Medicare Payments for Clinical Diagnostic Laboratory Tests in 2017: Year 4 of Baseline Data

WHY WE DID THIS STUDY

Effective in 2018, the Medicare program changed the way it sets payment rates for clinical diagnostic laboratory (lab) tests. CMS replaced payment rates with new rates based on charges in the private health care market. This is the first reform in 3 decades to Medicare's payment system for lab tests. As part of the same legislation reforming Medicare's payment system, Congress mandated that OIG monitor Medicare payments for lab tests and the implementation and effect of the new payment system for those tests. This data brief provides the fourth set of annual baseline analyses of the top 25 lab tests.

HOW WE DID THIS STUDY

We analyzed claims data for lab tests that CMS paid for under Medicare's Clinical Laboratory Fee Schedule. These tests are covered under Medicare Part B, and do not include tests that Medicare paid for under other payment systems, such as the payment system for critical access hospitals or the Outpatient Prospective Payment System. We identified the top 25 tests based on Medicare payments in 2017. We also identified key statistics and emerging trends, including Medicare payments by procedure code, beneficiary, lab, ordering provider, and test category.

WHAT WE FOUND

Medicare paid $7.1 billion under Part B for lab tests in 2017, a total that has changed very little in the 4-year period from 2014 through 2017. The top 25 tests by Medicare payments totaled $4.5 billion and represented 64 percent of all Medicare payments for lab tests in 2017. The top five tests, which remained consistent with the top five from the previous 3 years, totaled $2.2 billion in 2017.

Although more than 50,000 labs received Medicare payments in 2017, 3 labs received $1.1 billion of the $7.1 billion (15 percent) in total payments for lab tests. Spending in the top 25 tests was similarly concentrated among a few labs: 1 percent of labs received 55 percent of all Medicare payments for the top 25 lab tests in 2017.

WHAT WE CONCLUDE

Clinical labs play a critical role in delivering health care to millions of Medicare beneficiaries. The new payment system for lab tests took effect on January 1, 2018, and resulted in significant changes to the Medicare payment rates for lab tests. This data brief, like those before it, will provide baseline statistics that OIG will use to measure the effects of changes to the payment system when data from 2018 become available. We will continue to monitor Medicare payments for lab tests and to identify emerging trends in these payments and vulnerabilities to potential cost savings.