Eleven Things Labs Must Know to Comply with PAMA
An overview of PAMA and key aspects lab compliance officers should be aware of to help ensure compliance.
The Protecting Access to Medicare Act of 2014 (PAMA) is a thorn in the side of laboratories that provide tests to Medicare beneficiaries reimbursed under the Centers for Medicare & Medicaid Services (CMS) Clinical Laboratory Fee Schedule (CLFS). Specifically, there are two parts of PAMA that are troublesome: the onerous price data reporting requirements and the deep cuts in reimbursement that CMS deems to be necessary to align CLFS rates with the prices paid by private payors for those tests in the markets where they’re delivered. Although it has been challenged in court, called out by nonpartisan and respected sources like the Medicare Payment Advisory Commission (MedPAC), and even whittled back by CMS to some extent, PAMA compliance remains a major challenge. Here’s a helpful overview and briefing of key aspects of PAMA for lab compliance managers charged with meeting that challenge.1
1. Why Was PAMA Enacted?
PAMA is the product of the perception that Medicare Part B was overpaying for lab tests. In 2014, Medicare reported that it paid approximately $8 billion dollars for clinical laboratory testing under the CLFS.2 In April of that year, Congress adopted PAMA, adding a new section, 1834A, to the Social Security Act (SSA) whose objective was to establish a fair but also competitive market-based rate of reimbursement for lab tests. PAMA got off to a rocky start when implementation had to be delayed until March 2015 so that the necessary extensive revisions to the Medicare payment, coding, and coverage requirements for Clinical Laboratory Diagnostic Tests (CDLTs) could be made.
2. What Is Price Reporting?
To implement the market pricing component of PAMA, starting in 2017, labs had to report specific information to CMS about the payment rates from private payors for each CDLT, along with the corresponding volumes of such tests furnished during an identified period. Medicare would use the data it collected to set new CLFS allowables, starting in 2018.
3. Which Laboratories Must Report?
The duty to provide price reporting covers “applicable laboratories,” defined as those with a CLIA certificate that receive more than 50 percent of their Medicare revenues for services paid by Medicare under the CLFS and Physician Fee Schedule (PFS) in a data collection period. In addition, CMS proposed excluding laboratories receiving less than $50,000 in Medicare revenues in a data collection period for services that are paid by Medicare on the CLFS from the definition of applicable laboratory. CMS clarified that applicable laboratories would be identified at the Taxpayer Identification Number (TIN) level rather than the National Provider Identifier (NPI) level.
To meet the low expenditure threshold, a lab must have received $12,500 from final Medicare paid claims for services paid under the CLFS during the data collection period of January 1 to June 30, 2019. Under the 2019 Final Rule, Medicare Advantage revenues are excluded from the total Medicare revenue calculation, and hospital outreach labs that bill non-patients for laboratory services are included in the applicable lab determination.
4. Are Hospital Outreach Labs Required to Report Pricing Data?
Originally, CMS excluded hospital outreach laboratories from the definition of “applicable laboratory” due to the fact that laboratory services are bundled into the Ambulatory Payment Classification (APC) reimbursement for laboratory services. Physician office laboratories were also omitted. But in 2019, CMS expanded the definition to include hospital outreach laboratories that report claims to Medicare using the 14X type of bill (used specifically by hospital outreach laboratories). But it should be noted that the American Hospital Association (AHA) states that only 12 percent of hospital laboratories were reporting the 14X bill type.
Under the 2019 final rule, CMS no longer counted Medicare Advantage Part C payments toward the denominator in its percentage calculation, thinking that the exemption would expand the number of laboratories submitting payment data.
5. Which Information Must Applicable Laboratories Report?
Labs meeting the definition of applicable laboratories must report “applicable information” for each CLFS entry. Applicable information is defined as:
- The payment rate that was paid by each private payor for each test (identified by its HCPCS code) during the data collection period; and
- The volume of such tests for each such payor.
It’s significant that CMS opted to use “private payor rate’’ rather than ‘‘payment rate.’’ Typically, the latter term generically refers to the amount paid under the CLFS, while the term “private payor rate” reflects the price for a test before applying any patient deductible and coinsurance amounts.
6. Who’s a Private Payor?
The definition of “private payor” includes any of the following:
- A health insurance issuer as defined in Section 2791(b)(2) of the Public Health Service Act (PHS Act);
- A group health plan as defined in Section 2791(a)(1) of the PHS Act;
- A Medicare Advantage plan under Part C as defined in Section 1859(b)(1) of the SSA; or
- A Medicaid Managed Care Organization (MCO) as defined in Section 1903(m) of the SSA.
7. How are Data Collection Periods Identified?
For the initial data collection period, CMS proposed that applicable laboratories report applicable information to CMS for the period of July 1, 2015, through December 31, 2015. All subsequent data collection periods would cover a full calendar year (CY). CMS also proposed that all applicable information would be due by March 31 of the year following the data collection period.
