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Changes to the Clinical Laboratory Fee Schedule

By Jeremy Belanger

Prior Standards

Pursuant to the Section 216(a) Protecting Access to Medicare Act, which amended Section 1834A of the Social Security Act, the Center for Medicare & Medicaid Services (“CMS”) is making significant changes to how payments are made for clinical diagnostic laboratory tests (“CDLTs”) under the Clinical Laboratory Fee Schedule (“CLFS”).

Under the CLFS Final Rule, 81 Fed. Reg. 41036 (June 23, 2016), certain “reporting entities” must submit a report to CMS during a “data reporting period” with “applicable information” collected during a “data collection period” for their “applicable laboratories.” CMS-1693-P at 402.

“Applicable information” refers to “(i) Each private payor rate for which final payment has been made during the data collection period; (ii) The associated volume of tests performed corresponding to each private payor rate; and (iii) The specific Healthcare Common Procedure Coding System (HCPCS) code associated with the test.” 42 C.F.R. § 414.502. A “reporting entity” is an entity that reports tax-related information to the IRS using Taxpayer Identification Number (“TIN”) for its applicable laboratories components. Id.

An “applicable laboratory” is: (1) a laboratory; (2) which bills Medicare Part B under its own NPI; (3) which receives more than 50% of its total Medicare revenue from furnishing CDLTs and/or physician and other practitioner services under the physician fee schedule (“PFS”) (the “majority of Medicare revenue threshold”); and (4) receives at least $12,500 of its Medicare revenue (the “low expenditure threshold”). Id. Total Medicare revenue is the total payments received under Parts A and B, Medicare Advantage (“MA”) payments under Part C, prescription drug payments under Part D, and by beneficiary deductible or coinsurance. Id.

A “data collection period” is the six month period from January 1 through June 30, and the “data reporting period” is the three month period from January 1 through March 31 following a data collection period. Id. The first data collection period was January 1, 2016 through June 30, 2016, and the first data reporting period was January 1, 2017 through March 31, 2017.

The data collected during the first data reporting period formed the basis for payments for CDLTs beginning January 1, 2018, which was equal to the weighted median of the applicable information.

Many commenters noted that the data was collected from a relatively small sample of laboratories, that the criteria for applicable laboratories excluded hospital-based laboratories, and that the low expenditure threshold excluded many physician office-based and small laboratories. CMS-1693-P at 403-04. As CMS is attempting to obtain the broadest possible representation, it is proposing a change in how an applicable laboratory is determined and seeking comments on additional changes to this standard.

Proposed Changes

The rule is seeking to change the “majority of Medicare revenue threshold” calculations by excluding MA payments under Part C from total Medicare revenue. CMS notes that MA payments under Part C are more properly considered as private payor payments, not Medicare payments, and should be excluded accordingly. The effect would be to lower the amount of total Medicare revenue and allow more entities to satisfy the requirement that more than 50% of revenue comes from CDLT or PFS when compared with the lower total Medicare revenues. Id. at 404-09.

CMS is also seeking comments on several alternative means to define “applicable laboratory.” CMS in the past has rejected proposals based off a laboratory’s TIN or CLIA certification, stating that the NPI is the appropriate level to consider an applicable laboratory. However, it is considering an alternative option of allowing revenue reported on a Form CMS-1450 14x bill, which is used only by hospital outreach laboratories. Id. at 413-14.

CMS is also seeking comment on adjustments to the low expenditure threshold, either by decreasing it to $6,250 to include more physician office-based and small laboratories, or increasing it to $18,750 to relieve the administrative and financial burden on small laboratories. CMS is specifically seeking public comment as to whether: (1) physician office-based and small laboratories have adequate staff to meet the data collection and reporting requirements; (2) whether they have an appropriate system in place to identify, collect, and report the applicable information; (3) whether physician office-based and small laboratories are generally prepared to comply with the requirements and, if so, what would be an appropriate timeframe to be able to meet the requirements; and (4) what other administrative concerns adjusting the low expenditure threshold creates.

Effects of the Changes

Should the proposed changes go into effect, there would be an increased burden on practitioners to collect and report data. This rule could have a notable effect on small practices operating laboratories, either independently or as a part of services they provide. Once the rule is finalized, Chapman Law Group will review the new rules and can assist practitioners who might be affected in drafting a compliance plan to prepare to collect and report the data.