Hospital outreach laboratories are facing an enormous challenge this year: Beginning Jan. 1, almost all outreach labs are required to collect and report their private-payer rates to Medicare as part of the lab test repricing initiative mandated by the Protecting Access to Medicare Act of 2014 (PAMA).
PAMA essentially overhauled the previous system for determining how Medicare would pay for laboratory testing under the Clinical Laboratory Fee Schedule (CLFS). Beginning in 2016, applicable laboratories were required to report their private-payer rates to the Centers for Medicare and Medicaid Services (CMS) on a test-by-test basis, along with associated test volumes. Applicable laboratories were defined as those that received more than 50 percent of their total Medicare revenues under the CLFS and Physician Fee Schedule and that received at least $12,500 in Medicare revenues for CLFS services. CMS then calculated a “weighted median” for each billing code for tests paid under the CLFS beginning Jan. 1, 2018. That payment system resulted in Medicare cuts of up to 10 percent for many lab tests.
Hospital outreach labs were largely excluded from the data collection and reporting in the first PAMA reporting cycle, which began in 2016. Under criteria set by CMS, only outreach labs that had their own National Provider Identifier (NPI) were required to report, resulting in only 21 outreach labs reporting.
But under a final rule published Nov. 1, 2018, CMS expanded the reporting requirement to include hospital outreach labs that bill through their hospital’s NPI under bill type 14x on Form CMS-1450, which many hospital outreach labs use to bill for laboratory services provided to non-patients. This means that any hospital outreach lab that receives at least $12,500 in Medicare payments under the CLFS in the first six months of 2019 must now report its private-payer volume and rates to CMS.
The new data collection period runs from Jan. 1, 2019, to June 30, 2019. Labs are required to report this data to CMS in the first quarter of 2020, and the agency will use it to calculate new rates that will take effect Jan. 1, 2021.
Challenges for outreach labs
Because most outreach labs were not required to participate in the first data collection and reporting process, many do not have the necessary systems in place to accurately identify private payor reimbursement rates at the CPT level, notes Lale White, executive chairman and CEO of XIFIN Inc., a health information technology company based in San Diego. What’s more, many are still unaware they need to be collecting data and will be required to report.
“There are numerous land mines in the PAMA data-collection process and hospital labs have an even steeper hill to climb in most cases, being further removed from the actual lab billing process and lacking the detailed financial reports to facilitate ease and accuracy in reporting,” explains White. “Oftentimes, hospitals do not retain source documents—ERAs—once payment is posted, and the ERAs are essential to audit the data for accuracy and to appropriately calculate allowables. Where posting is performed in bulk at the patient level, the ERA is also the only source that provides the CPT-level data needed for reporting.”
During the last data collection period, many labs hired consultants, segregated internal-focused staff, and spent untold hours and expense gathering the data and analyzing it to provide a meaningful and accurate data set to CMS, says White. Even so, there was still a significant amount of questionable data received by CMS, as well as a number of unintended errors in reporting made by labs that lacked the reporting and analytical sophistication to find simple remittance errors made by payers and payment posting clerks.
Hospital labs are likely to face these same challenges, although there may actually be an upside to being required to report private payer data: The exercise will likely lead to stronger financial systems and improved insight into profit and loss as labs are forced to retain detail-level transactional data.
“There is no question that the PAMA exercise can be costly in time and resources for all labs, and that hospital labs may have an even higher burden due to inadequate systems,” says White. “However, PAMA also provides the most instructive exercise in highlighting the financial reporting shortcoming of the business unit and requirements for future systems decisions. After all, the financial data and analytical requirements essential for accurate PAMA reporting are no different from those required for the strategic management of any business unit, and are even more critical for the management of a laboratory whose responsibility is to provide not just a result on a report, but actionable information from which critical patient therapy decisions are made.”
WHAT DATA ARE LABS REQUIRED TO REPORT?The PAMA regulations require all applicable reporting labs, including hospital outreach labs, to report the following:
PAMA DATA COLLECTION AND REPORTING SCHEDULEJan. 1, 2016 – June 30, 2016: Labs collected the private payer amount and volumes for all their tests.
Jan. 1, 2017 – May 30, 2017: Labs reported their private payer amounts and volumes to CMS. Late Summer/Early Fall: CMS published the draft 2018 Medicare rates.
Jan. 1, 2018 – Dec. 31, 2020: New Medicare rates in effect. Rates are equal to the median weighted private payer’s rate (limited to a 10 percent year-over-year decline).
Jan. 1, 2019 – June 30, 2019: Round 2 – Labs will collect the private payer amount and volumes for their tests.
Jan. 1, 2020 – March 31, 2020: Labs will report the private payer amounts and volumes to CMS.
Jan. 1, 2021 – Dec. 31, 2023: New Medicare rates will go into effect. Rates are equal to the weighted median private payer’s rate (limited to a 15 percent year-over-year decline).
*The data collection and reporting periods will repeat every three years indefinitely.