Compliance Perspectives: PAMA—What We Know So Far, What You Need to Know to Comply

After much lobbying and debate from stakeholders in the laboratory industry, the Centers for Medicare & Medicaid Services (CMS) is moving forward with implementation of the Protecting Access to Medicare Act of 2014 (PAMA). Right now, labs are currently in a six-month period between the data collection period (Jan. 1 to June 30, 2016) and the data reporting period (Jan. 1 to March 31, 2017) and CMS says they should be using this time to determine if the lab is an applicable lab and to "review and validate applicable information before it is reported to CMS."

In late July and September CMS issued some guidance documents which offer some assistance but still leave many remaining issues to be addressed in further guidance. As laboratories begin preparations to comply with PAMA requirements, here's a rundown on what we do and don't know about how this will play out.

What's New?
CMS has released the following additional information since the June final rule:

• The list of HCPCS codes to be used in reporting. That list was accompanied by a short explanatory key to the Medicare Status Indicators that apply to the codes.
• Medicare Part B Clinical Laboratory Fee Schedule: Guidance to Laboratories for Collecting and Reporting Data for the Private Payor Rate-Based Payment System.
• Fee-for-Service Data Collection System: Clinical Laboratory Fee Schedule Data Reporting Template.

What are the 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 Clinical Diagnostic Laboratory Tests (CDLTs) and every year for Advanced Diagnostic Laboratory Tests (ADLTs, defined below). Based on reported data, in early September 2017, CMS will publish preliminary Clinical Laboratory Fee Schedule (CLFS) rates for public comment with final CLFS rates published in November 2017 and effective Jan. 1, 2018.

Who's Reporting?
In the June final rule, CMS clarified some details about what entities must collect applicable data and who must report it. In the July guidance, CMS described four steps to determining Applicable Laboratory status. CMS advises labs ask the following four questions to determine if they are an Applicable Lab:

1. Does the lab have a CLIA certificate?
2. Does the lab have its own National Provider Identifier under which it bills Medicare?
3. Does the lab get more than 50 percent of its total Medicare revenue under the CLFS and the Physician Fee Schedule (PFS)?
4. Does the lab get at least $12,500 in CLFS Medicare revenue (NOT including PFS revenue) during the six month data collection period?

The July guidance also provides an equation to help labs calculate the 50 percent billing threshold:

CLFS revenue + PFS revenue/total Medicare Revenues > 50 percent

Note the numerator includes all PFS revenue even if it isn't related to lab services, so it could include pathology services, evaluation and management or even radiology services. The denominator includes all fee for service revenue under Medicare Parts A, B, C and D as well as Medicare Advantage and any beneficiary deductible or coinsurance. The July guidance also provides seven examples of scenarios involving labs to show how the calculations work in hypothetical situations.

Hospital Labs: Will They or Won't They Report?
What initially was hailed as good news has come under further scrutiny—CMS now requires Applicable Laboratory calculations we just discussed be made for an entity that has its own NPI. This change to using NPIs rather than Taxpayer Identification Numbers (TINs) means that entities that are part of a larger organization but have their own NPI must apply the criteria to determine if they are an Applicable Lab and, if so, collect the required Applicable Information. Reporting is still done at the TIN level. 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.

Major criticism of the proposed rule was that it wouldn't capture hospital-based laboratories. Under the final rule, a hospital lab that bills under its own NPI rather than the hospital's NPI may be an Applicable Lab. Hospital-based labs can be paid at much higher rates than standalone labs so their inclusion on a large scale would be economically advantageous for the sector as a whole. But it is up for debate how many hospital based labs will actually end up reporting.

"We know there are more hospital labs that have their own NPI than TIN," said Alan Mertz, president of the American Clinical Laboratory Association, which had supported the change in the PAMA final rules to help include hospital laboratories. "We don't know how many hospital labs have their own NPI, but we also know a lot of them don't."

Barry Portugal, president of Health Care Development Services, a Florida-based consulting firm, said he has contacted operators of many hospital-based labs. Most are not participating in PAMA, he noted. "Everyone with whom I have spoken has said they do not plan to participate in the PAMA data collection process because their hospital laboratory does not meet the definition of an applicable lab," Portugal said. He added that there are exceptions. Those are primarily hospital-owned labs located outside of the hospital, and where the lab performs both inpatient, outpatient, and outreach testing. But he believes there are no more than 100 in operation nationwide.

