Labs Get 1-year Reprieve from New RatesA final rule the Centers for Medicare & Medicaid Services (CMS) published in the Federal Register on June 27 requires entities performing clinical diagnostic laboratory tests to report private payer rates for lab tests. CMS will use this data to calculate Medicare rates for lab tests paid under the Clinical Laboratory Fee Schedule (CLFS) beginning Jan. 1, 2018 — one year later than the proposed start date.

The additional year was given to allow labs more time to develop the information systems necessary to collect, review, and verify the data before reporting. In the interim, CMS will perform independent validation and testing of the system through which labs will report, and labs will have time to perform end-to-end testing of their systems with CMS’ system.

Not All Labs Are Affected

Only entities that receive at least $12,500 in Medicare revenue from lab services paid under the CLFS and more than 50 percent of its Medicare revenue from lab and/or physician services are required to report private payer rates and test volumes for lab tests.

CMS estimates that this will exempt about 95 percent of all physician office labs and about 50 percent of independent laboratory testing facilities.

Reporting Timeline

Applicable labs should begin to collect private payer data from Jan. 1, 2016 through June 30, 2016 (instead of a full year, as proposed), and report it to CMS between Jan. 1, 2017, and March 31, 2017. New rates will be posted by Nov. 17, 2016, and take effect Jan. 1, 2018.

This data collection and reporting schedule will occur every three years for clinical diagnostic laboratory tests, and every year for advanced diagnostic laboratory tests.

By law, the payment amount for a test cannot drop more than 10 percent as compared to previous payment amounts the first three years (2018-2020), and not more than 15 percent per year for the following three years (2021-2023).

CMS provides the following example to show how Medicare will implement the payment reduction limit:

  • If an existing test under the CLFS for 2017 has a payment rate of $20, but the weighted median private payer rate calculated during 2017 for 2018 (using January 1, 2016, through June 30, 2016 data) produces a payment rate of $15, then for 2018, the CLFS payment rate for the test becomes $18 ($20 minus $2), the maximum 10 percent reduction allowed from the prior year’s price.
  • The following year, a 10 percent reduction would equal $1.80, lowering the total payment to $16.20 for 2019.
  • The maximum reduction percentage allowed by the statute would continue to apply to the prior year’s payment until the reduction becomes less than the applicable percentage (10 percent or 15 percent), after which the fee schedule payment will reflect the weighted median of the private payer rates for the test.

The president, CEO, or CFO of the reporting entity, or an individual who has been delegated authority to sign for, and who reports directly to, such an officer may certify the accuracy of the data submitted for the reporting entity.

The Stakes are High

Applicable entities that do not comply with the requirements in this final rule could face a much greater financial loss than a 10- to 15-percent decline in rates. According to the Social Security Act, Section 1834A(a)(9)(A), labs can be slapped with a civil monetary penalty in an amount of up to $10,000 per day for each failure to report, or each misrepresentation or omission.