Last week, the OIG released two new studies analyzing what and how Medicare pays for clinical laboratory tests (“lab tests”).

The first study, Medicare Payments for Clinical Diagnostic Laboratory Tests in 2015: Year 2 of Baseline Data, analyzed Medicare Part B claims data for lab tests performed in 2015 and reimbursed under the Clinical Laboratory Fee Schedule. OIG compared this data with the same claims data for 2014, and found that, among other things:

  • Total Medicare spending for lab tests performed in 2015 was $7 billion, the same amount as in 2014.
  • Total Medicare spending for the top 25 lab tests performed in 2015 was $4.1 billion, slightly less than the $4.2 billion spent in 2014.
  • Payments for drug tests (which test for the presence or level of drugs in a person’s body) – increased significantly from $910 million in 2014 to $1.1 billion in 2015 (a 19 percent increase). Similarly, drug tests comprised a larger share of the top 25 lab tests performed in 2015 (six tests) as compared with 2014 (four tests). OIG believes the increase in payment for and prevalence of drug tests may reflect efforts to monitor the growing prescription drug abuse epidemic. It notes that while the increase in drug testing may be legitimate, it may also signal medically unnecessary drug testing.
  • Payments for molecular pathology tests (which analyze genetic material) – decreased significantly from $466 million in 2014 to $259 million in 2015 (a 44 percent decrease). OIG concludes that this decrease is the result of efforts by CMS, among others, to prevent medically unnecessary testing.
  • Only an estimated 5 percent of labs will be required to report private payor data to CMS. As we have reported previously, that data will be used by CMS to set new payment rates for lab tests, as required by the Protecting Access to Medicare Act of 2014 (PAMA). OIG reports that this group received 69 percent of Medicare payments in 2015.
  • While Medicare payment rates under the new payment system required by PAMA will decrease overall, rates for some tests will increase in certain locations.

The second study, Changing How Medicare Pays for Clinical Diagnostic Laboratory Tests: An Update on CMS’s Progress, assessed CMS’ progress implementing the new payment system required under PAMA. Through documentation review and interviews with CMS staff and contractors, the OIG identified six key implementation tasks:

  • Issuance of the Final Rule and Related Guidance Documents: OIG found this task “largely completed.” The final rule was issued in June 2016, and guidance from CMS is forthcoming.
  • Establishment and Consultation with the Advisory Panel: OIG found this task to be “completed.” The Advisory Panel was established in 2015, and it continues to meet and provide recommendations to CMS.
  • Collection of Private Payer Data Reported by Applicable Labs: OIG found that CMS has made “significant progress” toward this task, noting that CMS has built the system that labs will use to report data beginning in early 2017.
  • Ensuring the Completeness and Accuracy of Data Reports: OIG found this task to be “in progress,” noting that CMS has developed preliminary plans to conduct checks for data completeness and accuracy. However, OIG emphasizes that while CMS has some safeguards in place to mitigate incomplete or inaccurate reporting, it does not plan to independently verify labs’ data, which may result in inaccurate Medicare payment rates for lab tests.
  • Determining and Publishing New Medicare Payment Rates: OIG found this task to be “in progress,” noting that CMS has begun to plan how it will determine and publish new payment rates once labs start submitting data in early 2017.
  • Identifying Advanced Diagnostic Laboratory Tests (ADLTs): OIG found this task to be “in progress,” noting that while PAMA created this new category of tests, CMS plans to release supplementary guidance in late 2016.OIG will continue to monitor CMS’ implementation of the new payment system required by PAMA, as well as its effects on Medicare payments.

OIG will continue to monitor CMS’ implementation of the new payment system required by PAMA, as well as its effects on Medicare payments.