PAMA

Medicare Reimbursement: CMS Offers Some PAMA Relief But Not Nearly Enough

The final 2019 Clinical Laboratory Fee Schedule (CLFS) (Final Rule) is out and it’s just as bad as last year’s. Here’s a rundown of what lab compliance and reimbursement managers need to know.

CMS’s Olive Branch
The center of the controversy remains the overly narrow CMS definition of “applicable laboratories” that has the effect of excluding the pricing data of hospital outreach labs in calculating market rates for lab tests (see box below).

CMS Definition of Applicable Laboratory

An entity that’s a laboratory (as defined in CLIA) that bills Medicare Part B under its own NPI and/or that gets more than 50% of its Medicare revenues during a data collection period from the CLFS and/or Physician Fee Schedule (PFS). Applicable labs must also meet a “low expenditure threshold,” i.e., get at least $12.5K of Medicare CLFS revenues for clinical diagnostic lab tests that are not advanced diagnostic lab tests (ADLTs).

The Final Rule acknowledges that the definition may be too narrow and offers “relief” in the form of excluding Part C Medicare Advantage payments from the denominator by which the CLFS/PFS numerator is divided. Impact: It will be easier for labs with significant MA plan revenues to qualify as “applicable labs” under the majority of Medicare revenues threshold.

Too Little, Too Late
These changes aren’t nearly enough to satisfy industry, especially since they won’t kick in for two more years. The Final Rule doesn’t address the real problem, i.e., the current definition’s reliance on NPI number excludes hospital outreach labs that bill under the hospital NPI. In the Final Rule, the CMS acknowledges the problem and characterizes the arguments made by industry during the comment period to include more hospital outreach labs “particularly compelling.”

But while CMS wants more hospital representation, it doesn’t want too much more. The fundamental difference is the agency’s interpretation of the Affordable Care Act as being intended to exclude hospital labs and “limit reporting primarily to independent laboratories and physician offices.” So, it’s hardly surprising that none of the solutions that industry recommended made it into the Final Rule.

1. TIN, Not NPI

Recommendation: Base price reporting on the Tax Identification Number (TIN) the lab uses to report taxable income to the IRS rather than NPI.

Reason for Rejection: This was an idea that CMS considered when creating the first CLFS proposed rule back in October 2015. But it nixed the idea, reasoning that because test prices are negotiated at the TIN level, TIN-based price reporting would lead to double counting of the same pricing data.

2. CMS 1450 14x TOB, Not NPI

Recommendation: Replace the NPI number with the CMS 1500, a CMS 1450 form using a 14x Type of Bill for hospital outreach lab data collection reporting. Under this approach, applicable revenues would be based on the bills used for hospital lab services provided to non-patients, which are paid under Part B.

Reason for Rejection: Although the approach would relieve hospital labs of the burden of getting their own unique billing NPI, CMS rejected it because:

  • Defining “applicable laboratory” using the Form CMS-1450 14x TOB doesn’t identify an entity the same way the NPI does;
  • Hospitals may not have enough time to develop the information systems to collect, track and report the necessary data that such a system would require;
  • “Significantly”, such an approach would enable all outreach labs to meet the majority of Medicare revenues threshold.

3. CLIA Certificate, Not NPI

Recommendation: Base “applicable laboratory” on CLIA certificate-based definition.

Reason for Rejection: CMS said this approach would be “overly inclusive” to the extent it would count all hospital” labs rather than just outreach labs. In addition, the CLIA certificate is a health and safety standard that, unlike the NPI, isn’t associated with Medicare billing and can’t be used to identify revenues for specific services, the agency reasoned.

Latest Developments from the Litigation Front
Meanwhile, the ACLA isn’t giving up on its efforts to secure PAMA relief on the judicial front. In September, the organization suffered a setback when a federal court tossed out its lawsuit on procedural grounds. But now the ACLA has decided to appeal the ruling in the case called ACLA v. Azar. Winning the appeal is a long shot.

But filing the appeal is less about ultimate court victory than keeping the case alive and maintaining the pressure on HHS. The apparent strategy is to leverage that pressure to negotiate changes via the legislative and regulatory process.

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