ACLA and NILA Propose CMS Must Follow PAMA Rules, Not "Panel Pricing" Rules, in 2018

On July 31/August 1, CMS held the annual new code pricing meetings for the Clinical Laboratory Fee Schedule.

One topic received special prepared comments from both the American Clinical Laboratory Association and National Independent Laboratory Association (ACLA and NILA).

Traditionally, CMS has markedly reduced what it pays for routine clinical chemistry through a body of rules for panel test pricing - a body of policy found in neither regulation or statute.  ACLA and NILA argue that the text of PAMA, read closely, overrides prior agency pricing rules for panels.

A lot of money is in play.  Currently, the chemistry panel test codes pay out about $700M per year in Part B (here), while the panel prices typically represent a discount up to 75% on the analytic components if they were individually priced tests.

I summarize my understanding of the arguments in bullet points next, and for further discussion, see a link at the end of this blog to a PDF document in the cloud that includes my informal transcripts of the NILA and ACLA public discussions.

Summary

o   Based on public records, CMS pays $700M through the CPT chemistry panel pricing codes. 

o   The panel pricing policies probably save several hundred million dollars.

o   PAMA law requires CMS pay for lab tests, based on each CPT code, and based on market prices.  There is no option in PAMA that allows for the complex repricing maneuvers that occur today under CMS panel pricing rules.

o   NILA and ACLA are very aware of this and they are warning CMS it cannot apply panel pricing rules under PAMA.

o   To my eye, taking PAMA literally, CMS has only a few options.

§  (A) Ignore PAMA, continue panel pricing, and risk legal protests; or

§  (B)  Circumvent PAMA by making its own new G codes.

o   There is a chance that a “leg fix” could be sought by CMS to restore the panel price concept that was superseded by PAMA, and CMS might foresee that a quite large dollar volume is involved.

An 11-page PDF of the NILA and ACLA arguments, along with my own introductory summary, is in the cloud  here.

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Let's show an example, a hypothetical.  Let's say a 12-panel test is $20, and each of the analytes is $10.  A doctor orders the 12-panel test, and gives several ICD-10 codes as justification. The laboratory notes that none of the ICD-10 codes justifies the 12th analyte, and under CMS instructions, the lab can bill only for analytes that are medically necessary.  So the lab bills for the 11 analytes.   Currently, no stack of analytes exceeds the cost of the corresponding full panel, so CMS pays no more than $20 for the 11 analytes (ghost price ATP11).  If PAMA is taken literally, the lab is billing 11 CPT codes for 11 analytes, let's say at $10 each, so under PAMA the payment rises to $110 instead of $20.[*]

There may be a parallel to the 2009 federal appellate case Hays v Sebelius.  For some years, statute had required CMS to pay for Part B injectible drugs at 106% ASP.  However, CMS informally applied its own commonsensical "least costly alternative" pricing, which lowered prices.  Court said no: CMS must pay as written in statute.  Here, for the lab industry, CMS pays for panel tests with a capped, "commonsensical" rule which lowers prices.  But if this informal rule is challenged, a court may say no:  CMS must pay for the codes exactly as instructed by Congress in the PAMA statute.
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[*]  Readers may recognize the Merchant of Venice principle at work, wherein a contract is suddenly and dramatically interpreted adverse to the party that wrote it.
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For a deeper dive into quirks and values of panel pricing, here.