As PAMA brings estimated Medicare reimbursement cuts of up to 30% over the next three years to a range of typically high-volume tests and diagnostics, medical laboratories that wish to stay competitive must understand the needs of managed care payers and learn how to optimize collections, reduce denials, and communicate value effectively or risk their financial health
In what experts have called the biggest financial upheaval for the healthcare industry in three decades, the onset of new Medicare Part B Clinical Laboratory Fee Schedule (CLFS) reductions based on the Protecting Access to Medicare Act (PAMA)—and their continued decrease over coming years—places the financial integrity of clinical laboratories and anatomic pathology groups of all sizes in peril.
Recent years have seen major shifts in consolidation, automation, and efficiency analysis to help streamline both workflows and cashflows. However, the threat from the current and coming cuts to Medicare lab test prices will be particularly acute for smaller independent laboratories and hospital/health system lab outreach programs. These labs will continue to feel added strain due to reduced reimbursement across 25 of the most common tests billed to Medicare.
The Centers for Medicare and Medicaid Services (CMS) and the Office of the Inspector General (OIG) predict that the cuts enacted on January 1, 2018, alone will result in Medicare payments to labs falling by a total of $670 million just in 2018. This amount is almost 70% greater than the $400 million in fee cuts the federal agency had predicted in statements it published last year. (See Dark Daily, “For Top 20 Tests, CMS to Cut Payment by 28% in 2018-2020,” October 9, 2017.)
And, that doesn’t account for subsequent cuts, which are estimated to reach nearly 30% over the next three years.
Cost of Service Disparities/In-Network Status Further Impact Clinical Labs
If the CLFS reductions weren’t enough, labs face another threat—managed care and commercial payers aligning with big national laboratories and narrowing networks in an attempt to lower costs and provide maximum return for both patients and shareholders. For smaller and independent laboratories, this represents a double threat.
In the first situation, larger laboratories can offer services at lower costs due to increased automation, batch processing, and other scale advantages. This means that while the lower CLFS rates will impact the financial integrity of larger labs, the actual margin lost is less than that of smaller laboratories and facilities that face higher costs to perform tests and provide services.
Compounding the situation, commercial and managed care payers searching out the best value for their patients and shareholders tend to narrow their networks by excluding many independent clinical lab companies and hospital lab outreach programs, amplifying this inherent disparity and skewing the advantage away from independent providers yet again.
Higher cost providers without a clear understanding of promoting their value to payers could have trouble obtaining in-network status. Yet, failing to obtain in-network status may reduce overall test quantities, further raise prices, and make smaller labs less competitive with larger national laboratories—a dangerous cycle with today’s competitive laboratory landscape.
Shifting Focus and Optimizing Managed Care Reimbursements
As the financial stability of Medicare reimbursements wanes, it is imperative that laboratories look to new methods to further increase efficiency and stabilize cashflows. Once a smaller portion of laboratory revenue, managed care organizations and commercial payers will be of increased importance as overall reimbursement rates continue to shrink in the face of healthcare reform and value-based care.
Unfortunately, many laboratories assume that by simply providing requested services they are due reimbursement from commercial payers. In the age of value-based care this is no longer the case and considered an outdated mindset—one that can lead to endless audits, increased recoupment costs, and which could drastically impact successful collection from managed care and commercial payers. (See Dark Daily, “Payers Hit Medical Laboratories with More and Tougher Audits: Why Even Highly-Compliant Clinical Labs and Pathology Groups Are at Risk of Unexpected Recoupment Demands,” October 16, 2015.)
Special June 26 Webinar: Improving Managed Care Reimbursement Efficiency
Understanding not just what these payers are attempting to achieve for their organization—but also how they structure requirements and processes to support their goals—is an essential element of succeeding in this previously smaller share of the marketplace.
For those interested in learning more about critical concerns regarding managed care payers in the post-2018 CLFS landscape, Pathology Webinars is hosting a 90-minute webinar on Tuesday, June 26, 2018, at 2:00 PM Eastern.
