Protecting Access to Medicare Act

Sens. Hatch, Wyden Propose Alternative For Reporting Commercial Lab Test Prices

The Senate Finance Republican Chair and ranking Democrat proposed Wednesday (Jan. 6) a way for CMS to establish a new pay scheme for laboratory services that would increase pay rates for lab tests compared to CMS’ proposed approach. The senators also ask the agency to give labs more time to report commercial-payer rates.

“We urge that CMS establish an alternative, more expansive methodology for identifying laboratories that must report private payment rates in the final rule,” Sens. Orrin Hatch (R-UT) and Ron Wyden (D-OR) write to acting CMS Administrator Andrew Slavitt.

The senators are the latest to join a growing bipartisan group of lawmakers who are leaning on the agency to change its proposal for establishing the new Clinical Laboratory Fee Schedule. Bipartisan groups of senators and House representatives separately sent similar letters to CMS last month.

Medicare typically pays more for lab tests than commercial payers so the Protecting Access to Medicare Act directs CMS to overhaul how it sets pay rates for lab tests by basing Medicare reimbursement on commercial-payer rates. To determine commercial rates, CMS must collect price data from labs, and lawmakers dislike CMS’ proposal for collecting commercial-payer rates because it excludes hospitals.

Private plans pay hospital labs more on average than independent labs so excluding hospitals from reports on commercial-payer rates lowers reimbursement. Hospitals labs account for about half of the money that the health care system, public and private, spends on lab services.

The proposed pay rule effectively excludes hospitals, but it does not do so outright. The law calls for collecting price data from labs that receive at least half of their Medicare revenues from lab-test reimbursement. CMS proposed including all hospital revenue when calculating whether the Medicare reimbursement from lab tests accounts for more than half of Medicare revenue.

Hospitals also want their labs to report price data, despite the reporting burden.

“We are concerned that the new CLFS rates would not be representative of overall market rates,” the American Hospital Association states in comments on the proposed rule. “This would cause hospitals to see precipitous declines in Medicare payments for laboratory services, which could harm patient access to laboratory testing in many communities.”

CMS states the proposed rule is designed to reduce the reporting burden, so Hatch and Wyden propose an alternative approach that they say would balance burden with fairness. The proposed rule already excludes facilities that receive less than $50,000 annually in Medicare reimbursement for lab services. Hatch and Wyden say CMS should keep that exclusion, which alone sufficiently reduces the reporting burden, and get rid of the measure that does not isolate hospital lab revenue.

Hatch and Wyden also say the proposal wouldn’t give labs enough time to report private sector price data. CMS proposed giving labs until March 31 to report data from July through December of last year.

“The March 31 deadline is particularly unrealistic given that the final rule containing the information that laboratories will need to report has yet to be published,” they write, adding that even if CMS were to publish the final rule today, labs would need more time.

CMS was supposed to publish the final rule this summer to give sufficient time to get the new pay system running by 2017.

Hatch and Wyden’s suggestions mirror those of industry, but their letter does not mention labs’ other complaint about CMS’ proposed definition of advanced diagnostic lab tests. However, the letter from the other group of senators takes issue with the agency’s handling of advance diagnostic lab tests.

To encourage labs to develop advanced diagnostics, the law lets them initially name their price, although if that price ends up being more than 130 percent of what the market pays, Medicare later gets back some of that overcharge. Medicare pays the list price for advanced diagnostic lab tests during the first three quarters following market entry, then CMS transitions reimbursement to a weighted median of private payer rates.

To keep labs from abusing the advanced-diagnostic measure, the law requires that advanced diagnostic lab tests combine an analysis of multiple DNA, RNA, or protein biomarkers with a unique algorithm. CMS proposed an additional requirement that the tests “provide new clinical diagnostic information that cannot be obtained from any other existing test on the market or combination of tests.”

The American Clinical Laboratory Association and the American Hospital Association say CMS must change the proposal to comport with the law.

Industry disagrees with another aspect of how CMS proposes to handle advanced diagnostic lab tests. The law requires that both advanced diagnostics and regular lab tests be offered by a single lab, and the American Clinical Laboratory Association and the American Hospital Association opposes how CMS defines “single laboratory.”

“The AHA is concerned that CMS’s proposed policies for defining ADLTs would exclude most hospital-based and health system-based laboratories from being able to identify any of their tests as ADLTs,” the group writes. —John Wilkerson (jwilkerson@iwpnews.com)