PAMA Is Here!
January 1, 2018 marks the effective date of the new clinical laboratory fee schedule (CLFS), which is based on information reported under the 2014 Protecting Access to Medicare Act (PAMA). PAMA substantially revises the Medicare reimbursement methodology for clinical diagnostic laboratory tests, and its significant impact on laboratory margins is only now becoming clear; by one estimate, a 10% cut in the CLFS will result in a 3-4% drop in laboratory profit margins.
As a leader and trusted source of laboratory reimbursement data, XIFIN participates in and closely follows PAMA activity and discussion. We work to educate laboratories about the impact of the PAMA exercise on the CLFS, and ensure that XIFIN clients are armed with tools to perform internal audits and prepare for possible external ones; that they continue to provide accurate and compliant reporting as required; and that they understand and respond to the financial ramifications.
With lawsuits pending, pushes for revised congressional legislation, and misconceptions of who is affected by PAMA abounding, it pays to have a trusted guide.
An Executive's Guide to PAMA Impact
Learn about the financial ramification of the PAMA exercise and resultant CLFS
Current PAMA Schedule
Under the final rule:
- January 1, 2016 – June 30, 2016: Labs will collect the private payer amounts and volumes for all of its tests.
- January 1, 2017 – May 30, 2017: Labs will report the private payer amounts and volumes for all of its tests to CMS.
- Late Summer/Early Fall: CMS published the draft 2018 Medicare rates.
- January 1, 2018 – December 31, 2020: New Medicare rates go into effect. Rates are equal to the median weighted private payer’s rate (limited to a -10% YoY decline per year).
- January 1, 2019 – June 30, 2019: Round 2 - Labs will collect the private payer amounts and volumes for all of its tests.
- January 1, 2020 – March 31, 2020: Labs will report the private payer amounts and volumes for all of its tests to CMS.
- January 1, 2021 – December 31, 2023: New Medicare rates go into effect. Rates are equal to the weighted median private payer’s rate (limited to a -15% YoY decline per year).
- The data collection and reporting periods will repeat every three years indefinitely.
Industry Responds to 2018 Fee Schedule
On November 17, 2017, CMS released its final ruling and new clinical laboratory fee schedule reimbursement rates, effective January 1, 2018. On December 11, ACLA filed a lawsuit against the Department of Health and Human Services (HHS), asking the US federal district court to stop HHS from implementing PAMA and halt newly issued lab test prices from going into effect in January until the agency aligns its interpretation of "applicable laboratory" with statutory language and congressional intent. In the lawsuit, ACLA alleged that more than 99.3% of hospitals were prohibited from reporting their market-rate data.
More than 20 other organizations have also urged CMS not to implement the new pricing.
PAMA CLFS Reform As Implemented
PAMA changed the CLFS from a static fee schedule to a fee schedule based on the private market rates of Medicare lab providers. CMS, however, has implemented PAMA in an arbitrary way that ignores Congressional intent and threatens beneficiary access.
|PAMA's Intent||PAMA as CMS Implemented||Detail|
|Market-based system||CMS cherry-picked highest volume, lowest priced tests in market-place||System neither follows private market make-up nor the Medicare market make-up|
|Data from all market segments||Skewed data excluding market segments||Over 99% of laboratories were prohibited from reporting, especially hospital labs|
|Predictable and sustainable||Arbitrary and unsustainable||Agency cherry-picked lowest pricing labs to report and arbitrarily applied regulations to the data set, resulting in unpredictable and unsustainably low reimbursement|
|Fair and accurate rate-setting||Rate cuts 3-4x greater than government estimates||Top 25 test cut by average of 32%, rural hospital labs cut by average of 28.5%|
|Medicare beneficiary access||Beneficiary access threatened||Vulnerable beneficiaries at greatest risk of losing access to laboratory services, including rural, nursing home and home health patients|
Patient Access at Risk
Proposed rate cuts will likely force clinical labs in rural and underserved areas to close and limit the lab tests they offer, resulting in test result delays for Medicare Beneficiaries.
The U.S. clinical lab market is composed of nearly 250,000 labs, including hospital labs, physician office labs, and independent labs. In 2016, the Department of Health & Human Services estimated that 12,500 labs would report their private market lab data to calculate the new Medicare rates. Ultimately, fewer than 2,000 labs reported rates, creating a dataset that is unrepresentative of the private market.
Less Than 1% of All Labs Reported Data
Take Action Now—It’s Not too Late!
