Kusserow on Compliance: OIG baseline analysis of the top 25 lab tests

The OIG released a report that provided a baseline analysis of the top 25 lab tests in 2014, as part of the preparation for a change over of the lab payment system called for by the Protecting Access to Medicare Act of 2014 (PAMA) (P.L. 113-93). The new payment system will be for clinical laboratory tests, the first such reform in three decades.


Beginning in 2017, payment rates, which are currently based on lab charges from 1984 and 1985, will be replaced with new market rates. The new system of payment calls for a major undertaking by CMS, with significant implications for the lab industry. To provide oversight, PAMA mandated that the Office of Inspector General (OIG) monitor Medicare payments for lab tests and the implementation of the new payment system. Part of the mandate requires the OIG to publicly release an annual analysis of the top 25 lab tests based on Medicare payments, before the new payment system goes into effect, to assist CMS in its preparation. In response to this mandate, the OIG conducted an analysis of Medicare claims data for lab tests performed in 2014 and reimbursed under the clinical laboratory fee schedule. In addition to issuing an annual analysis of the top 25 lab tests, the OIG will conduct analyses to determine the implementation and effect of the new payment system.


The OIG analyzed claims for lab tests performed in independent labs, physician-based labs, and facilities, such as outpatient hospitals. The report specifically analyzed claims data by procedure code, beneficiary, lab, setting, and test category to describe Medicare Part B payments for lab tests in 2014. It found that in 2014, Medicare Part B paid $7.0 billion for 451 million lab tests. About 63,000 labs received Medicare payments for providing lab tests to 27 million beneficiaries, representing over half of all Medicare beneficiaries in 2014. For the top 25 lab tests in 2014, Medicare Part B payments totaled $4.2 billion with independent labs accounting for the majority of the payments. The OIG specifically noted that only a small portion of labs accounted for the majority of Medicare Part B payments. The tests fell into seven categories, with the chemistry category with molecular pathology tests predominately costing the most per test.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2015 Strategic Management Services, LLC. Published with permission.