Leaders from ACLA, AdvaMedDx, CAP, NILA will be at Executive War College on April 29-30 for first medical lab industry debate about the best and worst of the new law
Clinical laboratories will face new financial challenges following passage of a new federal law two weeks ago that makes deep changes in the way Medicare officials will establish prices for the Medicare Part B Clinical Laboratory Fee Schedule (CLFS). Many medical laboratory administrators, hospital lab managers, and pathologists remain unaware of the significant negative financial impact this law will have on their lab’s revenue and fiscal stability.
On April 1, President Barack Obama signed H.R. 4302: Protecting Access to Medicare Act of 2014. The law’s primary purpose is to extend the Sustainable Growth Rate (SGR) formula for 12 months. The House had passed the bill on the previous Thursday and the Senate passed the bill on the following Monday, March 31.
Along with the SGR extension, the bill addressed a grab bag of Medicare-related issues. For example, implementation of ICD-10 will be delayed one year.
New Law Has Good News/Bad News for Clinical Laboratories
What is of specific interest to the clinical laboratory industry is “Section. 216. Improving Medicare Policies for Clinical Diagnostic Laboratory Tests.” While there is some good news in the law for certain types of medical laboratories, there is bad news for others.
Many clinical lab organizations will see a substantial decline in the prices paid to them for the highest-volume lab tests reimbursed under Medicare Part B. The law specifies that the federal Centers for Medicare & Medicaid Services (CMS) can begin enacting those price cuts in 2017.
Law Mandates Medicare Cuts of $2.4 Billion to Clinical Lab Payments
This bad news aspect to the new law was quantified by Congress. It estimated that the consequence of the price cuts to the CLFS will be $2.4 billion less money paid to clinical laboratories. This was the source of some cost cuts and offsets that Congress needed to fund for the one-year extension of the SGR in a budget-neutral fashion.
Congress seems to always act swiftly when the Sustainable Growth Rate (SGR) formula is about to trigger substantial reductions to Medicare physician fees. This time around, the House passed the SGR fix on Thursday, March 27. The Senate passed the bill on Monday, March 31, and President Obama signed it into law hours later. H.R. 4307, among many things, created a new set of requirements that Medicare officials are to use to establish prices for the Medicare Part B Clinical Laboratory Fee Schedule. Congress expects the new requirements will reduce Medicare payments to clinical labs by $2.4 billion. (Photo copyright Codebusters.com.)
In its April 7th issue, The Dark Report, our sister publication, was the first important lab industry publication to provide some analysis of the new law as it applies to clinical laboratories. The Dark Report identified six aspects of H.R. 4302 that specifically apply to clinical laboratories, as follows:
- SETTING PRICES WITH MARKET DATA: Certain labs will be required, beginning on January 1, 2016, to report private-payer payment rates and volumes for their tests.
- NEW CATEGORY: ADVANCED DIAGNOSTIC TESTS (ADTs): For certain tests developed and performed by single laboratories, the initial payment rate for ADTs will be set at the “actual list charge.” If the charge exceeds private-payer rates by more than 130%, CMS can recoup the overpayment.
- SETTING PRICES FOR NEW TESTS AND EXPERT ADVISORY PANEL: To ensure transparent and reliable decisions about pay rates and coverage, CMS will assemble a panel of outside advisors, including clinicians and other technical experts. Also, CMS must follow either the crosswalk or gapfill process to determine the initial payment rates and explain, in a transparent manner, how the calculations were made.
- CHANGES IN HOW MEDICARE HANDLES LAB TEST CODES: For new lab tests, CMS will use temporary HCPCS codes to enable payment prior to a permanent HCPCS or CPT code.
- COVERAGE REQUIREMENTS AND DECISIONS: In support of fair and open coverage decisions for a lab test when a local coverage determination is needed, MACs must now follow a defined development and appeals process.
- OVERSIGHT OF THE PROCESS TO CREAT COVERAGE GUIDELINES AND SET LAB TEST PRICES: Two levels of oversight are written into the law: one by the U.S. Government Accountability Office (GAO), the other by the Office of Inspector General (OIG) of Department of Health and Human Services (DHHS) .
These are the major points in the law that direct the CMS how to handle specific issues associated with clinical laboratory testing. The brief summation above provides an indication of the potential for this new law to have far-reaching consequences to the financial sustainability of many clinical laboratories across the country.
