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Lab Industry Hoping for Permanent Fix to PAMA in 2022


NEW YORK – Earlier this month, Congress once again delayed implementation of lab reimbursement cuts and payment data reporting required by the Protecting Access to Medicare Act, passing the Protecting Medicare and American Farmers from Sequester Cuts Act.

After several such temporary delays, a number of lab industry organizations are now hoping 2022 will be the year Congress acts to make permanent changes to the law.

Reform of PAMA will "definitely" be a high priority for the industry in 2022, said Mark Birenbaum, executive director of the National Independent Laboratory Association, or NILA. He noted that his organization and others have pushed for changes to the law this year but had run up against a legislative calendar packed with other, higher priorities.

"You had the battle over the infrastructure bill. You still have the battle over the Build Back Better bill, you had the debt ceiling … and so our issue got pushed further back in priority because of these other things that came to the forefront," he said.

Tom Sparkman, senior VP of government affairs and policy at the American Clinical Laboratory Association, or ACLA, said that Congress' willingness to delay implementation of PAMA cuts and reporting indicated a realization that there are flaws in the law, but, like Birenbaum, he said that the clock had run out on 2021 in terms of making permanent changes.

"Based on conversations in Congress, it was our sense … that they want to work on this, but the way this past year developed, it wasn't feasible to work on or enact a long-term fix, and so the commitment is to work on it next year," he said.

Jonathan Myles, chair of the College of American Pathologists' Council on Government and Professional Affairs, likewise said that "PAMA is a top issue" for the organization, though he suggested the legislative logjam that prevented Congress from taking up a permanent fix to the law in 2021 could continue into 2022.

"In terms of 2022, we think legislation regarding PAMA is uncertain given the current political circumstances we are dealing with," he said. "Right now, Congress is focused on the Build Back Better Act and will likely continue to debate that bill into the new year, which is an election year."

In any case, there is an expectation among many in the industry that Congress is likely to revisit the law.

"I think there is some acknowledgement that there are some issues with PAMA, and so we do expect to see some legislative change," said Lale White, executive chairman and CEO of lab data and revenue management firm Xifin.

This expectation stems in part from the fact that, as Sparkman noted, Congress has already temporarily delayed PAMA cuts and data reporting three times, first with the passage of the Laboratory Access for Beneficiaries Act at the end of 2019, then by the Coronavirus Aid, Relief, and Economic Security Act, which was signed into law in March 2020, and most recently by passage of the PMAFSCA.

There is also a sense that the COVID-19 pandemic has heightened both politicians' and the public's awareness of the laboratory industry's value, with SARS-CoV-2 testing playing a high-profile role in combating the virus.

"I think there is broad recognition that labs are an essential service, that high quality is essential, [and] that timely access is essential, particularly given the heightened awareness about lab testing due to the pandemic," Sparkman said.

Another factor that could spur a push for permanent changes to PAMA is the release last summer of the Medicare Payment Advisory Commission's report to Congress on the law. Required by the LAB Act, the report reviewed the law's implementation and particularly the processes around collection of lab reimbursement data, which has been perhaps the most controversial portion of the law.

PAMA calls for the Centers for Medicare and Medicaid Services to set prices for lab tests based on private payor rates that it collected using payment data from clinical labs nationwide. The law was intended to reduce Medicare spending on lab testing and was spurred on by the recognition that for many tests, Medicare was paying higher rates than were private payors.

Under PAMA, the US Department of Health and Human Services established criteria for determining which labs were required to report pricing data. The agency's initial definition of an applicable laboratory excluded the vast majority of hospital outreach labs, which typically have some of the industry's higher reimbursement rates. Industry organizations like ACLA argued that this caused payment data from large reference labs like Quest Diagnostics and Laboratory Corporation of America to dominate the rate setting process. Further, because such labs typically receive lower reimbursement than many hospital and small independent labs, this skewed prices lower than they otherwise would have been.

ACLA filed a suit in 2017 against HHS challenging the implementation of PAMA. That case is still ongoing.

In the report, the MedPAC commission concluded that the lab industry was correct that the original HHS data collection process led to deeper payment cuts than would have occurred had price reporting been more representative of the industry as a whole. It noted that for the 100 tests on the Medicare clinical laboratory fee schedule, or CLFS, that accounted for roughly 85 percent of all CLFS spending in 2016, "hospital outpatients and physician-office laboratories received private payer rates that were, on average, 45 percent and 53 percent higher, respectively, than independent laboratories."

"Full representation of hospital outpatient and physician-office laboratories in the first round of data reporting would have resulted in higher Medicare CLFS spending," the commission concluded.

The commission's report was not straightforwardly favorable to the lab industry, though. While it observed that more broadly representative data collection would have boosted lab spending, it suggested that this was not necessarily desirable.

"Medicare should ensure that payment rates are sufficient to cover the costs of relatively efficient laboratories but should not increase rates solely to accommodate laboratories that receive high private-payer rates," the commission said, adding that "in setting CLFS payment rates, incorporating private-payer data from a representative sample of all types of laboratories would be imprudent for routine laboratory tests where higher private-payer raters likely reflect provider negotiating leverage rather than the costs of furnishing the tests."

The MedPAC commission also explored the feasibility of using a random, representative sampling of lab data to calculate reimbursement rates, finding that such a method could be effective while reducing "the number of laboratories that would be required to submit private-payer data by up to 70 percent."

A sampling-based approach could also address another major obstacle to including more hospital labs in price data reporting — the fact that many hospitals have shown little interest in providing this information. For instance, in 2018 HHS revised the PAMA data collection process to require hospital laboratories to report price data, but hospitals have been reluctant to invest the time and money that would be required to collect and report this information.

For instance, the American Hospital Association opposed HHS' shift to include more hospital outreach data, with Roslyne Schulman, director of policy at the AHA, telling 360Dx in 2019 that "the increased data reporting burden that would be imposed on hospital laboratories newly meeting the 'applicable laboratory' definition would not be justified by what CMS itself expects to be a minimal impact on the clinical laboratory fee schedule rates."

Using a random sampling of labs, as opposed to requiring that every eligible lab report data, could ease this burden while still allowing for consideration of hospital pricing in PAMA's price calculations.

ACLA's Sparkman said that he believed a move to a sampling-based approach like that described in the MedPAC report would likely be at the core of any legislative changes to PAMA.

"PAMA as intended is supposed to provide a rational, predictable, sustainable fee schedule that follows the private market," he said. "To get there, you actually need representative market data. So there is no conversation about moving away from that. It's really about how do you get the most representative and accurate data into the system. That's where the focus is."

NILA's Birenbaum likewise said that moving to a sampling-based approach to ensure broad representation of lab pricing will be "of primary importance going forward."

Upon passage of PMAFSCA, US Rep. Bill Pascrell, D-NJ, indicated in a statement his desire to revise PAMA, noting that the House was "moving with urgency to shore up Medicare while we fashion a permanent bridge to the future."

Pascrell's office did not respond to requests for additional comment.

Myles said that pathology and laboratory issues do not typically break down along partisan lines, but he noted that given that there is not an active PAMA reform bill currently being considered, "it is difficult to gauge whether it will be a partisan issue or not."

The PMAFSCA passed the House essentially on a straight party line with 221 Democrats voting for the bill and 212 Republicans voting against it. One Republican, Adam Kinzinger of Illinois, voted for the bill. The final version of the bill passed the Senate by a count of 59 to 35 with six senators abstaining.