California’s Lab Price Data Collection Project Cuts Lab Test Prices by 10.5%

In rate changes effective July 1, state slashed pay for 252 lab tests; most were cut by 0.1% to 25%

COLLECTING LAB TEST PRICE DATA is not limited to PAMA and the federal Centers for Medicare & Medicaid Services. California’s Medi-Cal program is in its second year of requiring clinical labs to submit private payer lab test price data.

However, in both the first and second year of requiring clinical labs to report lab test prices paid by private payers, the California Department of Health Care Services (DHCS) has received price data from only 9% and 10.1%, respectively, of the total number of labs required to report.

After the first year’s submission of lab price data, DHCS reported a drop in fee- for-service Medi-Cal spending on clinical lab tests from 2014 to 2015 of $29.4 mil- lion, or 10.5%.

This deep cut in payment came because DHCS slashed what its Medi-Cal program pays labs for 252 lab tests. Most of those tests (229) were cut by 0.1% to 25%, DHCS said. The rate adjustments were effective as of July 1, 2016, the first day of the state’s fiscal year. Medi-Cal is California’s Medicaid program.

“The overall expenditures for Medi-Cal FFS clinical lab services slightly decreased, from $278,566,000 in calendar year 2014 to $249,185,000 in calendar year 2015,” DHCS reported in answer to questions from THE DARK REPORT. That decline of $29.4 million equals a drop in payment of 10.5%.

Earlier this year, THE DARK REPORT covered the first phase of California’s data-collection effort, revealing that only 9% of clinical laboratories in California submitted data in 2015 for DHCS’ rate-setting program. The data submitted in 2015 was based on what third-party payers paid the labs in 2014.

This year, 56 clinical laboratories provided data in the second-phase of the state’s initiative. This number represented 10.1% of the 553 labs required by DHCS to submit data for the second annual rate-setting process, DHCS reported. “The labs that submitted the requested data continue to represent a majority of the total fee-for-service (FFS) claims for these services,” DHCS added.

Majority of Claims Submitted

Last year, DHCS required 742 labs to submit data in phase one and only 66 individual labs submitted the requested data, DHCS said, adding that those 66 labs represent most of the total claims for services.

“DHCS expected to receive a higher number of data submissions; however, the data received continues to represent the majority of FFS claims for these services,” the agency said.

Earlier this year, Michael Arnold, Legislative Advocate and Executive Director of the California Clinical Laboratory Association, said he did not know why most California labs were not submitting data to DHCS except that some labs have said the process is difficult and expensive. “We have suggested to CCLA members that more data would be better and have encouraged our labs to participate,” stated Arnold. “For labs, it’s probably a cost and time issue.”

prediction about PAMA

Earlier this year, Mark S. Birenbaum, PhD, Administrator, of the National Independent Laboratory Association (NILA), made a comment about California’s experience with the collection of lab price data that turned out to be prescient. “We believe that the California data reporting clearly indicates that the PAMA reporting will be difficult and complicated,” he commented in April. PAMA is the Protecting Access to Medicare Act of 2014.

DHCS choose the clinical labs required to submit data based on total claims paid and submitted. Lab providers with 2015 Medi-Cal utilization reflecting paid claims totaling $100,000 or greater, or claim counts totaling 5,000 or greater, were required to submit fee schedule data.

To get more labs to participate, DHCS implemented several strategies to alert labs. But the state agency did not extend the date to submit data beyond the deadline of March 18, 2016.

Steps To Build participation

“DHCS has implemented several methods focused on increasing participation, such as updating the DHCS Clinical Laboratory web page in November 2015 to provide advance notice of the affected NPIs and codes,” DHCS said. “The agency also directly mailed the affected providers to notify them of the data submission requirements and deadline. It continues to notify the lab stakeholders of the request for 2015 lab data so they can encourage their provider’s participation, and the agency has posted provider bulletins to notify the public and providers of the 2015 lab data request and deadline.

“DHCS expects that these efforts will help to increase the number of provider data submissions for the third annual rate-setting process, which recently started for the July 1, 2017, rate adjustments,” the agency said.

“DHCS did not impose any fines to providers,” the agency reported. “DHCS has authority to suspend providers for not complying with the data submission request, but in order to avoid any potential access issues as a result of suspending providers, the department is first looking to other methods of increasing data submissions. Again, the data submitted for the past two rate-setting processes continue to represent a majority of the total FFS claims for these services.”

Law requires Data Collection

California’s Department of Health Care Services (DHCS) is required under state law, Assembly Bill 1494, to develop a new rate-setting methodology for clinical laboratory or laboratory services based on the average of the lowest prices other third-party payers are paying for similar services. The new rate-setting methodology was effective July 1, 2015.

The new method requires a 10% payment reduction for clinical laboratory and laboratory services until CMS approves a new rate-setting methodology, DHCS said. Lab testing services under the Family Planning, Access and Treatment (FPACT) program and outpatient hospital services, effective July 1, 2012 through June 30, 2015, are excluded from this reporting requirement.

The low rate of clinical laboratories submitting private payer price data as required by California state law is a sign of how complex and time-consuming it is for the majority of labs to comply with this type of requirement.


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