District court sides with HHS in lab association suit challenging payment rates

ACLA and its members say they will continue to press against the rule. (Getty Images/artisteer)(Getty/artisteer)

A federal district judge dismissed the American Clinical Laboratory Association's (ACLA) lawsuit over federal reimbursement changes and new data collection requirements, citing a “lack of subject matter jurisdiction.” 

In 2016, the Department of Health and Human Services (HHS) finalized a rule requiring labs that bill Medicare to report information about how they set their prices. The agency said it would use this information when establishing Medicare payment rates. 

Labs that do not bill Medicare directly (including those in hospitals) did not need to report this information under the rule. ACLA argued that discrepancy was unlawful in a complaint (PDF) against the agency filed late last year. 

In particular, ACLA said the rule “improperly excludes a large body of relevant data and does not reflect private-sector market prices for diagnostic tests,” violating the Protecting Access to Medicare Act of 2014. 

But this data is “inextricably intertwined” with Medicare payments, D.C. District Judge Amy Berman Jackson said in her ruling (PDF). Considering the rule’s intent and examining case law, Jackson ultimately sided with HHS, who said the rule was not subject to judicial review. 

"The purpose and effect of the Final Rule is not to regulate the work of laboratories but, rather, to ensure that HHS is equipped with the data it needs to calculate Medicare payment amounts," she wrote.

According to a review of lab payments, Medicare paid labs more than $7 billion last year. But that number is expected to drop by $670 million this year thanks to new payment rules.

“The Court’s decision that it is powerless to require HHS to comply with the statutory requirements sets a harmful precedent that allows agencies to circumvent Congress’ express directions at the expense of patient care,” said ACLA President Julie Khani on the organization’s website

“By intentionally omitting data from more than 99 percent of laboratories, HHS is undermining Congress’ goal of protecting beneficiaries and supporting value-based care delivery,” Khani continued. 

She encouraged Congress to “mitigate the harm facing millions of seniors as a result of year-over-year cuts to essential lab services.” 

LabCorp CEO David King also encouraged Congress to “act quickly.” LabCorp and Quest Diagnostics are two of the independent laboratories that would be most affected by the changes.

“We are evaluating all of our options alongside our industry association ACLA and our industry colleagues to help protect Medicare beneficiaries' continued access to needed lab testing,” he said in a statement