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CMS Delays PAMA Implementation to 2018, Alters Criteria for Submitting Data

The agency overseeing the Medicare program delayed its implementation of clinical laboratory fee schedule (CLFS) payment rates until 2018, according to a final regulation filed on June 17. The new rules will require applicable laboratories to collect and submit data on private payer reimbursements for clinical laboratory services, which the Centers for Medicare & Medicaid Services (CMS) will use to set fees for these services provided to Medicare patients.

Implementation of the PAMA requirements has been long delayed, with the final rule published almost a year after its required release date. As a result, the agency not only delayed implementation of the reformed CLFS payment rates until 2018, but also data collection until 2016 and data reporting until 2017. Key provisions in the final rule of the broadest impact regarding implementation include:

  • The definition of an applicable laboratory subject to reporting is now based on 50% of its total Medicare revenues received under the CLFS and physician fee schedule (PFS) using its National Provider Identifier (NPI) rather than tax identification number (TIN), as proposed. The TIN, however, will be the "reporting entity" that will submit and certify data to the CMS.
  • The CMS cut the threshold for its low expenditure exception from reporting in half to $12,500 over a six month period in Medicare revenues from laboratory services paid under the CLFS.
  • The data collection periods were shortened from a year to six months. The initial, mostly retrospective, data collection period is January 1, 2016 through June 30, 2016 with reporting data to the CMS between January 1, 2017 and March 31, 2017.
  • Regarding coding of advanced diagnostic laboratory tests (ADLTs), the CMS acknowledged that the American Medical Association (AMA) is creating a new process to meet PAMA requirements. Either the AMA will create CPT Panel codes or the CMS will create HCPCS level II codes to identify new and existing ADLTs.
  • The CMS indicated that the revisions to the CLFS as authorized by PAMA will have a significant impact on entities furnishing laboratory tests paid under the CLFS which may amount to an estimated impact greater than a 3–4% change to their revenue. The impact on any individual laboratory will depend on the mix of laboratory services provided by the individual laboratory or physician office.

Statute required the CMS to use the private payer data submitted by laboratories to set payment rates on the CLFS with any reductions in rates limited to the following: 10% for 2017–2019, and 15% for 2020–2022.

The CAP has engaged with the CMS on implementation of PAMA and shared key concerns affecting members, including after the proposed regulation was released on September 25. The CAP advocated for accurate payments under the new Medicare Clinical Diagnostic Laboratory Test (CDLT) Payment System that will establish the CLFS payment rates. Under PAMA, the CLFS is based on the weighted median of private payer rates from what is to be a representative sample of laboratories. The CAP also urged the agency to minimize administrative burden and penalties. Two of the CAP’s nominees to the CMS’ PAMA CDLT advisory panel also were accepted and have been active participants since its inception.

Further, the CAP worked with stakeholders to support delaying implementation until it can be accomplished accurately and in the least disruptive fashion.

Which Laboratories Report Fees to CMS

PAMA requires applicable laboratories to submit data on private payer payments for laboratory services to the CMS. A weighted median of the data collected under statute was to have set rates for CLFS reimbursements in 2017. Under the agency's proposed rule, organizations as defined at the TIN level that receive more than 50% of their Medicare revenues from the clinical laboratory and physician fee schedule in a data collection period were subject to reporting/data submission requirements. In addition, the agency proposed a low expenditure threshold so that laboratories that are paid less than $50,000 per year on the CLFS were excluded from reporting.

The CAP had objected to the limited scope of entities required to submit data. Broadening the criteria to include more applicable laboratories would improve the accuracy of private payer and market rates, the CAP said. Based on the proposed definition of applicable laboratories, hospitals and virtually all physician office laboratories would be excluded. The CAP said excluding these laboratories would lead to inaccurate CLFS rates.

In response to comments including the CAP's, the final rule defines applicable laboratory at the NPI rather than TIN level. The agency acknowledged this mechanism for defining applicable laboratory as a change in policy from the proposed rule. CMS also created a "reporting entity" responsible for data certification and reporting which will remain at the TIN level which CMS believes will reduce administrative burden. The CMS also set a new low expenditure threshold of at least $12,500 in Medicare revenues from laboratory services paid under the CLFS based on the six month data collection period. The rest of the definition did not change.

The CMS believes that approximately 95% of all physician office laboratories and about half of independent laboratories will not fall under these requirements. The CMS said it was important not to prevent private payer rates from being reported for hospital outreach laboratories so that we may have a broader representation of the national laboratory market to use in setting CLFS payment amounts.

Timeline for Reporting Data

The CMS had proposed an initial data collection period from July 1 to December 31, 2015 with reporting by applicable laboratories required no later than March 31, 2016, which is no longer feasible.

New deadlines were set in the final rule. The initial collection period will be from January 1, 2016 through June 30, 2016 with applicable laboratories required to submit data between January 1, 2017 and March 31, 2017. Laboratories were given a longer, six month time period to review and certify their data than was allotted in the proposed rule.

The CMS will calculate and post the new Medicare rates (equal to the weighted median of private payer rates for each test) by early November 2017.

Subsequent CDLT reporting will be every three years, with six month data collection periods from January 1 through June 30 and data reporting that would begin on January 1 and end on March 31 of the year following the data collection period.

New Coding Requirements

In the final rule, the CMS acknowledged that "the [American Medical Association (AMA)] is creating a new coding process specifically to meet the requirements of PAMA. Either the AMA will create CPT Panel codes or CMS will create HCPCS level II codes to identify new and existing ADLTs and new and existing CDLTs".

This action reflects the CAP's recommendation to use the CPT (HCPCS level I) process when codes are available and recognizes the importance of use of HIPAA designated code sets, identifiers, and modifiers in the assignment of codes for new tests.

Penalties for Noncompliance

By statute, if the Secretary determines an applicable laboratory has failed to report or made a misrepresentation or omission, a civil monetary penalty of up to $10,000 per day for each such failure to report, misrepresentation, or omission may be applied. In its comments in the proposed rule, the CAP had urged leniency in assessment of penalties especially for the initial reporting period.

In the final rule, the CMS in situations where its review reveals that the data submitted is incomplete or incorrect, the agency will work with its Office of Inspector General (OIG) to assess whether a civil monetary penalty (CMP) should be applied, and if so, the appropriate amount based on the specific circumstances. "Although the statute authorizes CMPs of up to $10,000 per day per violation, we recognize that this is the maximum statutory amount, and not a minimum. The actual penalty imposed will be determined based on the facts and circumstances of each violation," the CMS said.

CMS on MAC Consolidation

Under PAMA, the CMS has discretionary authority to consolidate coverage and/or claims payment for clinical laboratory tests to between one and four Medicare Administrative Contractors (MACs). In the proposed regulation, the CMS has chosen not to exercise this authority, but has asked for comment on the disadvantages and advantages of consolidation.

In response, the CAP reaffirmed its position in favor of local coverage determination (LCD) reform and urged the CMS not to pursue MAC consolidation of coverage policies and/or claims process for clinical laboratory tests.

The CMS did not exercise its authority to consolidate MACs. Instead, the agency said it will give careful consideration to the input from stakeholders as it considers whether to downsize the number of MACs developing LCDs and/or processing claims for CDLTs. In the interim, MACs should continue to develop and implement CDLT-related LCDs in accordance with the guidance set forth in Chapter 13 of the Medicare Program Integrity Manual and process Medicare claims for payment of CDLTs in the same manner it always has until further notice.