CEO SUMMARY: For all laboratories that must report private payer price data under the Protecting Access to Medicare Act (PAMA), a new bill in congress would delay the next round of data reporting for one year and require the National Academy of Medicine to recommend ways to improve the data collection and market-rate setting processes under PAMA. Supporters consider the bill to be a first step toward more comprehensive reform of PAMA, which has resulted in deep cuts to Medicare lab test fees.
LATE LAST MONTH, members of both major parties co-sponsored a bill in Congress that supporters said could address two of the most significant problems labs face under the Protecting Access to Medicare Act (PAMA).
First, for all clinical laboratories that must report private payer lab test price data under the law, the bill would delay the next round of data reporting for one year. Instead of reporting payer data from private insurers in the first quarter of 2020, labs would not need to report those numbers until the first quarter of 2021.
Second, the bill would require the National Academy of Medicine to recommend to Congress less burdensome data collection methods and reimbursement rate calculations based on actual market rates, as Congress intended when it passed PAMA in 2014, according to the American Clinical Laboratory Association (ACLA).
In announcing its support for the billed, called the Laboratory Access for Beneficiaries Act (the LAB Act), ACLA said that when implementing PAMA, the Secretary of the federal Department of Health and Human Services, “deliberately disregarded Congress’ instructions and cherry-picked payment data from less than 1% of laboratories nationwide.” As a result, rates were much lower than if federal regulators collected data based on the entire clinical laboratory market.
The proposed bill has bipartisan support and the backing of the ACLA, the National Independent Laboratory Association (NILA), AdvaMed, and the Point of Care Testing Association.
Deep Medicare Price Cuts
While much about the bill is positive for labs, it does not address the larger issue of the deep price cuts that labs have faced under PAMA since last year, said NILA Administrator Mark Birenbaum, PhD. Those Medicare price cuts total 10% in each of 2018, 2019, and 2020, and then 15% in each of the next three years: 2021, 2022, and 2023.
For labs struggling to meet the data requirements and facing ever-lower levels of payment under PAMA, the bill is a significant step in the right direction, Birenbaum commented. “But it doesn’t get to the heart of the problem: the cuts scheduled under PAMA and the fact that those price cuts are based on incomplete data,” he said.
“The rates Medicare is paying are based on data from less than 1% of the lab marketplace,” he said. “Those rates have been in place since last year and then they’ll go even lower. If you cut most rates by up to 10% in each of the first three years, that’s up to a 30% drop, and then you cut most rates by 15% the following year, that’s a 45% drop in just four years for many rates.
Community Labs at Risk
“Such deep price cuts in high-volume tests mean very few community laboratories will be able to stay in business,” Birenbaum predicted. “These reductions in payment are such a significant concern, that NILA has continuously advocated for a comprehensive fix for PAMA. That’s why we believe additional reform will be needed after implementation of the LAB Act.”
ACLA President Julie Khani agreed that such deep cuts in Medicare payments are a significant concern and that comprehensive reform is needed. Even without comprehensive reform, however, the LAB Act is a positive step, she added.
“ACLA recognizes that PAMA needs comprehensive reform and we see the LAB Act as an important first step toward that broader reform,” she said in an interview with THE DARK REPORT. “One fundamental change we need now is to fix the data-collection process.
“In passing PAMA, lawmakers instructed the agency to set market-based rates, and you can’t get to market-based rates when data is collected from less than 1% of all laboratories,” she added.
The delay in reporting until 2021 is important not only because clinical labs need the extra time, but also because of changes the federal Centers for Medicare and Medicaid Services (CMS) made in defining which labs must report their private payer price data, Khani commented.
“In 2018, CMS amended the PAMA regulations to require more robust reporting, in particular for hospital labs,” she said. “But awareness of that new data reporting requirement among hospital administrators is very low. Therefore, delaying the data reporting period is an important step toward broader reform of the PAMA law.”
Even before CMS changed the reporting requirements last year, many hospitals were uninformed about PAMA and were unaware of how the Medicare price cuts would affect lab revenue, Khani added.
