This is an excerpt from a 1,565-word article in the Feb.4 issue of THE DARK REPORT.
The full article is available to paid members of The Dark Intelligence Group.
CEO SUMMARY: With most hospitals now included as “applicable laboratories” in the PAMA Medicare price reporting guidelines and required to report their private payer lab test price data, this incisive analysis covers the lessons learned during the 2017 PAMA reporting cycle. It also offers recommendations on how labs can do a better job of gathering their own private payer price data and reporting it to the Centers for Medicare and Medicaid Services – and explains why it’s in their best interest to do so.
FOR THE SECOND TIME IN TWO YEARS, clinical laboratories will gather data on the prices private insurers pay them for clinical lab tests, then report that data to the federal Centers for Medicare and Medicaid Services (CMS), as required under the Protecting Access to Medicare Act (PAMA) of 2014.
The new twist in this second reporting period is the fact that CMS expanded its original definition of applicable laboratories for reporting. In this reporting cycle, all hospital labs that bill with CMS-1450 14x claims are applicable laboratories and required to report. (See TDR, Dec. 3, 2018.)
Many lab executives and pathologists consider CMS’ first market price data collection and Part B price-setting effort to be an abject failure. The primary criticism was that CMS designed a flawed rule that did not fulfill the language of the PAMA Medicare statute nor the intent of Congress.
Under PAMA, CMS was instructed to conduct a market study of the prices that private health insurers paid for clinical laboratory tests. In its first data-collection effort, CMS excluded nearly all hospital and physician office labs from reporting by limiting the definition of “applicable laboratories” required to report. A report issued by the Health and Human Services Department’s Office of Inspector General (OIG) stated that from January to March 2017, only 1,942 labs submitted PAMA Medicare data to CMS. To put this number in perspective, the OIG had earlier reported that 61,040 labs received Medicare payments in 2015.
Another primary criticism involved the serious inaccuracies in the data that the relatively small number of clinical labs submitted to CMS.
Evidence of Bias
Experts who studied how CMS used that data identified a number of ways that CMS biased its use of the data to justify setting prices lower than the conclusions that might result from using more reliable analytical methods.
Following its analysis of the market price data it received, CMS aggressively cut many lab test prices on the revised Medicare Part B Clinical Laboratory Fee Schedule (CLFS) it announced for the years 2018, 2019, and 2020. The PAMA law limits price cuts to a maximum of 10% in each of those years. Thus, for some tests, the cumulative price cuts can total as much as 30% over 36 months.
That cap changes in the next market price reporting and price-setting cycle. The PAMA statute limits CMS to a maximum cut of 15% per year to the price of any test in 2021, 2022, and 2023. The prospect of still lower payments should motivate lab managers of applicable labs to be more diligent in how they compile and report the lab test prices they get from private health insurers as part of this PAMA Medicare price-setting effort.
One expert in clinical laboratory revenue cycle management recommended exactly that. “The mistakes the industry made last time mean that all applicable labs need to be much more careful when reporting their next data sets,” advised Lâle White, CEO of Xifin Inc., a company that helps labs enhance revenue.
“Probably the best way to validate the data in your billing system is for labs to go straight to the source documents—the electronic remittance advice (ERA) and the paper explanation of benefits (EOB)— which are integral parts of the data captured in the billing system,” she said. White made these comments at the annual conference of the California Clinical Laboratory Association last fall.
“Using the ERAs and EOBs, labs can document what they were paid and for which lab testing services,” she explained. “Also, labs can use the ERAs/EOBs to compare what he lab billed to the actual amount insurers paid.
“Once you know what your lab billed and what it was paid, you can establish some audit criteria to validate the accuracy of the payment data,” White commented. “We know health insurers regularly make mistakes in what they pay and in the units paid when multiple units are submitted. Thus, it’s essential that labs not report incorrect payment rates to CMS, especially if those rates are lower than they should be.
“Another important lesson we learned from the last data-reporting cycle is that labs should be getting paid correctly,” she warned. “If a lab doesn’t review the payments it receives and then asks insurers to correct under-payments or over-payments, there is a high probability the lab will report incorrect prices.”
Reporting incorrect data increases the risk labs face from CMS. “If the prices a lab reports are wrong, then that lab could face fines of as much as $10,000 a day from CMS,” noted White. “Moreover, if the prices labs report are lower than what insurers actually paid or should have paid, then CMS could end up setting what it pays all labs less than it should pay for these tests.”
White also recommended taking extra care when gathering and reporting data to Medicare on esoteric and outreach testing.
“In this PAMA reporting cycle, how esoteric and reference laboratories compile and submit their data on the molecular and genetic test prices private health insurers pay will be hugely important,” observed White, Xifin’s Chairman and CEO. “These data are important for two reasons.
“First, by definition, these tests are not the routine, automated, high-volume tests that labs run,” she said. “Second, private payers typically pay more for these assays than they pay for routine testing. For this reason, it is essential that labs submit accurate and complete data on what they’re paid for these tests. Then CMS will have the data to set new Medicare lab test fees that truly are based on the private pay marketplace.”
Will your lab be reporting private payer prices as part of the 2019 PAMA Medicare reporting round? Please share your thoughts on the process in the comments below.