Jim Poggi
By Jim Poggi
What do we know?
PAMA is now entering its third year as a major factor in the lab testing market, particularly for the POL and smaller, regional reference laboratories. In this article, I will review PAMA’s history and possible future course. Together we will review the factors leading up to its implementation, discover PAMA’s impact to date, understand the position of its advocates and opponents, and finally examine the actions we need to consider to manage and maintain our lab business at the point of care.
What were PAMA’s original objectives?
PAMA’s original intent was to reduce Medicare spending for lab tests to bring it in-line with the lower rates paid by private insurance. The Office of the Inspector General indicated that Medicare was paying a premium of about 20% compared to private insurance with Medicare’s lab spend in 2016 as $6.8 billion, or 2% of all Part B Medicare payments. PAMA legislation was intended to reduce Medicare lab spending by $2.5 billion over a 10-year period. In addition to adjusting rates downward by up to 10% annually in 2018-2020 with reductions of up to 15% if needed in 2021-2023, PAMA also made other changes. It created a single unified fee schedule, replacing the 57 local fee schedules previously utilized. It also eliminated the Sustainable Growth Rate factor and eliminated individual test discounts for tests typically performed as part of a larger test panel, such as the Comprehensive and Basic Metabolic panels.
What has PAMA’s impact been?
PAMA’s impact has been both controversial and substantial from several viewpoints. It reduced Medicare reimbursement across most CPT codes. Of the approximately 1,130 CPT codes impacted by PAMA’s changes, 880 have been reduced by the maximum of 10% annually, 114 other CPT codes have been reduced by a lesser amount and only 135 CPT codes have experienced no change or an increase in reimbursement. The tests that have not been reduced are primarily newer MultiAnalyte with Algorithm (MAAA) tests for various cancers and other genomic tests.
From a financial viewpoint, PAMA’s impact in 2018, its first year, has been estimated at between $300 and $670 million, far more than originally estimated.
In addition, PAMA has galvanized opinion across the laboratory and clinical communities which have strongly opposed the cuts in reimbursement as too deep and not having a uniform impact depending on where the tests are performed. CMS has responded to widespread criticism of its data collection scope and method by expanding labs eligible to report data under PAMA to include hospital outreach labs for the coming reporting period. It also lowered the Medicare payment amount to permit reporting by labs with lower Medicare spend amounts. Both moves were intended to palliate concerns that initial cuts were based on only 1% of the labs performing lab testing. In addition, legislation has been introduced in the House of Representatives to amend PAMA.
What can we expect in 2020?
This year is the third and final year in which cuts of up to 10% are expected. Approximately half of the current CPT codes are expected to experience reimbursement cuts this year. Data collection between laboratories reporting reimbursement rates to CMS is scheduled to take place in the first quarter of 2020 based on payments to them for lab tests in the first half of 2019. The results of CMS analysis of this data will be used to set rates for the three succeeding years of PAMA, 2021-2023.
What are the key areas of controversy surrounding PAMA?
PAMA has been met with widespread criticism on three specific fronts by the clinical and laboratory communities:
- With only 1% of labs performing tests reporting data for the initial collection period, concern is that the largest laboratories’ data skewed market-based reimbursements toward the lower end of the scale
- The depth of cuts estimated as high as $670 million by CMS is substantially higher than estimated and impact POL and other lower volume laboratories far more than the larger reference laboratories
- Access to care reductions, especially in rural areas is a possibility
The General Accounting Office, in a November 2018 report, also challenged CMS to assure all eligible laboratories reported data, requested that CMS re-set future rates based on actual payment rates rather than maximum rates, and also expressed concerns that eliminating the bundled rate previously paid on individual tests typically performed as part of panel needed to be re-instituted. CMS has only agreed to broaden laboratories eligible to provide data in response to the GAO report.
Reaction to PAMA in Congress resulted in the introduction of H.R. 3584, The Laboratory Access for Beneficiaries Act (LAB) by Rep. Scott Peters of California and five other representatives in June 2019. If passed, key provisions of this bill would be to delay reporting of private pay reimbursement by one year to delay further reimbursement cuts and to refine the number and type of labs that will report data in the future. The bill is in both the house Energy and Commerce and Ways and Means committees, but neither committee has taken action to move it forward.
What are customers and the industry saying?
Clinical laboratory organizations including the National Independent Laboratory Association (NILA) and American Association for Clinical Chemistry (AACC) have expressed their concerns and in addition to supporting HR 3584 have encouraged their members to support the bill with their legislators. More than 50 other professional organizations including pathology and medical care provider organizations have also expressed their concern. At the same time, the customer input I have become aware of has indicated some customers are reducing testing as a result of “reimbursement concerns” but they are typically not specifically mentioning PAMA as the reason.
What should we consider doing to support our clients’ lab testing and health care objectives?
As always, making sure we have the important three-way dialogue with our key manufacturers and key customers is critical to assuring appropriate testing. Be sure to focus on clinical value, keep your eyes and ears open for signals of concern, use customer business reviews wisely and look for “scale up” opportunities to keep costs in line where needed. Stay alert and agile. PAMA is here, and your planning and focus are keys to maintaining and growing your lab business and supporting our customer needs for better patient care.