Dec 12, 2017 | Compliance, Legal, and Malpractice, Laboratory Management and Operations, Laboratory News, Laboratory Operations, Laboratory Pathology, Laboratory Testing, Management & Operations, News From Dark Daily
In filing Monday, lawsuit seeks to force HHS to comply with PAMA’s statutory requirements and to withhold applying the new Clinical Laboratory Fee Schedule until HHS has revised the final rule appropriately
Many clinical laboratory executives will welcome the news that a lab industry trade association has filed a lawsuit in federal court in an effort to delay and fix the final rule for Protecting Access to Medicare Act of 2014 (PAMA) private payer lab test market price reporting that Medicare officials used to lower prices on the Medicare Part B Clinical Laboratory Fee Schedule (CLFS) that is scheduled to take effect on Jan. 1, 2018.
In a lawsuit filed Monday, the American Clinical Laboratory Association (ACLA) charged that the federal Department of Health and Human Services (HHS) ignored congressional intent and instituted a highly-flawed data reporting process when setting the 2018 CLFS rates under the Protecting Access to Medicare Act of 2014.
The ACLA asked the US District Court for the District of Columbia to force HHS to comply with PAMA’s statutory requirements, to withhold applying the new CLFS until HHS has revised the final rule appropriately. The CLFS is due to take effect on Jan. 1.
The lawsuit also seeks to vacate any actions that HHS made that were not in accordance with the PAMA law and to withdraw or suspend the final rule under PAMA. The case is American Clinical Laboratory Association v. Hargan, US District Court, District of Columbia, No. 1:17-cv-2645.
Final Prices for the 2018 Part B Clinical Laboratory Fee Schedule
Last month, the federal Centers for Medicare and Medicaid Services (CMS) issued the final CLFS rates and said at the time that it did so in compliance with the 2016 final rule implementing changes to the Medicare clinical laboratory fee schedule under PAMA section 216.
“We have repeatedly advised CMS that there are significant, substantive deficiencies in the final rule, which fail to follow the specific commands of the PAMA statute,” said ACLA President Julie Khani in an ACLA press release. “Contrary to Congress’ intent, instead of reforming Medicare reimbursement rates to reflect the broad scope of the laboratory market, the Secretary’s final rule will disrupt the market and prevent beneficiaries from having access to the essential laboratory services they need.”
Shown above is Julie Khani, President of the American Clinical Laboratory Association (ACLA) speaking at the Executive War College on Laboratory and Pathology Management last May in New Orleans. In a press release announcing ACLA’s lawsuit against the Department of Health and Human Services, Khani emphasized that many clinical laboratories had advised officials at the federal Centers for Medicare and Medicaid Services (CMS) about the “significant, substantive deficiencies in the final rule” for private payer market price reported that CMS designed. (Photo copyright: The Dark Report.)
22 Healthcare Organizations Opposed Cuts to Clinical Laboratory Test Prices
The ACLA, the American Hospital Association (AHA), and more than 20 other organizations had urged CMS to suspend implementation of the new CLFS rates, which are scheduled to take effect Jan. 1. The organizations cited concerns over the data-collection process used to establish the rates, and the fact that the rates would cause clinical laboratories to struggle financially and possibly close. If the rates set under PAMA affect Medicare beneficiaries’ access to clinical lab testing, the law would have the opposite effect of its intent.
To bring the lawsuit, ACLA retained Mark D. Polston, JD, of the Washington, DC, law firm of King and Spaulding. A specialist in representing healthcare systems seeking to navigate Medicare regulations, Polston is the former Chief Litigation counsel for CMS and specializes in complicated Medicare reimbursement litigation. Recently, he successfully challenged Medicare’s so-called “two-midnight” rule that imposed a 0.2% rate cut on hospitals billing for some patients.
