CMS Issues Final PAMA Rule, Delaying Implementation of New Rates to 2018

After much lobbying and debate from stakeholders in the laboratory industry, the Centers for Medicare & Medicaid Services (CMS) released its final rule implementing the Protecting Access to Medicare Act of 2014 (PAMA). Labs must now begin preparing to comply with private payor rate reporting requirements under the rule, which will lead to the first major changes in the Clinical Laboratory Fee Schedule (CLFS) in decades.

The good news is that the final rule delays the effectiveness of new payment rates under the CLFS to Jan. 1, 2018, rather than a mere six months away in January 2017, as planned in the proposed rule. But there are still many details to be resolved as the industry waits for subregulatory guidance to supplement the final rule. Here is a summary of what the final rule does and doesn’t definitely address:

Data Collection and Reporting Deadlines
The timeline for implementation now requires data be collected for the period Jan. 1 through June 30, 2016 (data collection period). This six-month collection period will be repeated in subsequent collection periods rather than the one-year periods originally contemplated.

Labs must then report their payor data to CMS for the first time between Jan. 1 and March 31, 2017 (reporting period). That Jan. 1 through March 31 reporting period will repeat every three years for CDLTs and every year for Advanced Diagnostic Laboratory Tests (ADLTs, defined below). Based on reported data, in early September 2017, CMS will publish preliminary CLFS rates for public comment with final CLFS rates published in November 2017 and effective Jan. 1, 2018.

Applicable Labs and reporting entities
CMS clarified some details about what entities must collect applicable data and who must report it. Here’s a rundown on some of the key details in the final rule that address who qualifies as an Applicable Lab and who reports data under the rule:

• Applicable Labs are those that receive more than 50 percent of total Medicare revenues under the CLFS or Physician Fee Schedule (PFS) (unchanged from proposed rule).
• Applicable Labs will be determined by Medicare revenue under their National Provider Identifier (NPIs) (rather than by Taxpayer Identification Numbers (TINs) as proposed). Commentators predict this change may bring more hospital outreach rates into the data collected.
• While applicable labs are determined by their NPI, the entity that reports the required data is now referred to as a Reporting Entity which will report data under its TIN for all entities within its organization that have their own NPI and qualify as an Applicable Lab.
• Applicable Labs will not include labs paid less than $12,500 under the CLFS during the six-month data collection period. (The proposed rule included a $25,000 threshold for the initial six-month collection period and $50,000 threshold for subsequent 12-month collection periods). Note that this threshold doesn’t apply with regard to ADLTs that need to be reported—as discussed more fully below.
• Hospital outreach laboratories will need to report if at least 50 percent of Medicare revenues are from CLFS and PFS services, with at least $12,500 from the CLFS.

So the change to using NPIs rather than TINs means that entities that bill Medicare under their own NPI must apply the criteria to determine if they are an Applicable Lab and, if so, collect the required Applicable Information. Then organizations must aggregate the data from all entities within their organization that have their own NPI and qualify as Applicable Labs—and then report that data under that umbrella organization’s TIN. CMS doesn’t dictate how the TIN reporting entity coordinates the data from entities with their own NPI but the reporting entity is the one that certifies compliance and will be subject to civil monetary penalties for noncompliance.

Data to be reported
Beginning Jan. 1, 2017, private payor data for CDLTs must be reported every three years and every year for ADLTs. The information collected and reported for CDLTs is defined in the final rule to include private payor rates “for which final payment has been made” during the collection period plus the number of tests performed at that rate and the HCPCS code for the test. Payment made on a capitatated basis isn’t included.

Treatment of ADLTs
ADLTs are tests covered under Medicare Part B that are only offered by a single laboratory, not sold for use by other laboratories other than the one that designed the test, and meet other specific criteria. Those other criteria originally included tests that measure biomarkers in RNA and DNA but excluded tests for protein-only analysis. Many industry comments criticized the definition of ADLTs in the proposed rule and argued that protein-only based tests should be included. CMS responded by including protein only tests in the final definition of ADLTs.

So, now ADLTs include either A) tests that are cleared or approved by the Food and Drug Administration or B) tests that 1) analyze multiple biomarkers of DNA or RNA or proteins, 2) “when combined with an empirically derived algorithm yields a result that predicts the probability a specific individual patient will develop a certain condition or respond to a particular therapy” and 3) provide new clinical diagnostic information not available from other tests and 4) “may include other assays.”

The proposed rule described a new ADLT initial period as “a period of 3 calendar quarters beginning on the first full calendar quarter following the first day on which a new ADLT is performed.” However, to facilitate a new ADLT being paid actual list charge during the initial period, CMS changed that in the final rule. Instead, the initial period for a new ADLT now begins “the first day of the first full calendar quarter following the later of the date a Medicare Part B coverage determination is made or ADLT status is granted by CMS.”

Changes to payment rates
Under PAMA, the new payment amount for CDLTs will be equal to the “weighted median of private payor rates determined for the test” based on the payor information labs report for the collection periods. The statute set limits on how much rates can change in the initial years of implementation and those are not changed in the final rule but are rather adjusted for the year they will apply to accommodate the new Jan. 1, 2018 implementation date. So, rates can’t be reduced by more than 10% in 2018, 2019 and 2020 or by more than 15% in the following three years.

Takeaway: With the much-awaited arrival of the final rule implementing PAMA, labs must now get to work preparing there systems to generate the date needing to be reported and bracing for the changes to come for the CLFS.

Editor’s Note: A G2 Intelligence webinar, hosted June 28, 2016 in partnership with the American Clinical Laboratory Association, provides analysis of and tips for complying with the new final rule. To purchase a recording of the webinar, The PAMA Final Rule: What You Need to Know and Do NOW to Comply with the New Payment Rules and Protect Your Lab Revenue, visit our website or contact customer service at 1-888-729-2315.