CMS Finalizes Controversial PAMA Fee Schedule

It’s official. Brushing aside fierce lab industry opposition, CMS has decided to go forward with its PAMA Clinical Laboratory Fee Schedule (CLFS) in 2018.

The Flawed Fee Schedule

The intent of the PAMA law is to base Medicare payments for lab tests on actual market rates. While welcoming the concept, the lab industry was appalled at how CMS proposed to implement it, specifically its exclusion of hospital and community labs from the definition of “applicable laboratories” whose data was used to determine market rates for tests. In addition to representing a key segment of the lab market, these labs have the leverage to command higher rates. So excluding their pricing data artificially deflates rates for lab tests.

In announcing the final 2018 rates, CMS defends the CLFS as incorporating pricing data “from laboratories from every state” accounting for over 96%of Medicare spending on lab tests in 2016. “This strong response gives us confidence that the final payment rates accurately capture the rates paid by private payors and allow CMS to utilize the power of the private market to help make sure the CLFS pays accurately for tests.”

The Final CLFS

The finalized CLFS published on Nov. 17 closely tracks the objectionable preliminary version of Sept. 22 (See GCA, Oct. 24, 2017, for the details) with four adjustments:

1. Phase-In Reduction Cap of Cuts Over 10%

Situation: Under the current CLFS, the National Limitation Amount (NLA) for a lab test HCPCS code is based on a percentage of the median of all local fee schedule amounts, including $0. Medicare pays whichever is lowest among the billed amount, local fee schedule amount or NLA. In most cases, the NLA is the lowest amount. The new CLFS will apply a phase-in reduction cap when comparing the 2017 NLA to the weighted median of the private payor rates would reduce payment for lab tests by over 10%.

Preliminary CLFS: The 23 HCPCS codes with a $0 NLA and a local fee schedule amount of over $0 in 2017 were slated for the full NLA treatment rather than the 10% reduction cap.

Final CLFS: The formula was recalculated to exclude the above $0 local fee schedule amounts. Result: 16 of the 23 tests will qualify for the phase-in reduction cap.

Application of Phase-In Reduction Cap When NLA = $0 but Some Local Rates > $0
Click here to view the table.

2. Payment Floor for Diagnostic or Screening Pap Smear Lab Tests

Situation: The national minimum payment amount for a diagnostic or screening pap smear lab test (including all cervical cancer screening technologies that the FDA has approved as a primary screening method for detecting cervical cancer) is $14.60 for tests furnished in 2000. The national minimum payment amount for later years is then annually adjusted. The CY 2017 floor for these tests was $14.49. The CY 2018 update factor is 1.1%, which yields a CY 2018 floor of $14.65.

Preliminary CLFS: CMS didn’t apply the national minimum payment amount floor to the 24 diagnostic or screening pap smear laboratory HCPCS codes for CY 2018.

Final CLFS: The minimum applies for eight of these codes; the remaining 16 will be paid the higher private payor rate-based payments, with the phase-in reduction cap where applicable.

3. Payment for Home Use Hemoglobin A1c (HbA1c) Kits

Situation: The payment rate for a diagnostic test for HbA1c labeled for home use by the FDA must equal the payment rate for HCPCS Code 83036 glycated hemoglobin test (and subsequent codes).

Preliminary CLFS: The CMS proposed rate of $22.50 for HCPCS code 83037 didn’t apply the private payor rate-based payment for code 83036 of $11.99 even though 83037 is a home use test.

Final CLFS: The CY 2018 payment rate for HCPCS 83037 has been reduced from $22.50 to $11.99.

4. Removal of General Health Panel Code (HCPCS 80050)

Situation: HCPCS 80050, a bundled code that includes a comprehensive metabolic panel (HCPCS code 80053), thyroid stimulating hormone test (HCPCS code 84443) and a complete blood count (HCPCS code 85025), is not payable under Medicare.

Preliminary CLFS: CMS listed 80050 as a payable code.

Final CLFS: HCPCS 80050 has been removed from the list of payable codes.