Preparing for PAMA's Part B Price Cuts: What XIFIN's Impact Analysis Predicts for Labs Like Yours in 2018 - Lâle White, Chairman and CEO, XIFIN ...
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Preparing for PAMA’s Part B Price Cuts: What XIFIN’s Impact Analysis Predicts for Labs Like Yours in 2018 Lâle White, Chairman and CEO, XIFIN Inc.
How Will Medicare’s Payment System Change?
CURRENT FUTURE
Implemented in 1984 To be implemented in 2018
• Payment rates for • Payment rates for
existing tests are based existing tests will be
Applicable labs report data
on lab charges in 1984– based on current rates
1985, adjusted annually from private payers,
for inflation and updated every 3
years using current data
• 57 local fee schedules
• Single national fee CMS calculates weighted median
• Same pricing schedule schedule private payor rate for each test
for all categories of lab
tests on the fee • Creates a new category
schedule of lab tests—advanced
diagnostic laboratory
tests—with a different
pricing schedule
Median determines new rate for
tests paid on Medicare CLFS
Source: Medicare Payments for Lab Tests in 2015: Year 2 of Baseline Data (OEI-09-16-00040)
www.XIFIN.com 2
PAMA Amplifies Significance of Financial
Discipline
CMS responds to lab comments and extends deadline to report by 60
days, stating that both the number of labs reporting & the volume of
data submitted through March 30th was less than expected.
www.XIFIN.com 3
Just when you thought PAMA was the end of it...
FASB ASC 606
– Effective Jan 2018 for publicly held companies
– Effective Jan 2019 for privately held companies
www.XIFIN.com 4
Timeline for CMS and Laboratories
Jan 1 Jun 30 Jan 1 March 31 Sep 1 Jan 1
2016 2016 2017 2017 2017 2018
CMS
makes CMS CMS
FFSDCS CMS Develops Publish Publish
available New Rates Draft Final
for Rates Rates
testing
Reporting
Data Collection Period Extension
New
period
Rates
Jan 1 Jun 30 Jan 1 March 31 Sep 1 Jan 1
2019 2019 2020 2020 2020 2021
Jan 1 Jun 30 Jan 1 March 31 Sep 1 Jan 1
2022 2022 2023 2023 2023 2024
www.XIFIN.com 5
Is CMS Gaming the System to Ensure CLFS
Cuts?
• 2016 OIG PAMA report reflects concerns that certain aspects of
PAMA could limit savings
• Despite CMS-redefined “Applicable Lab,” the number of hospital
labs that will report is still not reflective of market composition
– Labs that receive greater than 50% of Medicare revenue under the CLFS/PFS
based on NPI rather than TIN
• Calculation based on the “weighted median” for the data period vs.
“weighted average”
• Market factors do not reflect “market pricing” for routine clinical tests
– Private payor pricing is influenced by the CLFS
– A number of private payor contracts are at a percentage of the Medicare CLFS
www.XIFIN.com 6
OIG Concerned: Certain Aspects of PAMA
Could Limit Savings
• Medicare could pay more for certain lab tests when it switches to a
single national fee schedule
– Regional payments could be higher
– Median pricing in the private market could be higher than Medicare’s current rate
for some tests
• Medicare may pay more for specific sets of lab tests because under
the new payment system, it will no longer be able to pay using
“bundled” rates for those sets
• The absence of certain private payor pricing data from the data that
CMS will receive could limit decreases in Medicare lab test rates
www.XIFIN.com 7Laboratory Industry Test Volume by Facility Type
Independent; [CATEGO
34% Hospital; Inpatient; RY NAME]
53% 51% [VALUE]
; 0%
POL; 7%
Other; 5%
Source: G2 Intelligence, Truven Health Analytics. US Clinical Laboratory and Pathology Testing 2013-2015: Market Analysis, trends and Forecasts
www.XIFIN.com 8Calculating the Weighted Median
