Changes to the Clinical Laboratory Fee Schedule in the 2019 Medicare Physician Fee Schedule Proposed Rule

On July 12, the Centers for Medicare & Medicaid Services (CMS) published its 2019 Medicare Physician Fee Schedule Proposed Rule (Proposed Rule).  Weighing in at nearly 1,500 pages, the Proposed Rule covers a wide range of topics.  Over the next few weeks, we’ll summarize and offer our insights on several key provisions.  Comments on the Proposed Rule are due to CMS by September 10, 2018.  Expect CMS to publish the Final Rule around Thanksgiving.

In 2016, Medicare paid $6.8 billion to Medicare-enrolled laboratories for more than 1,300 types of clinical laboratory tests included on the Clinical Lab Fee Schedule (CLFS).   Prior to January 1, 2018, a provider furnishing a lab test reimbursed under the CLFS was paid the lesser of (1) the amount billed by the provider, (2) the local Medicare Administrative Contractor’s established fee schedule amount, or (3) a national limitation amount (NLA).  Most tests were paid at the NLA.

The Protecting Access to Medicare Act of 2014 (PAMA) mandated significant revisions to the methodology for calculating CLFS rates.    Specifically, PAMA requires a test’s CLFS rate generally to be equal to the weighted median of the private payer rates determined for that test, based on the data that is collected during a data collection period and reported to CMS during a data reporting period.  These rates are not subject to other geographic, budget neutrality, or annual update adjustments.

The data collection and reporting process is defined by CMS regulations.   A laboratory is required to collect applicable information for reporting to CMS if, by its own billing National Provider Identifier (NPI), it meets (1) the “majority of Medicare revenues” threshold (receives more than 50% of its total Medicare revenues from the CLFS and/or the Medicare Physician Fee Schedule), and (2) the low-expenditure threshold (receives at least $12,500 in Medicare revenues for CLFS services) during a data collection period.

In establishing these criteria, CMS intended to achieve a balance between collecting sufficient data and minimizing the reporting burden for entities.  According to CMS, approximately 95% of physician office laboratories and 55% of independent clinical labs were excluded from the data collection and reporting requirements because they did not meet the low-expenditure threshold.

For the new rates effective January 1, 2018, laboratories collected private payer data from January 1, 2016, through June 30, 2016, and reported it to CMS between January 1, 2017, and May 30, 2017.  CMS received data from 1,942 laboratories with over 4.9 million records of applicable information representing a volume of almost 248 million laboratory tests.

CMS then calculated the new Medicare rates (equal to the weighted median of private payer rates for each test), which were published in November 2017.  CMS estimates these new rates will save Medicare (through reduced provider reimbursement) $670 million in 2018, which would be a 10% reduction compared to 2016.

CMS will update the CLFS payment rates for most tests every three years to reflect market rates paid by private payers.  Rates for certain advanced diagnostic laboratory tests furnished by a single laboratory, however, will be updated annually.

In the Proposed Rule, CMS addresses modifications to the regulations, defining those laboratories required to collect and report private payer data to CMS.  First, CMS proposes to exclude Medicare Advantage (MA) payments for purposes of the “majority of Medicare revenues” threshold.  If finalized, this change would result in more laboratories being subject to the data collection and reporting requirements in the next update.

Second, CMS solicits comment on potential changes to the low-expenditure threshold (currently $12,500 in Medicare revenues for CLFS services) as set forth below:

Increase by 50% to $18,750 to eliminate the reporting requirements for many physician office and small independent laboratories.  CMS believes these entities may lack staff resources and/or systems to report required data, so increasing the threshold would effectively be removing that requirement.

Decrease by 50% to $6,250 to increase the number of entities reporting, thereby increasing the data set on which CMS will determine CLFS rates.  CMS is particularly interested in operational and administrative impacts to small physician practices and independent laboratories.

While the proposed changes for 2019 are relatively minor following the implementation of the new rates this year, expect more significant changes in future years as CMS refines its processes for the next data collection and reporting cycle.

PYA assists organizations in understanding and complying with Medicare payment rules.  For more information, contact one of our PYA executives below at (800) 270-9629.

© 2018 PYA

No portion of this article may be used or duplicated by any person or entity for any purpose without the express written permission of PYA.


Martie Ross

Martie Ross

Principal

Sarah Bowman

Sarah Bowman

Senior Manager

Related Posts
The term “one size fits all” may be desirable in certain circumstances.  But, in many cases, the phrase more often translates to “just kind of fits.”  This is particularly true...
Read More

Finding the Right Fit: 4 Considerations When Choosing a Healthcare Auditor

PYA ranks on INSIDE Public Accounting’s list of Top 100 Accounting Firms for the third consecutive year.  PYA, a national accounting and management consulting firm, has been ranked as a...
Read More

PYA Again Among IPA’s Top 100 Largest Accounting Firms

Baltimore, Maryland, will be the host city for the American Health Lawyers Association 2018 Fraud and Compliance Forum.  The forum, which takes place September 26-28, offers fundamental, intermediate, and advanced...
Read More

PYA Supports AHLA Educational Efforts at 2018 Fraud and Compliance Forum

Becker’s Hospital Review recently published a synopsis, “Cardiologist shortage is coming: 5 things to know,” based on PYA’s latest infographic. The infographic shines a spotlight on the interrelated nature of...
Read More

PYA Infographic Featured in Becker’s Hospital Review

FVS Consulting Digest recently published an article, “The Opioid Crisis: The Important Role of CPAs,” co-authored by PYA Senior Manager Valerie Rock.  The article outlines the crucial role CPAs play...
Read More

The Opioid Crisis: The Important Role of CPAs

On July 12, the Centers for Medicare & Medicaid Services (CMS) published its 2019 Medicare Physician Fee Schedule Proposed Rule (Proposed Rule).  Weighing in at nearly 1,500 pages, the Proposed...
Read More

Changes to Part B Drug Pricing in the 2019 Medicare Physician Fee Schedule Proposed Rule

On July 12, the Centers for Medicare & Medicaid Services (CMS) published its 2019 Medicare Physician Fee Schedule Proposed Rule (Proposed Rule).  Weighing in at nearly 1,500 pages, the Proposed...
Read More

2019 Medicare Physician Fee Schedule Proposed Rule

A recent article by PYA Consulting Manager Katie Culver has been published by Becker’s Hospital Review.  “Medicaid work requirements: What they mean for your healthcare organization,” explores state-imposed individual work...
Read More

Medicaid Work Requirements: What They Mean for your Healthcare Organization

On July 12, the Centers for Medicare & Medicaid Services (CMS) published its 2019 Medicare Physician Fee Schedule Proposed Rule (Proposed Rule).  Weighing in at nearly 1,500 pages, the Proposed...
Read More

Changes to the Medicare Shared Savings Program in the 2019 Medicare Physician Fee Schedule Proposed Rule

Share This Insight

If you received value from this article, please share it with your network (e.g., Facebook, Twitter, LinkedIn). Icons below for your convenience.

Stay Current

PYA Population Health Ascend

PYA Healthcare Blog

PYA Thought Leadership Services

The Healthcare Loop