Is CMS Manipulating Data to Increase Medicare Fee Schedule Cuts?

Industry fears drastic impact of Medicare fee schedule cuts on many labs

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This is an excerpt from a 2,150-word article in the April 3, 2017, issue of THE DARK REPORT. The complete article is available for a limited time to all readers, and available at all times to paid members of the Dark Intelligence Group.

CEO SUMMARY: Every laboratory in the United States is watching how the federal Center for Medicare and Medicaid Services is moving, step-by-step, to implement the final rule for private payer lab test price reporting, as mandated by the PAMA law. When CMS announced that it was extending the reporting deadline for certain labs, readers of THE DARK REPORT, which reported last year on the dismal results of Medi-Cal’s similar endeavor, may not have been surprised. In this analysis, TDR examines possible reasons for the delay and raises the question of whether CMS is trying to manipulate the data. Finally, TDR discusses how the Medicare fee schedule cuts resulting from the PAMA rule could bankrupt many of the nation’s small independent labs and community hospital labs – leaving many small towns and rural areas without access to local lab testing services. 

Is your lab required to report its test price data? If so, has it met the deadline or not, and why?

IT WAS BIG NEWS FOR THE CLINICAL LAB INDUSTRY when officials at the federal Centers for Medicare and Medicaid Services issued a public statement that effectively meant the agency would allow certain labs an additional 60 days—through May 30—to report their private payer lab test price data as required by the Protecting Access to Medicare Act.

That data will be used by CMS in a market price study, which is expected to result in major Medicare fee schedule cuts, leading to a dramatic drop in laboratory revenue. (See TDR, November 5, 2016.)

Many national lab associations have engaged with CMS, Congress, and the administration to request action to delay implementation of this controversial part of the PAMA statute and fix the problems with the final rule as issued by CMS.

In its written statement announcing the extension, CMS said it “will exercise enforcement discretion until May 30, 2017, with respect to the data reporting period for reporting applicable information under the Medicare Clinical Laboratory Fee Schedule (CLFS) and the application of the Secretary’s potential assessment of civil monetary penalties (CMPs) for failure to report applicable information.”

As the reason for this 60-day extension, CMS said, “Industry feedback suggests that many reporting entities will not be able to submit a complete set of applicable information to CMS by the March 31, 2017 deadline.”

There is a strong possibility that CMS may have received less data from the clinical laboratories than is needed to do the market price study. At least two developments support this theory.

First, on March 23 in Washington, DC, Carol Blackford, Director, Hospital and Ambulatory Policy Group at CMS, told the annual meeting of the American Clinical Laboratory Association that CMS is carefully monitoring the process labs use to upload their data.

“We are seeing the reported data fields for the majority of HCPCS codes, but the volume overall is lower than what we expected,” Blackford said.

This statement confirms that less data and/or fewer labs have reported than what CMS projected.

The second development is that another government agency in California has also tried to collect private payer lab test price data and has found it impossible to get more than about 10% of required labs to submit that data.

THE DARK REPORT alerted the lab industry to the fact that Medi-Cal found itself with price data for 2015 from just 9% of the labs required by state law to report. (See TDR, April 11, 2016.) That number rose to only 10% in 2016.

As with the CMS market price reporting rule, all of these labs face substantial penalties for their failure to report.

Mark Birenbaum, PhD, administrator of the National Independent Laboratory Association (NILA), said it is possible that the number of labs and volume of data reported to CMS are substantially below what the agency needs to do a thorough market price analysis that meets the requirements outlined by the PAMA statute.

Birenbaum has been talking to CMS officials, members of Congress, and officials newly-appointed to the Department of Health and Human Services about the need to delay implementation of the PAMA reporting rule so that the rule can be fixed.

Who will pay the price?

Critics of the final rule issued by CMS point out that, as currently written, this rule and its associated Medicare fee schedule cuts have the potential to be financially disruptive to the national’s independent labs and to the community and rural hospitals that depend on revenue from lab outreach testing, as well as physician office labs (POLs).

The result could be that Medicare beneficiaries in many cities, towns, and rural areas would lose access to the local labs offering the only testing in those area. For this reason, policymakers need to know what would happen if these labs shut down, were sold, or filed bankruptcy because of the coming Medicare Part B lab fee cuts.

“One key question is the precise number of hospitals with outreach lab programs that have NPI numbers,” observed Birenbaum. “We’ve repeatedly asked CMS for that number since the rule was first published last year. We put that request in writing and we asked for that number at several meetings during the past year. CMS has never answered our questions on this point.

Another issue of concern is how the final rule excludes the overwhelming majority of hospitals with lab outreach departments from reporting their private payer prices—thus introducing bias into the market determinations that will be made by CMS.

“CMS wrote the rule in such a way as to exclude data from most hospital lab outreach departments because they expected those hospital lab outreach numbers to be much higher than the numbers from the big commercial labs,” Birenbaum said. “They did that to keep their calculations lower.” And those lower calculations lead to Medicare fee schedule cuts.

“Another question is: Did CMS try to obtain market rates or did they try to get a close estimate of the discounted rates from the two big lab companies?” Birenbaum asked. “It looks like the latter. That’s what they were attempting to do.”



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