PAMA Cuts Might Be Reduced to Zero for 2023

New legislation aims to overhaul how Medicare calculates the Clinical Laboratory Fee Schedule

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CEO SUMMARY: Congress may soon vote on a new bill that permanently reduces the amount of price cuts to Medicare Part B lab test prices, as specified under the Protecting Access to Medicare Act of 2014 (PAMA). The Saving Access to Laboratory Services Act (SALSA) eliminates a 15% payment cut for hundreds of lab tests that would otherwise take effect on Jan. 1, 2023. 

NEW  BIPARTISAN LEGISLATION before both bodies of Congress aims to halt the scheduled price cuts to the Medicare Part B Clinical Laboratory Fee Schedule (CLFS) that otherwise could hit labs hard on Jan. 1.

Under the existing Protecting Access to Medicare Act of 2014 (PAMA), during 2023, medical labs and pathology groups face payment cuts of up to 15% for 800 lab tests on the Medicare CLFS. 

However, the new proposal before federal lawmakers—called the Saving Access to Laboratory Services Act (SALSA)—seeks to accomplish three things: 

  • Eliminate the scheduled Jan. 1 price cuts, 
  • Reduce future payment decreases to the Medicare CLFS, and,
  • Reconfigure how HHS/CMS calculate lab test payments for the CLFS.
Erin Will Morton, Senior Vice President at CRD Associates
Erin Will Morton

“Under the proposed bill, clinical laboratories would be in a much better situation because this bill caps payment reductions at 5% by 2025. That’s huge in and of itself,” stated Erin Will Morton, Senior Vice President at CRD Associates in Washington, D.C., in an exclusive interview with The Dark Report. Morton represents the National Independent Laboratory Association (NILA) in matters pending before Congress. 

“To have those caps built in permanently is really important,” she said, adding, “That’s a stark difference between this bill and the existing PAMA statute, which caps price cuts at 10% and 15% depending on the year.”

Working with Lawmakers

NILA and other laboratory industry groups have been working with members of the Senate and House of Representatives to bring SALSA forward.

“Over the past several years, we have achieved strong bipartisan and bicameral support to delay these anticipated cuts, but it is time to permanently fix this problem,” Susan Van Meter, President of the American Clinical Laboratory Association (ACLA), said in a statement.

PAMA has been a burr in the side of clinical laboratories since its inception in 2014. Beginning in 2018, the law triggered significant changes to how the Medicare program paid for lab tests. Under the CLFS, certain laboratories were required to report the lab test prices they were paid by private health insurers to the Centers for Medicare and Medicaid Services (CMS). 

The PAMA statute directs CMS to use that private payer price data to set prices for the CLFS. PAMA specified that CMS could not cut the price of a specific lab test by more than 10% in each of the years 2017, 2018, and 2019, nor by more than 15% in each of 2020, 2021, and 2022. Notably, the PAMA statute is silent about any limits to price cuts to the Medicare CLFS for the years following 2022. 

Congress delayed the cuts in 2021 and 2022, owing largely to the pandemic and the resulting feeling that clinical laboratories had raised their public perception. The next round of payment cuts is set for Jan. 1, 2023, unless other action stops it. (See TDR, “PAMA Test Price Cuts Deferred: It’s a ‘Huge Win’ for Labs,” Dec. 20, 2021.) 

Laboratory observers have noted that going to Congress each year seeking action to delay the PAMA cuts is a piecemeal effort, whereas SALSA would attempt to permanently limit the severity of future payment reductions.

Data Collection Questioned

The language in the SALSA bill focuses on “statistically representative samples” for affected clinical labs. Because of how the U.S. Department of Health and Human Services (HHS) implemented PAMA, some observers believed that data collection for private payer rates skewed towards larger, independent laboratories—to the detriment of all labs subject to the new, lower rates, Morton noted. 

Hospital outpatient laboratories and physician office labs were underrepresented in the data, resulting in Medicare payment rates being artificially lowered.

“In the data collection process specified by PAMA, CMS defined an ‘applicable laboratory’ in such a way that excluded the major of hospital laboratories from reporting their private payer lab test prices,” Morton explained. “The bulk of the data came from independent labs and specifically from the two large national, independent labs. 

