While COVID-19 took center stage in 2020, PAMA promises to have a major impact on lab testing in 2021.
With 2020 overshadowed by the COVID-19 pandemic, it’s hard to believe that the Protecting Access to Medicare Act (PAMA) was the center of controversy around the federal budget for healthcare and lab spending as well as a serious perceived threat to hospital and physician office revenue and viability since 2017. In fact, PAMA was the cover story for Repertoire in January 2018, subject of multiple podcasts and a key topic for all lab advocacy groups since then. The 10% cuts to Medicare Clinical Lab Fee Schedule payments for three years beginning in 2018 were supposed to be subject to three further years of cuts of up to 15% in subsequent years in order to align Medicare spending on lab tests with private pay.
At the heart of the matter was the finding by the Office of the Inspector General (OIG) published in 2017 that Medicare was paying a premium of 18% to 30% for lab tests compared to private insurance. This finding led to the requirement for “applicable laboratories” to begin reporting their private pay amounts for lab tests beginning in 2017. The analysis of these rates was used to create the new, lower rate of CLFS payments that began in 2018. Concern and challenges heated up quickly and lab advocacy groups filed suit to challenge the definition of “applicable laboratory” which was considered heavily weighted to reference laboratories, which typically had the lowest private payor rates and excluded most hospital and physician practice labs. Over time the definition of “applicable laboratory” has broadened to include hospital outreach laboratories and a larger proportion of physician office labs. The prevailing sentiment in the laboratory community remains that the data is still skewed toward the large scale, low cost per test settings.
Most Medicare CLFS fees were reduced by 10% in 2018, 2019 and 2020. At the same time, applicable labs were required to report their latest private insurance claims data in 2020 to re-set the fees going forward. Then, things started to change. In December 2019, the Laboratory Access for Beneficiaries Act (LAB) was finally passed with the intention of delaying reporting of private pay lab fees by applicable labs by one year. But, it was not intended to delay the reduction in CLFS fees which took place as scheduled in 2020.
Request for further action
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 to cause CMS to take further action on the definition of applicable lab. This case continues to wend its way through federal courts, with lab advocacy groups winning an appeal to allow their case to be heard.
In September 2020, the Medicare Payment Advisory Committee (MedPAC) convened a public meeting to hear arguments regarding the applicable lab definition and other issues being faced due to implementation of PAMA. MedPAC is an independent federal advisory group and tasked with presenting a report with their findings to Congress in June 2021. Their report is expected to refine the analysis of PAMA spending from 2017 to 2019, review private payer rates from the first round of reporting and look at revised reporting requirements for the second round of reporting in 2022. This is likely to result in the most comprehensive review of PAMA and its impact on the laboratory community since PAMA was implemented.
As a result of the COVID-19 pandemic, 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 has yet to be published but is expected to be identical to the 2020 CLFS payment schedule.
COVID-19 and lab testing
COVID-19 has had many other impacts on lab testing. Ten new CPT codes for COVID-19 RT-PCR, antigen and antibody tests have been created. While the CLFS schedule changes created by PAMA designed a new unified payment amount per CPT code across all Medicare carriers, these new COVID-19 related tests are subject to local payment determinations. Meaning? Payment amounts for these tests are subject to the local Medicare carriers’ discretion. However, both the CARES act and the Families First Coronavirus Act require Medicare, Medicaid and private insurance to pay for COVID-19 testing with no deductibles or copays, both in and out of network.
COVID-19 testing has clearly created a mixed bag for the laboratory community. Shutdowns of most physician offices and hospitals sharply reduced lab testing of all types in the second and third calendar quarters of 2020. At the same time, they also reduced access to care for all but the most seriously ill with COVID-19 or other conditions. As new COVID-19 tests have come to market, testing for COVID-19 diagnosis and follow up has sharply increased. Current estimates point to a monthly demand of over 34 million COVID-19 tests per month.
At this point, it’s unclear how long this upsurge of tests will continue with vaccines from Pfizer and Moderna just coming to market. It’s also unclear whether the current spike in COVID-19 tests will make up for revenues lost due to shutdowns earlier in 2020. It’s likely to be another year before the dust settles and the full impact of PAMA and COVID-19 and their inter-relationship becomes clear. My initial research on both lab and hospital closures as a proxy for the results of these impacts has not been fruitful. While hospital closures have risen from 2015 to 2019, with 47 closed in 2019 there is no reliable more recent data available. In addition, CLIA lab license data through 2018 shows a slight increase in lab licenses driven by CLIA certificates of waiver, but 2020 data is also not yet available. Moderate and high complexity licenses are down slightly, but that is part of a larger trend that began several years ago.
PAMA and the COVID-19 pandemic have both had dramatic impacts on the healthcare system and lab testing in particular. Their inter-relationship is a tug of war with impacts sure to be felt in 2021 and beyond.