PAMA Explained

Published February 22, 2019

If you’re working in the healthcare industry you have probably heard the acronym PAMA, but what actually is it and how does it affect you and your lab?

PAMA stands for The Protecting Access to Medicare Act. PAMA was passed in 2014, changing the way Medicare pays for, codes and covers clinical diagnostic laboratory tests, or CDLTs.

Under the new requirements, the payment amount for most CDLTs has to be equal to the weighted median of private payor rates determined for the test, based on data collected from applicable laboratories.

So basically, labs report how much private payors are paying for each of the laboratory tests and the volume of the tests they are performing, and the amount Medicare pays for the tests will be based off of that data.

The act was proposed as a way to update the prices of tests that may have changed due to changes in technology and provide a uniform system for pricing new tests. Many in the laboratory professions have expressed concern however, as the data is only based off of applicable laboratories, and the act is expected to reduce the reimbursement for many laboratory tests.

What is an Applicable Laboratory?

What is defined as an applicable laboratory? CMS defines an applicable laboratory as having the majority of its Medicare revenues paid under the CLFS (Clinical Laboratory Fee Schedule). A laboratory is also excluded if it is paid less than $12,500 under the CLFS during a collection period (6 months).

This threshold will largely affect independent labs and physician office laboratories. CMS estimates that “about 55 percent of independent laboratories and about 95 percent of physician office laboratories will be precluded from reporting private payor data as a result of the low expenditure criterion.”

CMS does state that the physician labs and independent labs that are able to report, make up the majority of CLSF spending on physicians and independent labs, 92% for physicians and 99% for independent labs. Essentially, only 8% and 1% respectively of CLFS spending on independent and physician labs, is going to labs that are not represented, which is how the act justifies excluding these laboratories.

Regardless, laboratories are concerned about the lack of representation in the data collection, and the impact it will have on price reductions. The act will not allow the price of any tests to drop more than 10% in the first 3 years, and no more than 15% in the years to come, however significant reductions are still expected for many tests. View CAP’s estimated price reduction chart.

In the anatomic pathology lab, an annual raise of prices from vendors is often in the 2-5% range. This is even with reagent agreements and contracted pricing (if a lab is paying list price, they are often paying much more). This basically means that labs are expected to continue to do the same work, paying more for reagents/supplies, but getting less in reimbursement. The gap has to be filled somewhere, especially for labs that do turn a profit (private, independent labs). This is why labs are so concerned about the cuts to reimbursement under the PAMA Act.

Interested in taking action? Join NSH and ASCLS at the Legislative Symposium in Washington, DC, March 18-19. Attendees will learn about issues affecting healthcare, such as PAMA, and meet with their legislators to discuss the impact these issues have.







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