CY 2023 Medicare Physician Fee Schedule: Clinical Laboratory Update

Firm Publication

On November 2, 2022, Centers for Medicare & Medicaid Services (CMS) filed its final rule implementing changes to the Medicare Physician Fee Schedule for CY 2023 (Final Rule). Embedded within this Final Rule are important changes for clinical laboratories that take effect January 1, 2023.

First, CMS implements congressionally-mandated changes to its Protecting Access to Medicare Act (PAMA) reporting regulations to update reporting timelines and limit the phase-in of laboratory test payment reductions. Laboratories should be dusting off their 2019 data and preparing to report before March 31, 2023.

Second, for the first time, CMS is issuing regulations to codify and modify its longstanding policies on billing Medicare for specimen collection fees and travel allowances. CMS made changes to simplify and clarify its prior guidance and, perhaps most importantly, update specimen collection payment rates that had previously remained stagnant for years. In the course of doing so, CMS modernizes its policy and weaves in essential reminders to the industry.

Updating PAMA Regulations to Revise Data Collection/Reporting Periods & Phase-In of Payment Reductions

In 2014, PAMA revised how Medicare establishes payment rates for clinical laboratory tests. Since its implementation, Medicare has set the clinical laboratory fee schedule (CLFS) rates based on data reported by applicable laboratories on the payment rates they receive from commercial payors. The initial reporting occurred in early 2017 based on data from 2016. In addition, PAMA limited the amounts by which the CLFS rates could be reduced for most tests to not more than 10% per year for the first three years (i.e., 2018 through 2020) of implementation and not more than 15% for the next three years (i.e., 2021 through 2023). Advanced diagnostic laboratory tests (ADLTs), which are largely new and innovative tests, are handled differently.

A series of congressional actions, spurred by the industry and the COVID-19 public health emergency, delayed the second reporting period initially intended for early 2020 and extended the phase-in of any further rate reductions. Most recently, section 4(b) of the Protecting Medicare and American Farmers from Sequester Cuts Act (PMAFSCA) again delayed the timeline for reporting and phasing-in reductions.

In the CY 2022 Final Rule, CMS updates its regulations at 42 CFR part 414, subpart G consistent with PMAFSCA. Accordingly, CMS revises the definitions of “data collection period” and “data reporting period” to specify that for the data reporting period of January 1, 2023, through March 31, 2023, the data collection period is January 1, 2019, through June 30, 2019. Moreover, CMS clarifies that data reporting is required every three years beginning January 2023. As a result, the CLFS payment rates for CY 2024 through CY 2026 will be based on data collected in the first half of 2019 and reported in early 2023. CMS declined a commenter’s request to revise the data collection period to January 1, 2022, through June 30, 2022, because the requirement is statutory and thus beyond CMS’s authority to adjust.

In addition, the Final Rule codifies PMAFSCA’s phase-in of payment reductions under the CLFS. Accordingly, the Final Rule updates the percentage by which the CLFS payment rates can be reduced: (1) to no more than 0.0%, as compared to CY 2021, for CY 2022, and (2) to no more than 15%, as compared to the preceding year for CY 2023 to 2025.

New Specimen Collection Fee & Travel Allowance Regulation

As part of the Final Rule, CMS promulgates a new regulation: 42 C.F.R. § 414.523 entitled “Payment for laboratory specimen collection fee and travel allowance.”

Historically, CMS’s specimen collection fee and travel allowance policies primarily existed in the Medicare Claims Processing Manual Pub. 100-04, chapter 16, §§ 60.1-.2; and, as between the manual and various Medicare transmittals, the guidance was inconsistent in places. In issuing the new regulation, CMS aims to clarify and modify its existing policies to take into account current healthcare practices and simplify the rules with respect to claims for travel allowances.

Specimen Collection Fees

In codifying these rules, CMS reiterates the eligibility requirements for billing for any specimen collection for clinical laboratory testing. CMS explains (and codifies) that the specimen must meet the following criteria:

  • Used to perform a Medicare-covered laboratory test paid under the CLFS.
  • Collected by a trained technician from a Medicare beneficiary who is either homebound or a non-hospital inpatient (but only when no qualified personnel is available at the facility to collect the specimen).
  • One of the following types—a blood specimen collected through venipuncture or a urine sample collected by catheterization.

