NEW YORK – Laboratory and medical provider organizations have made passage of the Saving Access to Laboratory Service Act, or SALSA, a key legislative priority, but a thorny implementation challenge could await if the bill passes into law.
Introduced in June in both the House and the Senate, SALSA would modify the Protecting Access to Medicare Act (PAMA) by instituting a sampling-based approach to collecting lab test pricing data. Many hospital labs, however, still don't have the necessary systems in place to effectively report lab price data, said industry observers, and this could undermine SALSA's impact on PAMA's price-setting process.
Passed in 2014 and implemented in 2018, PAMA called 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. However, the agency's initial definition of an applicable laboratory excluded the vast majority of hospital labs, which typically have some of the industry's higher reimbursement rates. Industry organizations have argued that omission of data from these labs led to lower CLFS prices.
In 2017, the American Clinical Laboratory Association (ACLA) filed a suit against HHS challenging the implementation of PAMA. It won the suit this year.
Meanwhile, Congress in 2019 passed the Laboratory Access for Beneficiaries (LAB) Act, which delayed by one year the reporting of lab payment data required by PAMA and called for the Medicare Payment Advisory Commission, or MedPAC, to review the law's implementation. In 2021, MedPAC produced a report affirming the lab industry's complaints about PAMA price data collecting and proposing that a sampling-based approach be used to collect price data under PAMA going forward.
Proponents say that this sampling approach would ensure that price data is collected from a more representative slice of the industry. In particular, they expect that it will lead to the inclusion of more hospital lab price data, which should push up average payment rates given these labs' generally higher reimbursement rates.
The difficulty is many hospital labs aren't able to easily compile the test price data that PAMA requires labs to report. And while SALSA's sampling-based approach — in which data from a subset of labs would be used to model prices across the entire industry — would reduce the administrative burden for the lab business as a whole, reporting will remain a challenge for those individual hospitals that are called up to provide price data, said Jeff Myers, VP of consulting services at lab consulting firm Accumen.
The root of the issue is that most hospitals don't have the ability to "delineate [lab] reimbursement rates at the line item level," Myers said, meaning that they aren't able to pull out what they were paid for specific tests on specific patients.
In the past, hospitals have resisted PAMA price reporting due to concerns about this administrative burden even though increased hospital reporting would have likely led to smaller reimbursement cuts under the law.
For instance, when, in 2018, CMS responded to industry complaints by changing PAMA price reporting requirements to include more hospital labs, the American Hospital Association opposed the move.
"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," Roslyne Schulman, director of policy at the AHA, told 360Dx at the time. "It is also our belief that Congress did not intend hospital outreach laboratories to qualify as applicable laboratories."
The AHA has come out in support of SALSA, however. Spokesperson Ben Teicher explained that while reporting price data "will still be burdensome" to the hospital labs selected to report under the plan, "the burden would be imposed on fewer labs."
He noted that under current CMS regulations, in the absence of SALSA passing, "the vast majority of hospital outreach laboratories will be required to report private payor data" at the beginning of the year. Whether those regulations would, in fact, induce these labs to report data, is an open question, though. Under PAMA, CMS can fine labs as much as $10,000 per day for failing to report required information, but the agency has not enforced those fines to date.
During a press call last month, ACLA President Susan Van Meter likewise said the sampling-based approach would reduce the administrative burden for hospital labs and noted that in addition to the AHA, the Federation of American Hospitals, and the Association of American Medical Centers had voiced support for SALSA.
She added that ACLA hoped to "work with the hospital field to ensure that there is ease of understanding and implementation of the [reporting] process."
AHA's Teicher highlighted several other aspects of SALSA that led AHA to line up behind it, including provisions to delay the next data reporting period to the first quarter of 2026 and increase the time between reporting periods from three to four years and to lower the annual cap on payment reductions from 15 percent to 5 percent.
"Enacting SALSA is preferable to what would happen to hospital outreach laboratories in the absence of SALSA being enacted," he said.
That still leaves the question of whether those laboratories currently have the necessary reporting capabilities in place.
"It's difficult to get the data," said Jane Hermansen, manager of outreach and network development at Mayo Clinic Laboratories, noting, like Myers, that the bundled payments that hospitals often receive typically don't have line items for individual lab tests.
However, she said that private payors are not yet frequently bundling payments in the outpatient setting and that there remains a large amount of fee-for-service outreach lab bills where individual test prices are displayed in the remittance from the insurer.
Myers said, though, that some flexibility around reporting processes may be necessary.
"In order to get a statistically valid sample group, you're going to have to allow some flexibility for hospital labs, those organizations that don't have the reporting capabilities that a national lab would have," he said. "You're going to have to give them the ability to provide valid market payor rates, but in a way that allows them to have some flexibility and to do ad hoc reporting as necessary."
He suggested as an example a process wherein hospital labs might combine estimations of their test volumes done under different private payor contracts and the payment rates under those contracts to model their average reimbursements for various tests.
"Contractual allowances are certainly an easier way to estimate revenue," Hermansen said of such an approach. "But I'm not sure if that is specific enough."
As currently written, SALSA does not spell out the specific statistical sampling process to be used but says that HHS "in consultation with stakeholders, shall develop a methodology for a statistically valid sample … as described" in the 2021 MedPAC report.
It also instructs HHS to develop a sampling methodology "designed to reduce administrative burdens of data collection and reporting on applicable laboratories and the Centers for Medicare and Medicaid Services to the greatest extent practicable."