Very Brief Blog: GAO Releases Report on CMS Lab Overpayments and Risks

GAO has issued an unusual report that implementation of PAMA lab pricing "May Lead to Billions in Excess Payments."   This will probably be a head-spinning conclusion, to anyone watching lab payment rates fall annually under PAMA.

UPDATE Feb 2019:
ACLA and Advamed complained about the report, here.  See 360DX article in Feb 2019,  here.

• The GAO report home page is here.
• The one page summary is here.
• The full 47 page report is here.
• See comments in response, from HHS to GAO, page 38-40.
• Footnote 67 on page 30 references a House report language request to CMS that I cited in a blog on August 31.

Update:  Grassley asks CMS to follow up on the GAO report, January 2019, here, here.

I think I was one of the first to report in 11/2017 on the potential implications of CMS dropping its longstand practice not to pay more for clinical chemistry panel components than it would pay for the clinical chemistry panel.  GAO picks up this same issue in its summary now in 11/2018. In addition, their Figure 6 page 29 almost exactly replicates the figure I published in the bottom of my blog in 11/2017.

CMS stopped paying a bundled payment rate for certain panel tests (groups of laboratory tests generally performed together), as was its practice prior to 2018, because CMS had not yet clarified its authority to do so under PAMA, according to officials. CMS is currently reviewing whether it has the authority to bundle payment rates for panel tests to reflect the efficiency of conducting a group of tests. GAO estimated that if the payment rate for each panel test were unbundled, Medicare expenditures could increase by as much as $10.3 billion from 2018 through 2020 compared to estimated Medicare expenditures using lower bundled payment rates for panel tests.

In addition, I have previously published (e.g. in August 2018) panel pricing graphics that almost exactly match some later used by GAO.

click to enlarge.  Quinn graphic left, later GAO graphic right.

House Messages CMS: Asks CMS to Address Panel Unbundling

Each year, annual budgets prepared at House and Senate come with something called "report language" which describes something of the rationale and purpose of the budget and may make numerous requests of an agency to look into one matter or another. 

This summer, the (health related) report language for House is  here and for Senate is here.

CMS and Chemistry Panels

CMS for decades has bundled together tests following CPT codes for common chemistry panels.  A ten-analyte panel might pay $15 as a panel even though each component tallied as a separate test might pay $60 or more.   With PAMA in 2018, CMS dropped the panel bundling rules and right now - if a set of tests fail to meet the exact definition of a panel - CMS pays at the individual line item rates. 

I discussed this for clinical chemistry in a blog in November 2017, here.   As shown in a clipping at bottom, 80053 panel had 29,000,000 uses at CMS.   If paid at the $13 panel cost, this is $377M.  If paid at the stack code analyte rate it's $82.88 or $2.2B.   The same thing can also happen in genetics; as shown in another clipping at bottom, CMS pays for Lynch panels as 81435+81436=$1444, but the genes included at a la carte prices look more like $3,334.

The message from the House to HHS regarding panels is:

"Clinical Laboratory Fee Schedule.  Inconsistencies in panel testing reimbursement in Medicare should be resolved to prevent wasteful government spending.  The Committee encourages the Administrator of CMS to develop and issue a panel pricing policy that ensures the agency is not paying more for a single clinical diagnostic laboratory test, or a group of individual clinical diagnostic laboratory tests, than it would pay for a clinical diagnostic laboratory testing panel that tests for the same analyte(s).  The Committee encourages the Administrator to apply the policy to all types of test panels."  (House report language, page 89.)

(See also a November 2018 GAO report on the same topic, here.)

OIG Guidance Now Dysfunctional

Labs can follow official OIG guidance, and it leads toward stack coding, not panel pricing.

OIG guidance discourages panel ordering, and encourages physicians and labs to provide only the most precise list of medically necessary tests.  If any one test on a ten analyte panel isn't necessary, then bill the 9 tests, please.   This guidance was written in an era when panels paid a fraction of the single test costs, BUT ALSO, coding and pricing with special rules meant that analyates could only pay LESS than a panel.  (E.g. 9 analytes would pay right about 90% of a ten-analyte-panel.  Today the nine analytes might pay 800% more than the ten-analyte-panel.)