NEW YORK – For six years running, Congress has passed temporary delays to clinical lab price cuts and reporting requirements called for by the Protecting Access to Medicare Act (PAMA).
But while these delays have provided the industry with a measure of relief, they have also locked labs into Medicare reimbursement rates determined by 2016 private sector payment data. This means that while labs have over the last six years been protected from cuts via PAMA, test pricing has nonetheless taken a substantial hit from inflation, a dynamic that has heightened the urgency within the industry for a permanent PAMA fix.
Meanwhile, the Saving Access to Laboratory Services Act (SALSA) remains the industry's preferred vehicle for PAMA reform, but Congress' inability to pass the bill into law has some in the lab business considering alternative approaches.
At first blush, the series of PAMA delays "sounds good," Quest Diagnostics Chairman, President, and CEO Jim Davis said on the company's recent Q3 earnings call. But "in fact, it's not good because we've had five really heavy years of wage inflation and other inflation," Davis said.
Mark Birenbaum, executive director of the National Independent Laboratory Association, likewise noted that "for labs, it’s a real challenge to continue this way where you're not getting cuts, but you're also getting no adjustments for inflation."
In the low inflation environment that persisted for much of the 2010s, this might have been less of a problem, Birenbaum said. The PAMA delays, however, have coincided with one of the largest spikes in inflation in decades. "When inflation was under 2 percent, well, it was an issue, but you could get by for a time," he said. "But when you start getting inflation rates that average 5 percent and 6 percent a year for four years … that's a much bigger issue."
Since 2016, the cumulative rate of inflation has been roughly 32 percent.
Inflation presents a challenge to labs in another way. Holding lab prices at the 2016 rates reduces projected Medicare spending on testing as it avoids price increases due to inflation. This has meant that Congressional Budget Office (CBO) analyses of the one-year PAMA delays have scored them as a cost saving. SALSA, on the other hand, has scored as an expense. This has made it easier for Congress to pass one-year delays, which provide savings lawmakers can use to pay for other priorities, than proceed with permanent reform via SALSA, which would likely require them to make cuts elsewhere.
In short, the same inflation impacts that have made permanent PAMA reform an increasingly urgent priority for labs are also one of the major challenges to getting permanent reform passed.
Each one-year PAMA delay makes this bind more difficult to unravel as the total amount of inflation avoided grows, making the projected savings provided by another temporary delay even larger. In 2022, a preliminary CBO score found that a one-year delay would save $730 million over 10 years. This year, CBO scored the one-year delay included in the September continuing resolution as producing $3.26 billion in savings over 10 years. A preliminary CBO score of SALSA, meanwhile, projects the bill would cost $6 billion over 10 years.
Moving SALSA through Congress has "been an uphill climb because of the CBO scoring," said Matthew Schulze, director of government relations at the American Society for Clinical Pathology (ASCP). "It's a lot of money to fix this, and I'm sure there are a billion competing [legislative] priorities from other organizations that would also like to see things changed, and those things require spending."
Prior to the recent elections, a number of lab stakeholders identified passage of SALSA as the industry's key legislative priority and suggested that this could happen during the lame duck session.
Jim Flanigan, executive VP of the American Society for Clinical Laboratory Science, said he expected that "the entire focus of the clinical laboratory community during the lame duck session will be on a permanent solution for fixing PAMA."
Susan Van Meter, president of the American Clinical Laboratory Association (ACLA), similarly said that her organization would be "pushing forward to secure long-term PAMA reform in the lame duck."
How the outcome of the election might affect SALSA's chances is unclear. The bill lost one of its major supporters in the Senate as Sen. Sherrod Brown, D-Ohio, lost to his Republican challenger Bernie Moreno. In the House of Representatives, former Rep. Bill Pascrell, D-N.J., an important SALSA supporter, passed away in August. Control of the Senate and the Committee on Health, Education, Labor, and Pensions (HELP) will also flip next year to the Republicans.
While these developments might seem to dim the bill's chances, Flanigan suggested they could move the current Congress to act.
There could be "motivation on the part of those who are losing control of their chambers to come together and potentially compromise and solve some of these problems," he said. "They'll have a short amount of time where they can, to a greater degree, influence what that legislative solution might be."
SALSA's struggles, however, have some considering alternative ways forward.
Schulze said that while the bill remains the lab industry's focus with regard to PAMA reform, even a simpler fix like an annual inflation-rate adjustment "would be a lot better than nothing."
Davis said during Quest's Q3 call that while the company had been "happy with the SALSA solution," which called for a new round of price data collection and price reductions, he was "not sure that's the solution we're going to put forth on the table."
Noting the heavy inflation that has occurred during the series of one-year delays, he said that Quest was "going to press the case that, in fact, Medicare rates should go up."
"We've gotten rates up through our commercial plans," he said. "We believe, given the inflationary environment that we have lived in from 2019 to 2024, that the rates need to go up, and so that is the fix that we are going to propose."
Joe Saad, governor of the board of the College of American Pathologists (CAP), likewise said the industry has begun to explore alternatives to SALSA.
"There seems to be a shift [in thinking] in that maybe it's not worth continuing to beat our heads against the wall with SALSA if it's not going anywhere," he said. "It is in the air."
Speaking to 360Dx this week, ACLA's Van Meter said that the organization is involved in discussions with Congress about a way forward on PAMA reform. She said that SALSA has been "our flagship legislation" concerning the matter, but that "whether it is SALSA or an alternative to achieve that foundational reform, we are going to be driving that forward again in a bipartisan way."