CLN Article

Labs’ Fears Realized in 2018 Fee Schedule Proposal

Federal Insider: December 2017

In 2018 the Centers for Medicare and Medicaid Services (CMS) plans to start paying labs based on what private payers are paying, but in preparing for this change, the agency asked few hospital labs what private payers actually pay them. AACC and other advocates for labs warned CMS that bad data would lead to bad results as the government embarks on what has been billed as a market-based pricing scheme for the clinical lab fee schedule (CLFS). However, CMS did not change course in the face of criticism from the lab community as it collected data that focused on large national reference labs that are known for intense price competition.

The results, after a 1-year delay and 6 months of data collection, show that the lab community was right to sound the alarm: CMS is proposing cuts to 75% of all tests on the CLFS in 2018 with more than half cut so severely that CMS will have to phase in the reductions over 3 years under the limits of the Protecting Access to Medicare Act (PAMA), which set the pricing change in motion. Overall, the proposed rates would cut lab payments in 2018 by approximately 21% compared to 2017 rates, although PAMA will only allow a 10% cut each year through 2020.

Medicare data for 2018 Clinical Laboratory Fee Schedule PAMA Rule

“One unintended consequence of the proposed CLFS is that it may force many laboratories to stop or significantly curtail their testing, particularly rural hospitals, small health clinics, and physician office laboratories,” wrote AACC in a letter to CMS. “Each unnecessary cut in laboratory reimbursement … likely means fewer laboratories and less patient access to testing services.”

The letter emphasized that hospitals account for 24% of all Part B Medicare lab payments, but CMS obtained data from only 21 of the 9,075 hospitals in the country. In announcing the proposed fee schedule, CMS’s own analysis shows that more than 90% of the test payment data that was collected came from high-volume, commercial laboratories. These labs represent less than 3% of all laboratories and just over half of total lab billing under Medicare.

Because the proposed rates would “create new barriers to patient access to care,” AACC is recommending that CMS delay implementation of the new CLFS until its data collection process can be revised.