CMS Releases the CY 2019 Physician Fee Schedule Final Rule; Addresses Open PAMA Issues

Yesterday the Centers for Medicare and Medicaid Services (CMS) released its final rule on the CY 2019 Physician Fee Schedule and Quality Payment Program (PFS). The 2,378-page document is going to take some time to analyze, but a few sections appear to be taking good steps forward, including use of CMS-1450 14x bill type vs. NPI as the basis to identify outreach labs in the definition of “applicable labs,” and formula adjustments to include more labs.

Still, as we dig into understanding the implications of this final rule, it’s important to continue to fight for one item that can only be addressed legislatively: changing the price calculation to a weighted average. It is unclear if, even with the inclusion of significantly more hospital outreach labs, the large labs will dominate the data set by greater than 50% for each CPT code. As we’ve said many times, the weighted median significantly skews prices toward lowest offered pricing, and away from any sort of market basis.

Sections of note in the final ruling:

The adjustments to include more laboratories, particularly hospital outreach labs, in PAMA data gathering are definitely steps in the right direction in terms of coming closer to a market-based pricing exercise. However, a fundamental issue remains unaddressed, which is the Congressional mandate to use weighted median in calculating rates. As an industry, we must continue to push forward to legislatively address this fundamental flaw.

Lâle White
Executive Chairman & CEO, XiFin, Inc.

• P. 712: “Accordingly, we are finalizing the use of the Form CMS-1450 14x TOB to define applicable laboratories for the next data collection period (January 1, 2019, through June 30, 2019).” This sentence appears to set the means by which all hospital outreach laboratories that meet the volume thresholds will be included in the PAMA pricing efforts.
• P. 1935: “Therefore, in an effort to increase the number of laboratories qualifying for applicable laboratory status, we are finalizing a change to the majority of Medicare revenues threshold so that laboratories furnishing tests to a significant level of Medicare part C enrollees may qualify as applicable laboratories and report data to us.”
• P.1934: “As part of the same effort to increase the number of laboratories qualifying for applicable laboratory status, we are finalizing a change in the definition of applicable laboratory to include an entity that bills Medicare Part B on the Form CMS-1450 14x bill type.”

For this comment period, CMS specifically solicited comments on:

• The low expenditure component of the applicable laboratory definition
• Changes to the majority of Medicare revenues threshold in the definition of an applicable laboratory
• Other approaches to define an applicable laboratory

We’re sure the PFS Final Rule is being scoured end-to-end today and there will be more revelations to be had. In the meantime, here are sections of the document that NILA (National Independent Laboratory Association) has identified as addressing PAMA:​

• Pages 687-739 address majority of Medicare revenues; alternative approaches to defining applicable laboratory; use of 14x bill type; and low expenditure threshold
• Pages 1807-1809 contain more details on applicable laboratory and address applicable information.
• Pages 1930-1937 include more details on majority of Medicare revenues threshold.

The adjustments to include more laboratories, particularly hospital outreach labs, in PAMA data gathering are definitely steps in the right direction in terms of coming closer to a market-based pricing exercise. However, a fundamental issue remains unaddressed, which is the Congressional mandate to use weighted median rather than mean average in calculating rates. As an industry, we must continue to push forward to legislatively address this fundamental flaw.

Lâle White
Executive Chairman & CEO, XiFin, Inc.