Proposed Rule Implementing PAMA Causes Concern About Sufficiency of Data to Be Collected

After much waiting, laboratories finally have a proposed rule from the Centers for Medicare & Medicaid Services (CMS) officially setting a framework for implementing the Protecting Access to Medicare Act of 2014 (PAMA), which requires Applicable Laboratories to report private payer reimbursement data regarding laboratory testing. CMS intends to collect such data in order to set new benchmark reimbursement rates modeled after what private insurers pay for laboratory services. The Office of Management and Budget has concluded that making such an adjustment would save the Medicare program as much as $360 million for fiscal 2017 and as much as $5 billion over the next decade, although the laboratory sector has argued that Medicare is acting on less than comprehensive information.

Lack of Hospital Data Raises Claims Data Will be Skewed
Applicable Laboratories required to report would be those receiving at least $50,000 under the Clinical Laboratory Fee Schedule and "more than 50% of Medicare revenues from laboratory and physician services." Such laboratories would need to report private payer payment rates and volume of services. If an organization includes multiple facilities, not just laboratories, that 50% threshold is calculated based on the Medicare revenue for the entire organization—so the organization must receive more than 50% of its entire revenue for all components, not just its laboratories, from payments under the Clinical Laboratory Fee Schedule and Physician Fee Schedule.

In a Fact Sheet, CMS reports: "We do not expect hospital laboratories to meet the definition of applicable laboratory, and we estimate that more than 50 percent of independent laboratories and more than 90 percent of physician offices will be precluded from reporting private payer data under the low expenditure criterion." However, CMS still predicts that "physicians and laboratories that would be required to report account for 96 percent of CLFS spending on physician office laboratories and more than 99 percent of CLFS spending on independent laboratories."

The omission of hospital laboratories has many concerned about the resulting data that will be used to set Medicare payment rates. NIR's sister publication Laboratory Industry Report (LIR) reported this month that Alan Mertz, president of the American Clinical Laboratory Association expressed concern that "[i]f you take the hospitals out and they don't report their pricing, we are concerned that the pricing would not reflect the true marketplace." Mertz pointed to a 2013 study performed on behalf of ACLA by Avalere Health that concluded commercial payments for tests were significantly higher than in the hospital setting. Francisco Velázquez, M.D., chief executive officer of PAML in Spokane, Wash., also expressed concern to LIR: "When you exempt hospital-based laboratories and physician office-based laboratories which provide a significant percentage of the testing in this country, an uneven burden is placed on independent laboratories," said Velázquez, who heads the largest independent lab in the Pacific Northwest. "For the most part independent laboratories are small to medium-sized, most often regional or extended regional facilities which provide a community focused high quality service with value added offerings such as home draws which benefit the Medicare population significantly. There seems to be a somewhat narrow focus on pricing which for the most part will not allow for value-added services, community impact and local continuity of services to be factored in as a value."

Not every laboratory, however, was concerned regarding the proposed PAMA rules. "While details on the proposed PAMA rule still need to be evaluated, we believe it provides a pathway to market-based pricing for the Afirma GEC and we continue to support PAMA's goal of bringing transparency and a market-based approach to how CMS sets Medicare rates for personalized medicine diagnostic tests," said Bonnie Anderson, chief executive officer of molecular lab Veracyte, in a statement. The South San Francisco, Calif.-based Veracyte specializes in molecular-based tests for thyroid cancer, which includes the Afirma assay.

Reporting Obligations
Reported data will be from the period July 1, 2015 through Dec. 31, 2015. Reports are due by March 31, 2016 and CMS promises new Medicare rates based on that reporting will be released Nov. 1, 2016 to be effective Jan. 1, 2017. There is some cushion built in to prevent payment from dropping too dramatically in the initial period of implementation. Payment can't drop more than 10 percent from the prior year's amount during the first three years of implementation (through 2019) and not more than 15 percent in the three years following (through 2022).

Every year, payment rates for Advanced Diagnostic Laboratory Tests (ADLTs) will be adjusted based on market rates and every three years for Clinical Diagnostic Laboratory Tests (CDLTs). ADLTs are tests provided by a single laboratory and that analyze multiple biomarkers of RNA, DNA or proteins, including a unique algorithm, for a specific patient or are FDA cleared or approved tests.

The proposed rule indicates comments must be received by 5 p.m. on Nov. 24, 2015.

Takeaway: Private payer reimbursement reporting obligations will finally become a reality and the industry is most concerned about who won't be reporting and how that will affect the data.