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CMS Finalizes 2018 PAMA Pricing Despite Lab Industry's Continued Objections

NEW YORK (GenomeWeb) – The Centers for Medicare & Medicaid Services Friday afternoon issued clinical lab fee schedule final prices slated to go into effect in 2018, even though a significant portion of the lab industry had urged the government payor to delay doing so.

CMS' preliminary prices for clinical lab tests issued under the Protecting Access to Medicare Act (PAMA) in September had not gone over well with many labs. The agency had initially estimated that PAMA pricing would save the government $390 million. However, when CMS issued draft prices, the cuts were deeper, shaving off $670 million, or 10 percent lower than the $7 billion that it pays annually for lab tests. 

The American Clinical Laboratory Association, which represents the lab industry sector that would be most heavily hit by these cuts, has protested the process by which CMS established pricing and the proposed rates. PAMA instructed CMS to set lab test pricing based on the weighted median of private payor rates, and in establishing the process, CMS excluded most hospital labs from reporting private payor rates.  

In October, ACLA and 21 organizations, including the American Medical Association, AdvaMedDx, American Association for Clinical Chemistry, and American Hospital Association, wrote a letter to CMS Administrator Seema Verma that the data CMS used to set proposed rates "would not stand up to statistical validity review." The groups asked CMS that it consider all segments of the clinical lab market, including independent, community, and rural independent, hospital outreach, and physician office labs. They urged the agency to establish a transparent process where stakeholders could validate the data collected by CMS.

ACLA continued to voice objections on Friday that by leaving out a significant portion of the lab market CMS was going against congressional intent. "The final payment rates published today make clear CMS ignored Congress’s instructions to gather commercial price information from all sectors of the clinical laboratory market and base Medicare payment rates on that data," said ACLA President Julie Khani in a statement, adding that the final rates are "ill advised," inconsistent with statute, and ultimately detrimental to patient care.

In releasing final prices, CMS explained some of its decisions reflecting on some 6,000 comments it received following the release of draft payment rates. In response to requests that the agency allow all hospitals to report private payors rates, CMS pointed out that some hospital outreach labs may meet the reporting requirements. Additionally, the agency noted that data reported to CMS captures 96 percent of lab tests on the clinical lab fee schedule (CLFS), accounting for more than 96 percent of Medicare spending on lab tests in 2016. 

"Laboratories from every state … reported data," CMS said. "This strong response gives us confidence that the final payment rates accurately capture the rates paid by private payors and allow CMS to utilize the power of the private market to help make sure the CLFS pays accurately for tests."

CMS recognized that several commenters requested independent verification of the data submitted for reporting, though the agency doesn't seem to feel this is needed, since based on CLFS regulations, the government payor must rely on the attestation of lab executives that the reported information is accurate.

Despite making certain adjustments, the general trends seen with draft rates still hold. Sole-source lab tests came out on top based on this market-based pricing scheme, while the broader impact on the molecular diagnostics market was more varied.

Lale White, CEO of healthcare information technology firm Xifin, expressed disappointment over email that CMS did not give most of the lab industry's comments enough consideration. However, she highlighted a few changes CMS did make as a positive. For example, the preliminary 2018 CLFS release did not cap codes that did not have a national limitation amount at the 10 percent cut, as required by PAMA. But CMS applied this cap in final pricing, White noted.

CMS also agreed with commenters that the general health panel — including complete blood count tests, the comprehensive metabolic panel, and thyroid tests — is not a payable Medicare benefit and deleted it from the 2018 CLFS. The agency also corrected payment rates for 23 codes where the phase-in reduction cap for 2019 and 2020 were wrongly listed due to transcription errors.  

The agency has decided that next year it will pay for tests bundled into automated testing panels (ATPs) according to individual Healthcare Common Procedure Coding System (HCPCS) codes. "Moving forward we will continue to consider the efficiencies of ATPs and the appropriate payment methods for these tests under the new private payor rate-based CLFS," CMS said.

As Medicare policy expert Bruce Quinn pointed out on his blog, CMS' panel pricing rules cost the lab industry $45 million, compared to if they could have billed using individual codes. ACLA had argued that PAMA overrides CMS' panel pricing policy for clinical chemistry tests. These panels netted more than $700 million in 2016 Medicare payments, and Quinn estimated that depending on the popularity of this new a la carte billing policy, CMS could end up paying a lot more. 

"Now, partial panels can receive a la carte stack prices that are higher than the panel the analytes are found on," he wrote. "It would not be surprising to see a Congressional fix of 10 or 20 words to repair this, since it will cost CMS $50M or more per year." 

In addition to final PAMA rates, CMS released final crosswalk and gapfill determinations for new CPT codes for 2018. The agency also said that it is working on an application that labs can use to classify their tests as advanced laboratory diagnostic tests, which are priced every year under PAMA, as opposed to every three years for clinical diagnostic lab tests.

Ultimately, many in the lab industry continued to feel that CMS didn't pay much heed to their main concerns.

"CMS did not address some of the anomalies of clearly faulty reporting by tossing out clear outliers where prices were reported at a penny, or an unusually low rate," White noted. "Disappointing, but consistent with a lack of consideration for legitimate comments from the industry."

"ACLA supported PAMA based on congressional intent. We strongly urge CMS to suspend its flawed implementation of PAMA until the process adheres to what Congress intended," Khani said in a statement. "We will advocate before all branches of government, including the courts if necessary, to ensure the best outcome for clinical laboratories and the Medicare beneficiaries we serve."