On Friday, Sept. 22, 2017, the U.S. Centers for Medicare & Medicaid Services (CMS) took an important step toward implementing the sweeping changes to Medicare payment for clinical lab testing mandated by the Protecting Access to Medicare Act of 2014 (PAMA). Those changes — scheduled to be finalized in November and implemented Jan. 1 — will result in Medicare reimbursement rates for lab tests that are based on private payor rates as reported by certain clinical labs to CMS during 2016. On Friday, CMS published the preliminary 2018 payment rates, which are based on that 2016 data collection. Based on those preliminary rates, CMS expects reductions in Medicare reimbursement for lab tests of approximately $670 million in 2018. Numerous stakeholders have expressed concerns with both the data collection process and the CMS implementation timeline; to date, CMS has held firm to the Jan. 1 implementation date.

In passing PAMA in April 2014, Congress originally required CMS to establish new Medicare payment rates for clinical lab tests, based on a weighted median of private payor payment rates, by Jan. 1, 2017. In response to public comments, CMS extended the deadline by regulation in June 2016 to allow labs time to develop systems necessary for a key aspect of the new payment framework: the collection and reporting to CMS of the private payor reimbursement rates for each individual test performed by a lab. The payment rates scheduled to go into effect in January 2018 reflect private payor data collected by applicable labs (as defined under PAMA and its implementing regulations) between January and June 2016. The preliminary rates, published last Friday, are open for public comment for 30 days, with comments due on Oct. 23. CMS expects to publish the final rates in November, and they will take effect on Jan. 1, 2018.

Throughout the CMS process to implement these changes to the clinical laboratory fee schedule, industry and provider stakeholders have expressed concerns that individual labs would face difficulties in meeting regulatory requirements associated with data collection and submission. In response to these concerns, CMS extended the deadline for reporting this past spring by 60 days. Further, industry and provider groups have filed comments to CMS highlighting an underlying concern with the data itself — in particular, that the current definition of an “applicable laboratory” (those laboratories that must collect and report private payor data to CMS) is not sufficiently broad and that, therefore, too few labs will be required to report. As a result, stakeholders have expressed concerns that the Medicare payment rates CMS establishes may not accurately reflect the entire private payor market for lab tests, particularly with respect to rates paid by smaller labs that perform fewer tests.

Based on the preliminary CMS payment rates published on Friday, Sept. 22, approximately 75 percent of the codes — representing categories of lab tests — in the clinical lab fee schedule will see decreased reimbursement rates in 2018. Moreover, the proposed weighted median payment rate for more than half of all codes represents greater than a 10 percent reduction from the 2017 rates. These more significant reductions will be phased in over a three-year period.

In addition to publishing the preliminary payment rates on Friday, CMS also published payment determinations for new and existing lab test codes for which no private payor data were submitted. CMS is accepting comments on these preliminary determinations, in addition to the proposed payment rates, for 30 days, until Oct. 23.