This article has been updated to include comments from Xifin Executive Chairman and CEO Lale White.
NEW YORK (360Dx) – New Medicare reimbursement rates for lab tests implemented at the start of the year under the Protecting Access to Medicare Act could lead to billions in excess Medicare payments to laboratories in the years ahead, according to a new report from the US Government Accountability Office.
The report, issued Friday, is at odds with the position of the laboratory industry, which has complained that cuts introduced by the new rates are too severe.
The American Clinical Laboratory Association called the report an acknowledgement that the Centers for Medicare and Medicaid Services mismanaged the data collection for establishing market-based prices for lab tests under PAMA, but it also criticized the GAO for misreading the effect of PAMA prices on the lab industry.
"Given the unprecedented cuts that have occurred and are scheduled to go into effect, GAO's suggestion that laboratories are receiving substantial excess payments from Medicare misses the mark and fails to reflect the market reality," ACLA President Julie Khani said in a statement.
PAMA required the creation of market-based Medicare reimbursement rates for laboratory tests because prior to 2018 Medicare rates based on historical fees were typically higher than rates paid by private payors. But the GAO report cited several problems with how the new PAMA Medicare Clinical Laboratory Fee Schedule rates were calculated.
According to the GAO report, CMS officials told GAO that it did not receive laboratory test pricing data from all laboratories required to report. While CMS took steps to mitigate the effect of missing data, such as excluding inaccurate private payor data or estimating how collecting certain types and amounts of additional private payor data could affect Medicare rates, it is not known whether CMS's estimates reflect actual risk of incomplete data, the report stated. In particular, incomplete data could have a larger effect on the accuracy of Medicare payment rates in future years when PAMA allows for greater payment-rate reductions, according to the report.
In addition, CMS stopped paying a bundled payment rate for certain panel tests, because CMS had not yet clarified its authority to do so under PAMA. GAO estimates that if reimbursement for panel tests were to remain unbundled, and CMS were required to pay for each test in a panel individually, Medicare expenditures could increase by as much as $10.3 billion from 2018 through 2020 compared to estimated Medicare expenditures using lower bundled Medicare rates.
In establishing new market-based Medicare lab test prices under PAMA, CMS also used the 2017 national limitation amounts, or the maximum Medicare payment rates, as a baseline to start rate reductions, instead of actual Medicare rates, the report stated. In some cases, this resulted in Medicare paying higher rates than it had previously paid on average, according to the report.
For example, the 2017 national limitation amount, or maximum payment, for a comprehensive metabolic panel test was $14.49, which was substantially higher than the average Medicare payment in 2016 of $11.45 and the median payment rate based on reported private laboratory data of $9.08. As a result, using the 2017 national limitation amount as a baseline caused Medicare to increase its average allowed amount of $11.45 in 2016 to $13.04 in 2018, the report stated. GAO estimated that Medicare expenditures from 2018 through 2020 based on national limitation amounts could be $733 million more than if CMS had phased in payment-rate reductions based on average payment rates.
One controversial issue of the GAO report is that it appears to suggest that American Medical Association panels, such as the basic metabolic, comprehensive metabolic, lipid, renal, and electrolyte panels have been unbundled under PAMA, according to Lale White, executive chairman and CEO of health information technology company Xifin.
"Labs continue to bundle automated chemistries consistent with the AMA panels in accordance with the CPT billing guidelines," she said, adding that it appears that GAO's assertion of unbundling of these panels is "based on an erroneous assumption."
According to the report, errors in data collection could lead to larger excess payments in the years ahead. "GAO found that collecting incomplete data could have larger effects on the accuracy of Medicare payment rates in future years when PAMA allows for greater payment rate reductions," the report stated.
But, according to ACLA, with each successive year, labs will feel the effects of sharper Medicare cuts more acutely.
"Additional cuts are scheduled to go into effect beginning in the new year, and Congress must step in to stop further reductions and another flawed data collection process to prevent further harm to patients," Khani said.
ACLA had filed a lawsuit against CMS over PAMA rates alleging that rates were based on faulty data collection and were harming the laboratory industry. The suit was dismissed by a District Court Judge in September, but ACLA is appealing that decision.
GAO recommended that CMS take steps to collect all data from laboratories that are required to report. It recommended that CMS use bundled rates for panel tests, consistent with its practice prior to the implementation of PAMA, and if necessary, it should seek legislative authority to do so. GAO also recommended that CMS phase in payment rate reductions based on actual payment rates paid by Medicare prior to 2018, rather than national limitation amounts.
The Department of Health and Human Services, which oversees CMS, agreed with the recommendation about collecting more complete data, and neither agreed nor disagreed with the other two, according to GAO. HHS has issued guidance to help address the issue of using bundled payments for lab tests, the GAO report stated.
CMS representatives did not return calls to 360Dx by press time.