The Protecting Access to Medicare Act of 2014 (PAMA) for Laboratories: What You Need to Know 

February 23, 2023  |  Shadowbox   |  ,


According to the CDC, 70% of today’s medical decisions depend on laboratory test results. 14 billion laboratory tests are ordered annually, and yet a large portion of lab billing goes unpaid, with bad-debt write-offs (the amount that is never paid) estimated at more than 15% of total revenues. 

Despite these facts and challenges, Congress passed the Protecting Access to Medicare Act (PAMA) in 2014.  The stated purpose was to ensure millions of seniors could maintain access to critical health services, however the reality is that Congress was looking for an offset to previously mandated cuts to reimbursement for physicians which were regularly exempted each year by Congress.  PAMA “limited” cuts to laboratories at 10% in each of year one through three, and 15% in each of the following three years.  The collective impact of the expected cuts to reimbursement was massive.  In fact, the Congressional Budget Office scored the savings from PAMA in the billions of dollars; enough to allow Congress to eliminate the otherwise mandated cuts for physician services.  

Six aspects of PAMA that specifically apply to clinical laboratories:  

  1. Setting prices with market data: Certain labs were required, as of Jan. 1, 2016, to report private-payer payment rates and volumes for their tests. 
  1. New category – Advanced Diagnostics Tests (ADTs): For certain tests developed and performed by single laboratories, the initial payment rate for ADTs would be set at the “actual list charge.” If the charge exceeds private-payer rates by more than 130%, Centers for Medicare and Medicaid Services (CMS) can recoup the overpayment. 
  1. Setting prices for new tests and expert advisory panel: To ensure transparent and reliable decisions about pay rates and coverage, CMS would assemble a panel of outside advisors, including clinicians and other technical experts. Also, CMS must follow either the crosswalk or gap fill process to determine the initial payment rates and explain, in a transparent manner, how the calculations were made. 
  1. Changes in how Medicare handles lab test codes: For new lab tests, CMS would use temporary HCPCS codes to enable payment prior to a permanent HCPCS or CPT code. 
  1. Coverage requirements and decisions: In support of fair and open coverage decisions for a lab test when a local coverage determination is needed, MACs must now follow a defined development and appeals process. 
  1. Oversight of the process to create coverage guidelines and set lab test prices: Two levels of oversight are written into the law: one by the U.S. Government Accountability Office (GAO), the other by the Office of Inspector General (OIG) of Department of Health and Human Services (DHHS). 

Issues with PAMA  

There are, however, existing issues with the data reporting performed by CMS, as they fail to capture the true representation of the laboratory market. Specifically, the clinical diagnostic community has argued that in developing the mandated “weighted median” pricing from commercial payers as the benchmark for the resetting of CMS rates, hospital and physician-office laboratories are vastly underrepresented.  This skewed payment methodology has led to severe cuts to laboratories, with the most significant cuts impacting tests used for diagnosing and treating patients with chronic diseases.  

PAMA Reform 

Congress has noted the flawed PAMA implementation by passing two acts Laboratory Access for Beneficiaries (LAB) Act and Coronavirus Aid, Relief, and Economic Security (CARES) Act that delayed rounds of PAMA data reporting.  

A more recent attempt at PAMA reform, called the Saving Access to Laboratory Services Act (SALSA), has been introduced to try and address the following issues related to PAMA: 

  • Using statistical sampling for widely available tests performed by a “representative pool of all clinical laboratory market segments.” 
  • Introducing annual “guardrails” aimed at creating limits for reductions as well as increases in Clinical Laboratory Fee Schedule (CLFS) rates. 
  • Excluding Medicaid managed care rates since they are not true “market rates.” 
  • Giving labs the option to exclude mailed remittances from reporting if less than 10% of claims. 
  • Easing clinical labs’ reporting requirements by changing data collection from three years to four. 

Unfortunately, SALSA failed to receive a vote on the floor, and although considered for inclusion in Congress’s end of year budget legislation called an Omnibus, ultimately the costly budget scoring and other factors were too much to overcome, it wasn’t included, and PAMA remains a challenge.  That said, Congress clearly recognized the issues with PAMA, in large part thanks to the collaboration between laboratory industry leaders and organizations, and secured a one-year delay of PAMA payment cuts and data reporting. 

PAMA isn’t the only challenge facing the laboratory industry, so laboratories need to invest in technology that can increase revenue and save time and resources in every way possible.  One ready opportunity is through eliminating the administrative burden of tracking down patient records. Shadowbox is a secure, no-code healthcare integration and automation platform that converges patient information into a single “pane of glass.” Shadowbox enables a lab to provide its own branded application allowing their clinician customers to operate multiple patient care applications at once, accessing all the information they need in real-time, in one place. The clinician can automatically provide the lab with a full view of a patient, at the time of order, from medications and diagnosis codes to verified insurance information and up-to-date billing.

Shadowbox is a smart, secure, HIPAA-compliant automation platform built for healthcare. We tackle interoperability and compliance by turning your browser into an “infinite API.”

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