In the Final Rule, CMS expressly states that the above-described circumstance is the only circumstance in which Medicare will pay a specimen collection fee, consistent with its past practices.

CMS had proposed to retain the same rates it has been paying for years—$3 per patient or $5 for a patient in a skilled nursing facility (SNF) or on behalf of a home health agency (HHA)—but agreed with commenters that updating the $3 amount for inflation was appropriate. As a result, beginning January 1, 2023, CMS will pay $8.57 for all specimens collected in one qualifying patient encounter, with an increase to $10.57 per patient encounter for specimens collected from a Medicare beneficiary in an SNF or on behalf of an HHA. Moreover, beginning January 1, 2024, CMS will update the specimen collection fee amount for each CY by the percent change in the CPI-U for the 12 months ending June 30 for the year preceding the update year.

In the Final Rule, among other things, CMS reiterates that only one specimen collection fee will be allowed for each single patient encounter, even if different types or multiple specimens are drawn from the patient. Additionally, CMS clarifies that specimens must be collected by “trained technician”—described in the Final Rule as “those staff providing specimen collection services” and includes phlebotomists—to clear up the confusion between language in Medicare policies and language from the U.S. Bureau of Labor Statistics.

Travel Allowance Policies

As part of the new regulation—42 C.F.R. §414.523—CMS is codifying and updating the Medicare CLFS travel allowance policies for laboratory specimen collection.

Importantly, CMS reiterates that a claim for a travel allowance may not be submitted where the technician merely acts as a messenger to pick up specimens. A travel allowance may only be paid if a specimen collection fee is also payable, meaning the specimen collection:

  • Requires a trained technician.
  • Is for a Medicare beneficiary who is homebound or an inpatient at a facility (other than a hospital).
  • Is for a Medicare-covered test.

When permitted, the travel allowance available depends on the distance traveled and the number of locations:

  • Flat Rate: A flat rate travel allowance applies when the trained technician travels 20 eligible miles or less to and from one location for specimen collection from one or more Medicare beneficiaries. For CY 2023, the amount is $10.40 divided by the number of Medicare beneficiaries who received a qualifying specimen collection.
  • Per-Mile: A per-mile travel allowance applies when a trained technician travels (1) more than 20 eligible miles to and from one location for specimen collection from one or more Medicare beneficiaries; or (2) to more than one location for specimen collection from more than one Medicare beneficiary. For CY 2023, the mileage rate is $1.04 per mile. As a result, the total travel allowance would be the eligible miles multiplied by $1.04, which is then divided by the number of Medicare beneficiaries who received a qualifying specimen collection.

The flat rate is calculated based on the mileage rate multiplied by ten. The mileage rate, $1.04 for CY 2023, is based on the IRS standard mileage rate plus the median hourly wage for a phlebotomist (based on U.S. Bureau of Labor Statistics) divided by 40 (i.e., estimated average miles per hour driving speed).

To determine the travel allowance that applies, laboratories need to determine the “eligible miles.” CMS proposed starting and ending the mileage calculation at the laboratory. However, based on commenter responses that phlebotomists, particularly in rural areas, often start from their homes and end at a location where they ship the specimens, CMS finalized a more flexible standard. As codified, “eligible miles” begin at the laboratory or the starting point of the technician’s travel for qualifying specimen collection and end at the laboratory or the ending point of the technician’s travel for qualifying specimen collection. Eligible miles do not include miles traveled for any purpose unrelated to qualifying specimen collection, such as collecting specimens from non-Medicare beneficiaries or for personal reasons. As a result, if multiple stops are made, and any of those are for non-Medicare beneficiaries or personal reasons, the miles associated with those stops must be subtracted from the total trip. CMS provides some helpful examples in the Final Rule on calculating the eligible miles.

Please contact the authors if you have any questions about the changes for clinical laboratories in the Medicare Physician Fee Schedule for CY 2023.

Series: Changes to Medicare Physician Fee Schedule for CY 2023

On November 2, 2022, the Centers for Medicare & Medicaid Services filed a final rule implementing changes to the Medicare Physician Fee Schedule for CY 2023 (Final Rule). Within this Final Rule are significant changes for various healthcare industry sectors. The healthcare attorneys at Bass, Berry & Sims have reviewed the Final Rule and have provided an in-depth analysis broken down by topic. Additional installments in this series focus on updates related to:

Related Professionals
Related Services
Firm Publication

On November 2, 2022, Centers for Medicare & Medicaid Services (CMS) filed its final rule implementing changes to the Medicare Physician Fee Schedule for CY 2023 (Final Rule). Embedded within this Final Rule are important changes for clinical laboratories that take effect January 1, 2023.

