To print this article, all you need is to be registered or login on Mondaq.com.
Important developments related to required price reporting to
Medicare for clinical laboratories under the Protecting Access to Medicare Act of 2014
(PAMA) have recently occurred. As a result, the clinical
laboratory industry is hopeful that Medicare cuts scheduled to
resume in 2023 and other aspects of PAMA’s price reporting
requirements will be reformed.
In 2016, the Centers for Medicare & Medicaid Services (CMS)
issued long-awaited final rules implementing
PAMA (the 2016 Rule) and later made changes to these
rules in 2018 (the 2018 Rule). PAMA was originally intended to
transition the Medicare Clinical Laboratory Fee Schedule (CLFS)
toward a fee schedule based on the prices paid to diverse segments
of the clinical laboratory industry by private payors. PAMA
required a broad range of clinical laboratories to submit private
payor reimbursement data to CMS for purposes of Medicare CLFS rate
setting. PAMA’s ultimate goal is to reduce Medicare’s
spending on laboratory testing by implementing a market-based fee
American Clinical Laboratory Association v. Xavier
Some industry stakeholders, such as the American Clinical
Laboratory Association (ACLA), have argued that PAMA’s
reporting requirements have led to unintended consequences. ACLA
recently received a favorable opinion in its lawsuit against HHS that challenged the scope
of PAMA’s reporting obligations. ACLA originally sued HHS in
December 2017 based on the 2016 Rule, which, among other things,
implemented CMS’s definition of “applicable
laboratory” with respect to the payment data reporting
requirements. The 2016 Rule defined “applicable
laboratory” as a laboratory that, bills Medicare Part B under
its own National Provider Identifier (NPI) and that meets certain
other requirements. This narrow definition led to skewed results in
the first round of reporting due to the fact that certain
laboratories accounting for a large amount of laboratory testing
fell outside its scope.
According to the D.C. Circuit’s opinion, this methodology
proved to be controversial because “. . . hospital
laboratories that provide outreach services do not typically have
their own NPIs, [and thus] the 2016 Rule exempts these entities
from data reporting requirements, even if they meet PAMA’s
statutory definition of an ‘applicable laboratory.'”
ACLA argued that the regulatory definition of the term had an
uneven and overall negative impact on Medicare reimbursement rates
because of the large volume of laboratories likely being
Following dismissals and appeals at the D.C. District Court and
D.C. Circuit levels, the district court focused on the 2018 Rule
which amended the definition of “applicable laboratory.”
Under the 2018 Rule, HHS stated that more laboratories furnishing
tests to a significant level of Medicare Part C enrollees would be
considered “applicable laboratories,” and it expanded the
definition to include entities that bill Medicare Part B on the
Form CMS-1450 14x bill type, which is used only for outreach (i.e.,
non-hospital patient) services.
The district court therefore found that more hospital
laboratories would need to comply with PAMA’s reporting
requirements and that the ACLA suit against the 2016 Rule was
“moot.” However, ACLA appealed to the D.C. Circuit,
maintaining that the 2018 Rule did not resolve all issues raised.
The D.C. Circuit agreed with ACLA, stating that the 2016 Rule
“results in inaccurate marketplace data and depresses Medicare
reimbursement rates.” From an Administrative Procedures Act
(APA) standpoint, the D.C. Circuit also ruled that HHS failed to
meet APA standards and that the “2016 Rule is arbitrary and
capricious because it failed to reasonably explain the agency’s
use of NPIs to identify laboratory revenue.”
The D.C. Circuit remanded the case to the district court with
the instruction to enter a declaratory judgment in favor of ACLA.
The court was careful to note that, in addition to its denial to
vacate the 2016 Rule, relief will be only prospective, and HHS will
not be required to accelerate laboratory data reporting periods or
recalculate past Medicare reimbursement rates.
Saving Access for Laboratory Services Act
While the D.C. Circuit’s decision is a victory for ACLA, the
laboratory industry may be more focused on legislative action with
the introduction in the House and Senate of the Saving Access for Laboratory Services Act
SALSA was introduced by in the Senate by Richard Burr
(R-NC), Ranking Member of the Senate Committee on Health,
Education, Labor and Pensions (HELP), and Sherrod Brown (D-OH).
Sens. Burr and Brown noted that the next CLFS reporting period for
clinical diagnostic laboratory tests is currently delayed until
2023 and that overall PAMA reporting has been delayed three times
to date by Congress. These delays included the Laboratory Access
for Beneficiaries (LAB) Act (2019), the Coronavirus Aid, Relief,
and Economic Security (CARES) Act (2020), and finally the
Protecting Medicare and American Farmers from Sequester Cuts Act
(2021), which delayed the reporting period and the application of
the 15% phase-in payment reductions resulting from private payor
rate implementation to 2023.
SALSA would amend Section 216(a) of PAMA and introduce these key
- HHS would be required to publish a list of widely available
clinical diagnostic laboratory tests and notify laboratories
required to report information covered under SALSA of such
- For “widely available” tests (defined as tests
performed by more than 100 NPI entities with Medicare reimbursement
rates under $1,000), CMS would need to collect “statistically
representative” samplings of payor data, including private
payor data from all hospital outreach laboratories, independent
laboratories, and physician office laboratories.
- Effective, January 1, 2023, there would be lower limits on
annual year-to-year CLFS payment rate reductions and increases, and
no cuts would occur in 2023.
- The definition of “applicable information” would no
longer include Medicaid managed care rates.
- Laboratories could choose to exclude manual (physically mailed)
remittances from reporting, if such remittances represent fewer
than 10 percent of the laboratory’s claims.
- Laboratory reporting periods would be every four years instead
of the current three years.
- HHS would be required to publish enabling regulations by
December 31, 2023.
ACLA has mounted an advocacy campaign to support passage. More
information can be found at www.stoplabcuts.org. We will continue to
monitor and report on both legislative and judicial developments
related to the Medicare CLFS.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
POPULAR ARTICLES ON: Food, Drugs, Healthcare, Life Sciences from United States