Hospital labs win concessions from Medicare on new payment system

Gavel in front of a stack of law books

The Centers for Medicare & Medicaid Services  released its final rules for lab payments under the Protecting Access to Medicare Act of 2014 (PAMA) and the new regs are good news for hospital-operated labs.

The proposed PAMA rules, which CMS issued last year, were a point of contention for the laboratory sector. Labs objected to how Medicare would collect payer data to set prices for tests in the future on the Clinical Laboratory Fee Schedule (CLFS). Hospital laboratories--which are paid at higher rates under Medicare than standalone labs--were mostly excluded from the data-gathering process, sparking fears that the future prices would be skewed much lower for labs as a whole.

CMS backed off much of that proposal in its final rule by recommending that labs be evaluated based on their national provider identifier numbers, as opposed to their taxpayer identification numbers--an item many hospital labs lack. The American Clinical Laboratory Association (ACLA), the leading lobby for the laboratory sector, applauded the move.

“Since Congress began consideration of reform of the CLFS, the ACLA has advocated for a system that bases Medicare reimbursement on the broad scope of the laboratory market, encourages innovation, and protects access to laboratory services for Medicare patients,” said ACLA President Alan Mertz in a statement.

The move toward curbing payments was fueled by a 2013 report by the Office of Inspector General for the U.S. Department of Health and Human Services that concluded Medicare overpaid between 18 and 30 percent for lab tests when compared to private insurers, costing the federal government some $910 million a year.

The lab sector has also been under fire for inaccurate testing, which the U.S. Food and Drug Administration concluded leads to higher costs for the healthcare sector.

In addition to that change, CMS also moved back implementation of the PAMA payment rules based on the gathered pricing data until 2018, two years later than originally proposed and another victory for the lab sector, which had pushed for a slower implementation.

- read the CMS final rule (.pdf)
- check out the ACLA statement