Medicare Program Prohibited Most Medical Laboratories from Reporting
Contrary to Congress’ directives, most laboratories were prohibited from reporting private payer data under CMS’ market-rate data-collection process, ACLA said in a prepared statement. “As a result, CMS failed to protect access to laboratory services for Medicare beneficiaries. This flawed process could cause serious financial harm to potentially thousands of hospitals, independent and physician office laboratories, and make it harder for Medicare beneficiaries to get access to medical testing, particularly in remote rural areas and in nursing homes that depend on laboratory testing services,” ACLA said.
In the lawsuit, ACLA alleged that more than 99.3% of hospitals were prohibited from reporting their market-rate data. It is believed that this is the first time this figure has been reported. In 2015, the lawsuit charged, more than 261,500 entities received Medicare payment for laboratory services but only 1,942 laboratories reported market-rate information in 2016 under the PAMA final rule. The 1,942 labs that reported market-rate data is about 0.7% of the total number of laboratories that serve Medicare beneficiaries, the lawsuit said.
Only 21 of 7,000 Hospital Laboratories Reported Data
“Moreover, contrary to Congress’ intent, the laboratories that did report information are not representative of the market as a whole,” the lawsuit added. “For example, although approximately 7,000 hospital laboratories billed Medicare for laboratory services in 2015—accounting for 24% of the Medicare payments made under the Clinical Laboratory Fee Schedule—no more than 21 hospital laboratories (and probably even fewer) reported information to the secretary, leaving hospital laboratories effectively unrepresented in the data collected by the secretary.
“Hospital laboratories are often the only laboratories available to patients in certain areas of the country, and the private payer rates they receive are often much higher than other laboratories, due to differences in competitive markets, volumes of services, and other factors,” the lawsuit charged.
The Dark Report, Dark Daily’s sister publication, provided a compelling example of the serious flaws in the market price study conducted by CMS. Writing about the state of Michigan, The Dark Report noted: “At Joint Venture Hospital Laboratory Network (JVHL), CEO John Kolozsvary said Michigan’s hospitals serve 70% of the office-based physicians in the state with outreach lab testing services. Included among these hospitals are the 120 JVHL member laboratory facilities.”
“Since our network, plus the outreach programs of another 25 or 30 hospitals, hold a significant share of outreach lab testing in Michigan, how can CMS conduct an accurate, representative market study of what private insurers pay for lab tests in Michigan if it doesn’t collect data on what private payers reimburse hospital lab outreach programs in Michigan?” stated Kolozsvary in his interview with The Dark Report.
Did CMS ‘Disregard and Violate’ PAMA Statute?
In the ACLA’s announcement of the lawsuit, Polston said, “CMS clearly disregarded and violated the statute’s specific, unambiguous directives requiring commercial rate information to be reported and collected from a broad, diverse group of market participants. Instead, information was collected from less than 1% of US laboratories.”
In the press announcement, ACLA Board Chair Curt Hanson, MD, Chief Medical Officer of Mayo Medical Laboratories said, “This lawsuit reflects our obligation to those who are providing critical testing services, and to those millions of Americans who rely on the services our industry provides.” Others supporting the lawsuit include Laboratory Corporation of America and Quest Diagnostics.
Compliance with PAMA Law’s Statutory Requirements
In the lawsuit, ACLA seeks to require HHS to comply with the statutory requirements and to set aside the provisions in the final rule, “that unlawfully exempts thousands of laboratories from the reporting obligations that Congress imposed” under PAMA. A central feature of PAMA Section 216 is that laboratories must report market rate data so that HHS can ensure that Medicare reimbursement rates closely reflect the rates laboratories receive from private payers, the lawsuit said.
“ACLA was a strong supporter of Congress’ market-based reforms, which resulted in the most extensive changes to the system for reimbursing clinical laboratories since 1984,” the lawsuit said.
In challenging the final regulations, the lawsuit said HHS disregarded and violated, “the statute’s specific, unambiguous directives requiring that all applicable laboratories report relevant data.”
Congress Specified Which Medical Laboratories Are Obligated to Report
“In imposing these requirements, Congress took care to specify which laboratories would be obligated to report market data to ensure that information would be collected from a broad, diverse group of market participants,” the lawsuit said. “Congress made clear that any ‘laboratory’ would be required to report data if, ‘with respect to its revenues under [the Medicare program], a majority of such revenues are from’ the Physician Fee Schedule or the Clinical Laboratory Fee Schedule,” the lawsuit charged.
