On September 25, 2015, the Centers for Medicare and Medicaid Services (CMS) released a proposed rule to implement provisions of the Protecting Access to Medicare Act of 2014 (PAMA) that require major changes in the reimbursement methodology for clinical laboratory tests (Proposed Rule). As part of these payment reforms, applicable clinical laboratories will be required to report private payor reimbursement rates and volume data for laboratory tests. The Proposed Rule sets the stage for PAMA’s significant changes to Medicare’s clinical laboratory reimbursement methodology, as discussed below, and addresses key issues such as which laboratories will be required to report private payor data, the timeline for data reports and subsequent changes to reimbursement rates, and differing requirements that CMS proposes to apply for advanced diagnostic laboratory tests. It also addresses the penalties that may apply to laboratories that fail to comply with the requirements imposed under PAMA and implementing regulations.
Proposed Scope: “Applicable Laboratories”
PAMA requires an “applicable laboratory” to report private payor payment rates and volume for each test on the clinical laboratory fee schedule (CLFS) that the laboratory performs. Under the Proposed Rule, laboratories that receive at least $50,000 in Medicare revenue from laboratory services and more than 50 percent of their Medicare revenues from services paid under the Medicare CLFS and Physician Fee Schedule (PFS) would be considered “applicable laboratories” subject to PAMA reporting requirements.
For an entity composed of multiple facilities, CMS proposes to consider such an organization to be an “applicable laboratory” so long as more than 50 percent of the total Medicare revenues of the entire organization are received from payments under the Medicare CLFS and PFS.
CMS estimates those physicians and laboratories that would be required to report under the Proposed Rule would account for 96 percent of CLFS spending on physician office laboratories and more than 99 percent of CLFS spending on independent laboratories.
Data Collection and Payment Changes
Subject to certain limited exceptions, PAMA requires that the Medicare reimbursement amount for tests on the CLFS furnished on or after January 1, 2017 be equal to the weighted median of private payor rates for the specific test, based on data collected and reported by applicable laboratories. Under the Proposed Rule, laboratories would be required to collect private payor data from July 1, 2015 through December 31, 2015, and to report such information to CMS by March 31, 2016. CMS states that the agency “believe[s] it is reasonable to limit the time period of the first data collection period to 6 months” rather than a full year, but proposes that subsequent data collection periods would cover a full calendar year.
CMS proposes to publish the final CLFS rates based on private payor data collected in the first reporting period by November 1, 2016, to be effective January 1, 2017. The next data collection period would take place from January 1, 2018 through December 31, 2018, and applicable laboratories would be required to report the 2018 data by March 31, 2019. Such data would then be used for CLFS payment rates in calendar years 2020 through 2022, and the same process would continue every three years.
Differing Requirements for Advanced Diagnostic Laboratory Tests
Advanced diagnostic laboratory tests (ADLTs) are subject to different reporting and payment requirements. An ADLT is a laboratory test covered under Medicare Part B that (1) is offered and furnished only by a single laboratory, (2) is not sold for use by a laboratory other than the original developing laboratory (or a successor owner), and (3) meets one of the following criteria: (a) the test is an analysis of multiple biomarkers of DNA, RNA or proteins combined with a unique algorithm to yield a single patient-specific result, (b) the test is cleared or approved by the Food and Drug Administration (FDA), or (c) the test meets other similar criteria established by the Secretary of Health and Human Services.
CMS proposes additional requirements for tests qualifying as ADLTs under the first criterion, and also provides its interpretation of what it means for a test to be “cleared or approved” by FDA.
With respect to payment of ADLTs, CMS proposes that initial payment for new ADLTs would be based on the actual list charge of the test for three calendar quarters, referred to as the “New ADLT Initial Period.” Accordingly, CMS proposes to codify the requirement that applicable laboratories report the necessary information for new ADLTs no later than the end of the second calendar quarter of the New ADLT Initial Period. CMS also proposes a definition of the term “actual list charge” for purposes of ADLT reimbursement.
Following the New ADLT Initial Period, CMS proposes that payment for new ADLTs would be based on the weighted median private payor rate reported by the single laboratory that performs the new ADLT.
Penalties
Under PAMA, applicable laboratories may be subject to civil monetary penalties of up to $10,000 per day for each failure to report or each misrepresentation or omission in reporting private payor prices for laboratory tests.
The Proposed Rule is scheduled for publication in the Federal Register on October 1, 2015. A pre-publication copy of the Proposed Rule is available here. The deadline for submitting comments is November 24, 2015.
