PAMA

by  M. Ann Bachman, BSMT(ASCP) CLC(AMT) CMPM
Nov 25th, 2016 - Reviewed/Updated Aug 17th

The Clinical Laboratory Fee Schedule (CLFS) final rule, "Medicare Program: Medicare Clinical Diagnostic Laboratory Tests Payment System" (CMS-16F) implements PAMA, the Protecting Access to Medicare Act of 2014. The purpose of this rule is to more closely align CLFS payments under Medicare with payments made by private payers. CMS perceives that Medicare pays significantly more for some tests than do some private payers.

Under this rule, "applicable" laboratories are required to report revenue information to CMS. "Applicable" laboratories are those laboratories that:

• Bill Medicare for laboratory testing under their own billing NPI number;

• Received more than $12,500 from the CLFS for traditional tests (Advanced Diagnostic Laboratory Tests will be handled separately; see explanation below) during the period of January 1, 2016 - June 30, 2016; and

• Received more than 50% of their Medicare revenues from laboratory and physician services during that same data-gathering period.

Applicable laboratories, or reporting entities, must first report to CMS during the reporting period of January 1 – March 31, 2017 the following "applicable" information:

• How much each private payer reimbursed for each laboratory test performed and

• How many of each test were billed to each payer

CMS will use this information to calculate new (reduced) reimbursement amounts they will pay for tests performed for Medicare beneficiaries. Failure to report, or omission or misrepresentation, may result in fines of up to $10,000 per day. PAMA does not allow voluntary reporting by laboratories that do not meet the definition of an applicable laboratory. Reporting will be required every three years. The maximum reimbursement reduction for any given clinical laboratory test will be:

• 10% in 2018

• 10% in 2019

• 10% in 2020

• 15% in 2021

• 15% in 2022

• 15% in 2023

An Advanced Diagnostic Laboratory Test, or ALDT, is defined by PAMA as "a clinical diagnostic laboratory test covered under this part that is offered and furnished only by a single laboratory (or a corporate entity that owns multiple laboratories) and not sold for use by a laboratory other than the original developing laboratory (or a successor owner) and 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 and yields clinical diagnostic information that cannot be obtained from any other tests or combination of tests, and may include other assays.

(B) The test is cleared or approved by the Food and Drug Administration (FDA).

(C) The test meets other similar criteria established by the Secretary."

The minimum threshold of $12,500 does not apply to ALDTs. However, for laboratories performing ALDTs and traditional testing, this applies only to the ALDTs. Reimbursement for new ALDTs will be the actual list charge during the new ALDT initial period, which is three full calendar quarters. The local Medicare Administrative Contractor (MAC) will determine the payment amount for a new ALDT prior to the new ALDT initial period, from the time the test is first offered prior to the beginning of the next full calendar quarter.

Applicable information for ALDTs must be gathered annually from January 1 - June 20 and reported to CMS the following January 1 - March 31. The American Medical Association, which creates and owns CPT codes, will create a new coding process specifically to meet the requirements of PAMA. Either the AMA will create CPT codes or CMS will create HCPCS Level II codes to identify new and existing ALDTs as well as CLDTs that are cleared or approved by the FDA. The Office of the Inspector General (OIG) has determined that Medicare could save as much as $910 million annually. Medicare currently spends approximately $7 billion annually for clinical diagnostic laboratory testing.