NILA Asks Labs to Speak about PAMA Rule’s Flaws

Lab directors urged: Tell Congress to delay PAMA implementation and its revision of rates

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CEO SUMMARY: In a call to action, the National Independent Laboratory Association is urging lab owners, lab managers, and pathologists to educate their members of Congress about the biases and deep flaws built into the final rule for PAMA market price reporting and how the rule will result in reduced access to clinical lab testing services for many Medicare beneficiaries. It is also providing an analysis of the problems with the final rule that lab leaders can use when they speak with members of Congress.

IT’S TIME FOR LAB DIRECTORS AND PATHOLOGISTS TO TELL CONGRESS that allowing the federal Centers for Medicare and Medicaid Services to implement the final rule on market price reporting under the Patient Access to Medicare Act (PAMA) could have drastic implications for labs, physicians and Medicare beneficiaries.

To help inform lab professionals about the specific problems with CMS’ final rule for PAMA market price reporting, THE DARK REPORT has published some of the lab industry’s most detailed analyses of the rule, its implications for labs, and why it has a serious bias that will reduce access to clinical laboratory testing for Medicare beneficiaries in many communities.

On July 17, THE DARK REPORT produced a well-attended webinar on the most recent developments involving the PAMA Part B fee cuts that will start on Jan. 1. One of the experts who addressed the webinar was Julie Scott Allen, Senior Vice President of the District Policy Group at Drinker Biddle and Reath. Allen represents the National Independent Laboratory Association (NILA).

In her presentation, Allen explained the multiple and serious problems that CMS wrote into the final rule and outlined how the clinical laboratory profession is working to educate members of Congress and the new administration about the flaws in the rule and why it is necessary to delay and fix the rule.

Message Is: Delay and Fix

Allen pointed out that a delay would allow time for CMS to work with Congress and the clinical laboratory profession to address the flaws and biases in the final rule as currently written. Revisions are needed to protect Medicare beneficiaries’ access to lab testing, avoid severe financial disruption for community-based, physician office, and hospital laboratories, and help Medicare achieve savings on Part B clinical laboratory spending.

One of the most significant problems with the final rule is that it excludes almost all of the nation’s 5,000 acute care hospital labs from reporting market-based laboratory prices, Allen explained. Also, it has limitations that threaten to exclude complete rate information and accurate data from physician office laboratories (POLs) and community-based laboratories.

This bias is a huge concern for the clinical laboratory industry. “How can CMS conduct a valid study of the market prices that private health insurers pay for lab tests if it excludes thousands of labs from reporting their private payment rates and those labs serve millions of patients every day?” she asked.

“Those hospital labs, community labs, and physician office labs are essential providers of lab testing in rural areas, towns, and smaller cities throughout the United States,” she added. “Private insurers recognize this value. That is why, for decades, private health insurers have paid these labs with test prices that take into consideration higher costs per test, as well as the greater costs these labs have for phlebotomy and specimen transport.

“By requiring only the lab organizations in the United States that have the highest volumes of tests to report their market price data, Medicare officials have introduced a troubling bias into the market price study,” Allen explained. “These larger labs have substantially lower costs per test because of their high volumes and, consequently, health plans pay many of these labs lower prices.”

Two Major Flaws In Reporting

Next, Allen explained to webinar attendees the two major flaws in the data collection and reporting process. “These flaws not only introduce serious problems in how CMS can use the data for its market price analysis, but they put those labs required to report at high risk of onerous fines and penalties should Medicare auditors determine that they failed to gather and report their private payer price data properly according to the requirements in the final rule.”

Also of importance, there are two major flaws with the final rule’s requirements in how labs are to collect and report their private payer price data. One is the retrospective reporting process coupled with a short amount of time that CMS allotted for data collection and reporting. The second is the inherent assumptions about how health insurers remit payments to clinical labs—which is by no means consistent and too frequently do not constitute the final and complete payment rates, she said.

Insufficient Time Allowed

“Congress never deliberated on the requirements included in the PAMA statute,” Allen explained. “CMS is implementing PAMA in a manner focused only on deriving the highest amount of up-front savings through maximum fee reductions,” she said. “No one is addressing the long term effects this rule will have on patient access or market competition.

“There will be significant up-front reductions to the fee schedule, which will result in savings initially to Medicare reimbursement rates,” she added. “But those reductions will result in a far greater cost to Medicare down the road. When laboratory professionals talk about their concerns, they need to emphasize this point with members of Congress and the administration.

“In conversations with Congress and their staff, lab directors need to explain how little time labs had to collect and report the market-price data,” she said. “The final regulation did not come out until June of last year. Then CMS released guidance in September 2016 that included the codes that laboratories needed to report,” she added. Therefore, labs had barely 3.5 months to start reporting data on Jan. 1 of this year.

“CMS required labs to respond to a retrospective reporting process,” continued Allen. “Thus, labs were forced to go back into old records and attempt to get those records to correspond to new requirements that look significantly different from a lab’s billing records.

“NILA’s member labs told us that this whole experience quickly became, at best an expensive process and, at worst one that was impossible to comply with,” she added.

