PAMA’s role in the COVID-19 testing disaster

April 6, 2020

We all know that COVID-19 is putting a huge strain on the entire healthcare system. Hospitals are overrun with acute cases for COVID-19. The ability to test and detect COVID-19 is crucial to understanding how the virus is spreading and what steps are needed to contain this ever growing pandemic.

As of March 25, Quest Diagnostics had about 160,000 COVID-19 test orders waiting to be processed. This amounts to about half of the 320,000 total orders for tests the company had received up to that date. How did we end up turning our nation's entire diagnostic capability into duopoly - where Quest and Labcorp have ultimately held  Americans’ laboratory testing hostage? 

The answer is quite simple, but more despicable - the nation's largest health plans lobbied Congress to unfairly target independent clinical laboratories to concentrate power with Quest and Labcorp who secretly share patient’s lab results with them and without the knowledge of their patients. 

What is PAMA?

On June 17, 2016, the Centers for Medicare and Medicaid Services (CMS) announced the release of its final rule, implementing section 216(a) of the Protecting Access to Medicare Act of 2014 (PAMA), which requires reporting entities (independent laboratories) to report private payer fees paid for laboratory tests. Those fee amounts were then to be used to calculate Medicare laboratory payment rates. The final rule also announced CMS’ decision to move the implementation date for the private payer rate-based fee schedule to January 1, 2018. The problem with this logic is that unlike hospitals that receive a percentage of billed charges, independent clinical laboratories always get a percentage of the Medicare/CMS fee schedule from commercial payers. As Medicare payments are reduced, commercial payments to independent labs continue to drop. The result is routine testing is not financially viable and many independent clinical laboratories have been forced to close their doors.  

On January 1, 2018, CMS published the new clinical laboratory fee schedule, reducing Medicare laboratory test reimbursement 40-50%. This has trickled down to commercial payers and resulted in mass closures of clinical laboratories. As we've seen with the COVID pandemic, we lack the capacity for testing and without testing our economy is now headed into a depression. 

The lack of widely available COVID-19 testing is a direct result of failed Congressional policy that unfairly targeted independent clinical laboratories and resulted in small rural and regional hospitals and independent clinical laboratories to shutdown and drastically reduce testing services. 

We must strengthen our nation’s diagnostic capabilities.  

Congress must pass legislation to reverse the aggressive reduction (PAMA) in the clinical laboratory fee schedule to ensure independent clinical laboratories are able to continue to serve as a community resource for years to come, even after the immediate threat of this pandemic passes. We will not have a strong and cost effective health care system without them. 

We’ve launched a petition to call on Congress to support laboratories in their goal of servicing the peoples’ need for rapid turnaround time of COVID-19 and other routine lab testing. 

As everyone works together to fight the COVID-19 pandemic, independent clinical laboratories continue to play a vital role in providing care to patients and by providing rapid turnaround of laboratory testing to physicians and hospitals. 

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