First, CMS implements congressionally-mandated changes to its Protecting Access to Medicare Act (PAMA) reporting regulations to update reporting timelines and limit the phase-in of laboratory test payment reductions. Laboratories should be dusting off their 2019 data and preparing to report before March 31, 2023.

Second, for the first time, CMS is issuing regulations to codify and modify its longstanding policies on billing Medicare for specimen collection fees and travel allowances. CMS made changes to simplify and clarify its prior guidance and, perhaps most importantly, update specimen collection payment rates that had previously remained stagnant for years. In the course of doing so, CMS modernizes its policy and weaves in essential reminders to the industry.

Updating PAMA Regulations to Revise Data Collection/Reporting Periods & Phase-In of Payment Reductions

In 2014, PAMA revised how Medicare establishes payment rates for clinical laboratory tests. Since its implementation, Medicare has set the clinical laboratory fee schedule (CLFS) rates based on data reported by applicable laboratories on the payment rates they receive from commercial payors. The initial reporting occurred in early 2017 based on data from 2016. In addition, PAMA limited the amounts by which the CLFS rates could be reduced for most tests to not more than 10% per year for the first three years (i.e., 2018 through 2020) of implementation and not more than 15% for the next three years (i.e., 2021 through 2023). Advanced diagnostic laboratory tests (ADLTs), which are largely new and innovative tests, are handled differently.

A series of congressional actions, spurred by the industry and the COVID-19 public health emergency, delayed the second reporting period initially intended for early 2020 and extended the phase-in of any further rate reductions. Most recently, section 4(b) of the Protecting Medicare and American Farmers from Sequester Cuts Act (PMAFSCA) again delayed the timeline for reporting and phasing-in reductions.

In the CY 2022 Final Rule, CMS updates its regulations at 42 CFR part 414, subpart G consistent with PMAFSCA. Accordingly, CMS revises the definitions of “data collection period” and “data reporting period” to specify that for the data reporting period of January 1, 2023, through March 31, 2023, the data collection period is January 1, 2019, through June 30, 2019. Moreover, CMS clarifies that data reporting is required every three years beginning January 2023. As a result, the CLFS payment rates for CY 2024 through CY 2026 will be based on data collected in the first half of 2019 and reported in early 2023. CMS declined a commenter’s request to revise the data collection period to January 1, 2022, through June 30, 2022, because the requirement is statutory and thus beyond CMS’s authority to adjust.

In addition, the Final Rule codifies PMAFSCA’s phase-in of payment reductions under the CLFS. Accordingly, the Final Rule updates the percentage by which the CLFS payment rates can be reduced: (1) to no more than 0.0%, as compared to CY 2021, for CY 2022, and (2) to no more than 15%, as compared to the preceding year for CY 2023 to 2025.

New Specimen Collection Fee & Travel Allowance Regulation

As part of the Final Rule, CMS promulgates a new regulation: 42 C.F.R. § 414.523 entitled “Payment for laboratory specimen collection fee and travel allowance.”

Historically, CMS’s specimen collection fee and travel allowance policies primarily existed in the Medicare Claims Processing Manual Pub. 100-04, chapter 16, §§ 60.1-.2; and, as between the manual and various Medicare transmittals, the guidance was inconsistent in places. In issuing the new regulation, CMS aims to clarify and modify its existing policies to take into account current healthcare practices and simplify the rules with respect to claims for travel allowances.

Specimen Collection Fees

In codifying these rules, CMS reiterates the eligibility requirements for billing for any specimen collection for clinical laboratory testing. CMS explains (and codifies) that the specimen must meet the following criteria:

  • Used to perform a Medicare-covered laboratory test paid under the CLFS.
  • Collected by a trained technician from a Medicare beneficiary who is either homebound or a non-hospital inpatient (but only when no qualified personnel is available at the facility to collect the specimen).
  • One of the following types—a blood specimen collected through venipuncture or a urine sample collected by catheterization.

