Medicare COVID Test Payments to Be Cut Starting Jan. 1

Medicare COVID test payments will be $25 less for labs reporting results in over 48 hours

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This is an excerpt of a 1,9842-word article in the October 26, 2020 issue of THE DARK REPORT (TDR). The full article is available to members of The Dark Intelligence Group.

CEO SUMMARY: Starting Jan. 1, CMS will lower the Medicare COVID test payment to $75 when labs with “high-throughput systems” report a COVID-19 test result after 48 hours. This is the federal government working at cross purposes, since other federal agencies are diverting COVID-19 testing supplies from labs. This penalizes a lab that accepts COVID-19 specimens believing it has the supplies needed to report results in less than 48 hours, only to have a federal agency divert those supplies with no advance notice. THE DARK REPORT asks industry leaders what this means for labs.

NEWS THAT THE MEDICARE PROGRAM WILL REDUCE PAYMENTS FOR MOLECULAR CORONAVIRUS TESTS starting Jan. 1 was an unwelcome surprise for clinical laboratories. Responding immediately, several lab associations and groups stated that reduced payment could cripple COVID-19 testing nationwide.

In interviews last week, experts from some of the largest organizations for clinical laboratories and pathologists expressed deep concern about a plan from the federal Centers for Medicare and Medicaid Services (CMS) to pay 25% less for what CMS called, “expedited COVID-19 test results.” Essentially, this payment policy penalizes clinical laboratories that take longer than two days to report COVID-19 test results.

In April, CMS increased payment to laboratories for high-throughput COVID-19 molecular tests from about $51 to $100 per test. But on Oct. 15, CMS changed that policy, saying that on Jan. 1, the agency would pay only $75 for each COVID-19 molecular test (called clinical diagnostic laboratory tests or CDLTs) when labs do not produce a result in 48 hours.

Only labs that complete high-throughput COVID-19 diagnostic tests within two calendar days of the specimen being collected would be paid $100, CMS said. In the announcement, CMS said the change in Medicare COVID test payments is designed to ensure that patients who test positive for SARS-CoV-2 are alerted quickly so they can self-isolate and get medical treatment. Fast turnaround times are more important than ever to allow patients and physicians to make treatment decisions quickly and then to isolate patients and do contact tracing, said CMS Administrator Seema Verma.

In effect, CMS is amending its Administrative Ruling (CMS 2020-1R2) from April to lower the base payment amount for COVID-19 tests on high-throughput instruments to $75.

The agency made this decision “… in accordance with CMS’ assessment of the resources needed to perform those tests,” the announcement said. This statement about “resources needed to perform those tests” contradicts what clinical laboratory directors and molecular pathologists have told The Dark Report since February.

Supply Chain Disruptions

Since then, each lab director and pathologist we’ve interviewed has said his or her laboratory has run short of collection supplies, viral transport media, COVID-19 test kits, primers, reagents, and other supplies required to perform tests at full capacity.

With few exceptions, every clinical laboratory in the United States has experienced daily supply shortages that hinder clinical laboratories’ ability to run all of the incoming SARS-CoV-2 specimens and report the results in a timely manner that would be clinically useful to physicians and patients.

In addition, the cut in Medicare COVID test payments does not take into consideration the fact that federal agencies and state governments have interceded to redirect lab-testing supplies with little or no notice to the clinical laboratories expecting to receive those supplies. Such disruptions have occurred when government agencies have commandeered supplies to send them elsewhere.

While the base payment rate will be $75 on Jan. 1, CMS also said that it will make a “$25 add-on payment” to laboratories for a COVID-19 diagnostic test run on high-throughput technology if the laboratory hits two benchmarks:

• Completes the test in two calendar days or less, and

• Completes the majority of their COVID-19 diagnostic tests that use high-throughput technology in two calendar days or less for all of their patients (not just Medicare patients) in the previous month.

The new rule defines a “majority of COVID-19 diagnostics tests” as being 51%. “These actions will be implemented under the amended Administrative Ruling (CMS-2020-1-R2) and coding instructions for the $25 add-on payment (HCPCS code U0005) released today,” the agency added.

“In the circumstance that the laboratory has not completed 51% of its CDLTS making use of high-throughput technologies for the detection of SARS-CoV-2 or the diagnosis of the virus that causes COVID-19 (for all patients) in two calendar days from the date the specimen was collected during the applicable month, it may not bill” for the new HCPCS codes in the rule, CMS said.

When this lower rate is combined with other requirements from CMS, the result of this payment reduction could cause clinical laboratories to struggle still further, crippling their ability to test at full capacity, said Matthew Schulze, Director of the Center for Public Policy at the American Society for Clinical Pathology.

