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A Forced Reduction

DATE: December 14, 2017

Changes to Clinical Laboratory Medicare payments could have a major financial impact on hospitals.

A series of payment adjustments enacted by Congress as part of the Protecting Access to Medicare Act of 2014 (PAMA) will change payments under the Medicare Clinical Laboratory Fee Schedule (CLFS) continuing through CY 2023.

Hospital labs could see drastic cuts to their payments. Starting on January 1, 2018, Medicare payment rates for the majority of laboratory tests paid under CLFS will be determined based on private payer information reported by laboratories that met criteria established by the Centers for Medicare and Medicaid Services (CMS). Medicare CLFS payment rates will be set to the weighted median of those private payer rates collected. Any reductions are to be phased in over a six-year period, and are capped at a cumulative 10% per year for each of CYs 2018- 2020, and 15% per year for CYs
2021-2023. Some industry analysts have criticized the methodology CMS used to collect the initial data.

DataGen has analyzed the financial impact these changes will have on hospital clinical laboratory payments. The year-over-year reductions in funding for laboratories are profound. We estimate a payment reduction of nearly 28.5% over the next ten years—or $5.3 billion.


This dramatic impact will likely be exacerbated, as CMS will be re-collecting data every three years and making updates. Nevertheless, assessing how this will impact your ability to keep your laboratories functioning optimally and planning strategically for this reduction is critical.

Click here for your copy of A Forced Reduction. To learn more about what DataGen is doing to simplify the complexities of healthcare payment reform change, contact DataGen and follow us on LinkedIn.

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