Hospitals say they'll be grossly underpaid if the CMS moves forward with a proposal to base lab payments on what non-hospital labs are paid. That could lead to labs closing and beneficiaries losing access to tests, providers said.
Medicare's current lab test fee schedule has been in place since 1984, according to the agency. Under the current system, each lab determines its own payment rates on the basis of average charges for lab tests in its area.
In September, the CMS proposed that some labs start reporting private payer rates and volume data every three years. The CMS would use those data to determine the new Medicare clinical laboratory fee schedule payment rates based on the weighted median of the private payer rates. This would put them in line with the Protecting Access to Medicare Act of 2014, which also requires clinical laboratories to report on private insurance payment amounts and lab test volumes.
More than 1,300 letters were received by the proposed rule's comment period deadline of Nov. 24.
The new laboratory payment rates will result in a $360 million loss for laboratories in 2017 and potential Medicare savings of over $5.14 billion in the next decade, according to the CMS.
Only labs receiving at least $50,000 in Medicare revenue from laboratory services and more than half of their Medicare revenue from laboratory and physician services would have to report the data to the CMS. That excludes hospital-based laboratories, according to the CMS.
Still, hospitals would be paid under the new rates based on skewed data, stakeholders said, because large independent laboratories often charge much lower rates due to huge volume, according to the American Hospital Association. .
Reduced payments would lead to lab closures and lack of patient access, AHA Executive Vice President Thomas Nickels said in a comment letter.
“Excluding hospital labs from the data also excludes innovative, and expensive, laboratory tests developed at academic medical centers,” added Michelle Cooper, senior vice president and corporate responsibility officer at Catholic Health Initiatives, the nation's second-largest not-for-profit health system.
To address the issue, the CMS should allow hospital and health systems with labs to voluntarily submit their private insurer data, AHA suggests.
Other stakeholders said hospitals should not provide data. Hospital payments for laboratory services are frequently bundled into payments for other services by commercial payers similar to how they are bundled under Medicare's outpatient and inpatient prospective payment systems, according to the Federation of American Hospitals, the trade association representing more than 1,000 for-profit U.S. hospitals.
In addition, where lab services are paid separately, most hospital systems would have difficulty differentiating between contract rates paid for services provided in an emergency or surgical department, for labs only or for inpatient consultation.
FAH CEO Chip Kahn said in a comment letter that it would likely be “impossible” to identify or report individual payment values.
Others went on to say that hospitals having to report payer data could actually be more financially harmful to their labs.
“The addition of complicated reporting requirements, in conjunction with the statutory penalty for failure or incorrect reporting, would potentially discourage hospitals from providing molecular pathology testing and other reportable testing in-house, resulting in a substantial decrease in access to testing for Medicare beneficiaries and a decrease in patient choice over critical healthcare decisions,” Dr. Charles Hill, president of the Association for Molecular Pathology, an international medical association representing over 2,300 physicians involved with laboratory testing.
The agency is expected to finalize the rule by yearend based on a timeline outlined in the rule.