On September 25, 2015, the Centers for Medicare and Medicaid Services (CMS) issued a pre-publication copy of the Clinical Laboratory Fee Schedule (CLFS) proposed rule. The proposed rule restructures payment rates for clinical diagnostic laboratory tests (CDLTs) and advanced diagnostic laboratory tests (ADLTs) beginning on or after January 1, 2017. Under the proposed rule, CMS would impose new data collection and reporting requirements for applicable laboratories, and new CLFS payment rates for CDLTs and ADLTs would equal the weighted median of private payor rates for each test as reported. CMS proposes to apply a civil monetary penalty to any applicable laboratory that fails to submit required reports.
Highlights of the proposed rule include:
- Data Collection Period. Under the proposed rule, data collection for 2015 encompass the period between July 1 and December 31, 2015. Data reporting will subsequently run from January 1, 2016 through March 31, 2016. CMS will use the collected data during these time periods to determine CLFS payment rates for years 2017-2019.
- New Methodology for Determining Medicare Payment Rates. Payment for CDLTs furnished on or after January 1, 2017 would be equal to the weighted median of private payor reimbursement for each test, based on data reported by applicable laboratories during the data collection period. New ADLTs would be reimbursed at their “actual list charge” amount during an initial three-quarter period. CMS defines “actual list charge” as “the publicly available rate on the first day the new ADLT is obtainable by a patient who is covered by private insurance, or marketed to the public as a test a patient can receive, even if the test has not yet been performed on that date.” However, once the initial three-quarter period has passed, payment for ADLTs will be determined in accordance with the weighted median private payor rate.
- Phase-In Payment Reduction. The proposed rule recommends a phase-in payment reduction in order to effectuate Section 216(a) of the Protecting Access to Medicare Act of 2014 (PAMA), which mandates that the payment amount for a test cannot drop more than ten percent (10%) as compared to the previous year. For example, if an existing test under the CLFS for calendar year (CY) 2016 has a payment rate of $20.00, but the weighted median private payor rate calculated during CY 2016 is $15.00, the CLFS payment rate for the test would be $18.00 (representing the maximum ten percent (10%) reduction). The following year, a ten percent (10%) reduction would equal $1.80, lowering the payment to $16.20, and so continues until the fee schedule payment meets the weighted median private payor rate.
- Applicable Laboratory Defined. “Applicable Laboratories” to which reporting and payment adjustment requirements would apply are defined as laboratories that receive a majority of Medicare revenues from the CLFS or the Physician Fee Schedule (PFS). For an entity that is composed of multiple facilities—and where at least one laboratory meets the Clinical Laboratory Improvement Amendments (CLIA) definition of laboratory—CMS will consider this laboratory to be an applicable laboratory where the entire organization receives greater than fifty percent (50%) of its total Medicare revenues from payments under the CLFS or PFS. CMS also reserves the right to establish a low volume or low expenditure threshold for excluding a laboratory from the definition of applicable laboratory—as proposed, CMS suggests excluding a laboratory if it receives less than $50,000 in revenues per year on the CLFS.
- Applicable Information Defined. “Applicable Information” to be reported under the proposed rule includes: (1) the payment rate paid by each private payor (i.e., a health insurance issuer or group health plan, Medicare Advantage Plan under Part C, or Medicaid managed care organization) for each CDLT during the prior 12-month data collection period, and (2) the volume of each such test for each payor during the specified data collection period. The payment rate must reflect all discounts, rebates, coupons, and other price concessions. Notably, where an applicable laboratory has more than one payment rate either from the same payor or from different payors for the same test, the applicable laboratory must report all payment rates and volumes. Applicable information must be reported to CMS every three (3) years for CDLTs and every year for ADLTs. Failure to report and/or misrepresentations or omissions in reporting could result in civil monetary penalties up to $10,0000 per day.
- Advanced Diagnostic Laboratory Test Defined. “Advanced Diagnostic Laboratory Test” is defined to mean a CDLT covered under Medicare Part B that is offered and furnished only by a single laboratory and not sold for use by a laboratory other than the original developing laboratory, and which meets one of the following criteria: (1) the test is an analysis of multiple biomarkers of DNA, RNA, or proteins combined with a unique algorithm to yield a single patient-specific result; (2) the test is cleared or approved by the FDA; or (3) the test meets other similar criteria established by CMS. CMS formulated a special definition for ADLTs because CMS believes section 1843A of the Social Security Act is intended to afford special payment status to laboratories who are expending resources in all aspects of the test.
The Proposed rule will be published in the Federal Register on October 1, 2015. CMS will solicit comments on the Proposed Rule until November 25, 2015: A pre-publication copy of the Proposed Rule is available here.