What has changed, and what future events can reps anticipate, when it comes to PAMA?
By Jim Poggi
Each time we approach the end of a calendar year, I begin thinking of the coming year’s February physician office lab column on the Protecting Access to Medicare Act (PAMA) for Laboratories. While some of the information may appear redundant or at least “no discernible change” from the prior year’s update, PAMA stands alone as the largest threat to the financial viability of labs large and small across the United States. As a consequence, it is also the subject of several legislative appeals by the National Independent Laboratory Association (NILA) and the Association for Diagnostics and Laboratory Medicine (formerly AACC).
So, where do we stand this year? What has changed and what future events can we anticipate? As I approach PAMA this year, I also plan to shed some light on the overall private payer insurance landscape and shed some light on how it differs from Medicare coverage for lab tests.
What has changed with PAMA?
The good news is that PAMA reimbursement cuts have been delayed once again. 2024 marks the fifth consecutive year Congress has stalled planned PAMA-mandated reimbursement cuts for tests covered by Medicare under the Clinical Lab Fee Schedule (CLFS). The legislation which avoided the decrease this year is the Further Continuing Appropriations and Other Extensions Act of 2024. It establishes the next data collection period where applicable laboratories must report private payer rates for lab CPT codes as calendar Q1, 2024, indicating there will be no further cuts in CLFS reimbursement in 2024. Any subsequent cuts in later years will be subject to the 15% decrease which is part of PAMA legislation. This information is subject to change, so it is advisable to stay in touch with your key lab suppliers and to review the CMS CLFS information frequently.
As most of you know the Centers for Medicare and Medicaid Services (CMS) manages the Clinical Lab Fee Schedule. For those newer to the lab business, the link to the CMS CLFS site is: www.cms.gov/medicare/payment/fee-schedules/clinical-laboratory-fee-schedule-clfs.
In addition to current and past CLFS fee schedules, there is a lot of useful information here. It includes information related to the history of past PAMA cuts as well as an explanation for the current delay in reimbursement reductions. There are also links to a variety of other resources useful to you as you gain experience as a laboratory consultant and many items valuable to share with customers and prospects. Much of the information explains Medicare policies and procedures as they pertain to coverage under the CLFS.
Another change since PAMA was enacted has been the reintroduction of “local coverage decisions” back into the CLFS. As you may remember, PAMA eliminated the patchwork quilt of local coverage decisions for ALL lab tests covered under the CLFS when it was implemented. When PAMA was implemented all local coverage decisions were abolished, which increased payment under CLFS in certain markets. From the viewpoint of understanding Medicare payment amounts across the country, the virtual elimination of local coverage decisions made reimbursement of CLFS tests far easier to understand and communicate.
But, as of the Q4 2023 version of the CLFS, local coverage decisions are creeping back into the CLFS again. There are currently 98 local coverage decision assays in the CLFS data base of 1,959 tests, 5% of the total number of covered tests. MOST of the assays subject to local coverage decisions are high complexity molecular and next generation sequencing assays and not typically performed by our customers. As an example, CPT code 0333U is “Surveillance of liver cancer in high-risk patients using algorithm”. Most local coverage decisions involve similar assays with a molecular component and many that use large scale data to assess risk. But, given the trickle-down effect of cutting-edge assays into the physician office market, it is valuable to review the list of local coverage determination assays to see where the cutting-edge technology is leading us.
History indicates we will see many of these assays coming to the physician office market based on clinical utility as the technology becomes more readily adapted to the physician office market. The adoption of molecular respiratory assays shows the clear pathway for migration of complex technology into our market and customer base.
Another big change in the current CLFS lab fee schedule is the number of covered tests. With 1,959 reimbursable tests, the 2023 fee schedule covers 193 more tests than the 2021 CLFS did. That’s more than a 10% increase in only two years. Interestingly, while there are COVID assays on the list as we would expect, many new tests are either molecular or molecular with risk assessment based on large scale data analysis. This tells me that we have a powerful research and development engine at work keeping new and more clinically valuable tests entering the pipeline. Innovation is clearly alive and well in the lab market.
