From providing vital diagnostic screenings for a wide range of conditions, to playing a pivotal role in precision medicine, clinical laboratories are a crucial component of America’s health system that drive disease prevention and diagnosis and help guide treatment decisions for patient care.
Congress enacted the Protecting Access to Medicare Act (PAMA) of 2014 to protect essential lab services by mandating a reform of the Clinical Laboratory Fee Schedule (CLFS) and establishing a market-based system that encourages innovation and protects patient access to vital clinical lab tests. Since the passage of PAMA, the American Clinical Laboratory Association (ACLA) has worked closely with CMS and other stakeholders to implement the statute consistent with Congress’s clear intent.
Throughout the multi-year consideration of changes to the CLFS, ACLA and its members agreed with Congress that predictability and rationality in Medicare payments for lab services was necessary. As long as CMS had the proper data and applied the appropriate methodology, the agency would be in a position to establish fair payment based on market rates that would protect ongoing industry innovation and ensure uninterrupted access to the important testing services on which patients rely.
Instead, CMS chose to ignore the clear intent of Congress and the specific commands of the PAMA statute. Rather than collecting private payor data from the broad laboratory market, including independent, hospital and physician labs, as Congress directed, CMS established data-collection parameters that resulted in the agency collecting data from less than 1 percent of U.S. laboratories. CMS then relied on this tiny, non-representative sample of data to establish payment rates for all laboratories providing care to Medicare beneficiaries.
When it became clear that CMS was not appropriately implementing PAMA’s requirement that the agency collect data from the broad laboratory market, organizations representing labs, hospitals, physicians and others called on CMS to suspend implementation until fundamental flaws could be addressed. Inexplicably, these stakeholder requests were ignored.
As a result, years of discussion on meaningful payment reform for lab testing that would protect diagnostic innovation and patient access have brought us to this reality: Medicare reimbursement rates to labs providing essential testing services are estimated to drop by $670 million this year, and additional reductions scheduled for 2019 and 2020 will cut payments by nearly 30 percent for many tests critical to caring for Medicare beneficiaries. For some labs, such as rural hospitals and labs serving patients in skilled nursing facilities – which already have significantly higher operating costs – this could be a death knell that would precede a devastating loss of patient access to necessary testing services. It would also be a devastating loss for local economies. According to a September 2017 analysis, the clinical lab sector contributed over $100 billion to the U.S. economy while sustaining 622,000 jobs nationwide.
Unfortunately, the threat to patient care doesn’t end there. The problem with CMS’s rate cuts stretches beyond Medicare. Since many state Medicaid agencies base reimbursement for labs services on the Medicare schedule, labs are facing further drastic reductions in Medicaid payments. Some state Medicaid programs have moved ahead with additional Medicaid cuts to clinical laboratory tests, resulting in “cuts on top of cuts.” This double hit of rate cuts at both the state and federal level stands to reduce reimbursement to such an extent that access to laboratory testing for some of the most vulnerable in our society is at risk of being seriously compromised.
In response to CMS’ flawed implementation of the data reporting requirements of PAMA, ACLA filed a lawsuit against the U.S. Department of Health & Human Services in December to challenge the unlawful exemption of the vast majority of laboratories required to report private payor data. Additionally, we urge state Medicaid agencies – particularly those that base their reimbursement on Medicare rates – to refrain from making further Medicaid payment reductions to lab services.
An ill-conceived data-collection process, dramatic reductions in Medicare, and a one-two punch rate cut for Medicaid lab services is not the outcome that Congress intended.
We need to reduce barriers to laboratory services and ensure diagnostic innovation continues unabated. To achieve these goals, we need Congress to pass legislation to fix the problems CMS created. If not, those who sought well-intentioned reforms of lab payment rates could instead find themselves delivering a knock-out blow to the promise of innovative diagnostics and long sought personalized care for patients now and in the future.
Julie Khani is the President of the American Clinical Laboratory Association.