The Protecting Access to Medicare Act of 2014 (PAMA) Final Rule, published in June of 2016, continues to spark apprehension across the laboratory industry. However, in a change of pace at the end of 2019, the Laboratory Access for Beneficiaries (LAB) Act, that will delay the PAMA reporting cycle until 2021, was signed into law.

The PAMA Rollercoaster
PAMA originally mandated that CMS establishes market-based laboratory reimbursements.
However, PAMA was greatly criticized because its definition of “applicable labs” (labs required to report their payer reimbursements to determine the new pricing) meant new pricing would be determined based on a very limited portion of the market.

After the first reporting cycle in 2017, 75% of tests on the clinical laboratory fee schedule (CLFS) saw reduced pricing, with 58% having phased-in decreases because of the annual limits that a test cannot be reduced by more than 10% of the previous year’s rate. In 2021, the reduction cap becomes 15%.

Elimination of ATP System Saved 2018-2019 Reimbursements
Ironically, PAMA eliminated the Automated Test Payment (ATP) system which was in place to eliminate duplicate testing and unbundling. Before PAMA rates dropped reimbursements in 2018, the ATP system dictated that certain high-volume lab tests (e.g., calcium, cholesterol, glucose, etc.) should not be billed alongside panels that included those tests (e.g., comprehensive metabolic, lipid, etc.) and limited those reimbursements. PAMA’s elimination of the ATP system allows for higher reimbursements when these tests are billed together, thereby helping to make up for the 75% fee schedule reduction.

LAB Act Implication
What the LAB Act does is delay PAMA reporting by one year. Lab data that was originally slated to be reported between January 1, 2020, and March 31, 2020, must now be reported between those dates in 2021. The original data collection period (January 1, 2019 through June 30, 2019) is still applicable. In 2024, lab data reporting resumes the three-year cycle.

The Silver Lining
On a positive note, the LAB Act requires a study to be conducted on ways to improve data collection and payment determination that is more in line with the law’s original intent—setting an accurate market-based CLFS.
In addition, the American Clinical Laboratory Association (ACLA) and other industry groups believe that the delay will allow hospital labs the time they need to gather payment data and increase their participation in the process.

Hospitals Refusing to Participate May Stifle LAB Act Impact
Controversially, the American Hospital Association has opposed the CMS’ requirement that hospitals be included as applicable labs under PAMA. Many hospital laboratories are refusing to participate because they believe that the burden of reporting the required data outweighs any pricing changes that would occur. This stance may diminish the intent of the LAB Act’s delay. However, the LAB Act delay offers time for other efforts that may help soften PAMA’s blow, such as the ACLA’s lawsuit against the Department of Health and Human Services that openly challenges the PAMA process.

In summary, all these activities basically put PAMA in a holding pattern. PAMA is not going away, but the delay in reporting may allow time for changes that can improve the reporting structure and allow labs to set up systems that help them report the required data. Going forward, laboratories need to stay abreast of changes in the PAMA Rule and those that are required to report data can be working toward developing a streamlined system to collect the required information.

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  • Medicare CLFS Spending Jumped In 2018. February 2020. Laboratory Economics