Congress Offers New Hopes of PAMA Reform
On March 28, the 118th Congress raised lab industry hopes once more by reintroducing the Saving Access to Laboratory Services Act (SALSA).
Hope springs eternal. On March 28, the 118th Congress raised lab industry hopes once more by reintroducing the Saving Access to Laboratory Services Act (SALSA) to clean up the mess that has become Protecting Access to Medicare Act (PAMA) pricing and reporting.1,2 The new SALSA is the same legislation that narrowly missed passing last year but there’s reason to hope that it gets across the finish line this year.
PAMA-geddon
Congress passed PAMA in 2014 to ensure that Medicare paid the same prices for medical lab tests that private payors are charged in the same market. The legislation made Centers for Medicare & Medicaid Services (CMS) responsible for establishing a mechanism for labs to report their pricing data that the agency could then use to set the Medicare Part B Clinical Laboratory Fee Schedule (CLFS) rates in accordance with market prices.
But the scheme veered off course when CMS defined “applicable laboratories” on whose pricing data CLFS rates would be based. That definition excluded hospital, physician office, and other labs that not only constituted an essential element of the market, but were also able to charge higher prices for tests. Working from a data set limited to independent labs, CMS created a pricing scheme that artificially depressed reimbursement rates.
As a result, PAMA’s financial impact on independent labs has been devastating. Instead of the $2.5 billion in reimbursement rate cuts over 10 years that the Congressional Budget Office (CBO) projected when PAMA was enacted in 2014, PAMA has already slashed CLFS lab payments by nearly $4 billion after only three years of cuts, according to the American Clinical Laboratory Association.3 The impact would have been far deeper and more dislocating if not for a series of annual price cut delays, the most recent of which was adopted at the end of 2022.
Common Set of Tests NILA Members Conduct and the Percent Cuts Under CMS’s Final CLFS Implemented 01/01/2018
| Test Name | Description | Uses | Percent Cut |
| Complete blood count | Measures vital blood related biodata, including red and white blood cell counts | Critical for patients with leukemia, anemia, autoimmune disorders, cancer, and conditions that require regular blood monitoring | 35% |
| Prothrombin time | A blood test that measures how quickly a patient’s blood clots | Checks for bleeding problems, monitors blood thinning medication, and diagnoses disorders such as leukemia, liver problems, and immune disorders | 20% |
| Comprehensive metabolic panel | Blood tests that measure glucose levels, electrolyte, and fluid balances | Examines liver and kidney function; can diagnose diabetes; monitors high blood pressure or effect of medications | 37% |
| Lipid panel | Blood tests that measure and detect abnormalities in cholesterol and triglyceride levels | Used in screening and treatment for high cholesterol, diabetes, heart disease, kidney disease, and obesity | 39% |
| Assay of ferritin | Blood tests used to determine the amount of iron stored in the body | Checks for iron storage disorders such as hemochromatosis, liver disease, rheumatoid arthritis, hyperthyroidism, and some types of cancer | 35% |
| Urine bacterial culture | A test used to identify bacteria in the urine that cause infection | Used to diagnose a urinary tract infection, which is a frequent infection in long-term care facilities | 35% |
| Hemoglobin A1c | Blood tests that measure the levels of glycated hemoglobin, which is a marker for levels of glucose in blood | Used to manage and control diabetes | 37% |
| Definitive drug tests | Blood tests to identify specific drugs or metabolites in the bloodstream | Used in suspected drug overdoses, treating, and monitoring of substance abuse disorders | 59% |
The lab industry protested vehemently, led by the ACLA, and even brought a lawsuit challenging the CMS PAMA pricing scheme in federal court. Last July, the federal D.C. Circuit Court held that the CMS Rule is “arbitrary and capricious” because it doesn’t “reasonably explain” the agency’s use of Medicare National Provider Identification (NPI) numbers to identify lab revenue.5 A year earlier, the bipartisan Medicare Payment Advisory Commission (MedPAC) reached much the same conclusion and called on Congress to adopt legislation to fix the PAMA pricing and reporting rules.6
SALSA vs PAMA
In June 2022, Congress responded by introducing the bipartisan SALSA bill to effect PAMA reform.7 SALSA has six key provisions:
1. Statistical Price Sampling
Adopting the MedPAC recommendation, SALSA would fix the current “applicable laboratory” distortion by requiring CMS to use a more statistically representative sample of private payer rates to determine CLFS rates while also alleviating reporting burdens by requiring fewer labs to report pricing data.
