Prepping for PAMA

November 24, 2015


Prepping for PAMA: Understanding the new law and its impact on your lab

Kate Claessens MS, BSN, RN

Senior Director of Policy and Reimbursement

Roche Diagnostics

With the recent passage of the new law, the Protecting Access to Medicare Act of 2014 (PAMA), major changes loom on the horizon that are set to disrupt the fiscal landscape of clinical lab testing as we know it today.

Under Medicare’s Clinical Laboratory Fee Schedule (CLFS), payment rates will all be reset based on rates paid by private insurers. While not scheduled to go into effect until January 2017, all applicable laboratories will soon be asked to report private payer rates and volumes on any CLFS tests they provide to the Centers for Medicare and Medicaid Services (CMS).

CMS has recently issued a proposed rule that will, when finalized, implement the PAMA provision, but the Agency has yet to provide any detailed guidance for labs to follow in order to adopt these changes and be compliant in reporting their data.

In an effort to help you gain a better understanding of the full impact of the PAMA provision, and what you’ll be required to do, LabLeaders.com engaged Kate Claessens MS, BSN, RN, Senior Director of Health Policy and Reimbursement, Roche Diagnostics, to shed some light about what’s currently known and what’s still unclear about these upcoming changes.


Get answers to pressing questions about what your lab is required to do 

1. Will all hospitals have to report their patient fee schedules? If no, how do we find out if our hospital is one of the ones chosen to report?
Under CMS’s proposed rule, hospital labs are not expected to have to report pricing data. Only “applicable labs” have to report pricing data. CMS proposed to define labs at the level of a tax identification number (TIN). An “applicable lab” is one for which more than 50 percent of Medicare revenue is from the Medicare Clinical Laboratory Fee Schedule or the Medicare Physician Fee Schedule, taking into consideration all Medicare revenue received by the TIN. Hospital labs are typically part of a TIN with a hospital which receives the bulk of its Medicare revenue from the hospital inpatient or outpatient prospective payment systems.

Therefore, if CMS finalizes its proposal, hospital labs would not meet the definition of an applicable lab and would not be required to report data to CMS.

We expect some parties will urge CMS to revise its proposal so data from more hospital labs would be included. We won’t know what labs will actually be required to report until CMS completes its final rule, probably very late this year or early next year.
2. Will the fee schedules be differentiated between inpatient and outpatient?
The new rules will only affect Medicare payments under the Medicare Clinical Lab Fee Schedule (CLFS), and payments under the CLFS do not vary based on whether the patient is an inpatient or outpatient. However, lab services provided to a hospital’s own patients are generally paid for under the inpatient or outpatient prospective payment systems, depending on the patient’s admission status. If the lab service is the only service being provided by the hospital to the patient (such as on a reference basis), then the hospital lab may be paid under the CLFS for the lab service.
3. Will the set rates be adjusted to reflect the regional rate differences across the country?
No. The law does not allow CMS to apply a geographic adjustment to the new rates.
4. From what I have read so far hospital based labs will NOT be required to report. Is this your understanding?
Yes, under the proposed rule, hospital labs are not expected to meet the definition of an “applicable lab” that is required to report pricing data. Hospital labs are not required to (and are actually prohibited from) reporting pricing data if CMS finalizes its definition as proposed. However, we won’t know what the final decision is for several more months.
5. Can other labs participate in data submission? I really worry that the conglomerate labs are going to dictate payment to smaller independent labs based in hospitals. How can we have a voice?
Only labs that meet the definition of an “applicable lab” will be permitted to report data to CMS. CMS proposed to define labs at the level of a tax identification number (TIN). An “applicable lab” is one for which more than 50 percent of Medicare revenue is from the Medicare Clinical Laboratory Fee Schedule (CLFS) or the Medicare Physician Fee Schedule, taking into consideration all Medicare revenue received by the TIN. Hospital labs are not expected, in general, to meet this definition.

CMS also proposed to exempt from reporting labs that do not have $50,000 in revenue from the CLFS for the year. This provision is expected to exclude many physician office labs.

