ACLA Files Lawsuit Challenging CMS Implementation of PAMA Section 216

December 12, 2017

McDermott+Consulting

On Monday December 11, the American Clinical Laboratory Association (ACLA) filed a legal challenge to CMS’s implementation of the revised Clinical Laboratory Fee Schedule (CLFS) required under Section 216 of the Protecting Access to Medicare Act (PAMA) of 2014.

In its challenge, ACLA asks the federal district court to force CMS to follow Congressional direction regarding data collection and to postpone implementation of revised payment rates until the Agency fully and completely complies with the law.

PAMA implemented the most sweeping changes in the nearly 30 year history of the CLFS and was intended to force Medicare into a “price-taker” role.  In this role, Medicare was expected to collect private insurer payment rates and payment volumes from a wide cross-section of labs (defined in statute as “applicable labs”).  This collected data would be used to set the payment rates for laboratory services paid by Medicare.

Since the release of the final rule, CMS has been criticized by many stakeholders, most notably ACLA, for failing to collect data from a full and representative range of laboratories, and for excluding virtually every physician office based laboratory as well as the vast majority of hospital laboratories from its data collection process.

In the final rule, CMS estimated that its policies would capture data from 12,400 of the 247,000 labs enrolled with Medicare as physician office laboratories (POL) and 1,200 of the 2,700 enrolled independent laboratories.  Furthermore, in the final rule, CMS expected its policies to exclude virtually all hospital based laboratories, with the exception of those that are separately enrolled as either a “hospital outreach laboratory”,  as a POLs or as an independent lab, from the reporting requirement.[1]  At these rates, CMS expected to capture 92 percent of the spending on physician office lab claims and 99 percent of spending on independent lab claims.

In actuality, fewer than 2,000 labs reported data to CMS.[2]  Of labs reporting data to CMS, 1,106 were physician office labs (less than one-half of one percent of the total number of Medicare- enrolled physician office lab), 658 were independent labs (roughly one-quarter of all Medicare-enrolled POLs) and 21 were hospital labs (one-third of one percent of Medicare enrolled hospital labs).  The ACLA complaint also asserts that the data that was collected came predominantly from urban labs, and represents only the lower costs associated with urban labs.

CMS predicts that Medicare CLFS payments will decrease nearly $670 million in CY 2018.

In their complaint, ACLA seeks to invalidate the final CMS rule, stop CMS from implementing the revised payment rates on January 1, 2018, and to require the Secretary to reissue regulations that are consistent with congressional intent.

For more information, please contact Paul Radensky, M.D., John Warren or Eric Zimmerman.


[1] 81 Fed.Reg. 41,036, 41,094 (June 23, 2016)
[2] “Summary of Data Reporting for the Medicare Clinical Laboratory Fee Schedule (CLFS) Private Payor Rate-Based Payment System,” September 22, 2017 (link).
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