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LAB Act's Ability to Provide PAMA Relief In the Balance as End-of-Year Deadline Looms

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NEW YORK – Clinical labs have been looking to the Laboratory Access for Beneficiaries (LAB) Act to provide some measure of relief from test reimbursement cuts as they are dealing with the impact of cuts from the Protecting Access to Medicare Act (PAMA) and are anticipating additional cuts to come.

Yet, while industry organizations by and large remain optimistic about the bill's chance of passing by the end of the year, other observers are less confident, citing a lack of strong supporters in Congress and a political environment unconducive to legislating. The possibility of impeachment hearings, driven by developments this week in the Ukraine whistleblower case, further dim the bill's prospects, they suggested.

Additionally, even if the bill were to pass by year's end, its impact could be limited as the third round of PAMA cuts will go into effect at the beginning of next year regardless, meaning test prices will have already seen cuts of as much as 10 percent annually for three years.

Introduced in June by a bipartisan group of US House of Representatives members comprising Rep. Scott Peters (D-Calif.), Rep. Gus Bilirakis (R-Fla.), Rep. Bill Pascrell (D-N.J.), Rep. Kurt Schrader (D-Ore.), Rep. Richard Hudson (R-N.C.) and Rep. George Holding (R-N.C.), the LAB Act would delay the reporting of lab payment data required by PAMA by one year and collect recommendations from the National Academy of Medicine on how to improve the law's requirements around lab payment data reporting.

Under PAMA, the Centers for Medicare & Medicaid Services set prices for lab tests based on private payor rates that it collected using payment data from clinical labs nationwide. Industry groups have argued, however, that large swaths of labs were not required to report payment data, leading to an overweighting of data from large firms like Quest Diagnostics and Laboratory Corporation of America, which, industry advocates claim, have lower cost structures than the typical clinical lab.

In 2017, the American Clinical Laboratory Association (ACLA) filed a lawsuit against the US Department of Health and Human Services challenging the rate-setting process, noting in its lawsuit that "99.3 percent of the laboratory market" was excluded from payment reporting requirements. It also pointed out that 7,000 hospital labs billed Medicare for testing services in 2015, accounting for nearly a quarter of the Medicare payments made under the Clinical Laboratory Fee Schedule, but only 21 hospital labs reported payment information under PAMA.

That lawsuit was dismissed in September of 2018, but ALCA won an appeal in July. The case will now go back to the US District Court for the District of Columbia for review.

In its Physician Fee Schedule for 2019, CMS changed its regulations in ways that could result in a broader set of labs reporting payment data. The new regulations require labs that submit Medicare claims using 14X billing, which is used by hospital outreach labs, to report payment data. They also changed the formula labs use to determine the percentage of revenue coming through the Clinical Laboratory Fee Schedule or Physician Fee Schedule in a way that will likely lead to more labs having to report payment data.

The ultimate impact of these changes remains unclear, though, and hospital and other labs potentially subject to the new regulations have expressed concerns about the challenges involved in determining whether they are required to report payment data and in collecting that data.

The most recent payment data collection period ran from January 1, 2019 to June 30, 2019. Laboratories are slated to report the next round of data between January 1 and March 31, 2020, and rates based on that data are to be implemented January 1, 2021.

The LAB Act would delay that process by a year while potentially devising new payment data reporting requirements.

The delay would give hospital labs additional time to collect payment data, which could improve their participation in the process, suggested Susan Van Meter, executive director of industry group AdvaMedDx. Increased reporting by hospital labs could boost the weighted median figures used to determine PAMA pricing as hospital labs typically receive higher payment rates than large reference labs.

"Providing additional time to educate these labs on the process to ensure that they can report will increase the likelihood of a more robust rate setting process moving forward," she said.

The pricing data scheduled to be collected between January 1 and March 31, 2020 will determine Medicare lab test pricing for the next three years, which makes passing the LAB Act by the end of the year and delaying that reporting period an urgent priority for the industry.

Healthcare consultant Dennis Weissman said, however, that he was not optimistic about the bill's chance of passing, noting that with only a few months left in the year, the bill had relatively few cosponsors (11) from the relevant House committees — Energy and Commerce and Ways and Means — and no companion bill in the Senate.

"It would have to go through both those committees and then find some [larger] measure it could be attached to, because it's never going to get through on its own, and then it would have to get through the Senate," Weissman said.

He added that most of the cosponsors has relatively little seniority in the relevant committees.

"If they had someone like the chairman of the full committees, he could power it through," he said. "But the sponsors they have, while ok, aren't really stars that have the power to get this through on their own. So it's a real uphill climb, and in a Congress that has trouble getting anything through, no less, you know, anything related to healthcare."

Another industry observer who wished to remain anonymous echoed Weissman's comments, suggesting that passage before the end of the year was unlikely given the current political environment and the lack of strong champions of the bill in Congress.

Thomas Sparkman, VP of government affairs at ACLA, said, though, that the organization "was optimistic we can get the LAB Act across the finish line in this calendar year." He cited the bill's growing number of cosponsors, which now stands at 26, with nine new representatives having signed on in the last two weeks.

Erin Morton, senior VP at lobbying firm CRD Associates, which represents the National Independent Laboratory Association (NILA), acknowledged that "it's an uphill battle getting anything done in Washington these days" and noted that given the looming impeachment inquiry, legislative efforts "could certainly be delayed."

Morton said, however, that healthcare-related legislation concerning matters like Medicaid in Puerto Rico and community health center funding will need to be dealt with by the end of the year, and that supporters of the LAB Act hope to attach the bill to a larger package addressing these issues.

Van Meter likewise said that her organization is "exploring opportunities with committee staff to include the LAB Act in the end-of-year package."

Even if the bill does manage to pass, though, it might be too little too late, Weissman suggested.

"The severe damage is already done," he said. Labs "will have gone through three years of cuts no matter when and if this legislation goes anyplace."

Sparkman said that the 25 most frequently ordered lab tests were due to be cut an average of 32 percent based on the initial round of PAMA price reporting. Cuts were limited to 10 percent a year in the first three years of the law's implementation, which suggests that many of these 25 tests are slated to see additional cuts in the years beyond 2020. But also, as Weissman noted, the bulk of the price cuts will take effect regardless of whether or not the LAB Act passes.

In 2017, Vachette Pathology broke down the projected PAMA-driven changes for the top 20 Clinical Lab Fee Schedule codes, finding that they ranged from a price increase of 11 percent (for Genomic Health's Oncotype Dx breast recurrence cancer assay) to a cut of 59 percent (for definitive drug testing classes 1-7). A majority of the tests, 13, were projected to see cuts in the 30 percent to 39 percent range. While the bulk of these cuts will take effect even if the LAB Act passes, the bill could ease them somewhat, depending on if and how it ultimately affects requirements around lab payment data reporting.

A small number of tests are projected to see cuts as high as 90 percent or more.

Van Meter said, though, that even if many of the projected PAMA cuts have already taken effect, the fact that some private payors base their rates on Medicare payment levels means rates could continue to fall, as lowered private payor rates are used in the next round of PAMA rate setting.

"To the extent that some payers set payment rates for tests at a percentage of Medicare payment, it’s possible under PAMA that there will be continuing pressure on rates, leading to a downward spiral," she said.

The hope is that the LAB Act could help prevent such a situation.

"We've got to get better [pricing] data in," Sparkman said. "If PAMA works the way it is supposed to, these [reporting] rounds will correct and we will get to an equilibrium. The goal of the LAB Act is to get this next round of data better so PAMA operates the way it's supposed to."