Kalorama: PAMA Final Rule Mixed For IVD Makers
NEW YORK, July 18, 2016 /PRNewswire/ -- Tough times will continue for smaller labs with the final rule of the 2014 Protecting Access to Medicare Act (PAMA) published by CMS, according to Kalorama Information. The healthcare market research firm said the sweeping market-based pricing reform for Medicare-reimbursed lab tests will impact small service provider revenue. The firm also said it is too early as yet to determine the law's full impact on the IVD market. Kalorama Information discusses the United States Market for IVD Testing in its recent report, United States Market for In Vitro Diagnostic Tests.
"With the introduction of market-based Medicare pricing, routine tests are likely to see sharp reductions in reimbursement," said Emil Salazar, IVD analyst for Kalorama Information.
PAMA is intended to introduce a more organic methodology to reimbursement adjustments for lab testing under Medicare and will replace uniform cuts implemented across the Clinical Laboratory Fee Schedule (CLFS) with the Affordable Care Act (ACA) and other past legislation. The recent CMS final rule delays implementation of market-based pricing to 2018 and expands the body of reporting labs in order to make prices more reflective of the entire lab market. The law has the potential to significantly cut Medicare reimbursement prices on routinely performed, highly automated tests – sparking further consolidation in the clinical lab services market – and increase IVD industry emphasis upon the development of new biomarkers and sophisticated and esoteric assays. In a blog post on its website, Kalorama Information expects the new law to hit smaller labs the hardest.
"Public estimates range from $100 to $350 million a year in lost revenue, but Kalorama at this time has not performed an economic analysis," said Bruce Carlson, Publisher of Kalorama. "We know the impact will be negative especially for small labs but we will incorporate PAMA effects into our next report on the U.S. It's too early to see reagent effects in this rule; the first impact is on the service market."
A significant change in the PAMA final rule is the scope of labs required to report paid lab test prices. Beginning in 2017, PAMA requires applicable clinical labs in the United States to submit payment rates and corresponding volumes for lab tests ordered by private payers during the six-month period of January 1 through June 30, 2016. The lab-reported test payment and volume data will be used by CMS to calculate weighted median payment rates to be paid by Medicare for lab tests. The new payment rates will then replace CLFS payment rates beginning in 2018. The information is being gathered to bring CMS payment rates for lab tests more in line with market rates and eliminate or reduce areas of overpayment.
Certain tests were noted by HHS in 2011 to be paid for by CMS at rates 18-20% higher than paid by private payers. Under PAMA, high-volume tests such as clinical chemistry panels, lipid panels, complete blood counts (CBCs) and routine infectious disease screens will be reimbursed according to rates paid for such tests when performed at high economies of scale in large clinical labs. As a consequence, the same tests performed at lower volumes in smaller labs may be reimbursed by CMS below cost and become unfeasible to perform at decentralized locations. Non-automated tests and routine CLIA-waived manual tests with unique reimbursement codes are unlikely to experience the same scale of rate erosion as tests performed on a variety of instruments, including high-volume automated ones, across lab settings. PAMA will variably affect molecular diagnostic codes or MoPath codes reimbursed by CMS. Most Tier 1 codes (the most commonly used molecular tests) are unlikely to see positive adjustments as private payer market rates will be heavily influenced by automated test performance at centralized clinical labs. PAMA will update CMS reimbursement rates for molecular tests to reflect the steady price erosion in the clinical lab market resulting from automation and competition.
Kalorama thinks the effect of PAMA on more esoteric molecular tests will be inconsistent due to the unclear relative pricing between private payers and CMS national rates determined without contributions from all MACs. To be eligible as advanced diagnostic laboratory tests (ADLTs) subject to more regular price adjustments under PAMA, tests must meet the following criteria: offered only by a single laboratory and not sold by any laboratory except the original developer and either incorporates multiple biomarkers of DNA, RNA or proteins in a unique algorithm (MAAA); is cleared and approved by the FDA; or meets other similar criteria established by the Secretary of HHS.
"Many advanced molecular tests, such as sequencing assays, MAAAs or proprietary laboratory-developed tests (LDTs), will be eligible for designation as ADLTs under PAMA," said Salazar.
For more information regarding the impacts of the ACA and PAMA on the U.S. IVD market, Kalorama Information offers United States Market for In Vitro Diagnostic Tests.
About Kalorama Information
Kalorama Information, a division of MarketResearch.com, supplies the latest in independent medical market research in diagnostics, biotech, pharmaceuticals, medical devices and healthcare; as well as a full range of custom research services. Reports can be purchased through Kalorama's website and are also available on www.marketresearch.com and www.profound.com.
We routinely assist the media with healthcare topics. Follow us on Twitter, LinkedIn and our blog at www.kaloramainformation.com.
Contact:
Bruce Carlson
(212) 807-2622
[email protected]
www.KaloramaInformation.com
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SOURCE Kalorama Information
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