Looming CMS lab fee schedule cuts unite AMA, AHA and labs in opposition

22 healthcare associations seek delay in implementing CMS lab fee schedule cuts

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This is an excerpt from a 1,237-word article in the Oct. 8, 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: In what may be a first for the clinical lab industry, the American Medical Association and the American Hospital Association joined with 20 other healthcare associations to ask CMS Administrator Seema Verma to address the problems with the proposal for CMS lab fee schedule cuts. Specifically, the associations asked Verma to delay implementing the Medicare Part B Clinical Laboratory Fee Schedule, which CMS plans to implement Jan. 1, 2018.

IN A SIGNIFICANT EVENT FOR THE CLINICAL laboratory industry, 22 healthcare associations issued an important warning to the federal Centers for Medicare and Medicaid Services that the fee cuts proposed for implementation on Jan. 1 will disrupt patient care by restricting Medicare beneficiaries’ access to clinical lab tests.

In a letter sent Oct. 6 to CMS Administrator Seema Verma, the American Medical Association and the American Hospital Association joined 20 other lab and healthcare associations asking Verma to correct numerous substantial problems with the market study that CMS conducted into private payer lab test prices.

The decision of the AMA and the AHA to join with other healthcare associations on an issue involving Medicare regulation of Part B clinical laboratory testing is without precedent in the past 25 years. It is a milestone event and a powerful statement to Medicare officials that physicians and hospitals recognize why the CMS lab fee schedule cuts to be implemented Jan. 1 will interfere with the provision of healthcare in hospitals and physician clinics.

“We urge the Centers for Medicare and Medicaid Services to take immediate action to address the significantly deficient data collection process used to establish new clinical laboratory payment rates, which resulted in unreliable and unsustainable rates that fall short of Congress’ goal of establishing a market-based system,” the associations wrote in the letter. “We urge CMS to suspend implementation of the draft payment rates until these deficiencies can be addressed.”

Serious Deficiencies Cited

Among the problems the association cited was a flawed process to collect market-based price data on clinical laboratory tests. “The payment data collected by CMS for tests on the Clinical Laboratory Fee Schedule (CLFS) does not result in an accurate weighted median of private payer rates for most tests on the CLFS, as required by the Protecting Access to Medicare Act (PAMA). We believe the data used to set the proposed rates would not stand up to statistical validity review,” the letter stated.

“The data sources used to determine the preliminary rates do not appear to reflect the various market segments, which CMS has the authority to consider in order to validate the data submitted,” the associations wrote. “It is also clear from our review that the overly burdensome regulatory requirements resulted in the submission of inaccurate and incomplete laboratory payment data that is not reliable for use in its current form.”

Medicare officials appear to have designed a flawed and biased study of the market prices that private health insurers pay to clinical labs. They did so by excluding from reporting those hospital laboratories, physician office labs, and community labs that insurers value and thus reward with higher fees for lab tests.

Significant Harm to Patients

“The proposed CLFS rates will now result in significant harm to the nation’s surveillance network for emergent public health issues, job losses across the United States, and significantly reduced access to clinical laboratory testing for Medicare beneficiaries, particularly those in rural geographic and post-acute care settings,” the letter stated.

The associations asked Verma to prevent the disruption in care and the financial turmoil that will befall independent labs, hospitals providing lab testing, and physician office labs.

“We stand together in our position that before CMS proceeds with making any revisions to the CLFS, the agency must first:

    • “Modify the PAMA regulation to address data integrity concerns and market exclusion through a statistically valid process that is least burdensome on providers;
    • “Ensure that the private payer data CMS collects accurately represents all segments of the clinical laboratory market (national independent, community and rural independent, hospital outreach, and physician office laboratories); and,
    • “Provide a transparent process to allow for the validation of the data collected by CMS.”

Tough Fight Ahead?

Certainly the AMA, AHA, and the lab associations united in this coalition have a tough fight to persuade government officials to suspend implementation and fix the deficiencies in the final market price reporting rule and in the PAMA CMS lab fee schedule proposed for 2018.

At the same time, it would be foolish of Congress, HHS, and CMS to not recognize this fact: Although clinical lab testing represents only about 3% of what the government spends on healthcare, lab test data makes up 70% or more of a patient’s permanent health record.

What’s more, lab tests play a role in more than half of all diagnoses, in decisions on how to treat, and in monitoring patient care. Thus, if Medicare officials deprive the nation’s labs of adequate funds, they could see almost every aspect of medical care deteriorate or suffer as a consequence.

Flawed, Biased Price Study

The letter sent to CMS is just the most recent development in this important story. Following the release of the proposed CMS lab fee schedule on Sept. 22, many lab associations and experts have issued public comments. This special, expanded issue of THE DARK REPORT provides detailed coverage and analysis of these developments.

What other steps could the clinical lab industry take to stop the new CLFS? Please share your thoughts with us in the comments below.

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