Labs Have Heavy Burden to Report Lab Price Data

Under new law, CMS requires each lab to choose if rules apply; then, which payments to report

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CEO SUMMARY: Clinical labs must assess their responsibilities to report lab test market prices to CMS as part of the Protecting Access to Medicare Act. A panel of three experts took up this topic at a recent webinar hosted by THE DARK REPORT. On June 23, the federal Centers for Medicaid & Medicare Services published a final rule and later issued more guidance setting out a complicated series of requirements that labs must follow to determine if they are required to report and, if so, what lab price data they must submit.

CLINICAL LABS WILL FACE SIGNIFICANT challenges in coming weeks to report lab test price data to the federal Centers for Medicare & Medicaid Services, starting January 1, 2017. Labs that fail to comply with this new law can be hit with stiff penalties.

That’s the opinion of lab industry experts who spoke during a recent DARK REPORT webinar. “Pathologists and clinical lab directors seeking to avoid these penalties need to know that PAMA requires CMS to revise how it pays for clinical diagnostic laboratory tests (CDLTs) on the Clinical Laboratory Fee Schedule (CLFS),” emphasized Mark Birenbaum, PhD, Administrator for the National Independent Laboratory Association (NILA).

In the webinar, Birenbaum’s goal was to explain the rule and its complexities to help pathologists and clinical lab managers tasked with learning the new terms and policies under PAMA and ensuring that their labs comply with those rules. “We also want to assist you in avoiding pitfalls, mistakes, and penalties,” added Birenbaum.

“On June 23, CMS published the final rule implementing the PAMA clinical lab reimbursement framework,” he continued. “Next, on Sept. 14, CMS posted a Clinical Laboratory Fee Schedule Data Reporting Template and a Quick User Guide to the template.”

Lower payments expected

From the presentations during the webinar, it was clear that clinical laboratories must deal with significant challenges as they follow the steps required to report the necessary market price data under the law. “The reality is that the end result is expected to be lower payments for Part B clinical laboratory test fees,” stated Julie Scott Allen, who represents NILA and is Senior Vice President at the District Policy Group in Washington, D.C.

Rounding out the webinar panel of experts was attorney Jeffrey J. Sherrin, President of O’Connell & Aronowitz, in Albany, N.Y. and an adviser to NILA.

“Through all of what’s been said about PAMA, CMS’ goal is to reduce what it pays under the clinical laboratory fee schedule,” stated Allen. “This is what the agency has said before PAMA came to be, and it’s what it says now. CMS officials even said so specifically in a recent meeting. They point out that the intention of PAMA is to reduce Medicare rates for these tests.”

“CMS intends to reduce what it pays for clinical diagnostic laboratory tests (CDLTs) and for Advanced Diagnostic Laboratory Tests (ADLTs) by collecting data on what private commercial insurers pay labs for these tests,” observed Birenbaum. “CMS will then use that data to reduce current Medicare reimbursement rates for these tests.”

price, Volume Data Needed

Under the final rule CMS issued to implement the law, certain clinical labs will be required to report private payer payment rates for laboratory tests and the corresponding volumes of tests. CMS will then use those private payer rates as the basis for revising Medicare payment rates for most laboratory tests on the CLFS beginning in January 2018. For some 1,300 CDLTs, CMS pays about $7 billion each year. (See TDR, July 5, 2016.)

Which Labs Report?          

Birenbaum began the webinar by explaining which clinical labs would be required to submit lab test price data and how they would do so. And he warned labs that they need to pay attention to the definitions CMS has set out in the PAMA final rule.

“Your lab needs to determine if it is ‘applicable’ as defined in the final rule for the purpose of reporting the data to CMS, because the penalties in the statute and in the regulations could be significant,” cautioned Birenbaum, adding that, “It is important to note that CMS is not planning to assess or notify a laboratory whether it must report data to the agency.

“Thus, step one is to answer this question: Does your lab need to report its private payer rates?” stated Birenbaum. “In other words, is your lab what CMS calls an ‘applicable laboratory?’

“To determine that, you must answer two questions: Between January 1 and June 30, 2016, did your laboratory receive from the CLFS more than $12,500 in Medicare revenue? That’s called the low expenditure threshold.” commented Birenbaum. “If the answer is no, then your lab would be excluded from reporting as an applicable laboratory.