Clinical Lab Associations React Differently to New Federal Law
In the days following enactment of the new law, different clinical laboratory trade groups held differing opinions about benefits and liabilities of the bill. In comments published by The Dark Report, the Association for Molecular Pathology (AMP) stated that H.R. 4302 creates an unlevel playing field that favors independent laboratories significantly. “The new weighted median calculations will place a disproportionate burden of reduced payments on hospital-based labs and favor large-volume independent laboratories,” stated an AMP spokesperson.
The American Clinical Laboratory Association (ACLA) took a different view. The Dark Report quoted its spokesperson as saying: “The lab industry was also facing an across-the-board cut to get savings for the SGR package. This was potentially as much as $8 billion—more than three times as much as the new law is estimated to cut. On top of that, lab test fees would continue to be subject to being cut in subsequent years each time Congress has to pay for the SGR. This is why we faced a triple threat. This law makes those future cuts less likely. Therefore, this was a far better alternative that what we were facing,” the ACLA spokesperson concluded.
NILA Criticizes New Law as Threatening Market Competition and Access
That favorable view was not shared by the National Independent Laboratory Association (NILA). It criticized the bill, and its spokesperson said that new law “places an unprecedented, unfunded mandate on certain ‘applicable’ laboratories to begin reporting private commercial payer data to CMS. The expressed purpose of the language is to assess laboratory market rates. However, as written, the language could exclude a majority of the laboratory market and that could place the burden and risk of significant penalties squarely on regional and community-based laboratories. This new law threatens market competition for clinical laboratory services and access to testing,” the NILA spokesperson warned.
In presenting these opinions by three different clinical laboratory associations, this Dark Daily presents contrary opinions that exist about H.R. 4302. This early reaction to a law that is just two weeks old shows how fault lines already exist within the clinical lab industry about how certain labs may be severely disadvantaged as the law is implemented and deep price cuts are enacted to the Medicare Part B Clinical Laboratory Fee Schedule.
The Dark Report Provides More Detailed Coverage of H.R. 4302
Lab administrators and pathologists wanting more information about the new law and reactions of various clinical laboratory associations to its passage should access the April 7, 2014 issue of The Dark Report. (go to darkreport.com to order the April 7 issue.)
Of equal importance, in just two weeks, leaders from the ACLA, NILA, College of American Pathologists (CAP), and Advanced Medical Technology Association–Diagnostics (AdvaMedDx) will be at the 19th Annual Executive War College on Laboratory and Pathology Management to participate in a special panel discussion focused on passage of the new law and the financial impact it will have on revenue and profitability for the nation’s clinical laboratories. This meeting will take place April 29-30, 2014, at the Sheraton Hotel in New Orleans.
Along with this timely panel, other sessions at the Executive War College will address the potential consequences of H.R. 4302 for hospital outreach laboratories, local clinical lab companies, and molecular diagnostics laboratories. The full agenda is available at www.executivewarcolleg.com/agenda. Registration can be accessed at http://www.executivewarcollege.com/register/.
Radical Change in How Medicare Officials Determine Lab Test Prices
Passage of H.R. 4302 represents a radical change in how Medicare officials will determine the prices to be paid for clinical laboratory tests. Clinical lab administrators and pathologists should be clear on this point: Congress enacted this section of the law primarily to cut $2.4 billion from Medicare Part B reimbursement for clinic laboratory tests. Thus, as CMS implements the provisions of this law, all laboratories filing Part B lab test claims will see less revenue for the same volume of claims, beginning in 2017.
That is why it is significant that, as illustrated by the quotes published above, schisms in the clinical laboratory industry are already visible as to how this new law may benefit certain types of clinical laboratory organizations, while other types of clinical labs face a disproportionately worse financial consequence. Because the law will take $2.4 billion away from projected Part B lab test funding, every lab executive should more fully research the language of H.R. 4302 so as to understand the law’s full financial impact on their clinical laboratory organization.
Related Information:
Text of H.R. 4302: Protecting Access to Medicare Act of 2014
AMP Concerned over Proposed Changes to CLFS Payment Policy PDF
NILA Outlines Problems With House-passed SGR “Patch”
Congress Raises Stakes in Lab Test Pricing Game
