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PAMA Cuts Negatively Impacting State Medicaid Reimbursements to Labs, Industry Groups Say

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NEW YORK (360Dx) – Lab industry groups are calling on the Centers for Medicare & Medicaid Services to warn state Medicaid agencies that cutting Medicaid laboratory reimbursements may further threaten some laboratory services that are already at risk due to Medicare rate cuts implemented as a result of the Protecting Access to Medicare Act.

"Since many states base Medicaid reimbursements on the [Medicare] Clinical Laboratory Fee Schedule, they are already realizing significant savings due to the flawed implementation of the Protecting Access to Medicare Act," said Julie Khani, president of the American Clinical Laboratory Association, in a phone interview. "Any attempt by state Medicaid agencies to make further reductions are going to threaten patient access, particularly in rural, underserved areas."

New prices for clinical lab tests issued under PAMA, which went into effect Jan. 1, reduced the amounts that the federal government pays for some lab tests by nearly 10 percent. ACLA filed a lawsuit in December challenging the implementation of the new pricing framework for not being market-based as Congress had intended.

New cuts to state Medicaid rates on top of the recently implemented PAMA cuts may be too hard for some labs to absorb, the industry groups argue. ACLA and 12 other laboratory industry groups sent a letter to CMS on March 9 asking the agency to "educate" state Medicaid agencies about PAMA by issuing a State Medicaid Director letter and an Information Bulletin about the recently implemented PAMA cuts. The letter further asked CMS to remind state Medicaid agencies "of their obligation to provide Medicaid reimbursement for laboratory services that is sufficient to ensure access." In addition, in cases where a state plan amendment is required to implement rate reductions, the groups asked CMS to reject amendment proposals.

The industry letter came one month after ACLA sent a letter to Missouri's HealthNet Division (MHD) to express its opposition to the agency's decision to reduce Medicaid reimbursement for laboratory services from 100 percent of the Medicare rate to 80 percent of the Medicare rate.

Because Missouri's Medicaid rates are based on Federal CLFS Medicare rates which have already been cut by as much as 10 percent, the additional reduction of the state's Medicaid percentage of Medicare effectively results in a double whammy, the ACLA letter argued.

"Since Missouri Medicaid rates are based off of Medicare rates, MHD will realize significant savings in laboratory services in 2018 without this proposed change, and additional savings are expected in future years. The proposed 20 percent cut to Medicaid payment rates, on top of PAMA reductions, will reduce reimbursement to a level that will threaten patient care," the Feb. 9 letter to Missouri's HealthNet Division stated.

States have some leeway in setting their own Medicaid rates, and Khani said 18 states tie their Medicaid reimbursements to Medicare. The new Missouri Medicaid rates are already in effect, Khani noted.

A Missouri laboratory reimbursement rate update listed the effective date of the new state Medicaid reimbursement rates as January 1, although other information on the agency's site noted that it was continuing to accept comments on the changes until February 11. A spokeswoman for Missouri's Department of Social Services noted that the change in laboratory reimbursement rate did not require a regulations amendment. The agency is currently reviewing comments to the reimbursement rate change to determine if further action will be taken, she noted.

Mark Birenbaum, National Independent Laboratory Association administrator, said Medicaid cuts would be particularly difficult for independent community-based labs.

"It particularly affects community and regional labs because they tend to have a higher percentage of Medicare and Medicaid as part of their income," he said.

Among NILA member labs, a patient mix that includes 20 percent to 45 percent Medicare patients is not uncommon, Birenbaum noted. Those labs often also have 10 percent to 15 percent of patients on Medicaid. Labs that focus on nursing home work, can have a patient mix that may include 50 percent to 60 percent Medicare and another 30 percent Medicaid patients, he said.

A NILA survey of community regional and independent laboratories conducted by George Washington University School of Public Health and Health Services in 2012 found that nearly half of small to medium-sized independent community laboratories estimated their average profit margins to be below 4 percent, Birenbaum said.

"In one year you have wiped out your profit margin easily for many labs," he said.

Those concerns were echoed by Eloise Aita, president of the New York State Clinical Laboratory Association.

"When people think of New York, they think of New York City, but it's a huge state. We have a lot of rural labs. With the significant cuts we have already experienced with PAMA on Medicare, these labs are getting a lot less in terms of reimbursement," she said.

New York State is still working on its budget, but Aita said NYCLA has heard that the current plans are for the state to keep Medicaid rates unchanged. Still, Aita noted that state budgets are impacted by federal funding, and if New York were to see a drop in federal funding it could look for new ways to reduce costs.

"In rural areas, if it continues along these lines of cutting reimbursements for lab services, that could lead to reduced access to services for patients who need them," she said.

Both NILA and NYCLA were among the organizations that signed the March 9 letter to CMS. The other organizations that signed the letter were American Medical Technologists, the American Society for Clinical Laboratory Services, the American Society for Clinical Pathology, the Association of Public Health Laboratories, the Clinical Laboratory Management Association, the College of American Pathologists, the Medical Group Management Association, the National Association of the Support of Long Term Care, the New York State Society of Pathologists, and Point of Care Testing Association.

A CMS spokesman noted that the agency has received the March 9 letter and it is under review.