Despite strong opposition from significant portions of the clinical laboratory industry, the Centers for Medicare and Medicaid Services (CMS) went ahead to issue final Clinical Laboratory Fee Schedule (CLFS) market-based prices which slashed many lab test rates by 10 %, effective January 1, 2018. In fact, many high-volume lab procedures are being slashed by roughly 35% though the maximum any test can be cut is 10% per year during the 2018-2020 period, in accord with the Protecting Access to Medicare Act (PAMA).
Signed into law in 2014, PAMA establishes a market-bases pricing system for laboratory tests under which Medicare payment for a lab tests equals the weighted median of private payor rates. In implementing a process for collecting data to establish market-based pricing, CMS specified only “applicable labs” could report lab payment rates and volumes from private payors. In deciding what labs were applicable, CMS ended up in excluding the vast majority of hospital outreach labs from its data pool in calculating Medicare market-based rates. In the final analysis, CMS ended up in excluding most data from hospital outreach labs, the one segment having the highest payments relative to the larger industry, and focusing instead on data from national labs whose discounting practices, particularly for high-volume procedures, resulted in decidedly lower prices.
Adding insult to injury, some lab industry experts claim that the methodology CMS used to collect private payor data was deeply flawed. “What CMS did in coming up with these low rates was a deliberate manipulation,” according to Lale White, Founder & CEO of Xifin. “CMS officials skewed the results toward the national labs because they wanted to get the pricing of the big labs,” she concluded. In fact, an estimated 75-80% of data for high-volume lab tests came from only two companies: Quest and LabCorp.
Meantime, a federal lawsuit by the American Clinical Laboratory Association which challenges the process by which CMS calculated Medicare’s new private-payer based lab test rates could be decided as soon as mid-February. The final briefing schedule for the case calls for ACLA to file a motion for summary judgment by no later than February 14 and the court could then either grant summary judgment in favor of ACLA, or wait for HHS to file its opposition to ACLA’s motion which is due by no later than March 16.