“If the answer is yes, then you need to answer the second question: Was 50% of your individual laboratory’s total Medicare revenues received from the CLFS or the Physician Fee Schedule (PFS)?” he continued. “This assessment is based on each laboratory’s national provider number (NPI). Thus, if you have multiple laboratories and they have individual NPIs, each NPI must conduct this assessment.

“An applicable lab must report total Medicare revenues received by each lab NPI from Jan. 1, 2016, through June 30, 2016,” noted Birenbaum. He said that the final rule defines these as as fee-for-service payments under:

  • Medicare Parts A and B
  • Medicare Advantage (Part C) payments
  • Prescription Drug Payments (Part D)
  • Medicare beneficiary deductibles and coinsurance under the CLFS or PFS

CLFS and pFS Calculations

“All of those figures for your clinical laboratory must be added together to come up with the denominator in the calculation,” noted Birenbaum. “If that numerator (CLFS and PFS revenue together) is more than 50% of your laboratory’s total revenue, then the answer is yes, your lab needs to report.

“If your lab answers no to either one of these questions, then you don’t have to report your private payer rates,” he said. “But even if you don’t have to report, your lab will have to live with the weighted medians that are calculated from the data that other labs submit. All laboratories paid on the CLFS are subject to the new prices.

“Now, if you’re an individual, independent lab, and you have just one type of business, your lab’s NPI is probably just for your business,” he explained. “But if you’re a bigger company and you have multiple entities with unique NPIs, then you have to do these calculations for each NPI in your corporation.

hospital Laboratories

“A hospital outreach laboratory must determine whether it operates under the hospital’s general NPI or whether it has its own unique NPI when billing Medicare,” commented Birenbaum. “If the hospital outreach lab uses the hospital’s NPI, then it would likely never be an applicable laboratory. That’s because the hospital gets a sizeable amount of Medicare revenue from sources other than the CLFS and the PFS and would not meet the 50% threshold outlined under the law.

“Hospital outpatient laboratories are excluded from reporting under the regulation, even if they receive a majority of their Medicare revenues under the CLFS or PFS,” he added. “CMS argued in the rule that most hospital laboratory payments are bundled under the outpatient payment schedule, so would not qualify for the purposes of reporting. This is despite the fact that many outpatient hospitals regularly bill under the CLFS for some laboratory tests.

“Now, who reports the data to CMS?” he asked. “The NPI doesn’t report the data and the CLIA lab doesn’t report the data to CMS,” explained Birenbaum. “Whoever holds the taxpayer identification number (TIN) associated with all the NPIs in your business is the entity that is required to report the private payer data to CMS. If you consider this confusing, then you are not alone!”

New CLFS Prices Become Effective on Jan. 1, 2018

“UNDER THE FINAL PAMA RULE, the Medicare program will be required on or after January 1, 2018, to pay an amount equal to the weighted median of what private payers pay for CDLTs,” explained Mark Birenbaum, Administrator for the National Independent Laboratory Association (NILA). “That means just 14 months remain before these new rates go into effect,” he said. “Then, CMS will recalculate the weighted medians every three years.

“Most labs were unaware that the first reporting period under PAMA has already past,” continued Birenbaum. “The reporting period reflects payments labs received from payers between January 1 and June 30 of this year. Labs required to report must submit their data between January 1 and March 31, 2017.

“CMS will use that data to set payment rates beginning in 2018,” said Birenbaum. “The next data collection period is expected to be January 1 to June 30 of 2019.

“It’s important to keep in mind that once the weighted medians are calculated, there will be no updates or adjustments to the CLFS as there are now,” warned Birenbaum. “There will be no increase tied to the Consumer Price Index and there will be no decrease tied to any productivity factors. CMS will set lab test prices only by the weighted median—or by gapfill or crosswalk when no data is provided for a test through the PAMA assessment process.”

How CMS decided to define the type of laboratory that must report price data is a point of major contention by many who have studied the draft rule and the final rule. “One major issue of concern to NILA is how CMS chose to identify applicable clinical laboratories,” noted Birenbaum. “Originally CMS proposed identifying applicable labs by tax ID numbers. But in the final rule, CMS changed that to the NPI number.

What Data Must Labs Report?          

Next, Birenbaum explained the challenges every clinical lab faces to report its price data. “Assume that you are an applicable lab, what do you need to report?” he asked. “Your lab must report each private payer rate for which a final payment has been received.

“The final payment has to be received in the six-month period between Jan. 1 and June 30 of this year,” continued Birenbaum. “Your lab reports only payments received during those dates regardless of the original date of service, but not claims submitted and unpaid.