“Another serious problem that labs faced was errors in the data,” Allen explained. “Under the provisions of the final rule, labs had to certify the accuracy of the data they were reporting. But given that the process was complex and labs had little time to do it properly, lab directors had serious concerns about the accuracy of the data they were required to submit to CMS. At the same time, labs faced the possibility of serious fines and penalties if they submitted false data or did not submit data.

“These two problems—having little time and the fear of reporting inaccurate data—put labs at a disadvantage,” she explained. “On top of those concerns, it is extremely difficult for a lab to set up rules to do a retroactive reporting process. One reason this is difficult is because most laboratories don’t have in-depth IT systems or the ability to reconstruct their systems to pull the data together efficiently.

Expensive Manual Review

“For many labs, including NILA members, this process required a manual review of payment data,” she said. “A manual review of paper claims was the only way for most labs to pull the data together for submission. That means labs had to spend thousands of dollars either to hire additional help or take their staff off of current billing processes to engage in the PAMA reporting process.

“Another significant issue that lab directors need to explain to their senators and representatives is that many labs do not have formal contracts or agreements with every health insurer,” Allen said. “Often, there is no contract rate or fee schedule for a lab to compare against what a payer remits after a laboratory submits its bills. This problem is even more challenging for labs that are out-of-network.

“Therefore, to pull the data together, labs literally had to do a manual review of paper claims to justify differences in how different plans pay and how different plans within the same insurer pay for certain tests,” she said. “All of these issues compound the fear of reporting errors.

Lacking Formal Contracts

“Here’s an example: When a payer issued a remittance that bundled individual lab tests together into a single payment, PAMA rules prohibit the reporting of bundled payment rates,” Allen said. “In addition, CMS told laboratories not to report data that they had to pro-rate in their systems.

“But with a retroactive reporting process, labs had no time to establish a mechanism for identifying which data in their systems was pro-rated or paid in a bundled payment basis versus which data wasn’t pro-rated or paid in a bundle,” Allen said. “Laboratories concerned about Medicare audits submitted the data anyway because their records reflect those payments, and there was no way to extrapolate those payments from the full data set reported.

“Many labs struggled with what one might assume was the more basic question: Am I required to report?” commented Allen. “There was much discussion among members of the hospital lab community about which ones needed to report and which ones didn’t need to report.

Hospital Labs with NPIs

“NILA has learned that even when some hospitals had their own national provider identification number (NPI) for hospital outreach laboratory work, many times they didn’t bill through their NPI,” she said. “Instead, they did an analysis of whether they had to report based on the health system they belong to. Often, labs in this situation would conclude that they didn’t need to submit data.

“Also, it’s important to note that the PAMA statute allowed the secretary of the federal Department of Health and Human Services to establish a low-volume or low-expenditure threshold so that CMS could allow certain labs not to report their data,” she added.

“In the final rule, CMS used this option to establish a low economic threshold, rather than a low volume threshold,” she said. “By establishing a low economic threshold, according to the Office of Inspector General, CMS effectively eliminated 96% of physician office labs from reporting and an estimated 52% of independent laboratories from reporting.

“For all these reasons, we encourage lab professionals and pathologists to contact their elected officials in Congress to discuss the significant bias and flaws in the PAMA final rule,” Allen concluded. “To be effective in these conversations, lab managers should be prepared to discuss how drastic reductions in reimbursement from a skewed and overly burdensome federal regulation will affect their ability to employ a skilled workforce and care for patients in their communities.”

Contact Elected Officials

Every clinical laboratory manager, lab scientist, and pathologist is encouraged to contact their senators and representatives to educate them about the need to delay and fix the PAMA market price reporting final rule. Such contacts will be timely and will reinforce the ongoing educational efforts that are happening in Washington, DC, as representatives from various lab associations and companies meet with elected officials and policymakers. This high-stakes issue needs to be fixed.

Contact Mark Birenbaum at 314-241-1445 or

A Serious Need to Explain the Threat From Price Cuts

MEMBERS OF CONGRESS ARE UNLIKELY to understand three serious threats that the final rule under the Patient Access to Medicare Act poses to clinical labs, physicians, and Medicare beneficiaries, explained Julie Scott Allen, who represents the National Independent Laboratory Association.

These three threats include loss of access to local lab testing services by Medicare beneficiaries, particularly those living in smaller cities and rural areas; the financial collapse and bankruptcies of many of the nation’s smaller labs that service these communities; and, the risk of severe penalties for labs that are later determined to have submitted inaccurate private payer market price data.

This is why lab directors should articulate these three problems to the members of Congress in their districts, while also explaining the threat to their businesses as employers and as an essential part of the public health system, Allen said. “Pathologists and lab directors should demand a delay of PAMA to ensure these problems are fixed,” urged Allen.

“I encourage you to raise your voice and be active in this discussion. Make certain that there’s an understanding—both in Congress and in the Trump Administration—about the implications of the PAMA rule on the communities you serve,” commented Allen. “This program has implications for your customer base, meaning the physicians and patients you serve, and there are serious implications on public health overall.

”More convincing needs to be done to persuade Congress that the implications of the revised Medicare Part B lab test fee schedule could be quite grave,” she said.


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