In promulgating the regulations, however, HHS, disregarded Congress’ instructions and “unreasonably and arbitrarily exempted significant categories and large numbers of laboratories that meet the statutory definition from the reporting requirements that Congress imposed,” the lawsuit said.
“The secretary’s final rule fatally undermines one of PAMA’s purposes, which is to require a broad spectrum of Medicare-participating laboratories to report market information to the secretary. Instead, in ultra vires (Latin for “beyond the powers”) fashion, the secretary has carved out large categories of laboratories—ultimately resulting in the exclusion of some 99.3% of the laboratory market—from the statutory reporting requirements,” the lawsuit charged. Ultra vires acts fall outside the authority of the organization in question.
In the lawsuit, the ACLA claims under:
count 1: ultra vires agency action not in accordance with law, in excess of statutory authority;
count 2: unreasonable construction of statute;
count 3: violation of the Administrative Procedure Act, arbitrary and capricious action; and,
count 4: violation of the Administrative Procedure Act, injunctive and declaratory relief.
Seeking an Injunction to Have HHS Secretary to Withhold or Suspend Final Rule
In its final section, “Prayer for Relief,” the lawsuit asks the court to vacate, “any agency action found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;” to require the Secretary of HHS to comply with the statutory requirements, “including faithfully implementing the statutory definition of ‘applicable laboratory;’” and enter an “injunction that (1) directs the Secretary to withdraw or suspend his final rule until such time as it can be brought into compliance with the statute, and (2) directs the Secretary to withhold applying the new Clinical Laboratory Fee Schedule until such time as the Secretary has made appropriate revisions to his final rule.” The lawsuit also asked the court to award to the ACLA “costs and disbursements of this action and reasonable attorneys’ fees.”
—Joseph Burns
Related Information:
ACLA Files Lawsuit Challenging PAMA Rates
CMS Ignored Congressional Intent in Implementing New Clinical Lab Payment System Under PAMA, ACLA Charges in Suit
Quest Diagnostics Supports Suit Against HHS Charging That CMS Ignored Congressional Intent in Implementing New Clinical Lab Payment System
LabCorp Supports American Clinical Laboratory Association Lawsuit on PAMA Final Rule
For Top 20 Tests, CMS to Cut Payment by 28% in 2018-2020; Medicare officials move one step closer to destroying beneficiary access to lab tests: The Dark Report, October 9, 2017
Sep 20, 2017 | Coding, Billing, and Collections, Laboratory Management and Operations, Laboratory News, Laboratory Operations, Laboratory Pathology, Managed Care Contracts & Payer Reimbursement, Management & Operations, News From Dark Daily
To offset the loss of revenue from the price cuts to Medicare Part B clinical laboratory tests, labs will need to aggressively—but wisely—slash costs to balance their budgets
Any day now, Medicare officials will announce the Medicare Part B Clinical Laboratory Fee Schedule (CLFS) for 2018. Both the Centers for Medicare and Medicaid Services (CMS) and the Department of Health and Human Services Office of Inspector General (OIG) have issued reports indicating that these fee cuts will total $400 million just during 2018, which Dark Daily reported on in July.
Many experienced industry executives expect this to be the single most financially disruptive event to hit the clinical laboratory profession in more than 20 years. This will not only have a substantial negative financial impact on all labs—large and small—but two sectors of the clinical lab industry are considered to be so financially vulnerable they could cease to exist.
At Greatest Risk of Financial Failure are Community Laboratories
The first sector is comprised of smaller community lab companies that operate in towns and rural areas. These labs are at the greatest risk because they are the primary providers of lab testing services to the nursing homes and skilled nursing facilities in their neighborhoods. And because they have a high proportion of Medicare Part B revenue.