Finally, this month CMS provided a template for reporting the data. The template doesn't provide new information, simply addressing the four elements that must be reported: HCPCS Code, payment rate, volume of tests, and the labs NPI. It does provide a User Guide however, addressing how to navigate the template CMS does note that the data collection system. CMS notes that the data collection system is undergoing testing and won't be accessible to labs until November 2016.

What does or doesn't get reported?
As labs already know, 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. Use of the term "final payment" means that some post-payment activity can affect the reported amount. For example, an erroneous initial payment made before the data collection period but corrected and final payment made during the data collection period would be reported for that period. CMS clearly lays out for labs in the July guidance what does and doesn't qualify as reportable:

Here's what does need to be reported:

• Tests paid under the CLFS
• Secondary insurance payments
• Non-contracted or out of network payments for lab services
• Patient cost sharing amounts are included in determining the final payment amount
• Final payments determined as a result of an appeal and paid within the data collection period

The following don't get reported:

• Private payor payments for test codes payable only under the PFS
• Payment rates adjusted by waivers of patient' deductibles, copays or coinsurance
• Denied payments (what CMS calls "zero payments")
• Any claims still under review or under appeal during that data collection period (even appeals concluded in the data collection period aren't reported if the payment isn't made within the data collection period)
• Capitated payments
• Payments made when the volume of tests associated with that payment can't be determined
• Bundled payments –where HCPCS codes are bundled into single encounter that isn't characterized by a single HCPCS code

What qualifies as an ADLT?
As we went to press we are still waiting for subregulatory guidance from CMS addressing Advanced Diagnostic Laboratory Tests (ADLTs). What we do know is that ADLTs now 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."

What we still don't know
Many questions still remain unanswered about the details of how the reporting and rate setting will be achieved. CMS has promised to provide those remaining details in subregulatory guidance. CMS doesn't indicate when that subregulatory guidance will be issued except to state that "we now expect to issue the subregulatory guidance prior to January 1, 2018."

Here are the issues that CMS indicates in its final rule will be the subject of more detailed guidance in subregulatory guidance:

• Details for applying for ADLT recognition: including information about how to prove the test is offered only by single laboratory, evidence needed to meet the criteria for ADLT qualification, timing for submitting and processing of applications and issuing decisions about ADLT status, and the process for assigning unique HCPCS codes to ADLTs (CMS says it will consider requests that ADLT applications be submitted and reviewed on a quarterly basis);
• How to notify CMS of ADLTs and CDLTs that do not have a unique HCPCS code;
• Guidance on compliant reporting, how to avoid civil monetary penalties, and when such penalties will be imposed (though CMS reiterates it doesn't intent to impose CMPs for minor errors);
• Details for certification process when submitting applicable information (CMS said it will consider commenters' suggestion that the certification form state "the information and statements submitted are accurate and complete to the best of the laboratory's knowledge and the submission is made in good faith");
• Instructions on what not to include in reporting applicable information, such as private payor identities and individual claims (CMS rejected requests to explicitly include in the final rule the prohibition against identifying private payors because it said it wasn't necessary and would be addressed in the subregulatory guidance); and
• If CMS decides to publish raw data ("actual, unaggregated data that is reported as applicable information for an applicable laboratory") in addition to aggregate-level private payor data and volume data, it will detail the process for public review of this data in the guidance. (CMS indicates it is investigating feasibility of releasing such raw data which it believes will afford greater transparency during public review of the proposed rates).

The guidance documents referenced in this article can be found on the CMS website.

Editor's Note: For the latest insight on PAMA, attend G2 Intelligence's 34th Annual Lab Institute, Oct. 26-28 in Washington D.C. A Thursday general session featuring Alan Mertz, President of the American Clinical Laboratory Association, Tim Kuruvilla, Co-Founder and Chief Commercial Officer of Viewics, Inc., and Rina Wolf, Vice President, Commercialization Strategies, Consulting and Industry Affairs, at XIFIN, Inc. will discuss the latest updates on PAMA implementation and how labs will play a role in supporting MACRA's implementation. Can't attend Lab Institute? 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. Click here 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.