Revisions to Payment Methodology?

According to a newly released announcement by the Centers for Medicare and Medicaid Services (CMS), revisions to the payment methodology regarding clinical diagnostic laboratory tests under the Clinical Laboratory Fee Schedule (CLFS) will soon be determined by the weighted median of private payer rates per test. These include health insurance issuers, group health plans, Medicare Advantage plans under Part C, and Medicaid managed care organizations.

In addition to an adoption of a new rule altering healthcare provider reimbursement, beginning January 2018, private entities will be required to report payment rates for laboratory tests and the corresponding volumes of tests. The Protecting Access to Medicare Act of 2014 (PAMA) defines “applicable laboratories as having the majority of their Medicare revenues paid under the CLFS or the Physician Fee Schedule (PFS).”

CMS will revise Medicare reimbursement rates to reflect market prices regarding individual laboratory tests. Currently, Medicare reimburses for 1,300 types of clinical diagnostic laboratory tests (CDLTs), equaling roughly $7 billion per year. The CMS fact sheet conveys that CLFS rates have not been updated, with the exception of entering new tests or to make across-the-board updates, since its introduction in 1984.

Advanced Diagnostic Laboratory Tests (ADLTs) are under Medicare Part B and solely conducted by a single laboratory. It must also use a “unique algorithm to analyze biomarkers of DNA, RNA or proteins or be approved by the Food and Drug Administration (FDA).” It will be paid by the list charge during a new ADLT initial period of three quarters. Upon completion, payment will be based on the weighted median private payer rate.

Requirements

An eligible laboratory is one that uses its National Provider Identification (NPI), obtains greater than 50 percent of its Medicare revenues from the CLFS and PFS, and its revenues total at least $12,500 during a data collection period. About 55 percent of independent laboratories and 95 percent of physician office laboratories will be “precluded from reporting private payor data as a result of the low expenditure criterion.”

It goes on to state that even though the low expenditure threshold will exclude numerous physicians and independent laboratories, CMS estimates those required will report for approximately “92 percent of CLFS spending on physician office laboratories and approximately 99 percent of CLFS spending on independent laboratories.” Laboratories will also be required to provide a Taxpayer Identification Number (TIN) and an NPI when enrolling in Medicare to lessen the “potential administrative burden” on the laboratory industry.

Implementation of data collection and reporting

Private payer rates will take place over a 12-month reporting period. The first collection period retrieval is for data falling between January 1, 2016, and June 30, 2016. The first reporting period begins on January 1, 2017, until March 31, 2017. Annual laboratory public meetings aimed at introducing new tests will begin taking place mid-July 2017.

The newly updated CLFS will be released by November 2017. Data collection and reporting for CDLTs will take place every three years. Private payer rates for ADLTs will be reported on a yearly basis versus every three years.

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