp and Quest,” Assaraf wrote in an research note, as CMS is not suggesting further cuts to reimbursement.

However, the American Clinical Laboratory Association, in a statement after CMS released the proposed change, said millions of seniors remain at risk for continued cuts to essential Medicare lab services. “ACLA will urge Congress as well as CMS to address significant shortfalls in the data collection process that jeopardize care for the most vulnerable seniors,” the industry group said.

CMS began to base its Clinical Laboratory Fee Schedule (CLFS) on private health insurance rates on Jan. 1, as a result of legislation known as the Protecting Access to Medicare Act (PAMA). The market-based payment system was designed to save the government $390 million in Medicare Part B payments in 2018, and CMS has projected payment savings will reach $3.93 billion over 10 years.

ACLA said that when Congress passed PAMA in 2014, the legislation directed CMS to collect private payer payment rates in order to establish a fair and predictable market-based payment system for clinical laboratories. Instead, CMS collected data from less than 1 percent of laboratories nationwide. “By excluding more than 99 percent of the nation’s laboratories, CMS violated the statute and undermined Congress’s goal of protecting beneficiaries and supporting value-based care delivery,” ACLA said.

As a result, in 2018 alone, Medicare beneficiaries faced more than $670 million in cuts to lab services, ACLA said. “These unsustainable cuts continue into 2020 – leading to a drastic reduction of $3.6 billion from clinical laboratory services over three years,” the group said.

CMS, in the new proposed rule, said its goal is to obtain as much information as possible on which to base payment amounts, from the broadest representation of the national laboratory market, without burdening labs. The agency projects the new rule will have “minimal impact” on CLFS rates from increasing participation among laboratories.

“Given that the largest laboratories with the highest test volumes, by definition, dominate the weighted median of private payer rates, and the largest laboratories reported data for the determination of (calendar year) 2018 CLFS rates and are expected to report again, we do not expect the additional reported data resulting from the proposed change to the majority of Medicare revenues threshold to have a predictable, direct impact on CLFS rates,” CMS said.

Last year, ACLA filed a lawsuit against HHS, alleging failure to comply with congressional intent and unlawfully using flawed data in the transition to a market-based payment system.

Assaraf said it has been historically difficult for plaintiffs to argue congressional intent in cases against CMS, and for that reason he does not expect ACLA’s court challenge to succeed.