What Data to report

“Here is the data that must be reported,” he stated. “1) the associated volume of the tests that correspond to each private payer rate; and, 2) the specific HCPCS code associated with each test as outlined in CMS’ list of HCPCS codes for collecting and reporting applicable information from the six-month period Jan. 1, through June 30, 2016.”

Birenbaum next explained that, “toward the end of August, CMS issued guidance on the more than 1,200 HCPCS codes, and those are the test codes labs must report.

“Labs are not to report payments made on a capitated basis, nor partial payments for which a final payment on a per-test basis cannot be determined,” added Birenbaum. “But your lab does report if it did out-of-network, non-contracted work for private insurers—in those cases where the final payment was received in the six- month period between January 1 and June 30, 2016.

“Also report lab test rates that are the final amount paid for a CDLT after all private payer price concessions are applied,” he noted. “These price concessions can be volume discounts, prompt-pay discounts, cash discounts, chargebacks, rebates, even those free goods contingent on any purchase requirements. So, for example, if the test is priced at $10 but your lab gives a $1 discount for prompt payment, then you report $9, not $10.

“In addition to what must be reported, there are some things not to report,” he continued. “If your laboratory did not receive the final payment because of, say, post-payment activity or appeal, or if there is a dispute about what the actual payment should be and that hasn’t been resolved by June 30, 2016, do not report that. If a claim is under review, it is not reported until the laboratory has the final payment.

What Not To report

“Do not report a payment that cannot be correlated to a specific HCPCS code,” Birenbaum said. “This part is confusing because some ‘test-level’ payments can be grouped into a ‘claim-level’ payment instead of using individual HCPCS codes.

“When a lab claim is denied and there’s no payment, do not report a zero amount. Simply don’t report it,” he explained.

Another issue involves patient cost-sharing amounts. “Labs should include deductibles and coinsurance in the private payer rates,” Birenbaum said. “If a rate is $10 and there’s a 20% patient copay and the private insurer pays your lab $8, you don’t report $8; you report $10. A lab does so whether it received the $2 from the patient or not.

how To handle Deductibles

“For deductibles, if the private payer rate is $10 and the patient hasn’t met her deductible, your lab still reports $10,” he explained. “We plan to get confirmation from CMS on the deductible and coinsurance issues.”

One last issue to consider is how CMS defines a private payer as a health insurance issuer. “This definition includes any Medicare Advantage plan, Part C; or Medicaid managed care organization,” observed Birenbaum. “If your lab gets Medicaid payments on a fee-for-service basis that is not part of Medicaid managed care, such a situation does not fall under the definition of private payer, so you don’t report that amount. Report it only if it comes from a Medicaid managed care organization.

Critics of CMS and Final PAMA Reporting Rule Object to Exclusion of Hospital Outreach Labs

“BECAUSE THE PRICE DATA from many hospitals will be excluded, as outlined in the regulation, this will bias the data collected by CMS in ways unfavorable to the clinical lab industry,” asserted Mark Birenbaum, Administrator for National Independent Laboratory Association (NILA).

He also believes that CMS is not interpreting the PAMA statute as written and as Congress intended. “What’s important about hospital lab data is how it might affect calculations for weighted medians,” he said. “NILA has a breakdown showing Part B payments in 2014 to independent labs, hospital labs, and physician office labs. Hospital labs accounted for about one-fourth of the total payments. (See pie charts below.)

“This means, that—without hospital lab data—what the two big labs report dominates the calculation of weighted medians because they have the biggest testing volume, which constitutes over 54% of the data from the non- hospital volume,” he warned.

“Under PAMA, the hospital inpatient data is excluded because they are not paid under the CLFS, and CMS excluded hospital outpatient data, because they argue that it is primarily bundled into Medicare’s outpatient prospective payment system,” stated Birenbaum. “CMS says hospital outreach testing data should be included, but we are very skeptical about how much of that data will actually find its way into the calculations since most hospital outreach labs do not have their own NPI.”

How Hospital Private Payer Rates Will Affect
the Calculations of Weighted Medians

Screenshot 2016-11-14 15.30.45

“Also, do not include payments your lab gets as cash from direct-to-consumer sales,” concluded Birenbaum. “Consumers are not included in CMS’ definition of private payers, so revenue from this source is not be be reported.”

Contact Mark Birenbaum 314-241-1445 or; Julie Scott Allen at 202-230-5126 or; Jeffrey Sherrin at or 518-462-5601.


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