Thus, the expected Medicare price cuts to the high-volume automated lab tests—such as chemistry panels and CBCs (complete blood count) that are the bread-and-butter tests for these labs—will swiftly move them from minimal profit margins to substantial losses. Since these labs have a cost-per-test that is significantly higher than the nation’s largest public lab companies, they will be unable to financially survive the 2018 Medicare fee cuts.
The second sector at risk is comprised of rural hospitals and modest-sized community hospitals. What officials at CMS and their consulting companies overlooked when they created the PAMA (Protecting Access to Medicare Act) private payer market price reporting rule is that these hospitals provide lab testing services to nursing homes and office-based physicians in their service areas.
Because of the low volumes of testing in these hospital labs, they also have a larger average cost-per-test than the big public labs. Thus, the 2018 cuts to Medicare Part B lab test prices will erode or erase any extra margin from this testing that now accrues to these hospitals.
Rural and Small Community Hospitals Rely on Lab Outreach Revenue
The financial disruption these Medicare lab test price cuts will cause to rural and community hospitals is a real thing. These hospitals rely on outreach lab test revenues to subsidize many other clinical services within the hospital. One rural hospital CEO confirmed the importance of lab outreach revenue to her organization. Michelle McEwen, FACHE, CEO of Speare Memorial Hospital in Plymouth, N.H., spoke to The Dark Report in 2012 about the financial disruption that was happening when a major health insurer excluded her hospital’s laboratory from its network.
Speare Memorial is a 25-bed critical access hospital in the central part of the state between the lakes region and the White Mountain National Forest. McEwen was blunt in her assessment of the importance of clinical laboratory outreach revenues to her hospital. “The funds generated by performing these [outreach] lab tests are used to support the cost of providing laboratory services to all patients 24/7, including stat labs for emergency patients and inpatients,” McEwen explained. “These funds also help support other services in the hospital where losses are typically incurred, such as the emergency room and obstetric programs.” (See “Critical Access Hospitals Losing Lab Test Work,” The Dark Report, April 2, 2012.)
For the second consecutive year, Lab Quality Confab (LQC) is offering an extended session on clinical laboratory accreditation and certification in New Orleans on October 24-25. CMS has indicated it will participate in this year’s session. It was an historic first for the clinical laboratory industry when last year’s Lab Quality Confab convened a panel that included experts in CLIA laboratory inspection and compliance from the four deeming organizations. From left to right: Moderator Nora L. Hess, MBA, MT(ASCP), PMP, Senior Consultant, Operations Management, Chi Solutions, Inc., Ann Arbor, Mich.; Kathy Nucifora, MPH, MT(ASCP), Director of Accreditation, COLA, Columbia, Md.; Stacy Olea, MBA, MT(ASCP), FACHE, Executive Director of Laboratory Accreditation Program, The Joint Commission, Oakbrook Terrace, Ill.; Randall Querry, Accreditation Manager, Clinical, American Association for Laboratory Accreditation (A2LA), Frederick, Md.; Robert L. Michel, Editor-in-Chief, The Dark Report, Spicewood, Texas; and Denise Driscoll, MS, MT(ASCP)SBB, Senior Director, Laboratory Accreditation and Regulatory Affairs, College of American Pathologists, Northfield, IL. (Photo by Linda Reineke of Riverview Photography. Copyright: The Dark Report.)
All Medical Laboratories Will Suffer Financial Pain from Medicare Price Cuts
But it is not just community lab companies and rural hospitals that are at risk of financial failure as the Medicare Part B cuts are implemented by CMS on Jan. 1, 2018. Any clinical laboratory serving Medicare patients will experience a meaningful drop in revenue. Many larger hospital and health system laboratories are recasting their financial projections for 2018 to identify how big a drop in revenue they will experience and what cost-cutting strategies will be needed to at least break even on their lab outreach business.
This explains why the first big trend of 2018 will be substantial revenue cuts from the Medicare program. It also explains why the second big trend of 2018 will be smart cost-cutting as labs attempt to balance their books and lower spending proportional to the reduced income they project.
