Clinical labs on track to lose $670 million next year

Clinical labs will lose up to $670 million as part of a CMS effort to pay the same rate as private payers for tests.

Medicare's current fee schedule for lab tests has been largely unchanged since it was established in 1984, according to the CMS. Under the current system, each lab determines its own rates based on market prices.

Medicare has historically paid between 18% and 30% more than other insurers for some lab tests, an HHS Office of Inspector General report found.

The reimbursement strategy change, made final in a rule released last year, is effective Jan. 1, 2018. Before making the rule final, the agency examined data from nearly 2,000 laboratories, which submitted around 5 million records for the period of Jan. 1, 2016, through June 30, 2016.

After getting the data, the CMS now estimates that Medicare reimbursement for 75% of lab tests will drop in 2018. The cut is approximately $670 million, according to a Sept. 22 notice, up from an earlier estimate of $390 million. The difference resulted from the agency not having the exact amount private payers were paying for tests.

"These rates will devastate many of our members and create severe disruptions in access to laboratory services, particularly for the most vulnerable Medicare beneficiaries," Julie Khani, president of the American Clinical Laboratory Association, said in a statement.

Industry stakeholders are concerned that CMS pay data is not a true picture of what labs receive from private payers. For instance, the HHS Office of Inspector General estimated approximately 12,000 laboratories would meet the applicable lab definition that would have to comply with the rule, yet only around 2,000 reported data.

A CMS spokesman did not immediately return a request for comment.

Some labs have no idea they may be on track for a cut, Melinda Martinson, general counsel for the Medical Society of New Jersey, said in a letter to the CMS leadership.

Most physician office-based laboratories have still not received effective outreach from the agency on whether or not they are an applicable laboratory.

"We are concerned that patient access will be harmed in early 2018," Martinson said. "Implementation of inaccurate and excessively low payment for clinical tests will cause many POLs and small, independent clinical laboratories around the country to stop offering testing for patients for rapid, near patient testing for infectious disease."

That could affect accurate detection of infectious disease outbreaks, she said.

Public comment on preliminary lab testing payment rates is due on Oct. 23. The CMS expects to publish the final rates in November with an effective date of Jan. 1, 2018.