CMS cuts threaten access to critical diagnostic tests

For years, Dr. John Cullen has prided himself on offering same-day diagnostic testing and results for his patients. He oversees a small family practice in Valdez, Alaska, and some of his patients travel as far as 120 miles for care.

Some of Cullen's patients don't have the option of returning in a few days for results. He offers this service even though Medicare does not fully reimburse the cost of administering the tests. Starting next year, the CMS will cut millions from what it pays for laboratory tests offered in outpatient settings, and Cullen finds himself facing a difficult choice.

"We plan to continue offering the tests, but it really comes down to if we would be able to maintain clinical operations," Cullen said. "At some point we're just going to stop offering them."

Cullen isn't alone in his dilemma. Practices in rural areas that offer clinical testing or small laboratories that service these communities are going to have to evaluate if it's feasible to continue offering these services. Shutting off the testing could mean ailments go undiagnosed longer, possibly leading to worse prognoses.

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

Medicare's fee schedule for lab tests has been largely unchanged since being established in 1984. Each lab determines its own rates based on market prices. Medicare has historically paid 18% to 30% more than other insurers for some tests, HHS' Office of Inspector General found. The program shells out about $7 billion a year for clinical diagnostic laboratory tests.

The change in reimbursement was mandated by the Protecting Access to Medicare Act of 2014. The switch was made final in a rule released last year and is effective Jan. 1. The CMS estimated the change will save nearly $4 billion over 10 years.

Medicare-enrolled laboratories are a mix of national chains that perform a large menu of tests and small regional ones that concentrate on a specific population, such as nursing home residents. Physician offices also perform some tests reimbursed by Medicare.

Some clinicians are most concerned that the cuts appear to have a disproportionate impact on the emerging field of genetic testing for cancer. Tests that evaluate the likelihood of breast cancer took the hardest hits in terms of cuts.

For instance, reimbursement for a test offering a risk score for breast cancer will be cut 73%, or $933, by 2020 once the cuts are fully implemented, according to CMS data. The second- and third-biggest losers are ones that determine if the BRCA gene has mutated, which is an indicator of increased risk of breast cancer.

The cuts come at an inopportune time, according to Dr. Joseph Alvarnas, a hematologist and oncologist at City of Hope in Duarte, Calif. Cancer diagnostics are finally helping deliver on the promise of precision medicine, by not only finding cancers but identifying specific variants and traits of that cancer on the individual level, helping indicate the best treatment.

Not all tests are facing cuts under the pay shift. For instance, reimbursement for a lung cancer diagnostic will rise nearly 35%, or $744 by 2020. However, doctors say genetic testing isn't a zero-sum game where taking money away for one and giving more to another will result in no harm for patients.

"Tests are not always used simultaneously, or in the same way, so it is not as if an increase in one will balance out a decrease in another," said Dr. Stephen Black-Schaffer, associate chief of pathology at Massachusetts General Hospital in Boston.

The lab community is lobbying both the CMS and Congress to push the pause button on the cuts over concerns that the CMS didn't use sound methodology to determine the new rates.

At issue is that the CMS, in an effort to reduce regulatory burden, exempted many labs from reporting what private insurance companies were paying for tests. HHS' Office of Inspector General initially estimated the rule would apply to approximately 12,000 laboratories, yet only around 2,000 reported data.

Industry groups argued that the CMS collected data from labs with the biggest test volumes receiving the highest discounts from test manufacturers. Had the CMS surveyed more labs, the forthcoming cuts would be much smaller than they are now, lab groups contended.

The Congressional Budget Office, assuming that a larger universe of labs would be surveyed, estimated that the Protecting Access to Medicare Act would cut Medicare spending by $100 million in the first year of the new rates and by $2.5 billion over 10 years. That's much lower than the $670 million in first-year losses and $3.9 billion over 10 years that labs now face based on the CMS' smaller sample size.

"The impact of these cuts will be unprecedented," said Julie Khani, president of the American Clinical Laboratory Association.

The new rates would still hold up even if more labs were surveyed, a CMS spokeswoman said. In analyzing the reported data, CMS ran multiple simulations on the impact of increasing laboratory participation and the results showed no significant impact.

Unlike the hospital industry, which is suing the CMS to stop a planned cut to the federal discount drug program known as 340B, labs for now aren't pursing legal action, but may reconsider, Khani said. If the cuts do kick in as planned, clinicians are optimistic the CMS will re-evaluate the matter if it's shown patient care is harmed.

"It seems like they would absolutely reconsider certain parts of the rulemaking after implementation," said Dr. Joshua Liao, associate medical director of value-based care and contracting at the University of Washington School of Medicine. "And that's absolutely critical given the concerns being raised."