Most Physician Offices, Hospitals Avoid Reporting Requirements in CLFS Rule

CMS issued a final rule last week 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 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.

In order to develop the new rates, CMS will require labs that receive 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.

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 denied, that data would not be reported to CMS.

CMS shortened the data reporting period 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.

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.

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.

For more information, see the fact sheet, press release, or final rule.