Why Were Hospital Labs Excluded From The Initial PAMA Survey?

by Jondavid Klipp | Mar 15, 2020 | ACLA, CMS, PAMA

Why Were Hospital Labs Excluded From The Initial PAMA Survey?

A former CMS official involved in drafting the initial Medicare rules that determined which labs must report their private-payer pricing data to CMS for calculating Medicare CLFS rates says that PAMA was specifically designed to exclude hospital labs. This flies in the face of the lab industry’s contention that the PAMA law intended pricing information from all labs, including hospital labs, to be included in the rate calculations.

Speaking at the Annual Meeting for the American Clinical Laboratory Assn. (ACLA), March 4, Marc Hartstein, a Principal with Health Policy Alternatives and former Director of CMS’s Hospital and Ambulatory Policy Group, said, “I provided technical assistance to the Senate Finance Committee, which wrote the statute, and I can tell you the intent was to exclude hospital laboratories. The provision was intended to get savings, and if hospital laboratories were included, that would have raised the payment amounts.”

Hartstein spent 26 years at CMS (1990-2016) and helped develop such major Medicare policies as the misvalued code initiative for the physician fee schedule, the hospital Diagnosis-Related Group system, the hospital two-midnight rule, as well as the regulations for implementing Medicare’s
new CLFS under PAMA.

At this point, the opinions of those involved in drafting the PAMA statute don’t really matter, said Hartstein, who noted that it’s now up to the court to issue a statutory interpretation of the law. “Courts rightly decide issues based on the words of the law, not the opinions of those involved in drafting or enacting the law,” he said. ACLA’s lawsuit challenging the implementation of PAMA (originally filed in December 2017) is now awaiting a ruling from Judge Amy Berman Jackson from the U.S. District Court for the District of Columbia. Judge Jackson initially dismissed the case, but ACLA won an appeal, and the case was sent back to her to make a ruling. All briefs and replies were submitted to Judge Jackson at the end of January, and a decision is expected by year’s end.

“The question is whether the secretary’s definition of ‘laboratory’ is a reasonable definition,” said Hartstein. “If a laboratory is only a laboratory and not its larger organization, the laboratory is going to get 100% of its [Medicare] revenues from the clinical laboratory fee schedule or physician fee schedule. I don’t understand what the majority revenues criterion would be in that circumstance. The majority of revenue criterion must have been drafted to eliminate somebody from this determination.”

Regardless, the second PAMA reporting cycle now requires hospital labs to report their privatepayer data for non-patients to CMS in the first quarter of 2021. The hospital data, along with data from independent labs and POLs, will be used to calculate Medicare CLFS rates for 2022-2024.

Finally, the Medical Payment Advisory Commission (MedPAC) is currently reviewing how CMS has implemented the private-payer-based CLFS under PAMA, giving the lab industry an opportunity to make its case for a different system, said Hartstein. The lab industry wants CMS to analyze the payment data it collects from labs using statistical sampling to ensure that all sectors
of the lab market are accurately represented.

PAMA Reporting Period Delay Is Welcome News For Labs

by Jondavid Klipp | Jan 15, 2020 | CLFS, CMS, PAMA

PAMA Reporting Period Delay Is Welcome News For Labs

On December 20, President Trump signed into law a spending package that included provisions of The LAB Act. The legislation delays the PAMA
private-payer data reporting schedule by one year, in order to give more time for all labs, especially hospital outreach labs, to gather and report data. The new schedule does not change the data collection period (Jan. 1 to June 30, 2019), but does delay the reporting of that data to CMS until Jan. 1 to March 31, 2021.

The reporting delay comes as a big relief to hospital outreach labs. Even the nation’s more sophisticated hospital outreach labs were planning to devote substantial billing and IT staff to meet the original deadline. The delay should allow more labs to report more complete and accurate payment data.

Furthermore, the delay will give ACLA a fighting chance to get something out of its PAMA lawsuit with CMS, notes lab industry consultant Dennis Weissman. “The original reporting schedule might have rendered the lawsuit moot. Now it has more time to move through the courts,” notes Weissman.

Julie Khani, President of the American Clinical Laboratory Assn., notes that there was broad bipartisan support for The LAB Act in both the House and Senate. In particular, she cites Rep. Scott Peters (D-CA), who introduced the House bill and raised The LAB Act with Energy & Commerce Committee Chair Frank Pallone (D-NJ) at a committee mark-up meeting earlier this year.

In addition to the delayed data reporting, The LAB Act directs the Medicare Payment Advisory Commission (MedPAC) to conduct a study to review how CMS has implemented the privatepayer-based Clinical Lab Fee Schedule (CLFS) under PAMA. As part of this study, MedPAC is to consider the least disruptive ways for CMS to collect data from labs and the most accurate and representative methods to determine payments rates, including the use of statistical methods for estimating rates that are representative of the whole lab market. MedPAC must report its findings to CMS and Congressional committees no later than 18 months from the enactment of The LAB Act (i.e., by late June 2021).

MedPAC is an independent U.S. federal body comprised of 17 members appointed by the Comptroller General of the United States. MedPAC’s Chair is Francis Crosson, MD, a former executive at the integrated managed care plan Kaiser Permanente. Its Vice Chair is Paul Ginsburg, PhD, a professor of health policy at the University of Southern California.

Of course there is no guarantee that MedPAC’s study recommendations will be favorable or that they will be acted upon by CMS or Congress.

Furthermore, using statistical sampling methods to capture a representative share of all sectors of the lab market (independents, hospital outreach and POLs) may be extremely complicated, notes Laboratory Economics. That’s because provider market share can vary widely for each of the 1,000+ CPT test codes on the CLFS.

Delayed Reporting Guarantees a Fourth Year of Cuts in 2021

The one-year delay in reporting means that CMS will continue to use pricing data from the initial PAMA survey to formulate CLFS rates for 2021. This guarantees rate cuts averaging 10-15% for most high-volume tests next year when the max reduction cap becomes 15%.

As highlighted in the last issue of Laboratory Economics, three straight years of 10% annual rate cuts (2018-2020) have not fully lowered many high-volume lab tests down to the median CLFS rates set by the initial PAMA survey. For example, after three years of the max 10% annual rate reduction, the comprehensive metabolic panel (CPT 80053) will still need another 14% cut next year to reach the median rate determined by the initial PAMA survey.

Any potential benefit from delayed PAMA reporting and the inclusion of more hospital outreach labs won’t occur until 2022.

Top Hospital-Based Outreach Labs by Medicare CLFS Payments

by Jondavid Klipp | Dec 15, 2019 | CLFS, Hospital Outreach Laboratory, Laboratory Economics, Medicare, PAMA

Top Hospital-Based Outreach Labs by Medicare CLFS Payments

The vast majority of hospital laboratory outreach programs uses its hospital’s NPI and finance department for billing and is now required to report their private-payer data to CMS under PAMA. The table below lists the top 25 hospital-based labs based on their Medicare CLFS payments for outreach lab testing in calendar-year 2018. Medicare CLFS payments typically represent roughly 20% to 30% of total revenue generated by hospital-based outreach labs.