Legislation designed to extend current Medicare payment for physicians for one year also contains good news for clinical laboratories: A new market-based system for Medicare payments for tests paid under the Clinical Laboratory Fee Schedule (CLFS). Laboratory groups are applauding the provision, which would repeal authority by the Centers for Medicare and Medicaid Services (CMS) to make changes to the CLFS based on technological changes and replace it with a process to adjust reimbursement based on market rates. The bill would also provide a temporary patch to the system used to pay physicians and delay implementation of the ICD-10 code set for one year. The House approved the measure March 27; the Senate is expected to follow. “We are pleased that Congress listened to and included many of our key priorities in this proposal for modernizing how Medicare reimburses clinical laboratories,” said Alan Mertz, president of the American Clinical Laboratory Association. “If adopted, this proposal would preserve seniors’ access to diagnostic testing by avoiding another potential round of indiscriminate across-the-board payment cuts, bringing some much-needed predictability in reimbursement over the next several years. This legislation will provide more transparency and more time for laboratories and other stakeholders to prepare for […]
Legislation designed to extend current Medicare payment for physicians for one year also contains good news for clinical laboratories: A new market-based system for Medicare payments for tests paid under the Clinical Laboratory Fee Schedule (CLFS).
Laboratory groups are applauding the provision, which would repeal authority by the Centers for Medicare and Medicaid Services (CMS) to make changes to the CLFS based on technological changes and replace it with a process to adjust reimbursement based on market rates. The bill would also provide a temporary patch to the system used to pay physicians and delay implementation of the ICD-10 code set for one year. The House approved the measure March 27; the Senate is expected to follow.
“We are pleased that Congress listened to and included many of our key priorities in this proposal for modernizing how Medicare reimburses clinical laboratories,” said Alan Mertz, president of the American Clinical Laboratory Association. “If adopted, this proposal would preserve seniors’ access to diagnostic testing by avoiding another potential round of indiscriminate across-the-board payment cuts, bringing some much-needed predictability in reimbursement over the next several years. This legislation will provide more transparency and more time for laboratories and other stakeholders to prepare for changes. It will also provide more opportunity for stakeholders to work with CMS on implementing these important reforms.”
Section 216 of the bill, “Improving Medicare Policies for Clinical Diagnostic Laboratory Tests,” would add a new section to the Social Security Act that would use rates paid to laboratories by private payers to determine Medicare rates for laboratory tests. The Congressional Budget Office estimates that this would save Medicare $2.5 billion over 10 years.
Under this new system of adjusting CLFS payment, there would be no cuts in 2015 and 2016. For years 2017 through 2019, cuts would be capped at 10 percent per code per year. For years 2020 through 2022, the cuts would be capped at 15 percent.
Labs Would Report Payment Rates
Beginning Jan. 1, 2016, and every three years thereafter, laboratories that receive a majority of their revenues under the CLFS or the Physician Fee Schedule, would be required to report to the Department of Health and Human Services (HHS) (1) the payment rates paid by each private payer during the specified reporting period, and (2) the volume of such tests for each payer for the period. If a lab has different payment rates for the same payer, or different rates for different payers for the same test, it would be required to report all rates.
Section 216 also creates a new system for establishing payment for “advanced diagnostic laboratory tests” that have not previously been paid under the CLFS. Essentially, initial Medicare payment for these tests would be the publicly available list price. After reporting private payer rates, the pricing would be determined under the same system using private-payer weighted median prices as used for other tests paid under the CLFS.
If HHS determines that the amount paid for an advanced diagnostic laboratory test during the initial period is greater than 130 percent of the private payer-based payment amount, HHS would recoup the different between the two payment amounts.
Between enactment of the measure and Dec. 31, 2016, HHS would use methodologies for pricing, coding, and coverage that are currently in effect.
While this new system could potentially result in some reductions in lab payment, the reductions are likely to be much less than the alternative being considered by Congress: continuation of the 1.75 percent across-the-board cut to the CLFS. That measure, included in President Obama’s proposed budget for 2015, would have resulted in cuts of $7.9 billion over 10 years. In addition, CMS’s plan to revalue tests paid under the CLFS could have resulted in further cuts on top of that.
Takeaway: Labs are likely to see enactment of a new system used to adjust payment for tests paid under the Clinical Laboratory Fee Schedule beginning in 2017.