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Proposed Scope: “Applicable Laboratories”
PAMA requires an “applicable laboratory” to report private payor payment rates and volume for each test on the clinical laboratory fee schedule (CLFS) that the laboratory performs. Under the Proposed Rule, laboratories that receive at least $50,000 in Medicare revenue from laboratory services and more than 50 percent of their Medicare revenues from services paid under the Medicare CLFS and Physician Fee Schedule (PFS) would be considered “applicable laboratories” subject to PAMA reporting requirements.
For an entity composed of multiple facilities, CMS proposes to consider such an organization to be an “applicable laboratory” so long as more than 50 percent of the total Medicare revenues of the entire organization are received from payments under the Medicare CLFS and PFS.
CMS estimates those physicians and laboratories that would be required to report under the Proposed Rule would account for 96 percent of CLFS spending on physician office laboratories and more than 99 percent of CLFS spending on independent laboratories.
Data Collection and Payment Changes
Subject to certain limited exceptions, PAMA requires that the Medicare reimbursement amount for tests on the CLFS furnished on or after January 1, 2017 be equal to the weighted median of private payor rates for the specific test, based on data collected and reported by applicable laboratories. Under the Proposed Rule, laboratories would be required to collect private payor data from July 1, 2015 through December 31, 2015, and to report such information to CMS by March 31, 2016. CMS states that the agency “believe[s] it is reasonable to limit the time period of the first data collection period to 6 months” rather than a full year, but proposes that subsequent data collection periods would cover a full calendar year.
CMS proposes to publish the final CLFS rates based on private payor data collected in the first reporting period by November 1, 2016, to be effective January 1, 2017. The next data collection period would take place from January 1, 2018 through December 31, 2018, and applicable laboratories would be required to report the 2018 data by March 31, 2019. Such data would then be used for CLFS payment rates in calendar years 2020 through 2022, and the same process would continue every three years.
Differing Requirements for Advanced Diagnostic Laboratory Tests
Advanced diagnostic laboratory tests (ADLTs) are subject to different reporting and payment requirements. An ADLT is a laboratory test covered under Medicare Part B that (1) is offered and furnished only by a single laboratory, (2) is not sold for use by a laboratory other than the original developing laboratory (or a successor owner), and (3) meets one of the following criteria: (a) the test is an analysis of multiple biomarkers of DNA, RNA or proteins combined with a unique algorithm to yield a single patient-specific result, (b) the test is cleared or approved by the Food and Drug Administration (FDA), or (c) the test meets other similar criteria established by the Secretary of Health and Human Services.
CMS proposes additional requirements for tests qualifying as ADLTs under the first criterion, and also provides its interpretation of what it means for a test to be “cleared or approved” by FDA.
With respect to payment of ADLTs, CMS proposes that initial payment for new ADLTs would be based on the actual list charge of the test for three calendar quarters, referred to as the “New ADLT Initial Period.” Accordingly, CMS proposes to codify the requirement that applicable laboratories report the necessary information for new ADLTs no later than the end of the second calendar quarter of the New ADLT Initial Period. CMS also proposes a definition of the term “actual list charge” for purposes of ADLT reimbursement.
Following the New ADLT Initial Period, CMS proposes that payment for new ADLTs would be based on the weighted median private payor rate reported by the single laboratory that performs the new ADLT.
Penalties
Under PAMA, applicable laboratories may be subject to civil monetary penalties of up to $10,000 per day for each failure to report or each misrepresentation or omission in reporting private payor prices for laboratory tests.
The Proposed Rule is scheduled for publication in the Federal Register on October 1, 2015. A pre-publication copy of the Proposed Rule is available here. The deadline for submitting comments is November 24, 2015.
If you have any questions regarding this Sidley Update, please contact the Sidley lawyer with whom you usually work, or
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Stephanie P. Hales
Associate
+1.202.736.8349
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Global Life Sciences Practice
Healthcare Practice
To receive Sidley Updates, please subscribe at www.sidley.com/subscribe.
Sidley Austin provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship.
Attorney Advertising - For purposes of compliance with New York State Bar rules, our headquarters are Sidley Austin LLP, 787 Seventh Avenue, New York, NY 10019, 212.839.5300; One South Dearborn, Chicago, IL 60603, 312.853.7000; and 1501 K Street, N.W., Washington, D.C. 20005, 202.736.8000.