Medicare Reimbursement: Labs Propose Solutions to PAMA Part B Pricing Problem

CMS recently issued its annual proposed rule on 2019 Medicare Part B reimbursement. For many labs, the number one concern is the proposed extension of the controversial PAMA “market pricing” scheme to a second year. Industry continues to oppose the CMS’ methodology of price setting as overly narrow and wants the agency to include data from thus-far excluded labs, particularly hospital outreach labs, into the pricing calculation. Here’s a look at and has proposed concrete methods to fix the problem.

1. Fixing the Hospital Outreach Lab NPI Disconnect

Some lab industry groups are asking CMS to do away with the requirement for submitting test pricing that says labs must bill Medicare under their National Provider Identifier (NPI) number. This process, they say, creates problems for the majority of hospital outreach labs that bill under the NPI number used by the entire hospital. According to the College of American Pathologists (CAP), hospital outreach lab use of the hospital-wide NPI skews the reimbursement calculation to the extent it “excludes the private payment rates received by a large segment of the nation’s laboratories.”

2. The CMS 1450 14x Bill Type Proposal

The American Clinical Laboratory Association (ACLA) proposes that CMS replace the NPI number with a CMS 1500, a CMS 1450 form using a 14x bill type, or their electronic equivalents for hospital outreach lab data collection reporting. “This approach would account only for the hospital laboratory business that competes in the marketplace with independent clinical laboratories,” the ACLA says.

3. The Weighted Median Formula Proposal

While supporting adoption of the CMS 1450 14x bill type, the American Society of Clinical Pathology (ASCP) favors a “weighted median” formula for calculating Medicare reimbursements which would consider the percentage of hospital labs in relation to the total market. For example, if hospital labs make up 20% of the market, data from those facilities would be weighted to 20% of the final calculation.

4. The Data Collection Expansion Approach

CAP likewise supports use of a CMS 1450 4X bill type but recommends that CMS expand its overall data collection process. In its comment letter to the proposed 2019 Part B rule, CAP “encourages CMS to explore options to collect applicable information from a randomly selected and statistically valid subset of applicable laboratories—including hospitals, large independent laboratories, small independent laboratories and physician office laboratories—and use the information reported to determine Medicare rates for subsequent data collection periods.”

5. The Concern over Lowering the Reporting Threshold

Another big concern for the lab industry is CMS’ proposal to reduce the “low expenditure threshold” for reporting private payor lab prices by 50%, from $12,500 to $6,250. Reducing the threshold wouldn’t make a significant impact on PAMA pricing and could overburden small labs, industry experts argue.

Next Steps
CMS is collecting feedback and hasn’t indicated when it will issue a final rule. To the extent feedback does result in changes, they would pertain to the 2019 PAMA data collection period and PAMA 2020 rates.