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Major Payment Changes for Lab Services on the Way

September 28, 2016

Lab Billing ServiceIndividual Labs and practices offering lab services may be in for some game-changing payment shifts due to the latest final rule issued by CMS under the Protecting Access to Medicare Act (PAMA) of 2014. If you fall under the definition of an “applicable” lab, you’ll need to report your private payor data for a specified six-month period to CMS and be prepared for the new payment policy starting in January 2018.

Who’s affected by the new PAMA final rule?

Under the final rule issued in July, labs are subject to a four-prong test to determine whether they are an “applicable” lab. These include:

  • Is the lab CLIA certified and eligible for Medicare payments?
  • Does the lab bill Medicare under its own NPI?
  • Does it meet the “majority of Medicare revenues” provision? (At least 50% of Medicare revenue must be received under CLFS or PFS to qualify).
  • Does the lab meet the low expenditure threshold of $12,500 under its NPI during the collection period?

If your lab meets these four criteria, you’re under the new data collection and payment regime. 

What lab payor data must be collected and reported?

You’ll need to report to CMS two pieces of “applicable” information for each HCPCS code:

  1. The private payor rate for each payor you’ve received final payment from during the data collection period, and
  2. The volume of tests for each payor during the collection period. 

Keep in mind, your data collection doesn’t stop there. You’ll also need to compile and report data for any secondary payors and any coinsurance amounts you collect, again, by HCPCS code. The accuracy of the data must be certified by the president, CEO, or CFO of the reporting entity.

Of course, there are stiff civil monetary penalties of up to $10,000 per day for noncompliance with the reporting guidelines. 

How will the rule affect payment rates?

This is where things get a little more complicated—and potentially financially significant for labs and lab revenue streams in practices. Beginning in January 2018, payment for all CDLTs will be the weighted median reimbursement amount for all private payors during the reporting period, taking into account each private payor rate and the volume of tests per payor. Significantly, these payment rates are not eligible to be appealed and will remain in place for three years, at which time CMS will re-evaluate and update. ADLTs, however, will be reviewed and updated annually. 

Currently, the rule specifies that payments will not reduced by more than 10% during the first three years of the phased implementation, or by more than 15% during the following three years. Keep in mind, the 15% reduction doesn’t apply to the original payment rate, but to the already reduced rates implemented during the first three years. 

What should I watch for in terms of guidance for the new PAMA rule?

The new rule is lengthy and complex and there will be clarifying guidance handed down in the coming months addressing the following issues:

  • Which HCPCS codes will be subject to the reporting requirement. 
  • What the certification mechanism will be for applicable labs. 
  • Specific guidelines for civil monetary penalties. 
  • What data and calculation methodology CMS will make available to labs to support its new payment regime. 
  • Information about a new web portal under development for applicable labs to report information (similar to the Open Payments system in place for drugs and devices). 

Lab billing has always been something of a challenge even for specialized coders and billers, but the new reporting and payment regime promises to complicate things even further.  At M-Scribe, we are experts in laboratory billing services and we’re prepared to help you through the new PAMA rules. Contact us for a free consultation to see if you’re ready for the upcoming requirements and changes.


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