Compliance Perspective of the Doc Fix Law’s Section On Laboratory Payment Reform

Clinical laboratories may face substantial penalties for failure to submit complete and accurate data in the latest government move to revise the Clinical Laboratory Fee Schedule (CLFS). Section 216 of H.R. 4302, the Protecting Access to Medicare Act of 2014, implements a new approach to setting payment under the CLFS that will tie lab fees to commercial market rates paid by private and third-party payers for laboratory services. However, the new law also includes important potential liabilities for labs should they make errors or omissions when they provide data during mandated reporting periods included in the measure. H.R. 4302, which passed both the House and Senate and was signed into law April 1 (P.L. 113-93), requires applicable laboratories to report test volumes and private market payment rates to the Centers for Medicare and Medicaid Services (CMS) beginning Jan. 1, 2016, and every three years thereafter. The data reported in this collection will be used to calculate new payment rates for virtually all tests on the CLFS and some on the Physician Fee Schedule. The lab industry has been seeking a modernization or updating of the CLFS since before the 2000 Institute of Medicine study titled Medicare Laboratory Payment Policy: Now and in the Future concerning how labs are reimbursed for their services. However it has failed to produce a solution of its own, partly because the industry consists of laboratories in a variety of settings and sizes, and often there are conflicts within the industry that paralyze any effort to make a concerted effort on controversial topics like fee setting. “Applicable laboratories” includes any laboratory that operates as a dedicated independent laboratory billing for laboratory services, small or large. It will likely include the nonpatients of hospital outreach laboratories, who are considered to be acting as independent labs when testing nonpatient samples. It may also include very large physician-owned labs, but that is not absolutely clear in the law. Section 216 provides that the secretary of Health and Human Services may exclude certain low-volume laboratories from the definition of an applicable laboratory. The law also contains provisions for the introduction of new tests and new advanced laboratory tests like molecular and genetic tests. Among the provisions is a process that should help labs bring tests to market faster than ever before. The new law would create an “expert outside advisory panel” by July 1, 2015, to help with this process. This would be in addition to the existing annual public meeting to decide how to price new tests created by the American Medical Association’s Current Procedural Terminology Pathology Coding Caucus group. Ensuring Accuracy and Completeness H.R. 4302 uses a variety of definitions, certifications, and civil monetary penalties (CMPs) to ensure laboratories do not inflate or leave out data in order to manipulate the outcome during the data collection periods. The government and CMS have stated previously that they believe that Medicare pays more for clinical laboratory services than other payers, including those described in H.R. 4302. Government officials may expect that the data reporting requirements of this legislation will prove they are correct. On the other hand, labs have repeatedly refuted this idea, saying on many occasions that Medicare is not the highest payer. In fact, a study conducted by Avalere Health for the American Clinical Laboratory Association found that commercial health plans often pay more for lab services than Medicare. The payment rates resulting from the new data reporting processes included in the new law will begin in 2017. The law describes “applicable information” as the payment rate paid by each private payer during a data collection period and the volume for each payer during the same collection period. A significant exception to the payment rate is any arrangement where payment is made on a capitated or similar basis, with the similar basis left undefined. Discounted payment rates will be included in the calculations. According to the text of the law, “The payment rate reported by a laboratory under this subsection shall reflect all discounts, rebates, coupons, and other price concessions, including those described in section 1847A(c)(3).” Section 1847A(c)(3) says “such price shall include volume discounts, prompt pay discounts, cash discounts, free goods that are contingent on any purchase requirement, chargebacks, and rebates.” Several of these terms raise questions that labs will need to get answers to before the first reporting period in 2016. The law provides mechanisms that try to ensure accurate and complete reporting of data, such as addressing what the reporting lab should do in the case of differing rates for the same test or different rates for different payers. In this case, labs would be required to report both rates. The law also requires certification by an officer of the laboratory that the data provided are complete and accurate. Finally, it also defines private payer as any health insurer or group health plan, a Medicare Advantage plan, or a Medicaid managed care organization. CMS hopes that by using what it considers a specific definition of what a private payer is, it will collect all of the data it is seeking. Finally, H.R. 4302 provides for a CMP of up to $10,000 for each day an applicable lab has failed to report, provided inaccurate data, or omitted data under the law. It is possible that these determinations may not be made until sometime after the new rates take effect. With such a significant amount of money at stake, laboratories will have to carefully review the data collected and submitted or they may face problems in the future. For laboratories that may be concerned about confidentiality of the data they report, the law provides that reported data “shall not be disclosed by the Secretary or a Medicare contractor in a form that discloses the identity of a specific payer or laboratory, or prices charged or payments made to any such laboratory.” There are exceptions to the prohibition on disclosure if the secretary deems disclosure is necessary to carry out the provisions of the law. These reporting requirements can be a problem for those labs reporting data for the establishment of the new fees since CMS has data from Medicare Advantage plans and Medicaid plans. Any discrepancies in reported data could raise red flags. Presumably, reporting labs will not be sharing the data they report, so there are many potential hazards for labs related to the reporting of prices, particularly when considering the penalties involved. Potential Compliance Issues The legislation presents the laboratory community with an unprecedented opportunity to participate in the process of setting the fees government payers reimburse for laboratory services. There are several areas where some providers may be tempted to inflate market rates or to try to influence the members of the new expert panel that will be created under the law. The process for establishing rates for new molecular and genetic tests is an area where laboratories could attempt to get higher reimbursements for a new test but, according to the law, CMS will assess the new rates, and any that prove to be more than 130 percent of what eventually becomes the market rate will have to be refunded to the program. The reporting requirements are the more hazardous parts of this legislation from a compliance point of view. Laboratories could simply misinterpret or misunderstand a term, like a discount based on volume, and report erroneous information or omit data that CMS considers relevant. It would be prudent for labs to carefully consider the details of this new legislation and construct appropriate comments, ask relevant questions, and seek clarification wherever the legislation is unclear or ambiguous. Takeaway: The Protecting Access to Medicare Act is about more than reimbursement and includes many compliance-related provisions that laboratory compliance officers and administrators must address to ensure labs report accurately and completely.