The Centers for Medicare & Medicaid Services’ (CMS) Clinical Laboratory Fee Schedule (CLFS) rates fail to take into account key components of the lab market, including most physician offices and virtually all hospitals, and over-emphasized the private market data of the highest volume (and therefore the most efficient) laboratories. As a result, Medicare beneficiary access to lab services will be significantly impacted and laboratory jobs will be put at risk. Make your voice heard and tweet your members of Congress today, asking them to enact legislation to fix the flaws in PAMA. Make your voice heard today!
What Medicare's $6.8 billion for lab tests went toward in 2016
Along with the new guidance, CMS published the actual form that labs are supposed to use when applying for ADLT status. Read this article for an overview and it will also point you to the instructions set out in the application.
Blog Post: Compliance is a Living Process: "Set it and Forget it" Can Lead to Trouble
Most of today's laboratories and diagnostic providers are running on even slimmer profit margins. This is due in great part to lower reimbursements resulting from the Protecting Access to Medicare Act (PAMA) clinical laboratory fee schedule (CLFS) that came into effect in early 2018.
Blog Post: Keys to Countering PAMA
The second round of PAMA cuts are projected to cut individual test payment rates by up to 15%. With this in mind, now is the time that labs should be looking to market trends and strategies in order to prosper.
Blog Post: PAMA’s Payment Impact & Strategies To Protect Your Lab's Revenue
Medicare's new pricing plan under the Protecting Access to Medicare Act (PAMA) is damaging to the bottom line for most clinical laboratories.
Blog Post: Understanding PAMA Changes and Managing its Effects
Recently, XIFIN, Inc. Executive Chairman and CEO Lâle White presented on recent PAMA pricing cuts, and the implications for laboratory billing.
Blog Post: Medicare's Market-Based Payment System - Effects on Labs
XIFIN's CEO and Executive Chairman Lâle White will speak on a Laboratory Economics teleconference on the effects of Medicare’s new market-based payment system for labs.
XIFIN and PAMA—In the News
Reduce and Minimize The PAMA Impact With XIFIN By Your Side
XIFIN's Revenue Performance Management (RPM) solution is designed to meet the needs of today's margin challenged diagnostic environment. XIFIN RPM is powered by the health economics optimization (HEO) platform that meets the high-volume data and transaction needs of laboratories. Deliver optimized billing for maximized revenue with:
PAMA Solution - XIFIN RPM
Executive Chairman & CEO
XIFIN's Lâle White Speaks at Executive War College
General Session Presentation:
Are the Paths of Hospital and Independent Labs Diverging or Will Reimbursement Pressures Bring Them Closer
PAMA stands for Protecting Access to Medicare Act of 2014 and was published by The White House Office of Management and Budget to modify the Medicare reimbursement rate methodology for lab services. The Final Rule was published on June 17, 2016.
Full details here, https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ClinicalLabFeeSched/PAMA-Regulations.html.
CMS created the CLFS to guarantee the new fee schedule continues to ensure adequate access to lab services for Medicare beneficiaries. But, the pre-PAMA Medicare Clinical Lab Fee Schedule (CLFS) payments were based on 1984 cost data and sometimes updated for inflation. A limited reconsideration process was in place for new tests.
The hope for the new CLFS was that by performing a market-based pricing exercise, pricing could be brought up to date and in-line with current practices.
ALL Part B Medicare FFS lab billings are subject to pricing determined by PAMA, even if the laboratory was not required to participate in the reporting effort.
PAMA reporting requirements apply to any “applicable laboratory.” An applicable laboratory is a laboratory that receives a majority of its Medicare revenue under the CLFS, the Physician Fee Schedule (“PFS”), or the new section 1834A of the Social Security Act, as added by PAMA. Those are:
- Non-Patients (“Outreach”)
Physician Office Labs:
- Point of Care/Traditional Tests
- Provider-Performed Microscopy
- Pathologists’ Practices
- Standard Tests
- Drug Abuse Testing
- Molecular Diagnostics
The Final Rule defines it as:
- A laboratory, as defined in CLIA, that bills Medicare Part B under its own NPI
- And receives the majority of its Medicare revenue from the PFS or CLFS
- And receives more than $12,500 Medicare revenue from the CLFS in a year
- The $12,500 threshold does not apply to a single laboratory that furnishes an ADLT (but does apply to any CDLTs that the laboratory performs)
Submission accuracy will be the responsibility of senior official and penalties could be $10,000 a day per line item.
CMS is involved in the proposal to change payment rates which is linked to Congress passing the first major reform of the Clinical Laboratory Fee Schedule (CLFS) in April 2014─ § 216 of Protecting Access to Medicare Act of 2014 (PAMA).
