Coming PAMA Price Cuts to Medicare Clinical Lab Fees Expected to Be Heavy Financial Blow to Hospital Laboratory Outreach Programs

All hospital labs need to understand the negative financial impact to their labs and have a plan to absorb the fee cuts and remain clinically and financially viable

If you believe some experts, in just 13 months many of the nation’s hospital medical laboratory outreach programs will experience a financial disaster that could put them out of business and reduce Medicare patients’ access to lab testing services. This event happens on January 1, 2018, when Medicare officials implement substantial cuts to the Part B Clinical Laboratory Fee Schedule (CLFS).

These fee cuts are the result of the section of the Protecting Access to Medicare Act (PAMA) that requires the Centers for Medicare and Medicaid Services (CMS) to collect private-payer lab test price data from the nation’s medical laboratories and use that data to establish fees for the CLFS. CMS officials estimate that the fee cuts will reduce payments to labs by as much as $400 million in 2018.

What puts the laboratory outreach programs of the nation’s hospitals and health systems at significant financial risk is the fact that CMS, as verified by reports issued by the Office of the Inspector General (OIG), intends to reduce fees on the 25 highest-volume highly-automated lab tests that make up 59% of what Medicare spent on clinical laboratory tests in 2014.

Stated differently, the OIG says that, in 2014, Medicare paid a total of $7 billion for clinical laboratory tests. Of this total, the Medicare program paid $4.1 billion for the top 25 tests. In a report issued in September, the OIG wrote, “Changes in the Medicare payment rates for these 25 tests could have a significant impact on overall Medicare spending for lab tests when the new payment system for lab tests goes into effect in 2018.” [Italics by Dark Daily.] (more…)