Appeals court revives lab challenge of multibillion-dollar Medicare cut

A federal appeals court on Tuesday revived a group of clinical laboratories’ challenge to billions of dollars in lost Medicare revenue.

In a unanimous decision, the three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit overturned a lower court ruling that the laboratories couldn’t dispute the lost reimbursement funding. The Medicare changes stemmed from the Protecting Access to Medicare Act of 2014, or PAMA, which required certain clinical laboratories to give the CMS private payer data that could be used to set new reimbursement rates.

Although portions of the law aren’t reviewable by the courts, the D.C. Circuit determined it could review the data collection provisions and resurrected the American Clinical Laboratory Association’s lawsuit.

“Several features of the statute suggest that Congress meant to bar challenges to the ‘establishment of payment amounts’ but not to prevent review of the rule delineating the data collection practices that precede and inform the setting of those amounts,” U.S. Circuit Judge Cornelia Pillard wrote for the panel.

A District Court judge in September 2018 dismissed the case citing the judicial review clause of the law. The case will be sent back to the district court level for further review.

The ACLA, a trade group for clinical laboratories, sued the CMS in December 2017 over the planned cuts, alleging the agency ignored congressional intent and instituted a flawed data-reporting process.

The group’s president, Julie Khani, said in a statement that she was encouraged by the D.C. Circuit’s decision.

“HHS’ continued flawed data collection process poses a direct challenge to the rule of law and PAMA’s intent to support a sustainable, market-based laboratory market for millions of seniors,” she said. “On behalf of those who have already seen the consequences of this painful overreach, we urge the district court to act quickly to rule on the merits of ACLA’s case.”

The Congressional Budget Office in 2017 estimated PAMA would cut Medicare spending by $100 million in the first year of the new rates and $2.5 billion over a decade. However, that assumed that more labs would be surveyed under the clinical laboratory definition. Most hospital laboratories are exempt from the law.

Medicare’s fee schedule for lab tests has been largely unchanged since it was established in 1984. Each lab determines its own rates based on market prices. Medicare has historically paid 18% to 30% more than other insurers for some tests, HHS’ Office of Inspector General found. The program shells out about $7 billion a year for clinical diagnostic laboratory tests.

https://www.modernhealthcare.com/legal/appeals-court-revives-lab-challenge-multibillion-dollar-medicare-cut