CMS is needed to develop or clarify definitions of several key terms, determine when private payor rates must be reported and for what timeframe, build a technology platform capable of accepting millions of discrete pieces of data, and establish coding processes for certain new tests.
The PAMA legislation will have a substantial impact on the rates and transform Medicare's payment system for clinical laboratory testing while establishing significant new compliance demands. It also has the potential to impact other payors’ rates, as many private payors and state Medicaid programs base their reimbursement levels on Medicare rates.
Medicare rates for lab services are best determined when payment and volume data reflect true market rates for clinical lab testing.
PAMA requires laboratories to report private payor rates, excluding price concessions. Every rate paid by every payor for each test on a laboratory's test menu adds up to a lot of data. The applicable information required is:
- Volume of tests paid at each private payor rate
- Include changes in rate during period – volume at rate 1, volume at rate 2
This data is required for each test on test menu, excluding unlisted / NOC codes/CPCS Code. In addition, the reporting entity executive (President, CEO, or CFO, or designee) must attest that data is accurate, complete, and truthful, and meet all the reporting parameters.
To report applicable information, reporting entities must:
- Register in the Enterprise Identity Management system (EIDM)
- Request a CLFS submitter or certifier role in the Fee-for-Service Data Collection System
- The CLFS Submitter must be certified in PECOS as a User or Authorized User on the PECOS Medicare Enrollment forms (CLFS submitters must have their name appear within one of the following 855 application forms: A,B,C,I,R).
With the new fee schedule in place and ongoing reporting obligations, it's more important than ever to have a financially grounded revenue cycle management system that gives you the necessary visibility and auditability. You need a system that can capture the following information and aggregate the data into timely buckets:
- Date paid
- Payor / payor type
- Number of tests for each procedure code
- Amount allowed – $ paid by insurer plus patient share of cost
- Contractual rates, where applicable, including volume and other discounts
It is imperative to have a revenue cycle management system that can capture the necessary information, and that has been capturing the information for the capture/reporting periods.
Resources: Industry Webinars
To help you better understand the legislation and what will be required, XIFIN has partnered to create a series of in-depth webinars that help laboratories prepare to comply with the rules and succeed in the new reimbursement environment.
Medicare's PAMA-Based CLFS Payment Impact: Strategic Options to Protect Revenue
Listen to and arm yourself now with this webinar which has critical information on the current CLFS's impact to your lab; potential disruptors; and what actions to take to protect revenue and maximize reimbursement.View On Demand
Medicare's Market-Based Payment Startup: Strategic Options & Compliance Red Flags for Labs
Listen to Laboratory Economics webinar "Medicare's Market-Based Payment Startup: Strategic Options & Compliance Red Flags for Labs" which discusses how the future structure of the lab market will be fundamentally altered by Medicare's new market-based payment system.View On Demand
Sizing up PAMA's Preliminary 2018 Payment Rates: What's the Bottom Line for Your Lab?
Listen to Lâle White, XIFIN's Executive Chairman & CEO and other industry experts as they address the most critical issues for lab and pathology interests regarding PAMA's preliminary 2018 payment rates.View On Demand
Deep Medicare Fee Cuts Are Coming to your Clinical Laboratory in 157 Days
Join Lâle White, XIFIN's Executive Chairman & CEO for this can't-miss webinar by Dark Daily. This webinar will provide you with an insider’s perspective on the essential market intelligence and knowledge you need to respond to the loss of important revenue that your lab will experience as of January 1.View On Demand
Part 1: Applicable Laboratories: Is Your Lab Required to Report?
CMS proposed to define an applicable laboratory so as to exclude many hospital laboratories and nearly all physician office laboratories. Will CMS change its policy and require more entities to submit private payer rates? Will median Medicare payment rates be more representative of the market as a result?
Part 2: Private Payer Data Reporting: What Information Must Be Reported, When, and How?
PAMA requires laboratories to report the rates paid by health plans in the commercial, Medicare and Medicaid markets, excluding price concessions. Every rate paid by every plan for each test on a laboratory’s test menu adds up to a lot of data. What are the immediate operational concerns for laboratories? How much time will they have to comply?
Part 3: Advanced Diagnostic Laboratory Tests: What Considerations for Launching a New Test?
PAMA gives special treatment to advanced diagnostic laboratory tests (ADLTs) including unique billing codes, Medicare payment at their list price at launch, and annual rate changes. CMS revised its definition of ADLT to include analyses of proteins, but to obtain ADLT status, tests must still provide new clinical information that can’t be gotten from other tests. What evidence will labs need to prove this, and what criteria will CMS use to evaluate it?
Blog Post: 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.