As the latest fix for the Sustainable Growth Rate (SGR) payment formula begins to be absorbed and analyzed by providers, it is becoming clear that laboratories will have enormous adjustments to make in the coming years, particularly as they have to begin submitting payment data to the Centers for Medicare and Medicaid Services (CMS). “It’s difficult to underestimate what Congress did,” said Peter M. Kazon, a partner with Alston & Bird, during a webinar recently conducted by the American Association for Clinical Chemistry. He believes labs will be undergoing the biggest change in payment structure since the Clinical Laboratory Fee Schedule (CLFS) was created in the mid-1970s. Kazon suggested there was little choice for the labs—the SGR fix was going to include a cut to reimbursement. But under the guise of the new bill, the Protecting Access to Medicare Act, CMS’s technological change authority is eliminating, meaning the payment issues regarding the revised molecular codes and the use of gap-filling would be avoided, and the changes would be phased in over five years beginning in 2017. The biggest change: a move away from fixed fees on a payment schedule to what Kazon says is a more market-based approach intended to […]
As the latest fix for the Sustainable Growth Rate (SGR) payment formula begins to be absorbed and analyzed by providers, it is becoming clear that laboratories will have enormous adjustments to make in the coming years, particularly as they have to begin submitting payment data to the Centers for Medicare and Medicaid Services (CMS).
“It’s difficult to underestimate what Congress did,” said Peter M. Kazon, a partner with Alston & Bird, during a webinar recently conducted by the American Association for Clinical Chemistry. He believes labs will be undergoing the biggest change in payment structure since the Clinical Laboratory Fee Schedule (CLFS) was created in the mid-1970s.
Kazon suggested there was little choice for the labs—the SGR fix was going to include a cut to reimbursement. But under the guise of the new bill, the Protecting Access to Medicare Act, CMS’s technological change authority is eliminating, meaning the payment issues regarding the revised molecular codes and the use of gap-filling would be avoided, and the changes would be phased in over five years beginning in 2017.
The biggest change: a move away from fixed fees on a payment schedule to what Kazon says is a more market-based approach intended to ensure that Medicare reimburses at rates more similar to those of commercial payers.
Of particular concern for Kazon and other sector observers is the price reporting component of the SGR fix. In order to establish enough pricing data for CMS to set its own reimbursement rates, many labs will have to submit to the agency what private payers pay them for each test they perform in order to help establish a weighted median price. If the median price is more than 130 percent of Medicare’s list price, CMS may recoup the payment difference.
“All of this is unknown territory from the data standpoint,” said Charles Root, chief executive officer for CodeMap, who also spoke during the webinar.
Labs that obtain the majority of their revenue from the CLFS and the Physician Fee Schedule will have to undertake such reporting. Kazon said that covers the “typical” laboratory.
“A lot of labs probably don’t know what their median price is,” Root said, noting that even data from a single payer can vary due to out-of-network payments.
Labs do not have an enormous amount of time to prepare: Payment reporting begins in 2016, with the phase-in of new prices beginning the following year. Reporting will be required every three years for most tests.
“There is a big concern here, because it will be a tremendous amount of data. And it’s not even known how most labs will be able to do this, to gather this information,” Kazon said.
Richard Nicholson, chief executive officer of West Pacific Medical Laboratory, noted that labs in California already went through a dry run of sorts for the state’s Medicaid program, which had requested data from labs on their five largest payers several years ago.
Although West Pacific was able to comply with the request, it required sifting through enormous numbers of explanation of benefit records.
“We probably sent in a Dumpster full of stuff,” Nicholson said, adding that CMS has likely created a gargantuan task for most labs.
Kazon and Root suggested that it may make sense for CMS to ask for a shorter period for reporting payment data, as opposed to an entire calendar year.
Takeaway: Many labs will likely be scrambling in the coming years to establish the appropriate infrastructure to gather and report their pricing data to the CMS.
