PAMA: Strategies Moving Forward

Moving forward in light of the impact of the Protecting Access to Medicare Act (PAMA) of 2014 requires laboratories to demonstrate fiscal acumen in terms of their contracting process and reimbursement due diligence. This will support:

• Help mitigate lost revenue from the current round of PAMA fe schedule cuts
• Preparation for the next PAMA data collection period
• Prepare labs from the next round of PAMA-induced pricing to begin in 2021

The next round of PAMA fee schedule cuts may cut individual test payment rates up to an additional 15% over the prior year. The following recommended strategies will help laboratories mitigate current lost revenue, remain financially sound, and prepare for the impact of the next round of PAMA fee schedule cuts.

1. Correct Contracting Issues

There are important steps that laboratories can take today to improve their performance for the next PAMA data collection period. The focus needs to be on correcting any contracting issues prior to the beginning of the next collection period, such as:

• Eliminating contracts that are tied to the Medicare fee schedule (i.e., coupled contracts)

• Fix contracts to the 2017 Clinical Laboratory Fee Schedule (CLFS), or
• Negotiate a market rate by CPT code

• Evaluating fees by CPT code to identify outliers that need to be renegotiated
• Understanding your current cost structure (direct and indirect), by CPT code, to better inform contract fee schedule negotiations (e.g., the lowest amount of reimbursement acceptable for each test)
• Partnering with payors to provide greater price transparency to patients as their financial responsibilities continue to rise

2. Improve Reporting

Solid reporting from laboratories with much more accurate data and verified payments is the key to mitigating future price cuts. There were many errors in the first round of PAMA reporting. It’s worth remembering that the penalties for errors or omissions in reporting are severe (up to $10,000 per day per occurrence) and reporting correctly will provide better data upon which to make decisions. Prior to the next reporting period, laboratories need to be able to:

• Track expected collections, but report on actual collections
• Validate the accuracy of payments received
• Optimize the appeals process to avoid reporting under payments

3. Ensure Financial Integrity

Laboratory leaders need billing and revenue cycle management systems that provide the reporting and analytics they need to support their pricing analyses and contract optimization. Labs must also retain source documents for audit trail purposes and to ensure that no errors have been made in payment posting.

Decoupling contracts from the Medicare fee schedule is a critical first step in paving a road for long-term success. Of equal importance is ensuring financial integrity in reporting and analysis. Financial systems must provide procedure-level detail and be able to provide analyses based on “billed price” to reflect market activity. It is important for laboratories to watch out for:

• Errors in electronic remittance advice from payors, such as inaccurate return of units in ERA.
• Errors due to manual payment posting (XiFin has seen a 10% – 15% error rate caused by clerical errors made while manually posting payments.) Automating these processes will improve the integrity of the data submitted.
• Improper contractual allowance calculations and discrepancies
• Inaccurate denials or inappropriate classification of patient responsibility
• Contracting with administrators or intermediaries that circumvent standards

To help compensate for the loss in revenues due to the initial PAMA fee schedule cuts, it is imperative that labs (often already operating on razor thin margins) need to put business practices and processes in place to ensure efficiency, accuracy, and maximum reimbursement.

Speak Up

At XiFin, we believe it is important for everyone in the laboratory industry to support the American Clinical Laboratory Association (ACLA) PAMA lawsuit. PAMA is impacting virtually every lab in the country, as 75% of the tests surveyed had median rates below the CFLS, per CMS. Even labs not servicing Medicare should be concerned about the trickle-down impact on private commercial payors. For more information on PAMA visit our PAMA Headquarters page.

To make your voice heard in support of the ACLA lawsuit and the legislative changes that need to be made, contact CMS and members of Congress via ACLA’s grassroots advocacy platform.