Legal Update

Labs Ask: Does PAMA Statute Prevent Legal Challenges?

Although the law prevents labs from challenging its provisions, avenues of challenge are possible

SINCE MEDICARE OFFICIALS PUBLISHED the final rule for lab test market price reporting of private payer prices last year, clinical lab industry consultants and lawyers have raised serious criticisms of the rule.

The critics recognized that CMS officials wrote a final rule for the Protecting Access to Medicare Act (PAMA) that excluded from reporting large numbers of clinical labs that receive higher payments from private health insurers than other labs do. This discrepancy will mean that CMS will set lower fees because the data it collects will come from labs that get paid less from health insurers.

One example offered of this bias is the final rule’s requirement that each hospital lab must have a National Provider Identification number to submit market price data to the federal government. The problem with this NPI issue is that only a few hospital labs have their own NPIs because they operate under their parent hospitals’ billing numbers when submitting claims to CMS.

Cuts Higher Than Expected

Another concern is that CMS expects the cuts to the Medicare Part B clinical lab fee schedule to total $400 million during 2018 and $5.4 billion over 10 years. Critics point out that these amounts are twice as high as the fee cuts that Congress planned when it passed the law in 2014.

But what will surprise many lab administrators and pathologists is a little-known fact about the PAMA statute and the final rule for market price reporting: Both include language that some say limits the legal challenges that the clinical lab industry could mount against that law.

To address these questions, THE DARK REPORT sought clarification from Jeffrey J. Sherrin, a lawyer who is President of O’Connell & Aronowitz, in Albany, N.Y. He represents the National Independent Laboratory Association.

Immunized from Lawsuits?

On the issue of whether the wording in the law prevents lawsuits, Sherrin said, “There is a section in the PAMA statute that prohibits legal challenges to the rates that CMS establishes. The PAMA provision that states ‘[t]here shall be no administrative or judicial review under section 1869, section 1878, or otherwise, of the establishment of payment amounts,’ is codified in 42 USC 1395m-1(h)(1) as well as in corresponding regulations in 42 CFR §414.507(e).

“It is disappointing that this provision is present, because it can have the effect of allowing CMS to set rates that are actually inconsistent with the data collected,” he added. “It may even immunize CMS from challenges to the methodology used to decide upon who has to report, and what data needs to be recovered, in what format.

“There is precedent for these statutory provisions that limit the available remedies, including in the context of Medicare rates,” Sherrin explained. “The theory is that if Congress creates the right, Congress has the power to determine and limit the remedies. The exception is if there is a claim of a deprivation of a constitutional right.

A Right To Payment?

“Congress has much less authority to restrict someone’s right to challenge an unconstitutional act,” he said. “In the Medicare context, however, it has been held that there is no constitutional right to a certain level of Medicare payment.

“A different result may be reached where CMS does something in the process that is inconsistent, or contrary to, congressional intent,” he said. “There, the claim would be that CMS is violating the principle of separation of powers, and defeating the intent of Congress. There may be a viable argument that the prohibition on challenges to rates would not bar challenges to administrative action that is actually contrary to the language or intent of the PAMA statute, or other federal law.”

Next Sherrin addressed the question most lab directors would have: can a lab challenge how CMS sets rates under the law? “The next question becomes whether it also bars challenges to the methodology that CMS uses to arrive at the rates,” he said. “Recent decisions have held that when the methodology is inextricably intertwined in the rates, one cannot challenge the methodology either.

Are Challenges Barred?

“Thus, this provision could be seen as barring challenges to the methodology,” he added. “But, as with the observation above, if the methodology itself violates some other congressional language, the challenge might still be viable. So, I think that the jury is still out whether all challenges are barred.”

The question about whether clinical labs that lack an NPI would need to collect data retroactively to comply with the law is more complex. “The issue of retroactive data gathering is a problem for all laboratories, not just hospital labs,” Sherrin explained.

“CMS could have set compliance dates with the PAMA regulations that allowed labs to put the systems in place first, to enable them to capture prospective data,” he said. “But CMS did not and the PAMA statute itself did not require that. Apparently, Congress and CMS failed to understand the problems and difficulties laboratories would face in collecting private payer price data, and assumed that labs had the systems and capabilities to retrieve this data retroactively. Unfortunately most do not.

“A legal challenge to setting the compliance timetables in a manner that is impossible to meet, therefore, might be viable on the ground that the demands in the regulations are arbitrary and capricious,” he added. “It would be a difficult case, and the remedy if the labs won might be just a delay in implementation.

Uncertainty Among Labs

“A big problem I see is that labs cannot really be sure in the initial reporting that their data is complete and accurate,” observed Sherrin. “Yet—not only is the lab subject to heavy sanctions if it fails to report—but the lab must also have a certifying officer who certifies to the completeness and accuracy of the data submission. They are subject to personal sanctions if they falsely certify. So, in some ways, these certifying officers are caught between a rock and a hard place.

“Hopefully these dilemmas will be recognized and fixed before the deadline for reporting,” he concluded. “Labs need clarity on these important issues.”

Contact Jeffrey J. Sherrin at 518-462-5601 or jsherrin@oalaw.com.

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