Current Status of Clinical Laboratory Reimbursement

Introduction In general, reimbursement for laboratory services in this country comes from two third-party payer sources - government and private sector. This third-party payment allows patients to access laboratory services from hospitals, physician offices, long-term care and other post acute providers and private laboratories. There are many components to this complex reimbursement system, including how and when tests are covered (coverage decisions), procedure and diagnosis codes (identifying what was actually ordered and performed) and payment methodologies. While levels of reimbursement are intended to reflect the value and the cost of the service being provided, over time the level of payment has been continually reduced to meet financial goals of the government or the healthcare system.

Government payers primarily reflect Medicare on the federal level and Medicaid (Medical Assistance) on the state level. The Medicare program is the most influential reimbursement system since it often impacts state programs and private payer reimbursement policies and payment levels. All public payers and approximately 67% of private payers use Medicare's payment methodologies as the basis for their own and as tools for negotiating discounts with providers.¹ In our current fiscal environment, with pressures on the federal budget and concerns about the long term viability of Medicare, we have seen a change in which the Medicare program is beginning to look at private payer reimbursement levels as an opportunity to reduce its financial responsibility for laboratory reimbursement.

The steady reduction in payment levels from Medicare and other payers are resulting in a negative impact on…

ABBREVIATIONS: ACA – Accountable Care Act; APC – Ambulatory Patient Classification; CAH – Critical Access Hospital; CLFS – Clinical Laboratory Fee Schedule; CMS – Centers for Medicare and Medicaid Services; CPI – Consumer Price Index; DRG – Diagnosis Related Group; FEHB – Federal Employee Health Benefits; IOM – Institute of Medicine; MolDX – Molecular Diagnostics; MS-DRG – Medical Severity Diagnosis Related Group; NLA – National Limitation Amount; OIG – Office of Inspector General; OPPS – Outpatient Prospective Payment System; PPS – Prospective Payment System; SGR – Sustainable Growth Rate.