2. Reporting Limited to Widely Available Tests
Section 2(a)(1)(C)(i) of SALSA limits CMS to requiring “the collection and reporting” on “widely available clinical diagnostic laboratory tests.” Such tests are defined as those offered by over 100 labs and that have CLFS reimbursement rates of less than $1,000.
3. Lower Annual Caps on CLFS Payment Reductions
SALSA would set annual limits on both CLFS payment rate cuts and increases. The PAMA legislation also includes caps, but they apply only for the first six years, ending in 2025. Under the SALSA caps, the CLFS would be frozen in 2023, the annual reduction cap for 2024 would be 2.5 percent and then increase to five percent in 2025 and each year after that.
Current PAMA CLFS Payment Cut Caps
| Year | Maximum PAMA Cut | Maximum SALSA Cut |
|---|---|---|
| 2023 | 0 percent | 0 percent |
| 2024 | 15 percent | 2.5 percent |
| 2025 | 15 percent | 5 percent |
| 2026 and thereafter | No cap | 5 percent |
4. Data Reporting Every 4 Years, Rather than 3 Years
PAMA price reporting is an administratively burdensome process. Under SALSA, applicable laboratories would have to report pricing data once every four years—instead of once every three years under current rules—with the next reporting period to occur in 2026 based on 2025 data.
5. Revised Definition of “Applicable Information”
SALSA would reduce reporting burdens and make pricing data more reflective of market prices by carving out two new exclusions to the definition of “applicable information” that labs must report:
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- Medicaid managed care rates, which, by law, must be below Medicare rates for the same services
- Physically mailed remittances to the extent that they don’t exceed 10 percent of the reporting lab’s total claims
6. Excluding “Majority of Medicare Revenues” Part from “Applicable Laboratories” Definition
SALSA eliminates the part of the definition of “applicable laboratory” as a lab that gets most of its Medicare revenues from one or a combination of the CLFS or Physician Fee Schedule, while keeping the part of the definition of a lab that receives at least $12,500 in payments from Medicare.
SALSA vs PAMA Definition of “Applicable Laboratory”
| PAMA | SALSA |
| A laboratory (as defined under the Clinical Laboratory Improvement Amendments [CLIA] regulatory definition of a laboratory in 42 C.F.R. § 49) that: • Bills Medicare Part B under its own National Provider Identifier (NPI); or, for hospital outreach laboratories, bills Medicare Part B on the Form CMS-1450 under type of bill (TOB) 14x • Meets the “majority of Medicare revenues” threshold (that is, receives more than 50 percent of its Medicare revenues from one or a combination of the CLFS or the Physician Fee Schedule (PFS) in a data collection period • Meets or exceeds the low expenditure threshold (that is, it receives at least $12,500 of its Medicare revenues from the CLFS in a data collection period) |
A laboratory (as defined under the Clinical Laboratory Improvement Amendments [CLIA] regulatory definition of a laboratory in 42 C.F.R. § 49) that: • Bills Medicare Part B under its own National Provider Identifier (NPI); or, for hospital outreach laboratories, bills Medicare Part B on the Form CMS-1450 under type of bill (TOB) 14x • Meets or exceeds the low expenditure threshold (that is, it receives at least $12,500 of its Medicare revenues from the CLFS in a data collection period) |
Takeaway: The New SALSA
The stakes couldn’t be higher. Unless Congress acts, 800 different CLFS lab tests will be subject to PAMA payment cuts of 15 percent starting on January 1, 2024.8 Like its predecessor, the reintroduced SALSA is a bipartisan bill with versions in both the House and the Senate.
Both the ACLA and National Independent Laboratory Association (NILA) have praised its reintroduction and called for its passage.4 After narrowly missing being included in the end-of-year spending bill that Congress adopted to avoid a federal government shutdown last December, there are hopes that Democrats and Republicans will find time to set aside their political bickering and come together to pass this important legislation.
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