Pathology/Lab Coding Alert

Lab reporting starts January 1.

Finally — the rule for re-valuing the Clinical Laboratory Fee Schedule (CLFS) that was due by June 30 arrived Oct. 1, 2015.

The rule implements section 216 of the Protecting Access to Medicare Act of 2014 (PAMA). It requires “applicable” labs to tell CMS how much private payers reimburse them for specific lab tests, so that CMS can use the data to establish new CLFS payment rates.

Read on to get the lowdown on the rule, and what it means for your lab.

See If You Need to Report

If you’re an “applicable” lab, you need to get ready to report specific data to CMS. The rule defines applicable labs as CLIA certified entities that earn more than 50 percent of their Medicare revenue for the entire organization (if the lab is part of a larger organization) from CLFS and physician fee schedule (PFS) payments. Also, an applicable lab must earn at least $50,000 per year from CLFS payments. CMS predicts that these critera will exclude most hospital labs, more than half of independent labs, and more than 90 percent of physician office labs from the reporting requirement.

Learn the schedule: As an applicable lab, you must report data from the time period of July 1 through Dec. 31, 2015. Your reporting window is January 1 through March 31, 2016. Mistakes will cost you — CMS can levy penalties of up to $10,000 per day for misrepresentation or failure to report.

Problem: With the mandatory comment period schedule, it appears that CMS may not release the final rule until after the reporting period begins. This doesn’t allow labs and billing vendors “adequate time to prepare for and reconfigure laboratory claims management systems and software to ensure that they provide accurate, timely and adequate reporting of claims data,” as envisioned by William G. Finn, MD, FASCP president of the American Society for Clinical Pathology (ASCP) in an open letter to CMS’s deputy administrator, Sean Cavanaugh.

Price determination: After applicable labs report private payer reimbursement rates and test volume for each test on the CLFS (approximately 1300 tests), CMS will use the data to establish the Jan. 1, 2017 CLFS payment rate. CMS will set the rate for each test as the weighted median of private payer rates reported by applicable labs.

Understand ADLT’s

CMS won’t use this method to determine payment rates for every test — it’s different for Advanced Diagnostic Laboratory Tests (ADLTs). These are tests that Medicare covers, but that only one lab performs, and that meet at least one of these criteria:

• Test is analysis of multiple DNA, RNA, or protein biomarkers, combined with a specific predictive algorithm
• Test is cleared or approved by the Food and Drug Administration (FDA)
• Test meets other similar criteria established by the Health and Human Services Secretary.

CMS will pay for new ADLTs at their actual list charge for three quarters. Then payment for ADLTs would be based on the weighted median private payer rate reported by the single laboratory that performs the ADLT.

Anticipate Your Financial Impact

Repricing the entire CLFS could have a tremendous impact on your lab’s future bottom line — or not. The effect will depend on your lab’s specific circumstances.

For instance: CMS expects that hospital labs may see little impact from the change, because most payments that hospitals receive for lab work come through the Inpatient or Outpatient Prospective Payment Systems, not the CLFS.

On the other hand, independent labs and physician office labs, which generally get paid at the CLFS rate, will bear the brunt of the change. CMS estimates that re-valuing the CLFS will result in $5 billion in Medicare savings over 10 years. That’s $5 billion that will come out of labs’ pockets.

Near term, CMS expects a 4.5 percent pay cut to the CLFS in 2017 — but no one really knows until the data come in.