We expect some parties will urge CMS to revise its proposal so data from more hospital labs and physician office labs would be included. We won’t know what labs will actually be required to report until CMS completes its final rule, probably very late this year or early next year.
6. Is the submission really going to happen on time? The timelines and deliverables do not seem to be matching up in regards to feasibility or practicality to result in having truly meaningful data.
We don’t yet know what the final timetable will be. CMS’s proposed data collection time table is aggressive. We expect that CMS will receive numerous comments on its proposals on the timing of the data collection and implementation of the new rates. We cannot predict whether CMS will change the timetable.
7. When submitting data to CMS, are we supposed to include Medicaid as a payer?
For patients covered under Medicaid managed care plans, yes: labs must report data on volume of services and on rates. Labs will not report on patients covered by Medicaid fee-for-service programs. (These rules are statutory (i.e., dictated by the law) and will not change in the final regulation.)
8. Are the changes in PAMA going to affect the laboratory billing for critical access facilities?
Critical-access hospitals (CAH) are paid (1) based on reasonable cost-for-lab services provided to their patients and (2) under the Medicare Clinical Lab Fee Schedule (CLFS) for outpatient lab services that provided to patients that are not registered patients of the hospital. PAMA does not change how a CAH is paid for tests for its own patients, but it will change the amount that the CAH will receive for lab services paid under the CLFS.

Nothing will affect how CAHs submit bills, and CAHs are not likely to be required to report information on private payer prices and volumes.
9. With labs suffering because there is not enough reimbursement to keep them running, what is being done by CMS to improve the lab issues of increased workload and decreasing staff?
The PAMA provisions affect the amounts Medicare pays for covered tests, but will not change whether or not Medicare covers the test. Passage of PAMA avoided reductions to lab payments planned by CMS that would have begun in 2015. Those reductions were not scheduled to be phased in and had the potential to be dramatic cuts in the case of some tests—even larger than those we now face.

The PAMA provisions are a significant change to lab payment, but the Affordable Care Act (ACA) is even more far-reaching and, as you note, are intended to change care delivery. Diagnostic tests are critical to high-quality, efficient health care and timely and accurate test results help target therapy options and avoid unnecessary or even potentially harmful treatments. Roche shares your concern that policy and payment changes intended to spur delivery system reforms should not inadvertently lead to reduced access to needed testing. Engaging directly and through our memberships in the American Clinical Laboratory Association and AdvaMed, Roche works to make sure CMS and other policymakers are attentive to this concern.
10. Will there be select tests affected by the rate reductions or will the reductions be applied to all laboratory tests starting January 1, 2017?
All tests paid under the Medicare Clinical Lab Fee Schedule will be paid the new rates based on the amount private payers pay for those tests. For most tests, we anticipate that rates will be reduced. For a few, newer tests, those rates could be higher than the current Medicare rates.

The new rates are currently scheduled to take effect January 1, 2017, based on private payer data collected from certain labs. CMS’s proposed data collection time table is aggressive. We expect that CMS will receive numerous comments on its proposals on the timing of the data collection and implementation of the new rates. We cannot predict whether CMS will change the timetable.
11. Does the reporting of volumes and reimbursements from all health insurances for all tests performed in our lab apply to physician office labs?
Some physician office labs may be required to report private payer data, but only if they have a sufficient volume of Medicare revenue from payments under the Medicare Clinical Lab Fee Schedule (CLFS). CMS proposed to exempt from reporting labs that do not have $50,000 in revenue from the CLFS for the year. This provision is expected to exclude many, but not all, physician office labs. We won’t know what labs will actually be required to report until CMS completes its final rule, probably very late this year or early next year. In its final rule, CMS could expand contract the number of labs required to report.
12. For labs that need to report, how are they reporting their data? Can hospitals voluntarily submit data and will that be considered?
CMS proposed that applicable labs would report data during the first three months of 2016 and intends to use a web-based collection system in which labs can either enter data manually or upload a file with the required information to receive this data.

CMS proposed that labs that do not meet the definition of an applicable lab, which is expected to exclude hospital labs, would not be allowed to submit data on private payer rates and volumes. In fact, labs that do not meet the definition of an applicable lab would be prohibited from submitting data.

CMS’s proposed data collection time table is aggressive. We expect that CMS will receive numerous comments on its proposals on the timing of the data collection and implementation of the new rates. We cannot predict whether CMS will change the timetable. We also expect some parties will urge CMS to revise its proposal so data from more hospital labs and physician office labs would be included. We won’t know what labs will actually be required to report until CMS completes its final rule, probably very late this year or early next year.

We would like to extend a special thank you to our LabLeaders members for submitting questions to Kate Claessens regarding this very important topic. We invite you to submit inquiries on other market forces you would like insight on by clicking CONNECT on LabLeaders.com.

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