Rate Setting Not Market-based and Circumvents Legislative Intent
SAN DIEGO, Calif., -- September 25, 2017 -- XIFIN Inc., the healthcare information technology company revolutionizing the business of healthcare diagnostics, has conducted an initial review of the draft laboratory rates published on Sept. 22 by the Centers for Medicare and Medicaid Services for 2018 clinical laboratory tests under the Protecting Access to Medicare Act.
The company’s preliminary analysis reveals fundamental concerns with the exercise that provide the basis for challenging the proposed schedule. Chief among concerns is that preliminary rate data is not market-based, and excludes rate information from the majority of acute care hospitals and community-based laboratories throughout the U.S.
“The preliminary rate calculations are flawed due to the way the exercise was designed, resulting in lack of true market and industry participation in the rate setting,” stated XIFIN CEO Lâle White. “Only about 34 percent of the lab market is represented, with two major labs representing 80 percent of the volume used to calculate the rates.”
Review of the data indicates that preliminary rates calculated using a weighted median cost instead of a weighted average cost skewed true market price downward as expected. “XIFIN’s previous detailed analysis of the financial impact of PAMA data predicted a 24 percent decrease for the top 20 tests using a weighted average, and noted that use of a weighted median would produce an even higher decrease,” stated White. “Our analysis of the rates published Friday by CMS reveal a 28 percent decrease for those top tests. While we were on the mark with our prediction, XIFIN’s estimate is slightly lower due to CMS’ use of a weighted median instead of a weighted average to calculate rates, which skew the numbers marginally downward for the highest volume tests and could grossly alter the numbers for lower volume tests. The less the effort reflects a true market mix of providers, the more the use of a weighted median skews the results toward lower pricing. It would appear that the methodology used was purposely crafted to maximize price cutting rather than insuring that the CLFS reflects private market rates.”
XIFIN’s analysis also revealed that the preliminary data may be distorted by reporting and calculation errors, especially related to G-codes. For more detail and commentary about these findings, please visit XIFIN’s Blog.
Because the CLFS significantly influences private payor pricing and contracting, the impact of the proposed rate structure will be far-reaching and have significant ramifications for many laboratories. XIFIN supports the American Clinical Laboratory Association’s position that implementation of these rates be delayed until the government and relevant stakeholders can move toward a market-based payment solution. XIFIN will continue to evaluate the data and advocate for an unbiased market-based policy.
CMS is accepting comments until October 23, and we encourage the lab industry to voice their concerns. Comments must be submitted electronically by this date to the following CMS mailbox: CLFS_Annual_Public_Meeting@cms.hhs.gov.