Avalere Health
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Insights

Jul 25, 2013

Labs May See Payment Cuts if CMS Revalues Medicare CLFS Codes

CMS plans to revalue the oldest laboratory service codes first. An Avalere analysis found pre-1997 codes accounted for nearly 37% of Medicare Clinical Laboratory Fee Schedule (CLFS) spending in 2011.

In its Calendar Year (CY) 2014 physician fee schedule draft rule, CMS proposed a new process to allow the agency to review and potentially revalue all of the roughly 1,250 codes that are currently on the Medicare CLFS over the next five years.  CMS plans to revalue the oldest laboratory service codes first, starting in the 2015 rulemaking process. CMS’ rationale is that some of the older CLFS rates do not reflect technological advances developed since the codes were first added to the fee schedule. 

Avalere applied 2011 Medicare spending data to roughly 750 lab service codes that were added to the CLFS before 1997. Our analysis found:

  • These codes accounted for almost 37 percent of total Medicare CLFS spending on labs in that year, totaling roughly $3.3 billion.
  • The 50 most frequently billed accounted for 31 percent of spending, about $ 2.7 billion.
  • The top 5 alone made up 15 percent of all spending, or $1.4 billion. 

CMS will release their physician fee schedule final rule by Nov. 1, 2013.   If CMS conducts the review as proposed, certain labs, particularly independent labs that receive 83 percent of their Medicare payment from services paid under CLFS, could see Medicare revenues decline over the next five years.  Physician offices with in-house laboratories that perform some of these tests may also be affected. CMS may face pressure from Congress to at least mitigate the proposed cuts in order to leave cost offsets to fund a future fix to the Sustainable Growth Rate (SGR) formula.

Comments on the 2014 physician fee schedule proposed rule are due by September 6, 2013. For support in submitting comments and more information, contact Caroline Pearson.

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