CMS Finalizes Medicare Laboratory Payment Overhaul

June 03, 2016

McDermott+Consulting

The long-awaited final rule sets the Centers for Medicare & Medicaid Services’ course to modernize clinical laboratory payments by implementing reforms in the Protecting Access to Medicare Act of 2014.

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On June 17, 2016, the Centers for Medicare & Medicaid Services (CMS) released a final rule implementing the reforms to clinical diagnostic laboratory payments established by Section 216 of the Protecting Access to Medicare Act of 2014 (PAMA), legislation enacted on April 1, 2014, that requires CMS to substantially overhaul how and how much Medicare pays for clinical laboratory services. PAMA replaced the historical processes of “crosswalk” and “gapfill” to determine Medicare payment amounts for lab services with a market-based and -driven payment system that will peg Medicare payments to payments made by private payers for lab services.

As in most legislation, Congress provided a broad framework in PAMA but left it to the regulatory agency to fill in specific details. CMS was required by statute to complete this rulemaking, including issuing a final rule, by June 30, 2015, and to implement the new payment amounts derived from these changes by January 1, 2017. The laboratory community and other affected stakeholders have been anxiously awaiting the release of this final rule to see how and when CMS will implement the various reporting, rate-setting and other requirements established by PAMA.

In response to consensus stakeholder advocacy efforts, and consistent with delays in publishing the proposed and final rules for this complex new payment system, CMS is postponing the first payment year under the new system to 2018. Laboratories must collect data on private payer rates paid between January 1 and June 30, 2016, and report those data to CMS between January 1 and March 30, 2017. CMS will use these reported data to set rates for clinical diagnostic laboratory tests beginning with dates of service on or after January 1, 2018.

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