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Medicare Is Simple
Friday, June 17, 2016
Medicare Will Use Private Payor Prices to Set Payment Rates for Clinical Diagnostic Laboratory Tests Starting in 2018
Medicare Will Use Private Payor Prices to Set
Payment Rates for Clinical Diagnostic Laboratory Tests Starting in 2018
Today, the Centers for Medicare
& Medicaid Services (CMS) released a final rule implementing Section 216(a)
of the Protecting Access to Medicare Act of 2014 (PAMA), requiring laboratories
performing clinical diagnostic laboratory tests to report the amounts paid by
private insurers for laboratory tests. Medicare will use these private insurer
rates to calculate Medicare payment rates for laboratory tests paid under the
Clinical Laboratory Fee Schedule (CLFS) beginning January 1, 2018. The final
rule includes provisions to ease administrative burdens for physician office
laboratories and smaller independent laboratories.
In response to public comments, CMS
moved implementation of the new payment system from January 1, 2017 to January
1, 2018 to allow laboratories sufficient time to develop the information
systems necessary to collect, review, and verify data before reporting
applicable information to CMS. This will also allow time for CMS to perform
independent validation and testing of the CMS system through which laboratories
will report applicable information, and allow laboratories to perform
end-to-end testing of their systems with CMS’ system.
Medicare pays approximately $7
billion a year to Medicare-enrolled laboratories for more than 1,300 types of
clinical laboratory tests on the CLFS. Medicare’s current fee schedule rates
have remained relatively unchanged since the current statutory methodology was
established in 1984, apart from setting payments for new tests or implementing
across-the-board statutory payment updates. Medicare-enrolled laboratories
include entities ranging from national chains, which perform a large menu of
tests to small regional operations, which may concentrate on specific
populations such as nursing home residents. Physician offices may also perform
certain laboratory tests that are paid for by Medicare.
The final rule will generally
require reporting entities to report private payor rates and test volumes for
laboratory tests if an applicable laboratory receives at least $12,500 in
Medicare revenues from laboratory services paid under the CLFS and more than 50
percent of its Medicare revenues from laboratory and/or physician services. This
means that approximately 95 percent of all physician office laboratories and
about half of independent laboratories will not fall under these requirements,
easing administrative burdens for physician office labs and smaller independent
labs while still capturing most of the CLFS spending on physician office and
For the system’s first year,
laboratories will collect private payor data from January 1, 2016 through June
30, 2016, and report it to CMS between January 1, 2017 and March 31, 2017. CMS
will calculate and post the new Medicare rates (equal to the weighted median of
private payor rates for each test) by early November 2017. These rates
will take effect on January 1, 2018.
Per statute, Medicare will pay a
special category of tests, known as advanced diagnostic laboratory tests
(ADLTs) at actual list charge for three calendar quarters. ADLTs are
tests furnished by a single laboratory that also meet one of two additional
criteria. . The first criteria requires that the test must be an
analysis of RNA, DNA or proteins; include a unique algorithm; produce a result
that predicts the probability a specific individual patient will develop a
certain condition or respond to a particular therapy; and provide new clinical
diagnostic information that cannot be obtained from any other test or
combination of tests. Alternatively, the second criteria requires that an
ADLT is cleared or approved by the U.S. Food and Drug Administration.
Payment rates under the revised
CLFS will be updated to reflect market rates paid by private payors every three
years for most tests, except for ADLT rates, which will be updated every year,
to reflect market rates paid by private payors.