The webinar will include presentations from two experts on a range of topics including:
- Actionable steps to absorb the loss of Medicare revenue due to the impact of the 2018 CLFS reductions;
- How managed care payers process network status and payments;
- Who in the managed care chain of command should receive your value proposition;
- How to better align your value propositions, policies, and workflows with the requirements of managed care and commercial payers; and,
- Understanding the roles managed care payers expect clinical laboratories and anatomic pathologists to play in managing and reducing unnecessary testing.
The first speaker, Frank Dookie, MBA, will provide an inside look at:
- How managed care payers function;
- Their requirements and workflows; and,
- What they look for when considering network status for a laboratory.
Dookie is a laboratory professional who has worked on the payer side for 28 years. He is passionate about the role that diagnostics play or can play in healthcare, and has spent his career working for instrumentation providers, clinical laboratories, the intermediary space between laboratories and managed care companies, and managed care companies.
The second speaker, Michael Snyder, will bring the entire payment process into sharp focus. He will cover:
- Optimizing the collection process;
- Identifying the purpose of each step, each review, and each team member involved; and,
- Critical points laboratories must address to ensure payment.
Snyder is the Senior Vice President of Network Operations for Avalon Healthcare Solutions, LLC, a firm that provides comprehensive benefit management services to the health plan industry and has more than 30 years’ experience in clinical laboratory management.
Frank R. Dookie, MBA (left), Contracting Executive with a major managed care company in Woodbridge, N.J.; and Michael Snyder (right), Senior Vice President with Avalon Healthcare Solutions in Flemington, N.J., will provide critical insights and actionable details for clinical laboratory and anatomic pathology group leaders who want to ensure future revenues.
An Essential Opportunity to Improve Your Reimbursements
This critical webinar offers anatomic pathology groups and medical laboratory managers essential information and actionable next steps to immediately leverage the potential of managed care payers. Additionally, it provides insider insight to laboratories straining to retain financial integrity as reduced reimbursements and increased regulatory burdens strain budgets and cashflows.
To register for the webinar and see further details about discussion topics, use this link (or copy and paste the URL into your browser: https://pathologywebinars.com/current/managed-care-an-insiders-guide-to-improving-your-reimbursement-efficiency-with-strategies-that-work-626/).
As further Medicare payment reductions over the next three years drive reimbursements even lower, understanding how to capture the positive attention of payers—while working within the rules and policies driving their reimbursement decisions—will be an essential element of successful laboratory management and growth. Register now!
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Coming PAMA Price Cuts to Medicare Clinical Lab Fees Expected to Be Heavy Financial Blow to Hospital Laboratory Outreach Programs
What Every Lab Needs to Know about the Medicare Part B Clinical Laboratory Price Cuts That Take Effect in Just 157 Days, on Jan. 1, 2018
Medicare Clinical Laboratory Price Cuts and Cost-cutting Predicted to be 2018’s Two Biggest Trends for Medical Laboratories in the United States
Another big question is whether the lobbying of medical laboratory and pathology societies can educate and convince members of Congress to delay and reform the PAMA Final Rule that uses the market price study of what private payers pay for lab tests
Coming in just five months are the deepest, most painful clinical laboratory test price cuts ever implemented by Medicare officials. During calendar 2018 alone, both the Centers for Medicare and Medicaid Services (CMS) and the Office of Inspector General US Department of Health and Human Services (OIG) expect the price cuts to the Medicare Part B Clinical Laboratory Fee Schedule (CLFS) to lower spending on lab tests by $400 million!
The bad news doesn’t stop there. Lab industry observers say that significant numbers of hospital laboratories and independent lab companies are unprepared for the drop in revenue they will experience once the Medicare price cuts take effect. And, with only 157 days remaining before Jan. 1, 2018, medical laboratory executives and pathologists have precious little time to prepare their labs to operate on significantly less Medicare revenue.
PAMA Market Study of What Private Payers Pay for Clinical Laboratory Tests
Blame it on the Protecting Access to Medicare Act (PAMA) of 2014! PAMA directed CMS to conduct a market study of the lab test prices paid by private health insurers, and then use this data to set the prices of the CLFS. As many lab professionals know, CMS spent the last 24 months publishing a final price reporting rule that defined which medical laboratories must report the prices they are paid by private payers, and then collecting that data.
