CEO SUMMARY: Federal officials tasked with implementing the PAMA lab market price reporting requirement would be well-served to study what happened in California when the Department of Health Care Services mandated market price reporting. According to DHCS, last year, only 9% of the state’s 742 labs submitted price data! This is evidence that requiring a lab to report every payer’s price for almost every test is not only a huge burden on most labs, but nearly all labs lack the technology needed to assemble the data.
CAN THE FEDERAL GOVERNMENT succeed in its effort to require clinical labs to report market price data, as mandated under the Protecting Access to Medicare Act? If the experience of California’s Department of Health Care Services is a useful precedent, then this experience is evidence that the federal reporting effort will be a dismal failure.
THE DARK REPORT is the only lab industry news source to report on the fact that just 9% of clinical laboratories in California submitted data to the state Department of Health Care Services (DHCS) for its rate-setting program, according to DHCS data. The data were based on what third-party payers paid the laboratories in 2014.
At this moment, the clinical lab industry awaits the publication of rules from the federal Centers for Medicare & Medicaid Services to implement PAMA lab test price reporting. This is a controversial section of the PAMA law, for many reasons. One reason is the heavy burden needed for labs to gather and report the lab test price data for each type of test and for each health insurance plan.
If California only could get 9% compliance with its lab test price reporting requirement from almost 750 labs, does this fact support a credible argument that, assuming CMS goes forward with the PAMA laboratory test price reporting requirement, it may get compliance of just 10% or lower? This is particularly true since CMS must require labs throughout the United States to report even more complex test price data than what was required of laboratories in California.
The data-collection effort of the California DHCS last year was phase one of a two-phase program. In phase two, labs have been asked to submit data on what third-party payers paid them in 2015. The deadline for submitting data under phase two was March 18.
No Phase Two Tally Yet
State officials have yet to tally how many labs had submitted data and how many had not under phase two of this reporting requirement. The Department of Health Care Services administers the state Medicaid program for low-income individuals, called Medi-Cal.
Michael Arnold, Legislative Advocate and Executive Director of the California Clinical Laboratory Association, said he did not know why more California labs did not submit data to DHCS except that some labs have said the process is difficult and expensive.
“We have suggested to CCLA members that more data would be better and have encouraged our labs to participate,” stated Arnold. “For labs, it’s probably a cost and time issue. They are all having a tough time these days, especially those who run tests for Medi-Cal beneficiaries.
“Keep in mind that DHCS plans to do this data collection annually,” he added.
“We hope the compliance rate for reporting lab test prices will be better at the federal level, since the Medicare work is much more important to labs than the Medicaid work,” observed Arnold. “But again, it’s likely to be an issue of time and cost.”
Difficult and Complicated
Commenting on California’s experience collecting lab price data, Mark S. Birenbaum, PhD, Administrator of the National Independent Laboratory Association (NILA), said, “We believe that the California data reporting clearly indicates that the PAMA reporting will be difficult and complicated.
“To date, no labs have reported private payer data to CMS because the agency has not published a final regulation,” explained Birenbaum. “In March, a majority of the members of the U.S. House Ways and Means Health Subcommittee issued a letter to CMS that advised CMS not to rush the PAMA regulations.”
It is reasonable to assume that the efforts to collect lab test rate-setting data in California would be of interest to federal officials tasked with the similar need to collect lab test price data in order to set Medicare Part B clinical lab payment rates as mandated under PAMA.
The experience in California with the state’s market reporting requirement shows the challenges that CMS officials will face. Of the 742 California labs required to submit the data last year on what third-party payers paid them, only 66 unique labs submitted the requested data, DHCS figures show. DHCS also reported that those 66 labs represent most of the total claims for services.
Increase Data Submission
“Those 742 labs that were required to submit fee-schedule data were providers that had Medi-Cal utilization in 2014 reflecting paid claims totaling $100,000 or greater, and claim counts totaling 5,000 or greater,” commented Anthony Cava, spokesman for DHCS, in an email response to questions from THE DARK REPORT. State officials are considering what methods they can use to increase data submission by the remaining 676 labs that did not provide the required data, noted Cava.
At this moment, the entire lab industry is waiting and watching to see what next steps CMS will take to implement market test price reporting. In recent months, legislators from both houses of Congress have signed letters asking CMS to reassess the draft regulation on market price reporting that it published last fall. To date, CMS has not made further comment about what it intends to do.
Contact Michael Arnold at 916-446-2646 or marnold@mjarnold.com; Mark Birenbaum, PhD, at 314-241-1445 or nila@nila-usa.org; Anthony Cava at 916-440-7660 or anthony.cava@dhcs.ca.gov.
California Lab Price Reporting Requirement Resulted In a Reduction of Medi-Cal Fees Paid for Lab Tests
OFFICIALS AT THE CALIFORNIA DEPARTMENT OF HEALTH CARE SERVICES hope that the latest round of reporting by labs on the prices they were paid for lab tests generates a better response than the first data collection effort.
“In addition to exploring methods to increase data submission by the labs, we will send reminders to these labs of the requirement to submit their data,” stated Anthony Cava, spokesman for DHCS.
Under state regulations, specifically Welfare and Institutions Code 14105.22 (5)(F), Cava said, “Clinical laboratory providers that fail to submit data reports within 30 working days from the time requested by the department shall be subject to the suspension provisions of subdivisions (a) and (c) of Section 14123.”
He added, however, that no penalties have been enforced to date. The data collection effort began last year and continued through March 18 of this year.
Asked to characterize what the data in the first round showed in terms of what labs are paid, Cava said new clinical laboratory fee schedule rates effective February 1, 2016, would result in savings of about $18.5 million compared with what DHCS paid in 2014.
DHCS achieved those savings by cutting what it paid for almost 400 clinical lab codes. “As a result of the new methodology, the Medi-Cal rates for a total of 370 codes decreased, effective July 1, 2015. Also, there were 35 codes that had no rate reduction,” he said.
Of the 370 codes, payment for 229 of them was slashed by 16% to 20%, payment for 43 codes was cut by 21% to 25% and payment for 33 codes was cut by 26% to 50%, DHCS data show. Payment for 35 codes was unaffected.
“The labs that submitted the required fee schedule data were mid-sized to large labs, both hospital and independent,” noted Cava. “Providers with 2014 Medi-Cal utilization that involved paid claims totaling $100,000 or greater, or claim counts totaling 5,000 or greater, were required to submit lab test fee schedule data.”
The California Assembly approved the program under Assembly Bill 1494 in 2012. This law was in response to settlements made by the California Attorney General with Quest Diagnostics Incorporated and Laboratory Corporation of America. In 2011, Quest Diagnostics paid $241 million to settle charges under the state’s False Claims Act that it overcharged Medi-Cal. Quest did not admit guilt.
Three months later, on August 30, 2011, Laboratory Corporation of America agreed to pay $49.5 million to settle similar charges and did not admit guilt.
Under California law at the time, reimbursement for clinical laboratory services provided under the Medi-Cal program could not exceed 80% of the lowest maximum allowed under the federal Medicare program.
But after the settlements involving Quest Diagnostics and LabCorp, the California Assembly drafted AB 1494 to develop a new rate-setting methodology for clinical laboratories and laboratory services based on the average of the lowest prices other third-party payers pay for similar services. The law also implemented a 10% payment reduction for clinical laboratory tests and lab services, excluding certain family planning services. That 10% reduction was effective July 1, 2012, and ended on June 30, 2015.