Source: Cormen, Thomas H.; Leiserson, Charles E.; Rivest, Ronald L.; Stein, Clifford (2001). "Introduction to Algorithms"
www.XIFIN.com 9Calculation of Average and Median
Row
#
Reimbursement
Units
1
3.11
1
2
3.48
1
3
3.52
1
4
5
6
3.9
3.97
4.02
1
1
1
Average
7
8
9
4.16
4.42
4.44
1
1
1
296.15 / 34 = 8.71
10
4.64
1
11
4.83
1
12
5.61
1
Median
13
5.87
1
14
6.49
1
15
6.5
1
(7.69 + 7.8)/2 = 7.75
16
7.36
1
17
7.69
1
18
7.8
1
19
7.96
1
20
21
8.05
8.14
1
1
(there are 2 “middle values”)
22
8.19
1
23
8.65
1
24
8.7
1
25
9.36
1
26
10.09
1
27
10.24
1
28
10.38
1
29
13.29
1
30
14.49
1
31
14.58
1
32
16.68
1
33
17.77
1
34
37.77
1
Sum
296.15
34
Source: Briggs Henan University 2010
www.XIFIN.com 10Weighted Median vs. Weighted Average
• Weighted median calculation not suited for financial analysis
• Weighted median better suited for Quality Control and removing
outliers
Proc Code 85027: Distribution Complete CBC
Medicare National Limit Amount
$8.81
Weighted Median Weighted Average
$7.91 $9.25
Source: XIFIN PAMA data set
www.XIFIN.com 11Weighted Median vs. Weighted Average
Proc Code 80053: Distribution Comprehensive Metabolic Panel
Weighted Average
Weighted Median $14.23
$10.50 Medicare National Limit Amount
$14.39
Source: XIFIN PAMA data set
www.XIFIN.com 12CMS Projects Medicare Benefit Savings
• Estimated Savings: 5.6% of CLFS spending in first year
• Estimates based on very limited information
• Note:
– Savings estimates do not represent across-the-board cuts and were based on a
sub set of high volume tests
– Each lab test can move up or down by different amounts.
In 2018 5 years (2016-25) 10 years (2016-25)
US$390 million US$2.3 Billion US$3.9 Billion
www.XIFIN.com 13Medicare Payments for Lab Tests in 2015:
Year 2 of Baseline Data - Summary
• Medicare Part B paid $7 billion for lab tests in 2015 (no change from
2014)
• The top 25 lab tests totaled $4.1 billion in 2015 (slightly less than in
2014)
• Medicare paid 19% more for all drug tests in 2015 than in 2014
• Medicare paid 44% less for all molecular tests in 2015 than in 2014
• New payment rates for lab tests will be based on data provided by a
projected 5% of labs; these labs received 69% of Medicare
payments in 2015
• Although Medicare payment rates are expected to decrease overall,
rates for some tests will increase in certain locations under the new
payment system
• Certain aspects of the new payment system that could limit savings
warrant ongoing monitoring
Source: September 2016 HHS OIG DATA BRIEF: Second set of annual baseline analysis of payment for the top 25 lab tests
www.XIFIN.com 14Payments Unevenly Distributed Across Labs
Medicare Payments for Top 25 Lab Tests
100% $4.1
90% 21%
$3.6
80%
$3.1
70%
25%
60% $2.6
% of Labs
$ Billion
95%
50% $2.0
40%
$1.5
30%
54% $1.0
20%
4% $0.5
10%
1%
0% $0.0
Labs (29,211) Medicare
Payments
($4.1B)
Source: OIG analysis of Medicare Part B lab test payments, 2016
www.XIFIN.com 15How to Prepare for Data Submission
• Assign authority to project lead who will sign off on final submission
• Project lead should designate individuals for data collection and
review
– Financial Analyst
– Financial/Compliance Auditor
– Billing system and reimbursement expert
– IT or reporting expert with access to reporting tools and source data
• Data Validation: Cross check system data to source data (ERAs/
EOBs)
– Identify clerical payment posting errors and adjustments
– Verify all reportable data has been captured
• Analysis: Review data quality and integrity
– Determine if claim is fully adjudicated within reporting period (recoupments,
adjustments, redeterminations)
– Identify payor adjudication errors that require redetermination, appeals etc.
