U.S. House seeks to change CLFS reimbursement policy in SGR legislation

The US House of Representatives introduced legislation that would extend the flawed sustainable growth rate (SGR) formula until April 1, 2015, but would also change the manner by which tests on the Clinical Laboratory Fee Schedule (CLFS) are reimbursed going forward. In addition to postponing the 24% pay cut to physicians for another year, the bill endeavors to take away CMS’ power to cut reimbursement for tests on the CLFS because of “technological advances”, as CMS announced it was going to do in its 2014 Final Rule.

The part of the bill applicable to labs is Section 216, which spans pages 35-58. Specifically, the proposal repeals CMS authority to make changes to the CLFS based on technological changes and replaces it with a process to adjust reimbursement based on market rates, provides a per test phase-in of reductions in reimbursement, creates a payment adjuster for laboratories serving the most vulnerable Medicare beneficiaries, and requires a clearly defined, transparent process for reconsideration of CLFS rates.

The bills main points are summarize below:

• Starting January 1, 2016, all “applicable labs” would be required to report the amount each private payor paid for every test offered and the corresponding volume of tests performed for each private payor to the Secretary of HHS every three years.
• The reported payment rate for each test will reflect the actual amount received and will include “all discounts, rebates, coupons and other price concessions.”
• The Secretary of HHS can fine labs up to $10,000 per day if it is determined the lab “failed to report or made a misrepresentation or omission in reporting information” for any reportable test.
• This information will then be used to calculate a “weighted median” price for each test that equals the amount Medicare will pay for that test until the year following the next data collection period.
• This weighted median will be calculated by “arraying the distribution of all payment rates reported for the period for each test weighted by volume for each payor and each laboratory.”
• The payment rate will be constant across the country, meaning there will be no geographic adjustment, and no capitated rates or other similar payment plans will be used to calculate the weighted median.
• Reimbursement cuts for each test, if any, cannot exceed 10% in the years 2017-2019 and 15% in the years 2020-2022.