On October 3, 2016, OIG released a report monitoring CMS’s progress on preparing for the implementation of the new payment system for clinical laboratory tests.  The new payment system was mandated by the Protecting Access to Medicare Act of 2014 (PAMA).  While CMS has made significant progress towards the anticipated January 2018 implementation of the new payment system, OIG has concerns regarding the accuracy of CMS’s method of obtaining payment data for the new payment rates.  First, CMS stated it will not verify whether required laboratories have submitted the payment data CMS will use to establish the new payment rates.  Second, CMS does not plan to independently verify the reported payment data’s completeness or accuracy.  The new payment system is expected to save Medicare $3.9 billion during the first ten years following implementation.  However, OIG has cautioned that issues with the accuracy of the payment data for the new payment system may impact its effectiveness and expected savings.

In 2015, Medicare Part B paid $7 billion for clinical laboratory tests.  Those payments were based on laboratory charges from 1984 and 1985, which have been adjusted annually for inflation.  PAMA instructed CMS to replace the historical payment system with a new payment system based on current charges in the private health insurance market.  CMS will use payment data reported by clinical laboratories to establish new payment rates.  These rates will be updated every three years. 

CMS released a final rule on June 23, 2016 detailing its plans to prepare for implementation of the new payment system.  According to OIG, CMS has built the reporting system that clinical laboratories will use to submit payment data.  The next step is collecting payment data from clinical laboratories.  While CMS has some safeguards in place to mitigate inaccurate reporting by clinical laboratories, it does not plan to independently verify clinical laboratories’ data and whether the required clinical laboratories have reported their data.  According to OIG, this may result in CMS setting inaccurate payment rates for laboratory tests.  In addition, CMS defines an “applicable laboratory” in a manner that excludes most if not all hospital laboratories, thus potentially understating true clinical laboratory cost and payment data.

Clinical laboratories will start reporting their payment data in early 2017.  CMS has set a target date of November 2017 to publish the rates that will be used in the new payment system.