Year end spending bills in Washington are called Christmas trees for a reason. They are almost always adorned with all manner of gifts to various industries and constituencies, big and small.
This year, one winner was the Clinical Laboratory industry. A bill known as Laboratory Access for Beneficiaries Act of 2019 was included in the year-end spending bill that cleared the Senate yesterday. It is, as we used to say when Vanderbilt University lost yet another football game, a “moral victory” but perhaps it evolves into something more.
The LAB Act delays reporting and implementation of Medicare rates based on the “weighted median” of commercial rates until 2021 and 2022, respectively. Payments rates currently in effect would be extended through 2021.
The bill also requires a report from MedPAC which is charged with considering a better methodology for data collection and reporting so rates that are used by Medicare are representative of the market. Importantly, the bill does not appear to suggest an end to the PAMA methodology, simply a more accurate approach.
The LAB Act is not likely to have an impact on anyone’s guidance. It does not impact rates until 2022. However, its inclusion is noteworthy as a political victory for the industry. It is also important in that the delay will permit time for additional legislative and administrative refinements such as reporting across a broader spectrum of lab types and use of a more sophisticated statistical approach.
While hard fought by the industry, the delay is largely the absence of a negative in 2021. The chief beneficiaries are the large labs like DGX and LH.
Beyond that, certain genetic tests will defer PAMA negative consequences in 2021. When commercial rates were collected in early 2016 and compared to the 2017 CLFS rates, a number of frequently ordered tests had differences in excess of 30%, which was the total downside limit impact of PAMA on any one test. Most noteworthy is CPT code 81432 under which NVTA and MYGN both bill.
The weighted median of all commercial payers in 2016 was $136.47 for 81432. The Medicare rate was $931.48, a difference of 85%. However, because PAMA stipulated a 10% downside limit on individual test fees for each year 2018 through 2020, the Medicare rate was only reduced from $931.48 to $679.05. Presumably when a new round of PAMA cuts goes into effect, the rate would be further reduced. That reduction is now delayed a year.
The same sort of analysis can be applied to other tests with significant discrepancies between Medicare and commercial rates.
For the lab industry, the spending bill is not a lump of coal but not exactly a new red Mercedes either.
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Emily Evans
Managing Director – Health Policy
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