The data reporting period ended on May 31. In coming months, CMS will publish the new CLFS test prices and allow time for public comment.
Recognizing the need to help lab executives and pathologists understand the scale and scope of the Medicare lab test price cuts coming their way, Dark Daily and its sister publication, The Dark Report, have asked two experts with unique knowledge about this issue to give interested lab managers an up-to-the-minute intelligence briefing during an important webinar. It’s titled, “Deep Medicare Fee Cuts Are Coming to Your Clinical Laboratory in 157 Days: What You Must Do Now, Why Congress Might Intervene, and Action Steps to Protect Your Lab’s Financial Integrity,” and it happens later this week on Thursday, July 20, at 1 PM Eastern.
First Opportunity to See What Private Payers Pay for Medical Laboratory Tests
The first expert to speak is Lâle White, Executive Chairman and CEO of XIFIN, Inc., a health information technology (HIT) company headquartered in San Diego. Annually, White and her colleagues handle as many as 300 million lab test claims for hundreds of their clinical laboratory clients. Also, XIFIN is electronically interfaced with every health insurance plan in the US. These two facts mean that White has essentially the same data their lab clients reported to CMS.
During her presentation, White will show you how her company analyzed the real information from hundreds of millions of medical lab test claims that were reimbursed by thousands of private payers. You are in for a big surprise!
Learn Why Medicare Lab Test Fee Cuts Will Be Deep and Painful
XIFIN’s conclusions are based on real-world data. They demonstrate how the CMS final rule was written to direct the way federal officials calculate and set the 2018 Part B clinical laboratory test prices, and reveal why the fee cuts will be deep and painful for the lab industry’s highest-volume tests. You’ll hear facts about XIFIN’s analysis and learn to use that knowledge to model and predict precisely how deep Medicare’s revenue cuts to your lab will be when the new price schedule becomes effective on Jan. 1.
Lâle White (above left), CEO of XIFIN, Inc., spoke at the Executive War College on Laboratory and Pathology Management last May, where she shared insights about the coming price cuts to the Medicare Part B Clinical Laboratory Fee Schedule (CLFS). Julie Scott Allen (above right) is Senior Vice President of the District Policy Group, Drinker Biddle, and represents the National Independent Laboratory Association (NILA) in Washington, DC. White and Allen will be speaking at a special Dark Daily webinar later this week on the current status of the Medicare fee cuts and how lab executives should respond to protect the financial integrity of their labs. (White photo copyright: The Dark Report. White photo by Linda Reineke. Allen photo copyright: Drinker Biddle.)
Because it is generally agreed that CMS officials will target the top 20 lab tests by volume for the deepest price cuts, the actual revenue drop will depend on your mix of tests and the volume of Medicare patients associated with each test. CMS says it will use the weighted median of the private payer lab test price data to determine its new Part B fees.
However, that is a flawed approach and the source of much criticism.
White will show why the weighted median generates a lower price than the use of a weighted average calculation. You’ll see the direct impact that CMS’ use of the weighted median will have on your lab’s Medicare revenue, beginning on Jan. 1.
Understanding Current Developments at CMS and Within Congress
Julie Scott Allen will be the second speaker on the July 20 webinar. She is Senior Vice President, District Policy Group, Drinker Biddle, and represents the National Independent Laboratory Association (NILA) in Washington, DC. In this role, Allen works with officials at CMS, the Department of Health and Human Services (HHS), and with members of Congress on issues relevant to the clinical laboratory members of NILA. She regularly participates as part of the Clinical Laboratory Coalition on these matters.
Allen will give you an up-to-the minute perspective on efforts by the clinical laboratory industry to educate officials within Congress, HHS, and CMS about the consequences of allowing the PAMA final rule price cuts to become effective on January 1, 2018. This is important information you can use to craft strategies to protect your lab’s financial stability. You’ll also recognize opportunities to contact your elected officials in Congress at the time when your input can make an important difference.
The message of many in the Clinical Laboratory Coalition to members of Congress is that, if the PAMA Medicare fee cuts happen as planned, many hospital lab outreach programs and community lab companies in the states and districts of the various Senators and Representatives will probably end up going out of business, filing bankruptcy, or selling to a national lab company.
