A Primer on PAMA: The impending legislation that may determine Medicare laboratory fees from 2025 onward

By Michael Schubert, PhD

With healthcare costs rising, reimbursement rates lagging, and workforce shortages a major concern, pressure on the clinical laboratory is high on all sides.¹ Enter the Protecting Access to Medicare Act of 2014  (PAMA)²—a bill that threatens deep cuts to reimbursement rates for laboratory testing while increasing the burden of required data collection and reporting. Read on for a quick primer on this legislation, the bill that hopes to counteract its effects, and what laboratories can do to advocate for their patients’ needs.

What is PAMA?

On its surface, PAMA is intended to delay cuts to Medicare physician payments, ensuring that patients in need continue to receive care. However, the delay to these cuts is achieved by slashing payments for services such as clinical laboratory testing, with the biggest reductions focused on key tests such as complete blood counts, metabolic panels, urine cultures, glucose testing, and more.³ Currently, PAMA caps these reductions at 15 percent per year. Other services whose payments are reduced include skilled nursing care, some advanced diagnostic imaging, and “misvalued services.”

What is SALSA?

The Saving Access to Laboratory Services Act (SALSA) aims to improve the accuracy of Medicare reimbursements for lab testing by changing the way information on payments and test volumes is collected.⁴ PAMA requirements may have negatively impacted labs’ ability to collect payment data accurately during the first reporting period in 2017, as well as skewing data toward high-volume independent laboratories (thereby disadvantaging smaller laboratories with lower test volumes and hospital laboratories with higher rates).⁵ SALSA also proposes to decrease the administrative burden of data collection and reporting and cap payment reductions at 5 percent per year, rather than 15 percent.

Current status of PAMA and SALSA

Although PAMA was implemented in 2014, its clinical laboratory data reporting and reimbursement reductions have been repeatedly delayed by temporary government actions. The fifth such action, Section 502 of the Further Continuing Appropriations and Other Extensions Act of 2024, delays the next data reporting period for PAMA to Q1 2025 and applies a 0 percent payment reduction to lab testing in 2024.⁶

At the moment, the Centers for Medicare & Medicaid Services (CMS) anticipates phasing in PAMA-associated payment reductions over 2025, 2026, and 2027, with reductions capped at 15 percent each year. The expectation is that applicable laboratories (see “Is my laboratory required to report?” sidebar) will collect and report the required data—HCPCS codes, private payer rates, test volumes, and National Provider Identifier (NPI)—between January 1 and March 31, 2025 so that the information can be used to update the 2026 Medicare Clinical Laboratory Fee Schedule.⁷

Is my laboratory required to report? If your laboratory meets the following criteria, you are required to report applicable data: □You bill Medicare Part B under your own NPI or on the Form CMS-1450 Type of Bill 14x □Your combined revenues from the Medicare Clinical Laboratory Fee Schedule and Physician Fee Schedule constitute over 50 percent of your total Medicare revenues

 

SALSA, a bipartisan bill, currently has 54 sponsors in the House of Representatives and four in the Senate;⁸ it has also received endorsements from over 30 professional and patient organizations including the American Society for Clinical Pathology and the American Society for Clinical Laboratory Science,⁹ the Association for Diagnostics & Laboratory Medicine (formerly known as the American Association for Clinical Chemistry),¹⁰ and the American Clinical Laboratory Association.¹¹ Despite this broad support from both government and industry, its passage remains in doubt due to the need for funding to support higher reimbursement rates in the laboratory and elsewhere.

Potential impact of PAMA and SALSA

Because PAMA reduces reimbursement rates for approximately 800 tests, including many of the most commonly ordered ones, it’s likely to affect almost every laboratory providing services to patients on Medicare. In an impact survey presented in March 2023, labs reported that reimbursement rates had a significant impact on whether or not they offered specific tests, expressing hesitation over tests whose costs were not fully covered and suggesting that cuts might reduce adoption of new tests, increase send-outs, and potentially even prompt workforce reductions.¹² Almost one-third (30 percent) of respondents reported that PAMA had already negatively impacted their laboratories and altered their practices, whereas a further 60 percent were concerned about the legislation’s future impact on their labs. Over half of commercial laboratory respondents stated that they would consider selling or merging their labs if PAMA’s payment cuts came into effect. Even the data reporting requirements were considered burdensome, although some respondents suggested that subsequent reporting periods might be easier than the first.

It’s clear that PAMA’s cuts could have widespread impact on patient care. With fewer laboratories offering affected tests and lower reimbursement rates making high-resource services (such as in-home sample collection) impossible, many patients may not receive the testing they need—which not only affects their health, but also threatens to increase overall healthcare costs by allowing treatable conditions to progress.^13,14

SALSA’s goal is to prevent these challenges for both labs and patients by providing a more accurate picture of current test reimbursement rates across all laboratory types, simplifying the data collection process to reduce administrative burden, and reducing the scale of year-on-year funding cuts. The expected outcome? Greater access to testing, more willingness to innovate or adopt new tests, improved laboratory resilience (especially in situations such as public health emergencies), and lower overall healthcare costs.

