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ACLA Files Lawsuit Challenging PAMA Rates

NEW YORK (GenomeWeb) – The American Clinical Laboratory Association filed a lawsuit Monday against Acting Secretary of the US Department of Health and Human Services Eric Hargan challenging the process by which the Centers for Medicare & Medicaid Services set prices for laboratory tests under the Protecting Access to Medicare Act.

The lawsuit, filed in the US District Court for the District of Columbia, argues that CMS, operating under the purview of HHS, ignored congressional intent to implement a market-based laboratory payment system by instituting a flawed data reporting process that excluded the majority of laboratories from reporting private payer data.

"The Secretary has carved out large categories of laboratories — ultimately resulting in the exclusion of some 99.3 percent of the laboratory market — from the statutory reporting requirements," the lawsuit states.

Specifically, the lawsuit noted that while 7,000 hospital laboratories billed Medicare for laboratory services in 2015, representing 24 percent of the Medicare payments made under the Clinical Laboratory Fee Schedule, no more than 21 hospital labs reported payer information. The suit noted that hospital labs are often the only labs available to patients in certain parts of the country.

The "vast majority" of payer data was collected from the nation's two largest lab companies — Quest Laboratories and Laboratory Corporation of America — whose, lab offices, according to the lawsuit, are located predominantly in large urban areas and have much lower cost structures.

"It is reckless and damaging to Medicare beneficiaries for the Secretary to implement a payment system based on a specious data collection process that actually threatens the viability of some laboratories to continue operations and jeopardizes access to important lab tests," ACLA president Julie Khani said in a statement.

LabCorp and Quest both issued statements in support of the lawsuit, as they had previously suggested they would, should legal action be taken against PAMA. Thoughout the year, both have said that CMS' data collection method was flawed.

During Quest's conference call to discuss its third quarter earnings results, Quest Chairman, President, and CEO Steve Rusckowski said that Quest, along with other groups, had sent a letter to CMS to take immediate action to address "significant deficiencies" in the then-proposed PAMA rates.

In a statement today, Rusckowski added, "We fully support the legal action taken today by ACLA. From the beginning, the process established by CMS was highly flawed."

LabCorp Chairman and CEO David King noted that the new pricing structure could hinder broad access to lab services.

"The irony is that the rates established by CMS will have the exact opposite effect from the very name of the law. Instead of protecting access, the new rates will jeopardize access to often-critical testing for Medicare beneficiaries and for the broader patient population. The greatest harm will be to the neediest beneficiaries, such as those in skilled nursing facilities and long-term care," he said in a statement.

In the lawsuit, ACLA seeks declaratory and injunctive relief that would require the secretary to comply with the statutory requirements and set aside the provisions in the final rule that exempt thousands of laboratories from the reporting obligations that Congress imposed.

HHS has not returned emails requesting comment.