On June 17, 2016, CMS published the “Medicare Clinical Diagnostic Laboratory Tests Payment System” final rule. Among the key changes in this final rule, CMS has revised the Medicare Clinical Laboratory Fee Schedule (CLFS) such that payment for clinical diagnostic laboratory tests (CDLTs) beginning January 1, 2018 will reflect the weighted median of private payor rates.

Highlights from this final rule are provided below:

  • Applicable Laboratory. Data reporting requirements established in the final rule will apply to laboratories (or entities with at least one component that is a laboratory) receiving more than 50 percent of Medicare revenues from CLFS or Physician Fee Schedule (PFS) payments. The final rule departs from CMS’s proposed rule by defining laboratories by National Provider Identifier (NPI) as opposed to Tax Identification Number (TIN). A laboratory is not required to report private payor data if it receives less than $12,500 in CLFS reimbursement during a 6-month data collection period. Despite the fact that applicable laboratories will be defined by NPI, CMS expects that reporting will be done at the TIN level (i.e., the reporting corporate entity will report payor data on all laboratories under a common TIN).
  • Applicable Information. For each CLFS-covered test an applicable laboratory performs, it must report: (i) the rate paid by each private payor for each test during the six-month data collection period (reflecting all discounts, rebates, coupons and other price concessions); and (ii) the volume of tests performed for beneficiaries of each such payor. Payment information about laboratory tests paid on a capitated or other similar basis would not be reported. CMS has defined the private payors for which payment reporting is required to include (i) health insurance issuers and group health plans, (ii) Medicare Advantage plans, and (iii) Medicaid managed care organizations.
  • Data Collection Period. Data will be collected during the six months from January 1 through June 30 prior to each data reporting period. The first data collection period will be January 1 through June 30, 2016.
  • Data Reporting. A reporting entity must report applicable information for each CDLT furnished by applicable laboratories during each data collection period. Applicable laboratories must report payment data for CDLTs beginning January 1 through March 31, 2017, and every three years thereafter. Payment information for advanced diagnostic laboratory tests (ADLTs) must be reported annually.
  • Advanced Diagnostic Laboratory Tests. An ADLT is a CDLT covered under Medicare Part B that is offered and furnished only by a single laboratory meeting one of the following three 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 HHS. According to the final rule, a “single laboratory” is a facility that has a single CLIA certificate and is the one that develops, markets, performs and sells the test – meaning the test is not sold for use by a laboratory other than the original developing laboratory. When a referring laboratory bills for a test performed by a reference laboratory, the reference laboratory would be considered the “laboratory that offered and furnished the test for purposes of the ADLT definition.”
  • Payment Calculations. CDLTs will be reimbursed based on the weighted median of private payor reimbursement rates, which will be calculated by “arraying the distribution of all private payor rates, weighted by the volume for each payor and each laboratory.” The calculated reimbursement rates will not be adjusted to take into consideration other factors (for instance, the geographic location of a particular lab). From 2018 through 2023, the reimbursement rates for CDLTs will not be reduced by more than the following: (i) in 2018 – 10% of the national limitation amount for the CDLT in 2017; (ii) in 2019 and 2020 – 10% of the prior year’s payment rate; and (iii) in 2021 through 2023 – 15% of the prior year’s payment rate. New CDLTs (based on a new or substantially revised HCPCS code on or after January 1, 2018) will be reimbursed using either crosswalking (payment based on comparable existing codes) or gapfilling (payment based on other payor rates) until sufficient reimbursement data is obtained. Payment for new ADLTs will be based on the test’s actual list charge for first three calendar quarters following the later of (i) the date a Medicare Part B coverage decision for the test is made; or (ii) the date on which CMS grants the test ADLT status, after which payment will be based on the weighted median of private payor rates.
  • Civil Money Penalties. Failure to report or misrepresentation or omission in reporting applicable information may result in civil monetary penalties up to $10,000 per day.

CMS estimates that the final rule will reduce Medicare program payments for CLFS tests furnished in FY 2018 by $390 million. More information regarding the final rule is available here. The final rule will be published in the federal register on June 23, 2016.