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November 22, 2017

Medicare will cut payments for clinical lab tests by $670M next year

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    CMS on Friday released the final clinical lab fee schedule for 2018, under which the agency will reduce Medicare payments to clinical labs by an estimated $670 million next year.

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    According to GenomeWeb, the final fee schedule includes cuts to Medicare lab payments that were called for under the Protecting Access to Medicare Act (PAMA). Under the final fee schedule, Medicare payment rates for 23 of the top 25 lab services as measured by spending will decline by 10% for 2018 when compared with 2017 payment rates. According to Reuters, the cuts could save the federal government up to $3 billion over five years.

    Lab companies, CMS clash over payment rate process

    Major lab groups have contested the process CMS used for setting the payment rates. Under PAMA, CMS was required to establish lab pricing and payments "based on the weighted median of private payor rates," GenomeWeb reports. However, lab groups say CMS excluded a majority of hospital labs when analyzing private payor rates. The American Clinical Laboratory Association (ACLA) and 21 additional groups—including the American Medical Association, the American Hospital Association, and others—in a letter sent last month to CMS Administrator Seema Verma wrote that CMS' process for establishing the payment rates "would not stand up to statistical validity review."

    ACLA on Friday again expressed concerns about CMS' process, saying, "The final payment rates published today make clear CMS ignored Congress' instructions to gather commercial price information from all sectors of the clinical laboratory market and base Medicare payment rates on that data."

    But CMS said the data on which it based the payment rates represented more than 96% of Medicare spending on clinical lab tests in 2016. CMS said, "This strong response gives us confidence that the final payment rates accurately capture the rates paid by private payors and allow CMS to utilize the power of the private market to help make sure the [clinical lab fee schedule] pays accurately for tests."

    Still, lab companies are urging federal lawmakers to delay the payment cuts, "Vitals" reports. But Veda Partners' Spencer Perlman said lawmakers are not likely to do so because they are "distracted by taxes and other issues, and because there is a cost to delaying implementation of (lab cuts) that requires offsets" (Baker, "Vitals," Axios, 11/21; Ray, GenomeWeb, 11/20; Grover, Reuters, 11/20).

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