“The majority of hospitals were not aware of PAMA after it passed in 2014 and few hospitals are aware of the changes CMS made last year,” she said. “That’s why we’re spreading the word to hospitals and to hospital lab directors about their obligation to report data to CMS on what private health insurers pay for lab tests.”
To help spread the word to hospitals and hospital labs, ACLA partnered with one of its associate members, Hologic, to host a series of webinars last month about hospital reporting obligations under PAMA. An on-demand version of the last session is available on the ACLA website.
“The delay until 2021 would give us time to make more hospital labs aware of the requirements,” Khani commented. “And, it would give labs the time they need to report private payer data to CMS.”
Data Reporting Requirements
Birenbaum concurred, saying, “Many hospital outreach laboratories are unaware of this new requirement and had little time to build the necessary data systems and procedures to report the data.
“The one-year delay gives hospital laboratories more time to meet the new reporting requirement, but additional legislation or regulations will still be necessary to fix the data-collection and rate-setting processes,” he added.
Fixing those processes is an important role for the National Academy of Medicine. “The LAB Act commissions a study by the National Academy of Medicine (NAM) to assess how to improve PAMA implementation to better reflect Congress’ original intent of a market-based fee schedule,” Birenbaum said. “NAM was chosen because it’s a neutral third party and has conducted previous studies related to the clinical laboratory fee schedule.”
Formerly known as the Institute of Medicine, NAM is one of three academies that make up the National Academies of Sciences, Engineering, and Medicine. It is a private, nonprofit institution that works outside of government to provide objective advice.
Less Burdensome Reporting
If passed, the LAB Act would have NAM gather comments from clinical labs and other members of the lab community to recommend a less-burdensome way for CMS to collect the data it needs to set private market-based rates, Birenbaum explained. “CMS needs a data collection process that results in a representative and statistically valid sample,” he said.
PAMA has frustrated clinical lab directors because it resulted in significantly lower Medicare payments and because many labs and lab associations have said the process CMS used to collect the payment data was flawed.
“In the first private payer price reporting cycle, CMS collected data from less than 1% of laboratories nationwide, resulting in a skewed and underrepresented sample of private payer market rate information,” said Birenbaum, echoing ACLA’s comment. “Congressional intent was to establish a market-based system, which CMS did not do. NILA believes that CMS should follow congressional intent and establish a data-collection process that represents the entire lab market.”
On Jan. 1 of this year, CMS began the second round of data collection. That collection period ended June 30. If the LAB Act is not passed and signed into law, labs will need to report that data and test volume starting Jan. 1 and continuing through March 31 of next year.
About the LAB Act
AS OF JUNE 27, when Representative Scott H. Peters (D-California) introduced HR 3584, the Laboratory Access for Beneficiaries Act, the bill had five co-sponsors: Gus Bilirakis (R-Florida), Bill Pascrell (D-New Jersey), Kurt Schrader (D-Oregon), Richard Hudson (R-North Carolina), and George Holding (R-North Carolina).
Four more cosponsors were added on July 11: Lisa Blunt Rochester (D-Delaware), Jackie Walorski (R-Indiana), Thomas R. Suozzi (D-New York), and Ken Calvert (R-California).
In addition to delaying the date for labs reporting private-payer rates to CMS for one year, the bill also would require CMS to have the National Academy of Medicine (NAM) review the methodology CMS used to implement the private payer rate-based clinical laboratory fee schedule.
Assuming the bill becomes law, the language in the bill directs CMS to contract with NAM within three months to consider how best to implement the least burdensome data-collection process required under PAMA. The bill states the goal would be to “result in a representative and statistically valid data sample of private market rates from all laboratory market segments, including hospital outreach laboratories, physician office laboratories, and independent laboratories.”
Also, NAM would consider the variability of market segments by laboratory procedure code and appropriate statistical methods for estimating rates that are representative of the market.
After 18 months, NAM would report its conclusions to CMS and to Congress and recommend ways to improve the data-collection and reporting methodology under PAMA, the bill says.