Labs Have a Decade of Successful Cost-Cutting, More Cuts are Difficult
Aggressive cost-cutting, however, puts the nation’s medical laboratories at risk for a different reason. For the past decade, most well-run labs have already harvested the low-hanging fruit from obvious sources of cost reduction. They installed latest-generation automation. They re-engineered workflows using the techniques of Lean, Six Sigma, and process improvement.
During these same years, most medical laboratories also reduced technical staff and trimmed management ranks. That has created two new problems:
- First, there are not enough managers in many labs to both handle the daily flow of work while also tackling specific projects to cut costs and boost productivity. Basically, these labs are already at their management limit, with no excess capacity for their lab managers to initiate and implement cost-cutting projects.
- Second, technical staffs are already working at near peak capacity. Increased use of automation at these labs has reduced lab costs because labs were able to do the same volume of testing with fewer staff. However, the reduced staffs that oversee the lab automation are now working at their own peak capacity. Not only are they highly stressed from the daily routine, they also do not have spare time to devote to new projects designed to further cut costs.
Each Year Will Bring Additional Cuts to Medicare Part B Lab Prices
This is why all clinical laboratories in the United States will find it difficult to deal with the Medicare Part lab test fee cuts that will total $400 million during 2018. And what must be remembered is that, in 2019 and beyond, CMS officials will use the PAMA private payer market price reporting rule to make additional fee cuts. Over 10 years, CMS expects these cuts will reduce spending by $5.4 billion from the current spending level.
Taken collectively, all these factors indicate that many medical laboratories in the United States will not survive these Medicare fee cuts. The basic economics of operating a clinical laboratory say that less volume equals a higher average cost per test and higher volume equals a lower average cost per test.
Medical Labs with Highest Costs Most at Risk of Failure from Price Cuts
What this means in the marketplace is that labs with the highest average cost per test make the least profit margin on a fee-for-service payment. The opposite is true for labs with the lowest average cost per test. They will make a greater profit margin on that same fee-for-service payment.
Carry this fundamental economic principle of medical laboratory operations forward as Medicare Part B lab test fee cuts happen in 2018. Labs with the highest average cost per test will be first to go from a modest profit or break-even to a loss. As noted earlier, the clinical lab sectors that have the highest average cost per test are smaller community labs, along with rural and community hospitals. That is why they will be first to go out of business—whether by sale, bankruptcy, or by simply closing their doors.
Learning How to Cut Lab Costs While Protecting Quality
Every pathologist and lab administrator seeking the right strategies to further cut costs in their lab, while protecting quality and enhancing patient services, will want to consider sending a team from their laboratory to the 11th Annual Lab Quality Confab that takes place in New Orleans on October 24-25, 2018.
Anticipating the greater need for shrewd cost-cutting that also protects the quality of the lab’s testing services, this year’s Lab Quality Confab has lined up more than 51 speakers and 39 sessions. Of particular interest are these extended workshops that come with certifications:
- Lean Six Sigma Yellow Belt Training and Certification, led by Maureen Harte, MT(ASCP), LSSBB, Master Black Belt, of HartePro Consulting.
- Mastering Strategic Leadership in Pursuit of Clinical Lab 2.0, led by Karan Arora, Senior Global Marketing Director, Digital Health, Abbott Laboratories.
- Getting More from Lean for Lab Leaders: Henry Ford Production System Lean Gold Certification, led by Richard J. Zarbo, MD, DMD, System Chairman, Pathology and Laboratory Medicine at Henry Ford Hospital.
Sessions will address proven ways to:
- Use real-time analytics to improve workflow in molecular laboratories;
- Introduce automation in microbiology; as well as
- New breakthroughs in core lab automation; and
- Success stories in reducing lab test utilization.
Lab Quality Confab is recognized for its use of lab case studies—taught by the nation’s early adopter lab organizations. Certification classes are available to gain proficiency in the use of Lean methods and Six Sigma tools, such as:
Given the strong interest in smart ways to cut costs, boost productivity, and balance revenue-versus-cost, registrations for this year’s Lab Quality Confab is running at a record pace. The full agenda can be viewed at this link (or copy this URL and paste into your browser: http://www.labqualityconfab.com/agenda).
