Unbundled lab payments could add $10B to Medicare, GAO finds

Blue-hued test tubes and dropper
The unbundling of claims for large panel tests could wind up costing the Medicare program billions of dollars. (Getty/artisteer)

The Centers for Medicare & Medicaid Services' new clinical lab fee schedule was supposed to save hundreds of millions of dollars. But a subtle change in the way Medicare pays for panels of tests could end up costing the program billions.

One particular change in the fee schedule enables labs to significantly up-charge for panel tests, according to an analysis by the Government Accountability Office (GAO). Previously, Medicare always paid a bundled rate for panel tests—rather than paying for each component test individually—regardless of how labs submitted their claims. But in the new schedule, labs can bill for each test individually if they submit claims that way.

"For example, if a laboratory submitted a claim individually for the 14 component tests that comprise a comprehensive metabolic panel it would receive a payment of $81.91, a 528% increase from the 2018 bundled payment rate of $13.04 for this panel test," the GAO wrote (PDF).

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Source: GAO

If every panel test were unbundled this way, the GAO estimated it would cost Medicare an extra $10.3 billion between 2018 and 2020.

The GAO recommended that CMS return to paying bundled rates for panel tests, among other suggestions for how to improve the fee schedule. But CMS has not yet concurred with that recommendation.

Although CMS said it was "aware of the risks" associated with paying unbundled claims, it wasn't certain it had the authority to continue paying bundled claims in every circumstance. It argued the Protecting Access to Medicare Act of 2014 (PAMA) may have removed that authority.

"CMS officials explained that this was due to PAMA's reference to payments for individual tests, similar to CMS's decision to stop paying bundled rates for panel tests without billing codes," the GAO wrote. "At the time we did our work, CMS had not yet implemented a response to these risks but had taken some initial steps to monitor unbundling and consider alternative approaches to Medicare payment rates for these tests."

The new lab payment rules were revised this year and have already faced some degree of controversy. Notably, the American Clinical Laboratory Association (ACLA) filed a lawsuit over other reimbursement changes, but a district court sided with HHS. ACLA filed an appeal in October. 

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

The GAO's study indicates there's still some work to be done. Beyond the change for panel test billing, GAO criticized CMS for using incomplete data in its calculations and for starting payment rate reductions from the maximum Medicare payment rates rather than the average.

CMS concurred that it needed to receive data from the full field of laboratories required to report the information. But it also has yet to respond to the GAO's assessment of the payment rate reduction calculation.

"GAO believes CMS should fully address these recommendations to prevent Medicare from paying more than is necessary," the watchdog agency wrote.