CMS To Abandon Longstanding Chemistry Panel Pricing in 2018, Opening a Two-Billion-Dollar Vulnerability

CMS has long had complex, manualized rules (not present in regulations) for pricing clinical chemistry panels. These panels are a "big deal" - $700M a year, and panel pricing saves AT LEAST $50M a year (see my article here), but may save several times that, because of current behavioral incentives not to report partial panels.  And if panels were priced at the summed cost of analytes, with no panel discount, payments would be over $3B, not $700M.

CMS will discard its longstanding chemistry panel pricing in 2018.   While CMS says it will "continue to review the issue," based on 2016 data already available, payments for analytes will go up at least by $40-50M dollars and potentially more, because there will be brand new massive incentives to submit partial panels of analytes for line item payments that are multiples of the panel price.  Why bill a 15 analyte panel for $13 when just 14 analytes will pay $75?  (See analysis at bottom).  

CMS writes,

How will CMS determine the price of automated testing profiles (ATPs) under the private payor rate-based CLFS payment system?
     For CY 2018, payment for tests that were bundled into ATPs will instead be made at the individual HCPCS code level. In other words, we will pay for each appropriately billed HCPCS code based on the CLFS amount for the specific code billed by the laboratory.
     Moving forward we will continue to consider the efficiencies of ATPs and the appropriate payment methods for these tests under the new private payor rate-based CLFS.
     Medicare administrative contractors will continue to apply editing to ensure that if a laboratory panel HCPCS code is submitted and is payable, an individual laboratory HCPCS code that is part of the same panel is not also paid separately

My answer: OK, we'll see how that works for you.

EXAMPLE - Two Billion Dollars of Free Money !

For example, the 15-analyte Comprehensive Metabolic Panel is the most popular panel, with 29M orders in 2016 and $323M in payments (CMS Part B; code 80053).   The new price for 80053 in CY2018 is $13.04, as set by PAMA.

However, at 2018 prices, the 15 analytes add up to $82.88.   If you leave off any one analyte - almost all of which are $5-6 - the remaining 14 analytes will pay about $75.  

Back of envelope math suggests that if, with the maximum behavioral element, all 29M panels were ordered in the 14-analyte format, CMS payments would rise from 29M x $13.04, or $377,000,000, to 29M x $75, or $2,175,000,000 (over $2B).   That's almost two billion dollars of free money in 2018 alone!

Check my math.  It's about $18M more taxpayer money automatically paid out for every 1% of tests converted from 80053 billing to 14-analyte billing, so eventually at the maximum, with 100% converted, the payout is about $1.8B higher.

Click to enlarge.

Note - You'd want to delete a code that disables several panels at once, such as "chloride," otherwise some of the 80053 line items codes would condense around some smaller panels and shrink the payment away from the item maximum. 

Use Secretary of Health Units of Measurement that People Can Understand

Just 5,500 tests converted to N-1 billing (0.01% of tests out of 29M tests) would cost CMS $400,000 - the same dollar amount that Secretary Price was fired over.