Of special interest to lab leaders preparing to stay ahead of the financial impact of the Medicare Part B fee cuts, Lab Quality Confab offers deep discounts for four or more attendees from the same lab organization. This allows your lab’s most effective cost-cutters to see, hear, and learn together, so that when they return they can get a flying start helping you align your lab’s costs to the expected declines in revenue that will happen on Jan. 1, 2018.
Reserve your place today and register now http://www.labqualityconfab.com/register.
—Robert L. Michel, Editor-in-Chief
Related Information:
Information, Agenda, and to Register for Lab Quality Confab Taking Place on October 24-25, 2017
In 2017, to Offset Declining Reimbursement and Shrinking Budgets, Savvy Clinical Laboratories Are Using LEAN to Improve Service and Intelligently Cut Costs
Lean-Six Sigma Medical Laboratories Begin to Innovate in Ways That Add Value to Physicians, Payers, and Patients
An Interview with Robert Michel, Editor-in-Chief of The Dark Report
At Lab Quality Confab in New Orleans this Week, Speakers Addressed Major Issues Faced by Medical Laboratories, including the Need for Labs to Deliver More Diagnostic Value to Physicians
Sep 13, 2017 | Coding, Billing, and Collections, Laboratory News, Laboratory Operations, Laboratory Pathology, Laboratory Testing
While multiple studies show reference pricing is an effective approach to reduce the cost of testing and procedures, medical laboratories and consumers alike must continue to focus on quality to ensure positive outcomes
The Dark Report in its September 2016 issue highlighted how reference pricing is positioned to become one of the biggest contributors to price erosion medical laboratories and pathology groups have faced in more than a decade. The issue featured details of a 2016 study published in JAMA Internal Medicine outlining how Safeway’s use of reference pricing for clinical laboratory tests decreased laboratory spending for itself and employees by 32% between 2011 and 2013—a total savings of more than $2.5-million.
That issue of The Dark Report also highlights a similar use of reference pricing by CalPERS (California Public Retirement System) that involved hip and knee replacement surgeries. CalPERS saw a 30% reduction in the cost of these surgeries after 12 months.
These highly publicized efforts have fueled interest in how reference pricing might work for other businesses, insurers, and the US government. The 2014 Protecting Access to Medicare Act (PAMA) is already collecting private payer rates paid to laboratories for tests. This data will then be used to create new rate-based fee schedules in 2018.
Speaking with Joseph Burns, Managing Editor of The Dark Report, about the outcome and potential rise of reference pricing, study author James C. Robinson, PhD, of University of California Berkeley noted that, “Any discussion about how to contain inappropriate healthcare utilization is challenging. By contrast, significant price variation is the low-hanging fruit. Employers would much rather save money by having patients travel to cheaper clinical labs than get into some esoteric discussion about whether a clinical procedure is appropriate or not.”
Quality is Key to Both Avoiding Price Erosion and Improving Patient Outcomes
There’s no question that reference pricing has forever changed the landscape of clinical laboratory pricing. Paired with increased pricing transparency and easier access to pricing information through platforms such as Castlight Health, Healthcare Blue Book, and Change Healthcare Corporation, consumers and businesses can quickly compare prices across a range of service providers.
However, in April, Leah Binder, President and CEO of The Leapfrog Group, published an article in Forbes that highlights the potential downsides to price shopping for laboratory testing and medical care.
“Differences among providers in quality can eliminate any cost advantages,” stated Binder in the Forbes article. “Some purchasers assume they can get around this problem by targeting reference pricing only for procedures that don’t vary in quality. When quality is all the same, decisions can pivot on price alone. Unfortunately, no such procedures exist. Extreme variation is the hallmark of our healthcare system.”
As reference pricing continues to force more consumers to shoulder a portion of medical laboratory testing costs, prices for more expensive laboratories are likely to continue eroding unless they can convince consumers that their services are higher quality or produce better results. (Graphic copyright: California Public Retirement System.)
