CEO SUMMARY: Last Thursday, the federal Centers for Medicare and Medicaid Services said it was extending the deadline for certain labs to report their private payer lab test prices by an additional 60 days, until May 30. Statements by CMS officials indicate that either or both the number of labs that reported and the volume of data submitted through March 30 was less than expected. But, does “less” mean that only 10% of required labs didn’t report, or might the under-reporting be 50% or greater?
IT WAS BIG NEWS FOR THE CLINICAL LAB INDUSTRY LAST WEEK when officials at the federal Centers for Medicare and Medicaid Services issued a public statement that effectively meant the agency would allow certain labs an additional 60 days—through May 30—to report their private payer lab test price data as required by the Protecting Access to Medicare Act.
Many national lab associations have engaged with CMS, Congress, and the administration to request action to delay implementation of this controversial part of the PAMA statute and fix the problems with the final rule as issued by CMS. However, agency officials did not acknowledge whether the lab industry’s engagement with government officials played a role in causing CMS to keep the reporting period open until May 30. Rather, in its written statement about the data reporting extension, CMS said it was in response to comments from some labs that they were unable to submit the required data by the original March 31, 2017 deadline.
In its written statement announcing the extension, CMS said it “will exercise enforcement discretion until May 30, 2017, with respect to the data reporting period for reporting applicable information under the Medicare Clinical Laboratory Fee Schedule (CLFS) and the application of the Secretary’s potential assessment of civil monetary penalties (CMPs) for failure to report applicable information. This enforcement discretion applies to entities that are subject to the data reporting requirements adopted in the Medicare Clinical Diagnostic Laboratory Tests Payment System final rule published on June 23, 2016 (81 FR 41036).”
Full Statutory Authority
Even in announcing an extension, CMS took steps to preserve its full statutory authority over labs, as demonstrated by its choice of language. Instead of writing in plain English that “the deadline for reporting would be extended,” CMS wrote that it “will exercise enforcement discretion until May 30, 2017 with respect to the data reporting period… and the application of the Secretary’s potential assessment of civil monetary penalties (CMPs) for failure to report applicable information.”
As the reason for this 60-day extension, CMS said, “Industry feedback suggests that many reporting entities will not be able to submit a complete set of applicable information to CMS by the March 31, 2017 deadline, and that such entities require additional time to review collected data, address any issues identified during such review, and compile the data into CMS’s required reporting format.”
There is a strong possibility that CMS may have received less data from the clinical laboratories required to report under this rule. This would be a problem for CMS if the total number of laboratories that submitted data as of March 30, the day when the agency announced the extension, was far below what the agency expected and what is needed to do the market price study. At least two developments support this theory.
Public Comments At ACLA
First, on March 23 in Washington, DC, Carol Blackford, Director, Hospital and Ambulatory Policy Group at CMS spoke at the annual meeting of the American Clinical Laboratory Association about the status of CMS’ lab test price reporting. Officials at CMS have heard that clinical labs have encountered many unexpected problems with compiling the market price data, the third-party software they used that may not have been updated, and labs need to do a lot of manual work to complete the submission of their data, she said.
Blackford explained that CMS is carefully monitoring the process labs use to upload their data and said that no serious issues had happened to date with that web-based system. “What we are seeing so far—in terms of volume—is that we have a good number of registrations,” she explained. “Totals are picking up, as you would expect them to as we near the end of the data collection period.
“We are seeing the reported data fields for the majority of HCPCS codes, but the volume overall is lower than what we expected,” Blackford said.
Lots of Under-Reporting?
This statement confirms that less data and/or fewer labs have reported than what CMS projected. But Blackford gives no hint as to whether the “lower overall volume” is just a bit less than expected or is materially less—so much less, in fact, as to threaten the ability of CMS to have adequate data for its market price analysis.
The second development is that another government agency has also tried to collect private payer lab test price data and has found it impossible to get more than about 10% of required labs to submit that data. This is the situation in California, where a recent state law requires labs to report these prices annually to the Medi-Cal program.
Last year was the first year that this data reporting requirement was in effect. THE DARK REPORT alerted the lab industry to the fact that Medi-Cal found itself with price data for 2015 from just 9% (66 unique labs) of the 742 labs required by state law to report. (See TDR, April 11, 2016.)
For the 2016 lab test price collection requirement, officials at the California Department of Health Care Services told THE DARK REPORT that only 56 labs sent data to Medi-Cal, out of 553 labs required to report. That is a 10% reporting rate. It is important to note that, as with the CMS market price reporting rule, all of these labs face substantial penalties for their failure to report.
Mark Birenbaum, PhD, said it is possible that the number of labs and volume of data reported to CMS are substantially below what the agency expected and what it needs to do a thorough market price analysis that meets the requirements out- lined by the PAMA statute.
The administrator of the National Independent Laboratory Association (NILA), Birenbaum has been talking to CMS officials, members of Congress, and officials newly-appointed to the Department of Health and Human Services about the need to delay implementation of the PAMA reporting rule so that the rule can be fixed.
