News & Perspectives

Lawsuit filed challenging new reimbursement system Medicare pays for lab work

12. December 2017 Sam Fish Health

On Monday, December 11, 2017, the American Clinical Laboratory Association (ACLA) filed a lawsuit in federal District Court in Washington, D.C., claiming that the Centers for Medicare and Medicaid Services (CMS) failed to follow a 2014 federal law when implementing a new system of reimbursing lab work in the Medicare program. 

The law in question is the Protecting Access to Medicare Act (PAMA), which is designed to establish a market-based pricing for certain lab tests and required laboratories to report information to CMS to ensure that Medicare reimbursement rates were closer to those that private insurers pay.

The lawsuit is in response to deep cuts to reimbursement rates for some lab tests under Medicare, which were instituted last month by CMS and which apparently will result in saving as much as $3 billion over five years for the federal government but which ACLA argues will hurt laboratory companies’ margins. 

In the lawsuit, ACLA claims that while PAMA requires all “applicable laboratories” to report market information on private payers, CMS used data primarily from the two largest laboratory owners which tended to result in the lowering of the rates. 

The case is American Clinical Laboratory Association v. Hargan, U.S. District Court, District of Columbia, No. 17-cv-2645.