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ACLA Reacts to Government Report on Implementation of Medicare Pricing Law

NEW YORK (GenomeWeb) – The American Clinical Laboratory Association issued a statement today criticizing a recent Office of Inspector General report on the implementation of the new lab test pricing law, the Protecting Access to Medicare Act.

PAMA, which became law in 2014, established a market-based pricing system for clinical lab tests where Medicare payment for a test is calculated based on the weighted median of private payor rates. The Centers for Medicare & Medicaid Services last year finalized rates on the clinical lab fee schedule (CLFS), which went into effect this year and are expected to save CMS $670 million.

A significant portion of the lab industry expressed concerns about the deep cuts they would face and had urged the government payor to delay PAMA implementation. After CMS decided to release final prices, however, ACLA sued CMS, alleging the agency established rates through a process that didn't capture the entire lab testing market and, therefore, had "failed to follow a congressional directive to implement a market-based laboratory payment system."

ACLA reiterated this allegation after the OIG issued a report this week concluding what most industry players already know, that the implementation of PAMA resulted in lower Medicare payment rates for most lab tests. Specifically, OIG estimated that 75 percent of CLFS rates decreased in 2018, while 15 percent of the rates remained the same, and 10 percent increased.

"The recent OIG report skirts the central issue: that [the US Department of Health and Human Services] deliberately chose to ignore congressional intent in its implementation of PAMA — cherry-picking data from fewer than 1 percent of labs," ACLA President Julie Khani said in a statement. "Any analysis by OIG that fails to recognize that fact does a disservice to Congress and to the millions of seniors who depend on access to lab testing through Medicare."

According to ACLA, the "draconian cuts" to rates are putting at risk millions of seniors who may not have access to necessary tests. "Particularly hard hit will be the most vulnerable seniors, such as those in rural areas, those who require home care, or those in skilled nursing facilities," Khani said.

CMS calculated 2018 rates based on data it received from nearly 2,000 labs, but OIG recognized that some labs reported having difficulty determining if they met the criteria for reporting. OIG said it identified at least 20 high volume independent labs that met the criteria for reporting but didn't nor report private payor rates last year, and 37 percent of the labs that reported may have been exempt from reporting because they didn't meet the low expenditure threshold.

CMS has maintained that that data it recieved and based 2018 rates on captures 96 percent of lab tests on the CLFS, accounting for more than 96 percent of Medicare spending on lab tests in 2016. "This strong response gives us confidence that the final payment rates accurately capture the rates paid by private payors and allow CMS to utilize the power of the private market to help make sure the CLFS pays accurately for tests," CMS has stated.

OIG in its report said that while limited reporting may not have had a meaningful effect on 2018 rates, "it remains a risk in future data reporting periods." According to the report, CMS relied on labs' self-certification of reported data and performed few quality assurance checks. For example, CMS identified outliers and removed wrong data reported by four labs, but OIG pointed out that the government payor didn't do much to ensure if labs were reporting rates that were excluded under PAMA.

OIG recommended that CMS do more outreach to labs to make sure they know whether or not they have to report under PAMA, and enhance efforts to ensure that labs are reporting data they're required to.

The OIG report does not go far enough in ACLA's view. "Unfortunately, OIG and HHS are working within a failed framework. Improving the methodology of collecting data from fewer than 1 percent of labs does little to improve overall data quality," Khani said. "Congress needs to intervene and direct HHS to follow congressional intent, gather data that is truly reflective of the market, and protect millions of seniors from draconian cuts to their Medicare benefits."