Setting Medicare Payment Rates for Clinical Diagnostic Laboratory Tests: Strategies To Ensure Data Quality

WHY WE DID THIS STUDY

The Protecting Access to Medicare Act of 2014 (PAMA) reformed the way the Medicare program sets payment rates for clinical diagnostic laboratory tests (lab tests) under Part B. CMS's new rates, which took effect on January 1, 2018, are based on lab-reported data: rates paid by private payers such as private health insurers, Medicaid managed care organizations, and Medicare Advantage plans. As part of the same legislation reforming Medicare's payment system, PAMA mandates that OIG conduct analyses it determines appropriate with respect to the implementation and effect of the new payment system. This review focuses on CMS's implementation activities in 2017 and the new payment rates that took effect on January 1, 2018.

HOW WE DID THIS STUDY

In this evaluation, we assessed CMS's progress in issuing the new rates that took effect in 2018. To provide an update on the 2017 data reporting period, we conducted interviews with CMS staff; reviewed CMS's guidance and other documentation regarding lab outreach; conducted interviews with representatives from lab industry associations; analyzed preliminary lab-reported data; and reviewed CMS's analysis of lab-reported data and final payment rates. This evaluation describes CMS's activities as of February 2018.

WHAT WE FOUND

CMS's analysis shows that new rates, effective January 2018, could save an estimated $670 million for the calendar year. New Medicare rates are in line with savings estimated in previous OIG reports. Rates for 75% of tests decreased from 2017 to 2018. During the 2017 data reporting period, 1,942 labs reported their private payer data. Although some labs reported difficulty in interpreting the reporting requirements, CMS's modeling demonstrated that increased reporting from more labs would not have had a meaningful effect on 2018 payment rates.

CMS performed limited quality assurance checks and relied on labs' self-certification of their reported data. CMS's quality assurance activities that identified outliers or excluded data affected new rates for a few low-volume tests. Labs experienced some one-time challenges in complying with a new policy, but CMS's limited quality-assurance efforts present an ongoing risk.

WHAT WE CONCLUDE

Complete and accurate data are essential to setting payment rates for lab tests, and CMS should address challenges from 2017 to ensure data quality in the future. Effective outreach can help ensure that all labs required to report data comply during future data reporting periods. CMS can help ensure data quality by assessing quality assurance efforts and compliance activities. OIG will continue to issue an annual analysis of the top 25 lab tests, based on Medicare Part B payments, and other analyses that OIG determines appropriate regarding the implementation and effect of the new payment system.