Behind the Scenes on PAMA Fee Cuts, ACA Repeal-and-Replace
Allen will take you behind the scenes of the inside-the-beltway developments that relate to the coming Medicare Part B clinical laboratory fee cuts. Different players from the clinical laboratory community are in discussions with CMS officials about the need to delay and reform the implementation of these price cuts.
Meanwhile, there are several developments unfolding within Congress that affect clinical laboratories. Yes, one of them is the PAMA final rule on lab price cuts. However, congressional efforts to repeal and replace the Affordable Care Act (ACA) are creating opportunities for different medical specialties—including the profession of laboratory medicine—to advocate for needed reforms in their areas of clinical services.
When clinical laboratory and anatomic pathology leaders are informed, they are more effective in two roles:
- Protecting the clinical excellence and financial sustainability of their respective laboratories;
- Advocating with government officials and lawmakers on the issues that are important to keeping the nation’s laboratories financially viable and key contributors to improving the quality of patient care.
Full details about this important webinar are at this link. Or copy and paste this URL into your browser: https://ddaily.wpengine.com/webinar/deep-medicare-fee-cuts-are-coming-to-your-clinical-laboratory-in-157-days-what-you-must-do-now-why-congress-might-intervene-and-action-steps-to-protect-your-labs-financial-integrity to register.
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Deep Medicare Fee Cuts Are Coming to Your Clinical Laboratory in 157 Days: What You Must Do Now, Why Congress Might Intervene, and Action Steps to Protect Your Lab’s Financial Integrity
In vitro diagnostic manufacturers and medical distributors share concerns, along with other types of medical labs in nation’s small cities and hinterlands that include rural hospital labs and physician office labs (POLs) because, along with financial erosion, there is the potential of reduced access by Medicare beneficiaries to clinical lab tests where they live
SAN ANTONIO, TEXAS—Owners and managers of community and regional independent lab companies and community laboratories gathered here last week at a lab conference to assess what many believe is a bleak future. That’s because, in less than 11 months, medical laboratories across the United States will be dealing with unprecedented price cuts to the Medicare Part B clinical laboratory fee schedule (CLFS) and how those price cuts erode the financial stability of these essential labs, often the only local medical laboratory serving smaller communities and rural areas throughout the nation.
The number one financial threat of concern to these community and regional lab owners is how the Protecting Access to Medicare Act (PAMA) rule for private-payer market-price reporting will be used by the Centers for Medicare and Medicaid Services (CMS) to make fee cuts—effective on January 1, 2018—that will be financially devastating to the nation’s small and mid-sized community and regional labs, rural hospitals, some individual and group physician practices, and community hospitals—while causing increased market concentration that benefits the nation’s two dominant publicly-traded lab companies. (more…)
“Protecting Access to Medicare Act of 2014” requires most medical laboratories to report market data and allows Medicare officials cut prices of Part B lab tests beginning in 2017
NEW ORLEANS, LA—No single development in the clinical laboratory industry grabbed more attention last week at the Executive War College than news that a new federal law gives Medicare officials the ability to reduce prices of individual medical laboratory tests by as much as 75% between 2017 and 2022.
This law is titled the “Protecting Access to Medicare Act of 2014” (PAMA). Congress passed this legislation to patch the Sustainable Growth Rate (SGR) formula until April 2015. (more…)
Leaders from ACLA, AdvaMedDx, CAP, NILA will be at Executive War College on April 29-30 for first medical lab industry debate about the best and worst of the new law
Clinical laboratories will face new financial challenges following passage of a new federal law two weeks ago that makes deep changes in the way Medicare officials will establish prices for the Medicare Part B Clinical Laboratory Fee Schedule (CLFS). Many medical laboratory administrators, hospital lab managers, and pathologists remain unaware of the significant negative financial impact this law will have on their lab’s revenue and fiscal stability.
On April 1, President Barack Obama signed H.R. 4302: Protecting Access to Medicare Act of 2014. The law’s primary purpose is to extend the Sustainable Growth Rate (SGR) formula for 12 months. The House had passed the bill on the previous Thursday and the Senate passed the bill on the following Monday, March 31. (more…)