OIG Report: Total Medicare Lab Test Payments in 2015 Same as in 2014

Medicare Part B paid $7 billion for lab tests in 2015, the same amount it shelled out in 2014. But 2015 Medicare payments for the top 25 lab tests dipped slightly to $4.1 billion, as compared to $4.2 billion in 2014. These are among the key conclusions of a new report issued by the Office of Inspector General (OIG) as part of its Protecting Access to Medicare Act of 2014 (PAMA) mandate to monitor Medicare payments for lab tests in advance of the new payment system taking effect on Jan. 1, 2018.

Medicare Lab Payments by the Numbers
The $7.0 billion paid for lab tests under the Clinical Laboratory Fee Schedule (CLFS) accounted for roughly 3% of all Part B payments made in 2015, according to the report. Where did that money go?

What Medicare's $7 Billion in 2015 Lab Spending Went Toward

Source: OIG "Medicare Payments for Clinical Diagnostic Laboratory Tests in 2015"

Fees Paid for Top 25 Lab Tests
As required by PAMA, the OIG report includes detailed analysis of the 25 most frequently ordered tests. Key findings:

• 23 of the top 25 tests of 2015 were also in the top 25 in 2014 (the two newcomers were drug confirmation (G6058), and amphetamine or methamphetamine (G6042));

• The $4.1 billion paid on the top 25 constituted 59% of Medicare payments made under the CLFS;

• Four of the top 25 tests posted increases in year-to-year payments of at least $10 million, including:
  • Opiates (drug) measurement (G6056)—up $35 million;
  • Drug screen, qualitative; multiple drug classes by high-complexity test method (e.g., immunoassay, enzyme assay), per patient encounter (G0431)—up $15 million;
  • Vitamin D-3 level (82306)—up $13 million; and
  • Benzodiazepines level (G6031)—up $10 million;

• Three of the top 25 tests posted decreases in year-to-year payments of at least $10 million, including:
  • Gene analysis (cytochrome P450, family 2, subfamily D, polypeptide 6) common variants (81226)—down $105 million;
  • Chemical analysis using chromatography technique (82542)—down $24 million; and
  • Blood test, clotting time (85610)—down $11 million;

• 54% of all Part B payments for the top 25 tests went to 1% of labs, i.e., 292 of 29,101;

• The next 4% of labs accounted for 25% of the payments for top 25 tests;

• The top eight tests each accounted for over $200 million in payments and, combined, $2.7 billion or roughly 66% of payments for the entire top 25 (see the table below for a breakdown of the individual tests).

Top 8 Lab Tests Based on Medicare Part B Payments in 2015

Source: OIG "Medicare Payments for Clinical Diagnostic Laboratory Tests in 2015"

Payment Trends
As required by PAMA, the OIG report includes detailed analysis of the 25 most frequently ordered tests. Key findings:

Drug tests up 19%: Medicare payments for drug tests were up 19% in 2015, from $910 million to $1.1 billion with 18 different drug tests generating increases of at least $1 million. Six of the year's top 25 were drug tests, as compared to four in 2014. According to the report, the spike "coincides with efforts to monitor drug abuse," according to the report. But, the report adds ominously, it could also be an indication of medically unnecessary testing. In fact, billing of medically unnecessary drug tests has been a focus of recent enforcement activity:

• On August 31, a Florida pain clinic called Coastal Spine and Pain paid $7.4 million to settle claims of routinely billing Medicare for Quantitative drug tests performed on elderly patients regardless of medical necessity;
• On Aug. 18, two former lab professionals convicted of false billing of medically unnecessary drug tests were sentenced to 36 months in prison and ordered to pay $1.437 million in restitution; and
• Similar charges were among the allegations of a pair of whistleblowers in a case settled by PremierTox 2.0, Inc. for $2.5 million in April.

Molecular pathology tests down 44%: On the flip side, Medicare payments for molecular pathology tests analyzing genetic material to determine how patients will respond to treatment decreased 44% from $466 million to $259 million year-over-year. The report says the decline was concentrated in payments for three different tests but does not specify the tests' names. The decline coincides with efforts to prevent medically unnecessary genetic testing, the report adds.

Looking Ahead
The report includes new insights into the new Medicare payment rates for lab tests. The private payer data that CMS will use to set new payment rates is expected to come from 5% of labs, including 1,398 independent labs and 11,149 physician office labs. These 12,547 labs accounted for 69% of Medicare payments for lab tests in 2015. The report also confirms that 0 of 6,994 hospital labs will report private payer data.

Although payment rates will be generally lower under the new payment system, the report states that rates for 22 of the 25 top tests will go up in some parts of the country, with 38 states seeing at least one of the top 25 tests receive increases ranging from $0.02 to $30.27 per test (see the table below).

Medicare Lab Test Pay Increases by State

Source: OIG analysis of Medicare's 2015 Clinical Laboratory Fee Schedule.

Note: New York has three local fee schedules, and California, Kansas, and Missouri each have two local fee schedules. For States with more than one fee schedule, the number shown is an average for the State's fee schedules.

Takeaway: The OIG's report on the top 25 lab tests doesn't show a major shift in the top tests and mirrors a national focus on drug testing.