Following an intense lobbying effort by ASCP members, Congress approved legislation in early December to override major cuts to Medicare reimbursement for laboratory and pathology services. The measure prevents payment reductions of more than 6 percent on pathology services and up to 15 percent on hundreds of laboratory tests.
The congressional action came shortly after ASCP reached out to members with an urgent appeal to flood their legislators’ offices with letters decrying the proposed cuts, which were slated to start in 2022.
ASCP President Henry Rinder, MD, FASCP, praised Congress for recognizing “the critical threats these cuts could have on patient care as well as the pathology and laboratory field.” However, he acknowledged that Congress’ action merely forestalls the debate for now, and emphasized that ASCP must remain vigilant in monitoring the issue.
“This victory . . . provides us time to advocate for permanent fixes to several flawed Medicare policies,” he said. “ASCP members need to continue advocating for permanent fixes to these and other key policies to enable us to provide quality care for our patients.”
At issue are payment adjustments that the Centers for Medicare & Medicaid Services (CMS) had planned to make to its Medicare Clinical Laboratory Fee Schedule (CLFS) for several years. The CLFS pays for laboratory services performed in physician offices, hospitals, clinical laboratories, and other settings. Laboratories that would have been most affected are the smaller labs which, unlike larger labs, are less apt to reap economics of scale and have higher per-test costs.
The matter ties into legislation that Congress enacted back in 2014, known as the Protecting Access to Medicare Act, or PAMA, which created a formula for how Medicare would reimburse laboratories for tests they performed.
The formula was based on diagnostic testing data that laboratories were required to submit to CMS about the rates they received from private payers for each type of test. CMS used that data to create a schedule for the level of reimbursement it would pay laboratories for each test.
Historically, insurers have argued that CMS’ payment rates were overvalued, largely because they were paying laboratories less than the Medicare rates for their services, and lobbied for changes to the CLFS. CMS had not updated the fee schedule for inflation for 20 years before PAMA came out.
In 2016, two years after Congress passed PAMA, CMS finalized the implementing regulations, thereby requiring applicable labs to report data on the payment rates they get and the volume at that rate. CMS used the test data it had collected to develop a fee schedule. Once CMS created the new payment rates, it was limited by PAMA in how much it could cut payment rates each year.
As an example, let’s say the previous payment rate for a certain lab test was $50. With the new data that was collected, the payment rate for that test might now be $30. However, PAMA contained a phase-in provision that only allowed CMS to reduce the payment rates, capped at 10 percent a year for three years. A second, three-year cycle of 15-percent cuts can follow the first cycle. The result was that it could take several years before CMS’ payment rate reached the rate it had calculated.
The kicker is that when CMS released the rule about the laboratories, they excluded smaller labs. Instead, CMS focused on large reference laboratories, such as Quest and LabCorp. These larger laboratories benefit from significant economies of scale, so the payment rates ended up lower than the actual market rates. That ends up putting a lot of financial pressure on hospital and smaller laboratories. A number of smaller labs closed or merged, owing to lower profit margins.
The upshot is that larger labs generally receive lower payment rates from insurers (economies of scale), and these lower payment rates are then built into the new PAMA/CLFS rates. Smaller labs are then forced to deal with lower rates than they are probably accustomed to, and they are also likely have higher cost structures in comparison to large labs.
To prevent Congress from implementing the cuts to reimbursement from Medicare, ASCP launched a campaign urging members to bombard congressional leaders with letters in opposition to the cuts.
“We are appreciative for the thousands of ASCP members who advocated for fixes to these potential cuts and educated Congress about the critical need to address Medicare payment flaws that could have threatened the ability of pathologists and laboratory professionals to care for our patients,” Dr. Rinder said.
ASCP coordinated its advocacy efforts with the American Medical Association and other medical societies and laboratory organizations to secure passage of the “Protecting Medicare and American Farmers from Sequester Cuts Act.”
The following are the key provisions that Congress just enacted to protect laboratory and pathology reimbursement.
• Delayed for one year a series of Protecting Access to Medicare Act (PAMA)-related cuts of up to 15 percent for hundreds of laboratory tests as well as delaying the next private payer data reporting requirement until Jan.1, 2023;
• Provided a 3 percent update to the Medicare Physician Fee Schedule for calendar year 2022;
• Delayed the application of a 4 percent cut to Medicare and other federal programs resulting from statutory “PAY-Go” requirements; and
• Extended the 2 percent Medicare “sequester” moratorium through March 31, 2022, re-implementing a 1 percent cut in the second quarter of 2022, and reinstating the 2 percent cut subsequently, funded by backend increased sequester cuts in fiscal year 2030.