It Turns Out that Federal Agencies Aren’t Sharing Accurate Numbers of Clinical Labs in the U.S.
CRITICS OF THE FINAL RULE the Federal Centers for Medicare and Medicaid Services issued last year that requires labs to report what private payers pay for clinical lab tests point out that, as currently written, this rule has the potential to be financially disruptive to the national’s independent labs and to the community and rural hospitals that depend on revenue from lab outreach testing, as well as physician office labs (POLs).
The result could be that Medicare beneficiaries in many cities, towns, and rural areas would lose access to the local labs offering the only testing in those area. For this reason, policymakers need to know what would happen if these labs shut down, were sold, or filed bankruptcy because of the coming Medicare Part B lab fee cuts.
“One key question is the precise number of hospitals with outreach lab programs that have NPI numbers,” observed Birenbaum. “We’ve repeatedly asked CMS for that number since the rule was first published last year. We put that request in writing and we asked for that number at several meetings during the past year. CMS has never answered our questions on this point.
“CMS should be the government agency that has accurate information about the number of labs in each category (such as independent lab, hospital lab, physician office lab) that is required to report,” he said.
Most Hospital Data Excluded
Another issue of concern is how the final rule excludes the overwhelming majority of hospitals with lab outreach departments from reporting their private payer prices— thus introducing bias into the market determinations that will be made by CMS.
“If hospitals with lab outreach departments are being excluded [because they don’t have an NPI number for the lab outreach department], then the question is how big of an impact will that missing price data have on the final numbers calculated by CMS?” he asked. “To make those estimates, CMS needs to have some idea about how many hospitals are required to report the data and what percentage of the nation’s hospital lab outreach departments that represents. Those numbers should have been in the final rule.
Use of NPI Numbers
“But when you read the final rule, you see they decided against using the CLIA certificate as the definition of a laboratory for the final numbers,” he explained. “NILA recommended the use of the CLIA certificate because that would capture the data from these hospital lab outreach departments. Others recommended that approach as well. But CMS ruled that out in favor of using the NPI number instead.
“So, if the NPI number is going to be the CMS policy, CMS officials should know the number of hospital labs with NPI numbers and put it in the final rule,” Birenbaum added. “CMS should also know how many tests that would represent, of the total tests reimbursed by Medicare. Those numbers are critical to the data collection effort and should be addressed before deciding to go forward with this program.
“CMS wrote the rule in such a way as to exclude data from most hospital lab outreach departments because they expected those hospital lab outreach numbers to be much higher than the numbers from the big commercial labs,” he added. “They did that to keep their calculations lower.”
When it defined the clinical labs that must report under the final rule, CMS acknowledged that large numbers of labs in each category (independent, hospital, POL) were excluded from reporting. At that time, CMS said that the labs required to report represented the majority of funds paid under the Medicare Part B clinical laboratory fee schedule.
Are Labs Hesitant to Report?
Birenbaum guessed that one reason CMS may have added the two-month delay was because the agency had not gotten the volume of data it expected from clinical labs, with just a day left before the March 31 deadline.
“It is possible that numerous labs have not submitted data because they are uncertain about how to do it,” said Birenbaum. “There is another legitimate reason why labs have doubts about how to accurately collect and submit this data are unwilling to transmit it to CMS.
“The lab and its compliance officer must certify to the correctness of the data and are subject to onerous penalties if federal officials want to take enforcement action against labs they deem to have failed to submit data as required by the final rule,” he said. “This could be a big part of why CMS may not be getting the volume of data it expected.
“Another question is: Did CMS try to obtain market rates or did they try to get a close estimate of the discounted rates from the two big lab companies?” he asked. “It looks like the latter. That’s what they were attempting to do.
Get the Numbers Right
“Time is needed for us to get the numbers right and figure out how big of an impact those numbers will make,” he added. “And we need to know whether the way CMS does the calculations is appropriate. If CMS wants to use market rates, then we say, ‘that data must first reflect the full laboratory market paid on CLFS—not a partial market, as it does now.’ then let the chips fall where they may.’
“For some tests, that may mean there will be no cut in rates,” continued Birenbaum. “For a few other tests, the rate may go slightly up. That’s the way the chips fall. But no one should try to manipulate the data to make sure all the rates go down. With the current final rule, it looks as if CMS is working to ensure that payment for most of the common lab tests will go down substantially.”
One other issue of concern involves the ability of clinical labs to challenge CMS’ analysis. “There needs to be an analysis of how this system was designed to make sure that it’s a fair system to identify market rates accurately,” Birenbaum said. “If it’s not fair, then there needs to be a system for review. If CMS makes a questionable calculation, we need a way to review that calculation. Or if the data submitted is incorrect, there needs to be a way for that data to be reviewed and checked for accuracy.
Delay and Fix is Requested
“These are the things that need to be done and they will not be done in two months,” he concluded. “This is why 10 lab organizations sent the March 24 letter to the new secretary of HHS.”
Contact Mark Birenbaum, PhD, at 314- 241-1445 or firstname.lastname@example.org.