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What the Passing of the LAB Act Means for Clinical Labs

What the Passing of the LAB Act Means for Clinical Labs

The Laboratory Access for Beneficiaries Act will delay PAMA data reporting by one year

Since its inception in 2014, PAMA has caused a major shift in the clinical laboratory fee schedule (CLFS), leading to challenges for laboratory managers. CLMA spoke with Rodney Forsman, assistant professor emeritus at Mayo Clinic, to get his take on the latest PAMA updates.

In December 2019, the LAB (Laboratory Access for Beneficiaries) Act passed into law, which will delay the next round of PAMA data reporting by one year to ensure that all laboratories required to report private payor data have enough time to do so.

The Act has been a priority for industry groups like the American Clinical Laboratory Association (ACLA), which hope delaying payment data reporting will give hospital labs additional time to collect payment data and thereby increase their participation in the process, which the groups believe could boost payment rates under PAMA. The passing of the Act has been deemed a tremendous victory for senior citizens who are reliant on frequent laboratory testing to manage chronic conditions and diseases.

“Folks were having difficulty coming up with the data since it is very tedious to obtain the required data from the hospital system in order to report it back to CMS,” said Forsman. “The LAB Act requires the reporting be delayed one year and directs MedPAC to conduct a study to review the methodology CMS implemented to collect the private payor rates.”

“CMS published a response indicating the cuts to the clinical lab tests will not be frozen. Also, the delay in the reporting period will not change the fact that every year the clinical lab fee schedule is subject to fee reduction,” said Forsman. “The fees for 2020 and 2021 will still be based upon the 2017 data and subject to a 10 percent cap on cuts in 2020 and 2021. Subsequent cuts in 2022, and 2023 can be up to 15 percent each year. CMS stated that the cycle will begin again in 2024.”

CLMA has joined with ACLA and others as a proponent of enforcing tighter restrictions on PAMA, given its detrimental implications for the future of laboratory testing.  

“ACLA had written a letter to Secretary Azar saying that the regulators were not faithful in their implementation of PAMA. They’ve taken a significant departure from what the statute dictated. In fact, the regulators did something entirely different,” Forsman said. “When that letter was received, the US District Court Judge, Amy Berman Jackson, ruled the court did not have jurisdiction, so they weren’t going to act on it. ACLA has filed a new brief in response to this, and it reinforces the assertion that Secretary Azar did not fulfil his statutory obligations for PAMA implementation. HHS ha[d] until January 10, 2020 to reply.”

Last July, the US District Court of Appeals in DC ruled that ACLA can legally challenge the adverse regulatory conditions created by Azar’s implementation of PAMA.

As far as the adverse effects in hospitals, Forsman went on to discuss the overall response from the lab community to the widespread cuts.

“Sadly, the clinical laboratory has a long history of enduring reimbursement challenges. The typical response from hospital leadership is to emphasize laboratory cost cutting by reducing staff, controlling utilization, and reducing the in-house test repertoire. PAMA has created an increased interest in mergers, acquisitions, and consolidations. Hospital outreach programs that retain in-patient out-patient testing and service in the community are threatened,” Forsman said.

Forsman also brought to light the possibility of lowered testing volume and what that could mean long-term for laboratory testing in hospitals.

“You have to consider the effect on volume by virtue of these decisions. Does it mean we’re going to cut back on service levels?” said Forsman. “You must have a laboratory in a hospital. It’s a requirement for accreditation and licensure. You can never get to point where you can eliminate your laboratory services. But history has shown that decisions which have forced laboratories to reduce their volume drives up the cost of testing and of patient care while lowering patient and physician satisfaction.”

Forsman reinforced the need to stress the value of laboratory testing as a service that lowers the aggregate cost of patient care rather than a cost to be cut.

“Our lab manager members need to effectively communicate the value of what they do from a service perspective and not just as a commodity. The laboratory represents only five percent of the hospital budget but can favorably influence the remaining 95 percent of costs,” Forsman said.