CMS eases provider burden and reporting requirements in CLFS final rule

CMS issued a final rule in June to revamp the way it pays for tests under the Clinical Laboratory Fee Schedule (CLFS), though the agency has pushed the start date back a year and worked to ease administrative burden based on public comments.

"This, along with some other changes CMS finalized based on commenter concerns and additional analyses, is really good news for providers," says Jugna Shah, MPH, president and founder of Nimitt Consulting, Inc. "It’s all in the spirit of reducing provider burden."

Now starting January 1, 2018, CMS will base CLFS payments on the weighted median amount paid by private payers for the same services. Providers are hopeful that these new weighted median rates based on a different process from the existing CLFS updating process, which has remained relatively unchanged since its establishment in 1984, will result in more accurate rates, says Shah.

Applicability

In order to develop the new rates, CMS will require "applicable laboratories to report applicable information" to the agency.

An applicable lab is defined as one that receives at least $ 12,500 in payments under the CLFS, and more than 50% of Medicare revenue from laboratory and/or physician services over the data reporting period to report private payer rates and test volumes for laboratory tests.

These thresholds will exclude approximately 95% of physician office laboratories and 55% of independent laboratories from having to report information, along with just about all hospital labs, according to CMS.

The applicable information required to be reported is:

• The payment rate that was paid by each private payer for each test during the data collection period
• The volume of such tests for each such payer

CMS originally proposed to use Taxpayer Identification Numbers (TIN) to identify applicable laboratories, but in the final rule made a change to use National Provider Identifiers (NPI). In order to keep administrative burden at a minimum, CMS will continue to apply the reporting requirements at the TIN level, making those entities responsible for reporting all NPI-level information for its applicable laboratories.

CMS also clarified that the information that must be reported is tied to payments received, which means that if a claim was submitted but payment was not yet received or was denied, that data would not be reported to CMS.

The data reporting period has been shortened from one year in the proposed rule to six months in the final rule. The first data collection period is from January 1?June 30, 2016. That collected data will have to be reported to CMS from January 1?March 31, 2017.

CMS plans to follow this schedule for subsequent collecting and reporting periods, which will occur every three years for all CLFS tests except Advanced Diagnostic Laboratory Tests (ADLT), which will have more frequent data collection and updating.

CMS has defined an ADLT as a clinical diagnostic laboratory test that is covered under Medicare Part B and offered and furnished by only a single laboratory, and only sold for use by the original developing laboratory, or a successor owner.

The test must also meet the following criteria:

• The test is an analysis of multiple biomarkers of DNA, RNA, or proteins combined with a unique algorithm to yield a single patient-specific result
• the test is cleared or approved by the Food and Drug Administration (FDA)
• the test meets other similar criteria established by the secretary of HHS

In response to public comments to the proposed rule, CMS changed the definition of ADLTs, which originally only included molecular pathology analysis and did not include protein-only based tests.

ADLTs have been established by the agency in order to recognize when a laboratory has expended all of the resources associated with a test, including development, marketing, and selling.

The $ 12,500 threshold for CLFS payments will not apply with respect to ADLTs. If a laboratory would otherwise meet the definition of applicable, excepting the $ 12,500 threshold, CMS will consider it applicable with respect to the ADLT and it must report the applicable information pertaining to the ADLT.

Payments and penalties

In order to slowly migrate current payment rates over to the new ones based on private payer data, CMS has built in safeguards to prevent payments from dropping more than a certain amount each year, says Shah, which is helpful for mitigating large financial swings. CMS finalized that payment for a test cannot drop more than 10% compared to the previous year for the first three years after the January 1, 2018 implementation, and not more than 15% in the subsequent three years.

For example, a test currently has a payment rate of $ 20, but the data from the first reporting period shows a weighted median private payer rate of $ 15. For the first year of implementation, instead of using the $ 15 payment, CMS would limit the reduction to $ 2, resulting in an $ 18 payment rate. Another 10% would be subtracted the next year, bringing payment to $ 16.20. CMS would continue to apply the maximum allowed percentage reduction until the payment reaches the weighted median of private payer rates.

Initial payment for new ADLTs will be based on the actual list charge of the test for three calendar quarters. CMS defines the list charge as the "publicly available rate on the first day the new ADLT is obtainable by a patient who is covered by private insurance, or marketed to the public as a test a patient can receive, even if the test has not yet been performed on that date."

After the first three quarters, the rate will be based on the weighted median of private payer rates and associated volume reported annually.

For new and existing tests which the agency has no applicable information to create the weighted median rate, the agency will use crosswalking or gapfilling methods.

CMS will also be able to impose civil monetary penalties to applicable laboratories that fail to report all applicable information or misrepresent or omit that data. The agency requires that all data be certified by the president, CEO, CFO, or an individual who has been delegated to sign for and directly report to one of those individuals.

In this final rule, CMS also agreed to release subregulatory guidance that will provide a list of HCPCS codes for which private payer rates should be submitted, which will be useful, says Shah, as this takes some of the guesswork out about which services or tests CMS is expecting to receive data.

CMS will use HCPCS G codes to identify new ADLTs and laboratory tests that are cleared or approved by the FDA. These would be temporary codes that would be in effect for up to two years, until a permanent HCPCS code is created or use of the temporary code is extended.

Editor’s note: For more information, see the fact sheet at www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items/2016-06-17.html.

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