Medicare Payments for Clinical Laboratory Tests in 2014: Baseline Data

WHY WE DID THIS STUDY

The Protecting Access to Medicare Act (PAMA) of 2014 requires reform of the payment system for clinical laboratory (lab) tests-the first such reform in 3 decades. Beginning in 2017, payment rates-which are currently based on lab charges from 1984 and 1985-will be replaced with current market rates. To provide oversight, PAMA mandated that OIG monitor Medicare payments for lab tests and the implementation of the new payment system. As part of the mandate, PAMA requires OIG to publicly release an annual analysis of the top 25 lab tests based on Medicare payments. This data brief is an initial, baseline analysis of the top 25 lab tests in 2014.

HOW WE DID THIS STUDY

We based this data brief on an analysis of Medicare claims data for lab tests performed in 2014 and reimbursed under the Clinical Laboratory Fee Schedule. We analyzed claims for lab tests performed in independent labs, physician-based labs, and facilities such as outpatient hospitals. We analyzed the claims data by procedure code, beneficiary, lab, setting, and test category to describe Medicare Part B payments for lab tests in 2014.

WHAT WE FOUND

In 2014, Medicare Part B paid $7.0 billion for 451 million lab tests. About 63,000 labs received Medicare payments for providing lab tests to 27 million beneficiaries, representing over half of all Medicare beneficiaries in 2014. For the top 25 lab tests in 2014:

• Medicare Part B payments totaled $4.2 billion;
• independent labs accounted for the majority of Medicare Part B payments;
• a small portion of labs accounted for the majority of Medicare Part B payments;
• the tests fell into seven categories, predominantly the chemistry category; and
• molecular pathology tests cost the most per test.

WHAT WE CONCLUDE

The new system of payment required by PAMA calls for a major undertaking by CMS, with significant implications for the lab industry. This data brief provides baseline analyses of the top 25 lab tests for 2014, 3 years before the new payment system goes into effect. In addition to issuing an annual analysis of the top 25 lab tests, we will conduct analyses that we determine appropriate regarding the new payment system's implementation and effect.