ACLA Court Win May Tip the Battle Over PAMA Pricing

Take that, CMS! The American Clinical Laboratory Association (ACLA) can sue to get the agency’s PAMA lab pricing scheme struck down after all. So ruled the US Court of Appeals for the District of Columbia Circuit in late July, roughly 10 months after the lower court ruled that the ACLA couldn’t take its claims to court.

PAMAgeddon

The focal point of the ACLA and lab industry’s opposition isn’t with the idea of basing Part B lab test prices on market rates but rather CMS’ implementation of the concept, specifically its exemption of virtually all hospital labs from the data-reporting requirements. As a result, the pricing data collected was skewed and didn’t accurately represent the private market the way Congress intended when it passed the legislation.

For years, industry tried to negotiate a solution and expand data-reporting to hospital labs but CMS stuck to its guns and the controversial new PAMA Clinical Laboratory Fee Schedule rates took effect in 2018. Frustrated by the lack of progress on the regulatory front, the industry led by the ACLA, escalated the dispute by taking CMS to court. The essence of ACLA’s legal claim is that CMS abused its power by rewriting rather than implementing PAMA.

In September 2018, it looked like the litigation strategy would turn out to be a dead end when U.S. District Judge Amy Berman Jackson dismissed the lawsuit. While acknowledging that ACLA’s “arguments on the merits raise important questions,” she reasoned that the court didn’t have jurisdiction on PAMA rate-setting.

Despite the setback, the ACLA decided to maintain the pressure by filing an appeal. We’re not challenging the rate-setting itself, the ACLA argued, but the implementation of the rate setting. The agency’s “egregious violation of the statutory requirements should not be shielded from judicial review,” noted the ACLA appeal. And it worked. The Court of Appeals agreed that there’s a difference between the federal agency’s establishing test payment amounts and establishing the process for collecting pricing data. The former isn’t subject to judicial review but the latter is. Result: The ACLA could proceed with its suit.

What It Means

Although it’s a victory, the Court of Appeals ruling isn’t final victory. It just means that ACLA can take its case to court and raise those “important questions” the lower court avoided answering. Victory on the merits may take years, if it happens at all.

But that’s not the point—at least not the whole point. All along, the industry strategy in opposing the CMS PAMA pricing scheme has been to engage the agency on multiple fronts—in court, in Congress and in behind the scenes negotiations. Success on the litigation front increases the industry’s credibility in Congress and leverage in negotiations. In fact, those efforts were already starting to bear fruit before the new Court of Appeal ruling came down, including:

• CMS’ agreement to include certain hospital outreach labs in data-reporting for 2019 (see Lab Compliance Advisor (LCA), Jan. 21, 2019); and
• The introduction of a new Congressional bill to delay the reporting of lab payment data required by PAMA by one year.

Takeaway: After years of frustration, it appears that the balance may be tipping and that industry is winning the battle with CMS over PAMA pricing. Chances are that real relief will come in the form of new legislation or, more realistically, revised regulations long before the court battle is renewed.