“Those private payer rates are significantly lower than the rates paid to hospital labs and other independent laboratories in the private sector. So, by moving to a statistical sampling methodology as defined in the proposed SALSA bill, we hope the agency will more accurately capture the makeup of the market.”

Data from All Types of Labs

That market includes not only independent and hospital labs, but also hospital outpatient labs and physician office laboratories, according to SALSA’s wording.

The ACLA filed a lawsuit against HHS in 2017 over PAMA, and after several twists and turns, an appeals court recently ruled in the ACLA’s favor. (Watch for full analysis about this court decision in the next issue of The Dark Report.)

While SALSA defines goals for data collection, it remains to be seen how HHS and CMS will gather the payment data. 

Some research has already been done on this matter, as called for in 2019’s Laboratory Access for Beneficiaries (LAB) Act. Under that Act, the Medicare Payment Advisory Commission (MedPAC) researched how test payment data was collected. MedPAC concluded in 2019 that PAMA’s methodology captured far more Medicare payments made to hospital labs and physician office labs. (See TDR, “MedPAC Advises Congress on Lab Data Reporting,” June 14, 2021.)

MedPAC hired an external statistic consultant to look at the best way to collect the data. The consultant used two methodologies, one of them is known as “Maximal Brewer Selection,” Morton said. Language in the SALSA bill refers to Maximal Brewer Selection.

“Because the bill points to Maximal Brewer Selection and it’s established in the MedPAC study, CMS should lean on that methodology when implementing the rules for collecting this data as called for in the proposed legislation,” she explained.

A related provision in the new bill would delay a reporting requirement from 2023 to 2026 and decrease the frequency of reporting from every three years to every four.

LAB Act Was a Precursor

SALSA’s roots stretch back to the LAB Act, which also took aim at aspects of PAMA, including instituting a delay in reporting requirements for labs. (See TDR, “33 Groups Cooperated to Get PAMA-Related LAB Act Passed,” Jan. 27, 2020.) Clinical laboratory industry groups have pushed lawmakers for more action since the LAB Act. 

“When the industry supported the LAB Act a couple of years ago, we were clear that it was a starting point to get the MedPAC report, but there would need to be additional legislation to implement permanent changes to PAMA,” Morton recalled.

Congress passed PAMA in 2014 because of the need to find funds to avoid a 24% cut to Medicare physician fees, as required by the “Sustainable Growth Rate” (SGR) formula in a Medicare funding bill passed by Congress in 1997. 

This was described as the “doc fix”. Lawmakers estimated that the new rules for lab test pricing would reduce the money paid to labs by $2.4 billion over a 10-year period. (See TDR, “New Federal Law Changes How CMS Sets Lab Prices,” April 7, 2014.)

PAMA has led to nearly $4 billion in cuts to laboratories since 2018, far greater than the original estimate, according to figures published by the ACLA.

Morton said NILA’s goal is to have SALSA attached to must-pass legislation that Congress typically votes on at the end of each year. 

Not only should clinical laboratory administrators and pathologists closely watch the progress of SALSA over the next several months, they may want to contact members of Congress if they feel strongly about the proposal.

Contact Erin Will Morton at emorton@dc-crd.com.

Lawmakers Supporting the SALSA Bill 

MEMBERS IOF CONGRESS who have sponsored the Senate and House of Representatives versions of the Saving Access to Laboratory Services Act (SALSA) include: Senator Richard Burr (R-NC), Senator Sherrod Brown (D-OH), Representative Bill Pascrell (D-NJ), Representative Scott Peters (D-CA), Representative Richard Hudson (R-NC), Representative Gus Bilirakis (R-FL), and Representative Kurt Schrader (D-OR). 

The bill version numbers are:

    • Senate version: S.4449
    • House version: H.R.8188

Comparing Payment Reductions in PAMA and SALSA 

ONE MAJOR MOTIVATION behind the proposed Saving Access to Laboratory Services Act (SALSA) is to reduce the severity of clinical laboratory test payment cuts currently in effect under the Protecting Access to Medicare Act of 2014 (PAMA).

PAMA does not explicitly state what cuts are in effect beyond 2025, which leaves the language open for any amount of reduction or increase, observers have noted. SALSA, on the other hand, caps the reduction amount to no more than 5% in 2025 and beyond. The table below compares the payment reductions in PAMA, and proposed cuts under SALSA, for 2023 through 2025:

Comparison PAMA vs SALSA payment cuts

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