Irresistible force versus immovable object
By Jim Poggi
In the conflict between the irresistible force and the immovable object, which one wins? In this case, the battle is pitting the Protecting Access to Medicare Act (PAMA) against COVID-19, a formidable worldwide pandemic foe. PAMA is a 2014 law first enforced in 2018 with the goal of aligning Medicare payments for laboratory tests under the Clinical Lab Fee Schedule with rates paid by private insurance. When it was enacted, it caused widespread concern in the U.S. laboratory and healthcare communities. SARS COV-2 came out of the blue in late 2019 and rapidly became a worldwide healthcare concern as it created a pandemic.
How is the battle shaping up? What’s the current score and who is likely to prevail?
In this corner, PAMA
When PAMA was enacted, with reductions in the Clinical Lab Fee Schedule set to take place in 2018 and the expectation that most CPT codes would take the full 10% reduction, things did not look too optimistic for the laboratory business, especially the physician office laboratory. As predicted, in 2018, 88% of the then active 1129 CPT codes were reduced up to the statutory maximum of 10%. The 10-year projection of payment reductions by the Office of the Inspector General estimated a reduction of $10 billion, with first year impact of up to $370 million. Data indicates the first-year impact exceeded $670 million. It looked like PAMA was an irresistible force to be reckoned with.
But, from the beginning, there was controversy regarding which labs would report their private payer data to set new reduced CLFS rates. Virtually all professional laboratory societies and medical societies raised concerns that independent reference laboratories were grossly over-represented in the definition of “applicable laboratories” and that their typically lower private reimbursement would skew the new CLFS rates and impact physician office laboratories and hospital outreach laboratories. Concerns were raised about access to care, especially in rural areas, and potential reduction in the number of labs resulting in further consolidation into the largest laboratory systems.
One national laboratory society observed that while private commercial laboratories represent just under 50% of all CLFS test volume, their data on private pay represented 90% of the data CMS used to reduce CLFS fees in 2018. Despite controversy of the definition of applicable labs and CMS’ agreement to broaden the definition to include hospital outreach labs and smaller physician office labs, lab advocacy groups have continued to petition the courts and Congress to cause CMS to take further action on the definition of applicable lab. Despite these protests and CMS’ agreement to broaden the definition of “applicable laboratory” to include more hospital outreach and physician office laboratories, it looked like PAMA would be uncontested in its impact on the US laboratory testing landscape.
In this corner, COVID-19
Then, in late 2019, everything began to change. A new pandemic virus made its appearance on the worldwide healthcare scene. Coronavirus SARS COV-2 emerged as the immovable object: in the early going, there were no lab tests, vaccinations, or specific treatments beyond respiratory and symptomatic support. COVID-19 swept across the globe quickly and forcefully.
The impact of the COVID-19 pandemic on the worldwide healthcare system has been incredibly broad. COVID-19 has had an impact on 222 countries, with over 275 million cases reported. For context, COVID-19 has infected 3.4% of the total worldwide population since 2019, with the likelihood that many cases have gone unreported. Morbidity and mortality has also been widespread with over 5.3 million deaths worldwide, and over 800,000 in the United States alone.
As the COVID-19 pandemic and the emergence of its new variants (Omicron is the latest as of press time) have continued to cast their shadow across worldwide healthcare, the impact of the COVID-19 pandemic has gone well beyond the healthcare community. Largely due to COVID-19, the U.S. Gross Domestic Product (GDP) contracted by 3.5% in 2020, and we experienced the worst U.S. GDP contraction since 1946. As we approached the end of 2021, there were signs of economic recovery, in spite of challenges throughout the transportation and supply chain areas. As of July, 2021, the GDP was surging up 6.5%, and exceeded the pre-COVID GDP. However, the U.S. inflation rate was reported as 6.2% in October, the highest since November, 1990.
The U.S. economy and jobs outlook was substantially impacted. At its height, COVID-19 was largely responsible for both the U.S. recession of 2020 and the Great Resignation. There is no doubt that its impact on the global supply chain from personal protective equipment to microprocessors will continue well into 2022.
As a result of the COVID-19 pandemic, in January 2019, the CARES Act was passed and, among other stimulus programs, delayed both the next round of CLFS cuts and reporting of private pay fees by one year. CLFS CPT code reimbursement for 2021 remained at 2020 levels with no reduction in CPT code reimbursement. Most recently, the Protecting Medicare and American Farmers from Sequester Cuts Act, enacted on Dec. 10, 2021 has delayed cuts to the CLFS further. As a result, no further cuts to the CLFS are expected until 2023, with the statutory maximum set at 15% as previously planned.
COVID-19 testing has clearly created a mixed bag for the laboratory community. In the early going, a number of physician practices and testing sites shut down reducing overall healthcare services and essential U.S. lab testing. However there has been a substantial rebound. Emergency Use Authorization has been granted to over 330 COVID tests including a wide range of new tests designed for use at home. As the new COVID-19 tests have come to market, testing for COVID-19 diagnosis and follow up has sharply increased. Current data estimate that over 364 million COVID RT-PCR, antigen and antibody tests have been performed in the U.S. This trend is likely to continue as new variants create additional concern and infection rates are impacted by fall and winter weather, as well as a relaxation of social distancing requirements.
The score?
On the lab side of things, PAMA reductions have been delayed for two years largely due to COVID-19. What about lab spending under the CLFS? Lab spending under CLFS has increased to about $7.7 billion in 2019 from $6.8 billion in 2016. The increase is largely due to COVID testing and other new molecular assays despite reductions in fees for most of the top 25 CLFS schedule tests.
On the COVID front, COVID infections had declined from their highest levels as of late 2021, but the omicron variant and winter weather is showing an early season surge in cases. The worldwide economy and supply chain have been impacted substantially, but both are showing rebounds. The number of U.S. jobs is expanding and this trend appears stable. We have new testing and treatment technologies including new types of breakthrough vaccines and an expanding number of new molecular technologies. Virtual patient visits are on the rise expanding access to healthcare and we are experiencing a surge in home testing.
The winner: progress. Not without pain, but progress nonetheless.