Huge Financial Challenge

“Like many medical specialties, clinical laboratories have encountered major economic challenges this year due to the erosion of routine lab test referrals,” he commented. “Ordinarily the loss of $25 per test (a decrease of 25%) would pose huge financial challenges for the laboratory community in any year.

“But given all the other financial hits the laboratory community faces right now, this action from CMS could be crippling,” he added. “We appreciate the intent of the policy, but this could be a real challenge for some laboratories.”

In addition toMedicare COVID test payment cuts, CMS recently imposed new COVID-19 test reporting rules that require labs to provide demographic and other information on those being tested for SARS-CoV-2. “Those requirements impose a huge financial burden on labs,” noted Schulze.

After analyzing the rule requiring more information on patients’ demographic information, ASCP reported that the added costs of this rule alone could be significant, Schulze said.

No Solution for Shortages

Mark Birenbaum, PhD, Executive Director of the National Independent Laboratory Association (NILA), said Medicare COVID test payment cuts will do nothing to help labs address the problem of test kit, reagent, and other supply shortages. “It’s not by choice that clinical labs are taking longer to turn around COVID-19 test results,” he explained. “The big issue they face is a reduced ability to test at full capacity because of a lack of supplies specifically used for COVID-19 testing. That’s what I hear from NILA members.

“They’re not getting the supplies they need because test manufacturers limit what they allocate to their lab customers,” continued Birenbaum. “Reduced allocations limit the number of COVID-19 tests labs can do in a day. That’s the real challenge.

“Adjusting labs’ reimbursement for these COVID-19 tests is the wrong incentive mechanism and may boomerang onCMS officials,” he added.

On Oct. 1, members of the U.S. House of Representatives sponsored a bill called the “Strictly Pay for Efficient and Expedited Delivery of Your (SPEEDY) COVID-19 Tests” Act, which would change payment for these tests in a way that’s similar to what CMS proposed, Birenbaum noted.

“The SPEEDY Act also takes the wrong approach to COVID-19 test turnaround times,” explained Erin Will Morton, a Senior Vice President at CRD Associates in Washington, D.C., who advises NILA on legislative and regulatory strategy.

“While it would offer an increased payment for tests turned around within 24 hours, it would also eliminate payment altogether for any results that take longer than 72 hours.

“This could discourage labs from offering COVID testing and misses the point altogether that labs cannot turn tests around any faster if they don’t have the supplies they need to do so,” she added. “This is why NILA called for more transparency in laboratory supply distribution in a letter we sent along with five other groups to Vice President Pence.”

Neither the CMS policy nor the SPEEDY COVID-19 Act would address the supply-shortage problems that have hampered labs since the pandemic began and continue today, she added.

Assuming that clinical laboratories could produce COVID-19 test results more quickly than they do now, Birenbaum asked how they would report the turnaround times to CMS. “Will labs submit one claim for payment of the test and a separate claim for the extra $25 if the test result is reported in 48 hours?” he asked. “If labs have to submit a second claim, then CMS is creating more work for labs.

Much-Needed Cash Flow

“Then if payments for these COVID-19 tests are delayed, that will just slow down much-needed cash flow to the very labs that other federal agencies are encouraging to increase the number of COVID-19 tests they perform daily,” he added. In addition, would the new CMS rule provide an incentive for labs to report results in 48 hours, and how would CMS know if that reporting is correct, Birenbaum said.

“How will clinical labs prove they’ve submitted the COVID-19 results in two days?” he asked. “Will Medicare go back to the doctor or other provider to get that information? If so, then Medicare is creating another level of complexity.”

Another issue that CMS did not address is that a 25% cut in Medicare COVID test payments could affect smaller community labs more severely than it would affect larger labs, said Danielle Sloane, a lawyer with Bass, Berry, and Sims in Nashville, Tenn.

“This change in payment could be a disadvantage for smaller lab companies that typically have less buying power on the supply side than larger labs,” she commented. “It appears that CMS is trying to discourage labs from committing to do a certain volume of tests that they can’t turn around in a timely manner. That’s a laudable goal,” she added.

Factors Affecting Test TAT

“However, I don’t know if CMS appreciated that many factors affect COVID-19 lab test turnaround times,” said Sloane. “CMS is likely concerned with laboratories holding onto volume in order to retain revenue, rather than shifting it to a laboratory that has more capacity.

How will the cuts to Medicare COVID test payments impact your lab? Please share your thoughts with us in the comments below.

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