2021 Medicare Physician Fee Schedule Slashes Lab Reimbursements 5% but Provides Some PAMA Relief

On Aug. 3, CMS released the proposed Medicare Physician Fee Schedule (PFS) rule for 2021. Bottom line on top: The agency is slashing lab reimbursement rates. Here are the four key takeaways for labs. Note that the deadline to comment is Oct. 5.

1. Overall Physician Payment Rates 

CMS is proposing to reduce the conversion factor it uses to calculate the PFS rate from $36.09 to $32.26. This whopping 10.6 percent cut is necessary because CMS is significantly increasing E/M code reimbursement rates in 2021 and, by law, the agency is required to maintain budget neutrality by implementing decreases to offset increases.

2. Impact on Labs and Pathologists

The reduced conversion factor and other proposed policy changes will reduce overall payments to independent labs by approximately 5 percent, and to pathologists by roughly 9 percent, according to CMS’ projections. By contrast, the 2020 PFS increased overall lab payments by 1 percent payments for pathology even with 2019 levels .Among the largest scheduled cuts is to the professional component of pathology tissue examinations, which is slated to drop 12 percent to $34.52 to $39.34.

3. One-Year Delay in PAMA Reporting

The news isn’t all bad. Delivering on promises made during the March CARES Act COVID-19 relief bill negotiations, the next round of PAMA Clinical Laboratory Fee Schedule (CLFS) data reporting period would be delayed by an additional year. Result: Hospital outreach labs won’t need to report private payor data until Jan. 1, 2022 through March 31, 2022.

4. PAMA Pricing Relief

CMS is proposing phased-in CLFS payment reductions through 2024 by imposing a 0.0 percent reduction for CY 2021 and a 15 percent reduction cap for the next three years after that.