Expect Significant Disruption during 2019

Each time a new year approaches, it is natural to look ahead and think about what the next 12 months will bring. My bet is that certain sectors of the clinical laboratory industry are soon to experience substantial disruption.

This disruption will come in two forms. First, federal regulators will be tougher on labs that violate the Anti-Kickback Statute and other fraud and abuse regulations. Passage of the Support for Patients and Communities Act (H.R. 6) in October, for example, now makes it against federal law for providers (including labs) to pay commissions to sales reps for generating referrals from physicians. The law covers referrals for both governement and private health plans. Lab industry attorneys and associations are scrambling to get Congress and the federal government to address the conflicts in this law versus the long-standing safe harbors in the Anti-Kickback Statute. However, until that happens, labs that pay sales commissions are at risk of enforcement action by the government and whistleblowers. (See TDR, Dec. 3, 2018.)

Second, in the final Medicare Rule for 2019 PAMA reporting of private payer lab prices, the federal Centers for Medicare and Medicaid Services (CMS) defines hospitals that use the CMS-1450 14x claim form as “applicable labs” that must report their private payer lab test price data to CMS. Many hospitals with billing for Medicare Part B lab tests lack the capability to easily and accurately assemble, assess, and report their private payer lab prices and test volumes.

Yet, failure to report, or to report inaccurate and/or incomplete data, puts every applicable lab at risk of federal fines of as much as $10,000 per day. Thus, a substantial number of hospitals and health systems will find themselves either unable or unwilling to devote the manpower and financial resources needed to collect and report this data. Assuming this is true, then this will be disruptive.

The lab industry knows, from the first data reporting cycle in 2017, that many labs required to report failed to submit any data to CMS. Other labs submitted data that were obviously inaccurate or incomplete. That experience is likely to be equally true for hospitals during this reporting cycle. This raises the possibility of many hospitals choosing to sell their lab outreach programs during 2019 to avoid the need to report this PAMA data (and avoid the possibility of federal fines). If that happens, it will be disruptive to the clinical laboratory industry.


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