What can clinical labs do?

The key to preserving funding for laboratory services is to educate and advocate. Clinical laboratory professionals can consult with their administration to find out how PAMA and SALSA might affect their labs and what plans are in place to address any concerns or requirements. They can contact government officials to express their views and request support for SALSA—for instance, by using this automated template or reaching out to individual representatives. Laboratory groups and healthcare systems can express their support for SALSA publicly or participate in efforts such as educational programs, in-person consultations with representatives, or advocacy events. Ultimately, although PAMA’s full implementation has been delayed to 2025, only a permanent decision will ensure ongoing protection for patients and professionals alike.

For more tips on advocating for your laboratory, see G2 Intelligence’s article on advocacy, “Championing Change.”

 

References:

1. PwC Health Research Institute. Medical cost trend: behind the numbers 2024. June 28, 2023. https://www.pwc.com/us/en/industries/health-industries/library/assets/pwc-behind-the-numbers-2024.pdf.
2. H.R.4302 – Protecting Access to Medicare Act of 2014. Congress.gov. April 1, 2014. https://www.congress.gov/bill/113th-congress/house-bill/4302/text.
3. National Independent Laboratory Association. PAMA: An Urgent Threat to Laboratory Infrastructure. https://www.nila-usa.org/images/nila/2024/PAMAfact24.pdf.
4. H.R.2377 – Saving Access to Laboratory Services Act. Congress.gov. March 29, 2023. https://www.congress.gov/bill/118th-congress/house-bill/2377/text.
5. Rothenberg IZ. The Protecting Access to Medicare Act (PAMA): Reduced Payments to Laboratories in 2018. May 9, 2018. https://www.physiciansofficeresource.com/articles/laboratory/the-protecting-access-to-medicare-act-pama-reduced-payments-to-laboratories-in-2018.
6. H.R.6363 – Further Continuing Appropriations and Other Extensions Act, 2024. Congress.gov. November 16, 2023. https://www.congress.gov/bill/118th-congress/house-bill/6363/text.
7. Centers for Medicare & Medicaid Services. CLFS Reporting. CMS.gov. November 22, 2023. https://www.cms.gov/medicare/payment/fee-schedules/clinical-laboratory-fee-schedule/clfs-reporting.
8. S.1000 – Saving Access to Laboratory Services Act. Congress.gov. March 28, 2023. https://www.congress.gov/bill/118th-congress/senate-bill/1000/text.
9. Cooney P et al. Clinical Laboratory Medicare Reimbursement: Support SALSA! September 2023. https://ascls.org/wp-content/uploads/2022/09/Issue-Brief-SALSA-2022.pdf.
10. Haymond S. Rep Hudson SALSA endorsement letter. April 11, 2023. https://www.myadlm.org/-/media/Files/Health-and-Science-Policy/Legislative-Issues/2023/Rep,-d-,-Hudson,-d-,SALSA,-d-,endorsement,-d-,letter.pdf.
11. CLC Provider SALSA Support Letter. September 8, 2022. https://www.acla.com/wp-content/uploads/2022/09/2022-Sep-8-CLC_Provider-SALSA_HR8188_-S4449-Support-Letter-Final.pdf.
12. Association for Molecular Pathology. PAMA Impact Survey. March 6, 2023. https://www.amp.org/AMP/assets/File/advocacy/AMP_PAMA_Impact_Survey_Output%202_28_23%20AMP%20Final_.pdf.
13. Kraft AD et al. The health and cost impact of care delay and the experimental impact of insurance on reducing delays. J Pediatr. 2009;155(2):281–285.e1. doi:10.1016/j.jpeds.2009.02.035.
14. EveryLife Foundation for Rare Diseases. The Cost of Delayed Diagnosis in Rare Disease: A Health Economic Study. September 14, 2023. https://everylifefoundation.org/wp-content/uploads/2023/09/EveryLife-Cost-of-Delayed-Diagnosis-in-Rare-Disease_Final-Full-Study-Report_0914223.pdf.

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This article originally appeared in G2 Intelligence, Lab Industry Advisor, Volume 2, April 2024, posted online March 25, 2024, in advance of PDF publication.

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Author Bio:

Michael Schubert, PhD, is a veteran science and medicine communicator. He holds graduate degrees in biochemistry and molecular biology with a research focus on chromatin structure and function and has written on subjects from subspeciality pathology to fictional science. In addition to writing and editing, he is co-director of the Digital Communications Fellowship in Pathology and professor of professional practice in academic writing at ThinkSpace Education, the University of Chichester.