Further proof of the proliferation of new high complexity and high reimbursement assays comes from two different sources. First, from the CLFS data base, there are now 119 molecular/next generation sequencing tests which reimburse $1,000 or more each. And secondly, spend under the CLFS which was intended to decrease under PAMA has increased steadily since 2018 to 2021. From a historical perspective, Medicare Part B paid out $9.3 billion in 2021 for lab compared to $6.8 billion in 2016. Some of the increase is directly attributable to COVID tests, but a substantial portion is also due to new high value and high reimbursement molecular assays.
What has NOT changed?
Remember our old friend, SALSA (Saving Access to Laboratory Services Act)? Despite the clear rationale to delay payments under PAMA, extensive lobbying from the laboratory industry and multiple short term funding acts by Congress, SALSA has still not passed as of December 2023. It was originally proposed in June of 2022 and is still under active consideration but has not yet become law. Given the history of SALSA and other congressional funding acts related to PAMA it is hard to say whether SALSA will ever become law. But, overall, it is clear there is support from Congress to assure continuing access to laboratory tests and services in one way or another. This is certainly good news and the fact that substantial cuts in reimbursement have been delayed is a welcome relief to our customers and helps us add value as consultants to physician office laboratories.
What about private insurance?
The threat posed by PAMA has largely been to reduce reimbursement levels to those typical of private insurance. Now that is has been established that we have a delay in PAMA reimbursement cuts, what about private insurance? Here is where the crystal ball becomes especially cloudy for many reasons. First, the diversity of private insurance carriers and the multiple local geographical coverage areas where private pay reimbursement is established provides a very complex network of carriers and rates. Further complicating matters, large physician practices sometimes negotiate different rates within a payer coverage area.
From a practical viewpoint, it becomes nearly impossible to understand private insurance payments for lab tests on a national basis. The best the distribution account manager can do is to stay current with Medicare reimbursement and seek guidance from their home office and key lab suppliers around financial conversations with customers. From my perspective, it has always been advisable to refer customers and prospects to their practice billing experts and the insurance carriers they work with. There is a lot of risk in trying to understand private pay reimbursement at any specific practice level and no real advantage in doing so. Keeping the conversation focused on clinical value, providing quality technical consulting from our trusted lab suppliers, and keeping a distance from conversations related to private pay reimbursement has been the approach that seems to work best.
As an interesting side note on private pay insurers, on an overall basis, Medicare’s CLFS has adopted cutting-edge molecular and next generation sequencing assays faster than the typical private insurance carrier. In my experience, private insurance companies tend to require more substantial proof that new cutting-edge assays reduce the cost of a covered life. In other words, the insurance companies tend to ask themselves “if we cover the cost of this expensive new lab test today, does it reduce our lifetime costs of covering this patient?” Often new tests need to be extensively proven to provide longer, more complication free quality of life free from substantial morbidities before the private pay insurance companies will provide more than token coverage. As risk analysis based on large scale data analysis and artificial intelligence takes hold, I expect changes in the viewpoint of private insurance companies. Any time they can reduce lifetime costs of patient coverage, they will react and respond accordingly. Rapid changes are taking place in the ability to prove the worth of new cutting-edge assays.
Overall, as some things change, others remain the same. The well-versed distribution account manager keeps their finger on the pulse of change and frequently engages their trusted lab suppliers for the best way to communicate the value of lab. Practice and experience lead to confidence. Our customers want and need the information we can provide to make informed decisions on lab testing in their practices. The changing landscape regarding PAMA and reimbursement in general points to the need to stay informed to provide the best possible information to our customers and prospects. The best lab consultants tend to have the largest lab customer base and also the most satisfied customers. Stay informed to be the best.