CMS moved the implementation date up a year to 2018 to give laboratories enough time to adjust operations to establish the information systems necessary to collect private payor rates and ensure data accuracy before reporting to CMS. Thus, the first collection period was January 1 through June 30, 2016. The last six months of the year allowed laboratories time to verify and massage data, test systems, and prepare reports. The delay also allowed CMS to be prepared to handle data. The actual reporting of the data was January 1 through March 31, 2017. CMS spent the remainder of 2017 calculating the new weighted median rates for the 2018 fee schedule. This process repeats on an annual basis.
8. When Is the Next PAMA Data Reporting Period?
The federal government spending bill adopted at the end of 2022 delays 2023 PAMA reporting for one year. As a result, the next PAMA data reporting period is January 1, 2024 through March 31, 2024. Significantly, it will be based on the original data collection period of January 1, 2019 through June 30, 2019.
After the next data reporting period, there is a three-year data reporting cycle for CDLTs that are not advanced diagnostic laboratory tests (ADLTs) (that is 2027, 2030, etc.). So, the statutory phase-in of payment reductions resulting from private payor rate implementation is extended through CY 2026. There is a 0.0 percent reduction for CYs 2021, 2022, and 2023 and payment may not be reduced by more than 15 percent for CYs 2024 through 2026.
|Year for CDLT Rates||Based on Data Collection Period||Based on Data Reporting Period||Reduction Cap|
9. What Are the PAMA Caps on CLFS Cuts?
To blunt the impact of chaotic cuts to the fee schedule, CMS established caps for the first three years and the following three years:
- Maximum of 10 percent per year for 2018-2020; and
- Maximum of 15 percent per year for 2021-2023.
10. What’s the Difference between CDLTs and ADLTs?
Not all lab tests are subject to the PAMA pricing rules. PAMA created a separate classification for new tests that qualify as advanced diagnostic laboratory tests (ADLTs). To qualify as an ADLT, a new test must:
- Be covered under Medicare Part B;
- Be offered, furnished, and sold only by the single lab that develops the test (or a successor owner); and
- Meet either:
- Criterion A: The test is an analysis of multiple biomarkers of DNA, RNA, or protein combined with a unique algorithm to yield a single patient-specific result predicting if a patient will develop a condition(s), how the patient will respond to a therapy(ies) or providing new clinical diagnostic information that can’t be obtained from another test(s); or
- Criterion B: The test received FDA clearance or approval.3
- Meet either:
Currently, a list of 12 Proprietary Laboratory Analyses (PLA) or multianalyte assay with algorithmic analyses (MAAA) codes meet the definition. ADLT status has significant financial ramifications because ADLTs are subject to separate pricing rules. The price of a new ADLT is the actual list charge over the first three quarters that it’s available on the market. Labs that secure ADLT status for their products must report the actual prices of the test during that period so that CMS can determine the test’s weighted median rate. If the list charge turns out to be more than 130 percent of the median, CMS can make the lab repay the difference.
ADLTs also have separate reporting requirements. A single laboratory that offers and furnishes an ADLT doesn’t meet the minimum threshold; the $12,500 threshold won’t apply with respect to the ADLT. If the laboratory otherwise meets the definition of applicable laboratory, it’s considered an applicable laboratory with respect to the ADLT it offers and furnishes, and must report applicable information for its ADLT. If it doesn’t meet the threshold, it’s considered an applicable laboratory with respect to all the other CDLTs it furnishes. ADLT data must be reported annually.
11. What’s the Latest on PAMA Reporting and Price Cuts?
PAMA pricing and reporting hasn’t quite unfolded as planned. Draconian 10 percent payment reductions were implemented in the first three years that the system took effect—2018 to 2020. But then the pandemic struck. There was a 0.0 percent reduction for CY 2021, and payment could not be reduced by more than 15 percent for CYs 2022 through 2024.
In addition, the Further Consolidated Appropriations Act, 2020 (FCAA) and Laboratory Access for Beneficiaries Act enacted on December 19, 2019, delayed the next reporting period for reimbursement data. Since there was no price data reporting in 2020, the next data reporting period of January 1, 2022 through March 31, 2022, was based on the original data collection period of January 1, 2019 through June 30, 2019.
In 2021, the statutory PAMA phase-in of payment reductions resulting from private payor rate implementation was again extended, that is, through CY 2024. In December 2021, the Senate passed a delay for the PAMA cuts for another year. Sequestration of payments of two percent was delayed through April 1, 2022; it then dropped to one percent for April 1 through June 30, 2022.
A 15-percent fee schedule payment cut was slated to take effect and data reporting was scheduled to resume on January 1, 2023. While Congress declined to adopt legislation called the Saving Access to Laboratory Services Act (SALSA) that would have addressed these issues permanently, it did at least postpone the latest round of price cuts and data reporting for 2023. The hopes are that SALSA will pass this year.
Diana W. Voorhees, M.A., CLS, MT, SH, CLCP, CPCO, is principal in DV & Associates, Inc., Salt Lake City, UT, which makes no representation, guarantee, or warranty, expressed or implied, that the information provided is free of error, and will bear no responsibility or liability for results or consequences of its use.
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