Health Law Daily Private insurer rates will help set clinical diagnostic lab test rates in 2018
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Monday, June 20, 2016

Private insurer rates will help set clinical diagnostic lab test rates in 2018

By Harold Bishop, J.D.

The Medicare fee schedule rates for the more than 1,300 types of clinical diagnostic laboratory tests (CDLTs) have remained relatively unchanged, apart from setting payments for new tests or implementing across-the-board statutory payment updates, since the current statutory methodology was established in 1984. The enactment of section 216(a) of the Protecting Access to Medicare Act of 2014 (PAMA) (P.L. 113-93), however, which added new section 1834A to the Soc. Sec. Act, required extensive revisions to the Medicare payment, coding, and coverage requirements for CDLTs and created a new subcategory of CDLTs called advanced diagnostic laboratory tests (ADLTs) with separate reporting and payment requirements.

To implement these statutory changes, CMS issued an Advance Release of a Final rule requiring laboratories performing CDLTs to report the amounts paid by private insurers for laboratory tests. Medicare will then use these private insurer rates to calculate Medicare payment rates for laboratory tests paid under its Clinical Laboratory Fee Schedule (CLFS) beginning January 1, 2018. The Final rule also includes provisions to ease administrative burdens for physician office laboratories and smaller independent laboratories. The Final rule will officially publish in the Federal Register on June 23, 2016.

Implementation date for CLFS rates. Section 1834A(b)(1)(A) of the Soc. Sec. Act requires that, for a CDLT furnished on or after January 1, 2017, the amount Medicare pays for the CDLT must be equal to the weighted median of private payor rates for the CDLT. However, after considering public comments on its Proposed rule (see Major changes afoot for Medicare clinical diagnostic test payment system, October 1, 2015), CMS decided to move the implementation date to January 1, 2018, to allow laboratories sufficient time to develop the information systems necessary to collect, review, and verify data before reporting applicable information to CMS. This delay will also allow time for CMS to perform independent validation and testing of the CMS system through which laboratories will report applicable information and allow laboratories to perform end-to-end testing of their systems with CMS’ system.

CMS plans to publish preliminary CLFS rates for calendar year (CY) 2018 in early September 2017. The public will then have approximately 30 days, through early October 2017, to submit comments on the preliminary CY 2018 rates. CMS plans to make final CY 2018 CLFS rates available on its website in early November 2017.

Applicable laboratory defined. Under the Final rule, in response to comments, a laboratory, using its National Provider Identifier (NPI), is considered an applicable laboratory if more than 50 percent of its total Medicare revenues are received under the CLFS and Physician Fee Schedule (PFS). This is a change from the Proposed rule where CMS was planning to use the Taxpayer Identification Numbers (TINs) as a mechanism for defining an applicable laboratory.

CMS also will generally exclude a laboratory from being an applicable laboratory, and thus from having its private payor data reported, if it is paid less than $12,500 under the CLFS during a data collection period. This exclusion will not apply to certain laboratories offering ADLTs.

In addition, a hospital outreach laboratory that is independently enrolled in Medicare and has its own NPI would meet the definition of an applicable laboratory if at least 50 percent of its Medicare revenues are from CLFS and PFS services and its revenues from the CLFS are at least $12,500 during a data collection period.

Reporting period. The Final rule adopted a 6-month data collection period for the private payor rates, rather than the 12-month period suggested in the Proposed rule. The first data collection period by applicable CDLTs will be from January 1 through June 30, 2016. The first data reporting period to CMS will be from January 1, 2017, through March 31, 2017. All subsequent data collection and reporting periods for CDLTs will follow this same data collection and reporting schedule, every three years. The reporting of private payor rates for ADLTs will occur on the same schedule but will be on an annual basis.

ADLTs. Section 1834A(d)(5) defines an ADLT as a laboratory test that is covered under Medicare Part B and is offered and furnished only by a single laboratory, is not sold for use by a laboratory other than the original developing laboratory, and meets one of the following criteria:

  1. is an analysis of multiple biomarkers of DNA, RNA, or proteins combined with a unique algorithm to yield a single patient-specific result;
  2. is cleared or approved by the FDA; or
  3. other similar criteria established by the Secretary of HHS.

In the Final rule, CMS responded to public comments and decided also to include as ADLTs tests that are solely an analysis of proteins. In addition, CMS requires that an ADLT must (1) include an empirically derived algorithm that yields a result that predicts the probability a specific patient will develop a certain condition or respond to a particular therapy, and (2) provide new clinical diagnostic information that cannot be obtained from any other test or combination of tests.

CMS further requires (1) that laboratories present evidence and attest to the test’s unique algorithm, (2) that the test is not offered for sale by any other laboratory, and (3) the results of the test offer information that no other test can provide.

Coding of new tests. Section 1834A(e)(1)(A) requires CMS to adopt temporary Healthcare Common Procedure Coding System (HCPCS) codes to identify new ADLTs and new CDLTs that are cleared or approved by the FDA. CMS is also required to assign a unique HCPCS code for existing ADLTs and existing CDLTs that are cleared or approved by the FDA if they have not already been assigned a unique HCPCS code, and to publicly report the payment rate for the test. According to the Final rule, either the American Medical Association (AMA) will create Current Procedural Terminology (CPT) Panel codes or CMS will create HCPCS level II codes to identify new and existing CDLTs and ADLTs that are cleared or approved by the FDA.

Avoiding payment reductions. The Final rule provides that the payment amount for a CDLT cannot drop more than 10 percent as compared to the previous year’s payment amount for the first three years after implementation of the new payment system and not more than 15 percent per year for years four through six.

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