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Impact of Medicare Rate Cut (PAMA rule) 

Reduction of Medicare fees for laboratory tests under new PAMA rule is a major concern for many clinical labs. Medicare is planning to reduce annual payments to medical labs by $680 million. Fee rate changes will be implemented gradually over three years and affect different CPT codes in different ways. 

To understand how these changes will affect our clients we have analyzed historical Medicare payments and computed detailed impact on each US medical lab based on the historical mix of CPT codes submitted to Medicare for payments. 

Below are aggregated analysis results. To get free detailed analysis report for your lab, complete the request form

 

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KEY FINDINGS

  • In 2018  first phase of rate cuts comes into effect but for most of the labs, the impact will be limited. 50% of labs will see negative revenue impact within $10K, 26% of labs are estimated to have losses from $10 to $50K and 17% of labs will are expected to see revenue drop up to $1m. Two largest national labs will be most impacted with revenue drop over $100 million.

  • Few labs will see an increase in revenues from the  Medicare rate change, some up to $1 million

  • Our statistical model estimates that in 2019 impact from PAMA rate cut will more than double, increasing Medicare savings from $670 million to over $1.3 Billion.  

  • The change will mostly impact larger labs what perform the majority of the most common tests such as Comprehensive Metabolic Panel or Lipid Panel tests.
  • For majority of labs, impact will not significantly change from  2019 to 2020

  • Our statistical model estimates that in 2020 Medicare will save over $2B from rate cuts assuming  Compound Annual Growth Rate (CAGR) of test volumes to be at 5% 

  • While two largest national reference labs will experience the majority of impact, the most of Medicare savings will come from a large number of small providers.