– Financial over site to determine data makes sense
www.XIFIN.com 16Limited Sampling of Market Pricing
Clinical Labs
Top 20 tests based on Medicare Part B 2015 payments
Based on XIFIN data
Weighted Average
Big Labs Represent 50% of
Volume PAMA Impact : -29.6%
Big Labs Represent 30% of
Volume PAMA Impact : -19.6%
Source: XIFIN analysis based on XIFIN PAMA data set
www.XIFIN.com 17Limited Sampling of Market Pricing
Hospital Labs
Top 20 tests based on Medicare Part B 2015 payments
Based on XIFIN data
Weighted Average
Hospital Labs with NPI
PAMA Impact: +26.5%
Mix of Hospital Labs
with & without NPI
PAMA Impact: +32.1%
Source: XIFIN analysis based on XIFIN PAMA data set
www.XIFIN.com 18Limited Sampling of Market Pricing
Pain/Tox Labs
Top 20 tests by Medicare dollar volume
Based on XIFIN data
Weighted Average
PAMA Impact: +50.4%
Source: XIFIN analysis based on XIFIN PAMA data set
www.XIFIN.com 19Limited Sampling of Market Pricing
Molecular Labs
Top 20 tests by Medicare dollar volume
Based on XIFIN data
Weighted Average
PAMA Impact:+27.3%
Source: XIFIN analysis based on XIFIN PAMA data set
www.XIFIN.com 20PAMA Test Volume by Facility Type
POL; 7%
Other; 5% Big Labs;
17%
[CATEGO
RY NAME],
[CATEGORY [VALUE]
Big Labs;
Hospital NAME], 28%
Inpatient; 26% [VALUE] Hospital
Outreach
Hospital Labs; 44%
Outreach;
27%
Weighted Average
Lab Type Percent of Total Impact %
Big Labs 28% (44.8%)*
Rest of Independent Labs 28% 8.0%*
Hospital Outreach Labs 44% 32.1%*
Total 100% 3.8%
Source: XIFIN analysis based on XIFIN PAMA data set *Top 20 OIG Codes
www.XIFIN.com 21Hospital Outreach Impact on PAMA Rates
% of Hospital Outreach Labs
Reporting Weighted Average Impact %
0%
-‐18.4%
10%
-‐16.2%
25%
-‐12.8%
50%
-‐7.3%
75%
-‐1.7%
100%
3.8%
Source: XIFIN analysis based on XIFIN PAMA data set
www.XIFIN.com 22Data Capture Is Critical
• Imperative to have a revenue cycle management system that can
capture necessary information, ability to:
– Consolidate multiple payments per procedure code and adjusted allowables
– Reconcile units billed vs. paid
– Identify paid claims still in process (appeals, redetermination, corrected claim etc.)
– Identify over payments and under payments
– Accurately process recoupments, refunds and adjustments at the procedure code
level
– Capture components of contractual allowance calculation
– Identify change in primary payor from the ERA
• To comply with deadlines, system must routinely have captured the
information
• Data now needs to be refined to address final sub-regulatory criteria
and portal reporting requirements
www.XIFIN.com 23Civil Monetary Penalties for
Non-Reporting or Mistakes in Reporting
• If CMS determines that an applicable
laboratory has failed to report, or made
a misrepresentation or omission in
reporting, applicable information, the
• Certification By Specified Official law provides that a civil monetary
– Executive (President, CEO, or CFO, or
penalty of “up to $10,000 per day per
violation” may apply
an individual who has been delegated
– Actual maximum of CMPs will be
authority to sign for and who reports updated to reflect inflation: US$10,017
directly to such an official) of the in 2016, with further annual updates in
Reporting Entity must attest that data the future.
are accurate, complete, and truthful,
and meet all the reporting parameters • CMS notes that the CMP amount is a
• Individual with delegated authority maximum not a minimum and will be
added in response to comments assessed based on circumstances of
each case
– CMPs would apply at the level of the
Reporting Entity
www.XIFIN.com 24Lessons from the PAMA Audit for Future
Reference
• Billed amount equals allowable
– Generally indicates lab’s billed amount is lower than the allowable
– This artificially deflates the market price and should be noted for future
corrections to billed price
• Allowed amount is less than contracted fee schedule
– Incorrect payment that should be appealed and not reported
• Contracts are a percentage of Medicare
– Contracts should be renegotiated to avoid distorting market based pricing
analysis
• Retention of Source Documentation
• Optimize ERAs and eliminate manual payment posting
• Integrity of Financial Systems and reporting/analytical capabilities
• Creation of audit file that supports submission
www.XIFIN.com 25Example Audit Cases
• Incorrect units reported on the EOB/ERA
– Units 5x, 10x and even 1000x more than actual test submitted. All other values are
correct. (If they allowed $17 for 1 unit but show 1000 units, allowed = $0.017 per unit)
• Missing values from the EOB/ERA
– Missing reversal of the allowed amount only the payment was reversed.
– The allowed was reversed and the payment wasn't recouped.
• Multiple payments/reversals
– Payor did not apply a reversal of prior incorrect allowable, but provided an additional
allowable when re-adjudicating claim. Possibly multiple times.
– Partial payments/reversals and how they aggregate.
• Contractual Allowance calculation is net of sequestration
• Clerical payment posting adjustments
– 1 in 10 manually posted claims have an error
– Payment posted in bulk, not at procedure code level
– Systems that auto-allocate bulk payments have high error rates and cannot be
defended in an audit
– Misapplied allowed charges to wrong code or payor
– Keying errors
www.XIFIN.com 26Thank You
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