In the Final Rule, CMS expressly states that the above-described circumstance is the only circumstance in which Medicare will pay a specimen collection fee, consistent with its past practices.

CMS had proposed to retain the same rates it has been paying for years—$3 per patient or $5 for a patient in a skilled nursing facility (SNF) or on behalf of a home health agency (HHA)—but agreed with commenters that updating the $3 amount for inflation was appropriate. As a result, beginning January 1, 2023, CMS will pay $8.57 for all specimens collected in one qualifying patient encounter, with an increase to $10.57 per patient encounter for specimens collected from a Medicare beneficiary in an SNF or on behalf of an HHA. Moreover, beginning January 1, 2024, CMS will update the specimen collection fee amount for each CY by the percent change in the CPI-U for the 12 months ending June 30 for the year preceding the update year.

In the Final Rule, among other things, CMS reiterates that only one specimen collection fee will be allowed for each single patient encounter, even if different types or multiple specimens are drawn from the patient. Additionally, CMS clarifies that specimens must be collected by “trained technician”—described in the Final Rule as “those staff providing specimen collection services” and includes phlebotomists—to clear up the confusion between language in Medicare policies and language from the U.S. Bureau of Labor Statistics.

Travel Allowance Policies

As part of the new regulation—42 C.F.R. §414.523—CMS is codifying and updating the Medicare CLFS travel allowance policies for laboratory specimen collection.

Importantly, CMS reiterates that a claim for a travel allowance may not be submitted where the technician merely acts as a messenger to pick up specimens. A travel allowance may only be paid if a specimen collection fee is also payable, meaning the specimen collection:

  • Requires a trained technician.
  • Is for a Medicare beneficiary who is homebound or an inpatient at a facility (other than a hospital).
  • Is for a Medicare-covered test.

When permitted, the travel allowance available depends on the distance traveled and the number of locations:

  • Flat Rate: A flat rate travel allowance applies when the trained technician travels 20 eligible miles or less to and from one location for specimen collection from one or more Medicare beneficiaries. For CY 2023, the amount is $10.40 divided by the number of Medicare beneficiaries who received a qualifying specimen collection.
  • Per-Mile: A per-mile travel allowance applies when a trained technician travels (1) more than 20 eligible miles to and from one location for specimen collection from one or more Medicare beneficiaries; or (2) to more than one location for specimen collection from more than one Medicare beneficiary. For CY 2023, the mileage rate is $1.04 per mile. As a result, the total travel allowance would be the eligible miles multiplied by $1.04, which is then divided by the number of Medicare beneficiaries who received a qualifying specimen collection.

The flat rate is calculated based on the mileage rate multiplied by ten. The mileage rate, $1.04 for CY 2023, is based on the IRS standard mileage rate plus the median hourly wage for a phlebotomist (based on U.S. Bureau of Labor Statistics) divided by 40 (i.e., estimated average miles per hour driving speed).

To determine the travel allowance that applies, laboratories need to determine the “eligible miles.” CMS proposed starting and ending the mileage calculation at the laboratory. However, based on commenter responses that phlebotomists, particularly in rural areas, often start from their homes and end at a location where they ship the specimens, CMS finalized a more flexible standard. As codified, “eligible miles” begin at the laboratory or the starting point of the technician’s travel for qualifying specimen collection and end at the laboratory or the ending point of the technician’s travel for qualifying specimen collection. Eligible miles do not include miles traveled for any purpose unrelated to qualifying specimen collection, such as collecting specimens from non-Medicare beneficiaries or for personal reasons. As a result, if multiple stops are made, and any of those are for non-Medicare beneficiaries or personal reasons, the miles associated with those stops must be subtracted from the total trip. CMS provides some helpful examples in the Final Rule on calculating the eligible miles.

Please contact the authors if you have any questions about the changes for clinical laboratories in the Medicare Physician Fee Schedule for CY 2023.

Series: Changes to Medicare Physician Fee Schedule for CY 2023

On November 2, 2022, the Centers for Medicare & Medicaid Services filed a final rule implementing changes to the Medicare Physician Fee Schedule for CY 2023 (Final Rule). Within this Final Rule are significant changes for various healthcare industry sectors. The healthcare attorneys at Bass, Berry & Sims have reviewed the Final Rule and have provided an in-depth analysis broken down by topic. Additional installments in this series focus on updates related to:

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