Part B Fee Update

Lab Associations Comment on CMS Actions, Lab Fees

ACLA mentions possibility of a legal challenge; NILA predicts many small lab failures, bankruptcies

FOR THE LAB INDUSTRY, THE FEE CUTS proposed in the 2018 Clinical Laboratory Fee Schedule would be even more aggressive than what the federal Centers for Medicare and Medicaid Services had earlier predicted for Medicare Part B.

In the days following the Sept. 22 publication of the proposed fee schedule, major lab industry associations issued statements explaining how the proposal is flawed and the serious problems it could cause for labs and Medicare beneficiaries.

Community Lab Association

In a statement that day, Mark Birenbaum, PhD, Executive Director of the National Independent Laboratory Association, said, “The [PAMA] statute’s intent was to establish private market-based laboratory payment rates within Medicare, but the regulatory agency has not done this.

“CMS imposed requirements that community laboratories could not meet, giving them only a few months to prepare reportable data, and threatening penalties up to $10,000 for each error they made,” he continued. “CMS constructed a system where the national laboratories with the highest test volumes and highest discounts in the private market would dominate the data reported. Then they prohibited the segments of the laboratory market with high test volumes and higher payments in the private market from reporting their data.”

Birenbaum predicted dire consequences for community laboratories and the Medicare beneficiaries living in the small towns and rural areas that labs serve. “This regulation will eliminate access to clinical laboratory testing services for many Medicare beneficiaries, particularly those living in rural and underserved areas and those with complex health conditions that rely on clinical laboratory tests to guide their care and treatment,” he said.

“If these payments are not corrected, laboratories will be forced to lay off thousands of workers across the U.S., eliminate services, or close their businesses all together,” he emphasized.

The same day, the American Clinical Laboratory Association also criticized the process CMS used and the proposed rates. “ACLA has conducted an initial review of the draft PAMA rates published by CMS today. With few exceptions, these rates are not market-based. If finalized, these rates will inflict severe cuts—well beyond those ever envisioned by Congress—and ACLA believes the impact will be unprecedented and far reaching. These rates will devastate many of our members and create severe disruptions in access to laboratory services, particularly for the most vulnerable Medicare beneficiaries.

“ACLA even submitted an analysis to CMS that showed how the inclusion of physician office labs and hospital labs would meaningfully impact the rate determination,” continued ACLA. “CMS simply ignored all such input. The result is proposed rates that will negatively impact Medicare beneficiaries, restrict access to necessary and life-saving clinical laboratory testing, and stifle innovation in the research and development of new diagnostic tools.”

Legal Action Considered

ACLA also said that it would pursue all available remedies in an effort to delay implementation of the fee cuts and use that time to address the problems in the final rule. “ACLA is continuing to evaluate the draft rates and will advocate before all branches of government, including the courts if necessary, for a fair and effective market-based policy solution that encourages innovation and protects Medicare beneficiary access to lab services,” ACLA stated.

Quest Diagnostics also issued a statement that day and specifically mentioned that it was considering legal action. “We are deeply disappointed that CMS has issued draft 2018 Medicare payment rates that are not market-based and derived from a flawed market data collection that excluded key components of the lab market,” said Chairman, President, and CEO Steve Rusckowski.

Hospitals, POLs Excluded

“For example, hospitals and physician office labs [POLs] comprise half of Medicare CLFS volume and lab spending, but only accounted for 8.5% of the reported lab volume used by CMS to calculate the rates,” he continued. “These draft rates are counter to the intent of Congress and will likely cause significant negative impacts to Medicare beneficiary access to lab services. These rates should not be finalized, and I fully support the American Clinical Laboratory Association’s plan to explore all available options, including the courts if necessary, to ensure that patients have access to the services we provide.”

The following Monday, Sept. 25, Laboratory Corporation of America issued a statement. “The new PAMA rates published by CMS do not reflect the intent of Congress when it directed CMS to implement market-based Medicare rates for lab testing,” stated Chairman and CEO David P. King. “We join with the American Clinical Laboratory Association and others in our industry in calling on Congress to take swift action to prevent the harm that will occur if these rates take effect.

CMS Process ‘Fatally Flawed’

“The process CMS followed to determine these rates was fatally flawed and failed to account for significant segments of the lab market by excluding 99% of all U.S. labs from reporting data and limiting data collection to 1% of laboratories, dominated by independent labs. The industry and LabCorp, as well as other healthcare groups, repeatedly pointed out to CMS in formal comments and multiple face-to-face meetings that the definition of ‘applicable laboratories’ in the rule would lead to exactly the flawed outcome that has occurred.

“We will continue to work with all stakeholders to delay implementation of these rates so that CMS can implement the intent of Congress and develop true market-based rates for laboratory services. We and ACLA will continue to explore all remedies, including legal action as appropriate, to prevent the infliction of serious harm on our industry and Medicare beneficiaries,” King concluded.

To learn more about how hospital laboratories are responding to the publication of the Medicare Part B clinical lab test prices for 2018, THE DARK REPORT contacted the Joint Venture Hospital Laboratory Network and the Great Lakes Laboratory Network in Michigan.

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