Binder cites a study in Spine Journal’s April 2017 issue regarding diagnostic error rates for magnetic resonance imaging (MRI). The study involved a 63-year-old woman seeking relief from low back pain. Over a three-week span, she received 10 different scans. These scans resulted in 49 different findings. Of these findings, none were repeated across all 10 scan reports provided to her physician.
“As a result,” the study’s authors concluded, “where a patient obtains his or her MRI examination, and which radiologist interprets the examination, may have a direct impact on radiological diagnosis, subsequent choice of treatment, and clinical outcome.”
Binder reinforced this, stating, “Purchasers should still pursue reference pricing and try to incorporate considerations of utilization and quality to the extent they have the data. Never assume any procedure is like a commodity—largely the same quality everywhere.”
High-Cost Medical Laboratories Likely to Face a Decision Between Volume or Price Erosion
A 2016 study by Health Care Cost Institute found the average pricing of 240 common medical services varied by as much as 200% between states. Within states, prices fluctuated as much as 300%.
Thus, for pathology groups and medical laboratories in the upper percentiles for their region, referencing pricing is likely to impact volume. Even if adoption of reference pricing by payers or self-insured business groups remains stable, price cuts due to PAMA loom on the horizon. As reported by Dark Daily in December 2016, price cuts to the Part B clinical laboratory fee schedule could add up to $400 million in reduced Medicare payments in 2018 alone.
This is particularly troublesome for hospital laboratory outreach programs, where Medicare patients commonly represent 40% to 70% of outreach lab volumes. The combination of reduced volume and reduced Medicare pricing could have dire financial consequences.
It will remain essential for medical laboratories to differentiate their services from those of lower-cost competitors to avoid volume and price erosion. Continuing to optimize test utilization, improving laboratory efficiency, and emphasizing the value of services rendered will help to further strengthen lab positions and reduce the impact of coming change.
—Jon Stone
Related Information:
Price Shopping Could Cut Employer Health Costs by 20%, but There’s a Catch
Variability in Diagnostic Error Rates of 10 MRI Centers Performing Lumbar Spine MRI Examinations on the Same Patient Within a 3-week Period
The Striking Variation of Commercial Healthcare Prices
Some States Pay Twice the Price for Health Care, Finds New Report
Association of Reference Pricing for Diagnostic Laboratory Testing with Changes in Patient Choices, Prices, and Total Spending for Diagnostic Tests
Coming PAMA Price Cuts to Medicare Clinical Lab Fees Expected to Be Heavy Financial Blow to Hospital Laboratory Outreach Programs
Volume XXIII No. 12 – September 6, 2016
Consumers Now Use Medical Cost Websites to Price Shop for Clinical Pathology Laboratory Tests and Other Medical Procedures
Jul 17, 2017 | Compliance, Legal, and Malpractice, Laboratory Management and Operations, Laboratory News, Laboratory Operations, Laboratory Pathology, Uncategorized
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.
—Michael McBride
Related Information:
NILA and Other Stakeholders Ask HHS to Delay the Medicare Laboratory Payment Reform Rule
Nation’s Most Vulnerable Clinical Laboratories Fear Financial Failure If Medicare Officials Cut Part B Lab Fees Using PAMA Market Price Data Final Rule
Overview of CMS-1621-F Medicare Clinical Diagnostic Laboratory Test Payment System Final Rule
Dark Report Cracks the Mystery on PAMA Pricing; Genetic Coverage Still Tough Going
XIFIN Analysis of Its Real Price Data Shows Hospital Lab Price Effect: Study Based on Hundreds of Millions of Lab Test Claims
10% PAMA Fee Cut Would Lower Medicare Pay to Laboratories by $400 Million: New OIG Report Provides Clues as to How Cuts to CLFS Prices Will Reduce Payments to Clinical Labs
CMS Issues PAMA Final Rule That Aims to Cut Medicare’s Clinical Laboratory Test Price Schedule Sharply Beginning in 2018
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
Feb 8, 2017 | Compliance, Legal, and Malpractice, Laboratory Management and Operations, Laboratory News, Laboratory Pathology, Laboratory Testing
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…)
