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As PAMA Data Reporting Period Nears, Many Hospital Labs May Not Comply

Courtesy of Bobjgalindo/Wikimedia Commons
Hospital labs, such as the one above, may not submit payment data as required by PAMA.

NEW YORK – With the next round of price reporting for the Protecting Access to Medicare Act (PAMA) approaching, industry stakeholders are concerned about whether laboratories will be ready to submit required test payment data to the Centers for Medicare and Medicaid Services.

But while lab readiness is no doubt an issue, it remains an open question whether many labs are even interested in submitting PAMA data. Industry organizations like the American Clinical Lab Association (ACLA) have pushed CMS to expand its data reporting requirements to include a wider range of facilities, but many labs, particularly on the hospital side of the business, appear disinclined to participate.

Their failure to report will likely make the next round of PAMA cuts somewhat more severe than they would be otherwise, but for many labs this consequence would seem to be outweighed by the challenges involved in gathering the required data.

"I'm not feeling as much urgency from [hospital] outreach programs as there should be," said Jane Hermansen, manager of outreach and network development at Mayo Medical Laboratories.

"I don't know if they are expecting their billing departments to take the lead on this or if because they weren't included [in the last reporting cycle] these labs aren't aware of the regulatory changes," she said.

Under PAMA, CMS sets prices for lab tests based on private payor rates that it collects using payment data from clinical labs nationwide. Industry groups have argued, however, that large swaths of labs — hospital labs, in particular — have not been required to report payment data, leading to an overweighting of data from large firms like Quest Laboratories and Laboratory Corporation of America, which, industry advocates claim, have lower cost structures than the typical clinical lab.

In 2017, 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 excluding from payment reporting requirements and that, although 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, only 21 hospital labs reported payment information under PAMA.

In response to these criticisms, CMS last year changed its rules regarding which labs are required to report data, shifting to a system that uses the CMS-1450 14X type of bill to identify Medicare revenues from hospital outreach labs, which is expected to increase the reporting of lab test prices by hospital outreach labs. The agency estimated that the change could boost the number of labs reporting by 43 percent.

The lab industry hopes increased reporting by hospital labs will limit PAMA price cuts as these labs have typically received higher reimbursement for tests than do large national labs like Quest and LabCorp, which dominated the last round of reporting.

Labs were required to collect pricing data between January 2019 and June 2019 and are slated to report this data between January 2020 and March 2020.

While industry organizations like ACLA supported these changes as an initial step toward improving PAMA price reporting practices, it is unclear how many hospital outreach labs will comply with the reporting requirements, especially given that the hospital industry more broadly appears skeptical about the benefits of doing so.

Roslyne Schulman, director of policy at the American Hospital Association noted that the organization opposed CMS' move to require hospital labs to collect and report private payor data under PAMA.

"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," she said. "It is also our belief that Congress did not intend hospital outreach laboratories to qualify as applicable laboratories."

"From the laboratory industry's perspective, I would say universally we all want hospital outreach labs to be included in this next data collection period with the intent and very sincere hope that our reimbursement is going to go up," Hermansen said. However, she acknowledged that hospitals themselves are less enthusiastic about the idea, something she attributed to the challenges of pulling the required payment data and the fact that, as she put it, "actual net collected revenue for outreach programs is the best kept secret in a hospital."

Healthcare consultant Dennis Weissman noted that "the overwhelming number of hospital laboratories doing outreach work are not really on their own separate billing system but have used the hospital's billing system."

"The real issue is going to be whether or not they can take that [billing] information out of the hospital's [system]," he said. "I've been told by any number of hospitals that that is virtually impossible with the system the hospital has. They cannot parse that 14X type of bill, so they really can't distinguish between their outreach testing and all the other lab testing that they are doing."

Walt Williams, director, revenue cycle optimization and strategy at Quadax, said that for commercial labs outside academic and hospital systems, revenue management platforms like those offered by his company and its competitors make PAMA reporting fairly straightforward.

Many hospitals, on the other hand, have billing and data management systems "that just aren't ready," he said. "It's almost like a custom situation where every single hospital is going to have to navigate on their own through this rule set. They're having to kind of create [systems for PAMA reporting] from scratch and it is costly and time consuming."

"That's where the reluctance [on the part of hospital labs] is," Williams said. "But the rest of the industry is like, we need your data because we need to somehow offset the really low pricing [due to PAMA data] that has been dominated by Quest and LabCorp."

Hermansen said that once outreach labs "have a process [for PAMA reporting] figured out, it's not that difficult, and there are many labs that have been able to do it without a lot of pain and some have even spoken at national conferences and other venues to talk about how they've done it."

"It's not rocket science," she said. Nonetheless, it is unclear whether the message is getting through.

"I don't know anymore what else we can do as an industry to impress upon the hospital outreach programs the fact that they need to understand what their applicable lab status is and then go through and pull their data," Hermansen said.

Weissman suggested that there is something of a collective action problem at work. Because data from any one outreach lab will do little to shift the weighted medians that determine PAMA prices, these labs have little incentive individually to invest the time and money required to report pricing data.

"Unless you have a really good majority — and I don't know if that's a thousand [labs] or whatever, but no one expects the number to be anywhere close to that high — it won't really make a consequential difference," he said. "Maybe if you had the right 200 [hospital labs], the ones that have the most volume, but you have no way of knowing that those are going to be the ones that report."

If the prospect of somewhat mitigating the next round of PAMA cuts isn't incentive enough, CMS' ability to fine non-reporting labs could prove an effective inducement. Under PAMA, the agency can fine labs as much as $10,000 per day for failing to report required information. However, the agency has not enforced those fines to date and has shown little indication that it plans to in this reporting round.

"There's no sense and certainly no public pronouncements by CMS that indicate it is going to [enforce fines] during the second round" of price reporting, Weissman said.

While, as Hermansen noted, the lab industry hopes expanded reporting by hospital outreach labs will help lessen PAMA's blow, stakeholders are pursuing several additional routes aimed at countering the law's impact.

Last month, ACLA renewed its legal battle against the law, asking a federal court to strike down provisions in the final rule from the US Department of Health and Human Services implementing it.

ACLA and other industry organizations are also pushing for passage of the Laboratory Access for Beneficiaries (LAB) Act, which 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.

With the end of the year approaching, however, it is unclear what its chances are of passing before the 2020 reporting session.

Weissman said he was skeptical that either a court decision or passage of the LAB Act would occur in time to forestall the looming reporting period.

Proponents of the bill hope to attach it to a larger healthcare legislation package that Congress needs to pass by the end of the year. It has picked up some momentum, gaining 16 co-sponsors over the last month, bringing the total of cosponsors to 42.

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