Protecting Access to Medicare Act (PAMA) Updates – What Clinical Labs Need to Know

 In Coding & Compliance

If you work in the pathology or laboratory areas of a healthcare organization, you no doubt have heard of PAMA, the Protecting Access to Medicare Act. But do you fully understand what it is all about? And have you kept abreast of the updates to PAMA and how they affect which laboratories have to report revenue and how to do it?

Whether you are regularly immersed in PAMA issues or have an interest in or a passing exposure to the Act, we will help you gain a better understanding of its history and its reporting requirements.

A Brief History of PAMA

PAMA became law on April 1, 2014. According to the Centers for Medicare & Medicaid Services (CMS), PAMA required significant changes to how Medicare pays for clinical diagnostic laboratory tests under the Clinical Laboratory Fee Schedule (CLFS).

The effect of PAMA was to adjust the CLFS to more closely reflect market-based rates using current charges from private payers as its foundation. According to CMS, the new payment amount for most tests is the weighted median of private payer rates.

The new rate structure became effective Jan. 1, 2018; it will be updated every three years. Prior to 2018, rates were based on historical laboratory charges to CMS and had not been updated since 1984, when the fee schedule was first implemented.

2017 reporting requirements – Cycle 1 exclusions

The first reporting cycle took effect in 2017 and was limited to laboratories that received greater than 50% of their Medicare revenue from the clinical laboratory or physician fee schedule when billing under the laboratory’s specific tax identification number (TIN). However, the structure of this requirement had the effect of excluding most hospital-based laboratories from reporting, because their revenues were generally captured under the broad TIN of the hospital. With only major, national corporate laboratories reporting, the median prices were skewed downward, leading CMS to determine that it was overpaying by about 30%. Companies like LabCorp and Quest Diagnostics can offer discounts that hospital-based facilities generally can’t.

As a result of the limited Cycle 1 reporting data received, CMS implemented a 10% reduction in the clinical laboratory fee schedule for 2018, 2019, and 2020. Reductions of 15% are scheduled for 2021, 2022, and 2023.

2019 reporting requirements – pushback

The planned fee schedule reductions related to Cycle 1 data led to significant pushback from the laboratory industry. As a result, in 2019, CMS implemented a second cycle of reporting, revising the definition of applicable laboratories.

The revised definition enables CMS to obtain data from hospital laboratories – which were not required to report during Cycle 1. Yet many hospital-based laboratories were not aware that they now were required to report. There was also uncertainty on what data was necessary to report, leading to under-reporting by hospital laboratories.

While the implementation of Cycle 2 will not stop the 10% cuts scheduled for 2019 and 2020, the inclusion of hospital-based laboratories in the reporting cycle could impact the scheduled reductions for 2021, 2022, and 2023.

What is an applicable lab?

According to CMS, applicable labs are those that:

  • Are CLIA certified
  • Have an independent national provider identifier (NPI), a physician NPI, or bills TOB 14X as part of a hospital
  • Receive greater than or equal to $12,500 from Medicare Part B under the CLFS during the six-month billing period
  • Meet the “Majority of Medicare Revenues” test during the collection period, with greater than 50% of Medicare revenue coming from the clinical laboratory or physician fee schedule

What data is reported?

Once a laboratory is determined to be an applicable laboratory, its operators must become familiar with specific data reporting requirements. There are four key data requirements:

  1. The specific HCPCS code associated with a given test
  2. The private payer rate for each test for which final payment was made during the collection period
    • Final amount paid by a private payer for laboratory tests after all private-payer price concessions are applied
  3. The associated volume for each test
  4. NPI (10 numeric characters)

The data necessary to meet the CMS reporting requirements should be collected from Jan. 1 to June 30, 2019. From July 1 to Dec. 31, 2019, laboratories will review and validate the collected data. The data must then be reported to CMS between Jan. 1 and March 31, 2020.

Preparing your lab for data collection in 2020

PAMA is complex, and with CMS increasing the number of laboratories that must report data, laboratory operators must take time to learn and understand its requirements – or face possible penalties.

Becoming well versed in everything associated with PAMA requires time and effort. You might even need to seek the counsel of an experienced vendor that can help you fully understand the important details of PAMA.

For more information on how Change Healthcare can help you navigate through the intricacies of PAMA, please visit

Source: Centers for Medicare & Medicaid Services

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