Health Alerts, Opioid Epidemic

The Impact of PAMA on the Toxicology Lab Industry

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The Protecting Access to Medicare Act (PAMA) would save government payors an estimated $670 million, nearly 10 percent of the $7 billion that it currently pays annually for lab tests. In draft form, the proposed reduction in the fee schedule for clinical lab tests will significantly impact labs overall and the smaller, regional toxicology labs to an even greater extent. If the proposed reimbursement reductions are adopted, they will negatively impact how Aspenti Health will be able to provide services to our patients at the height of the opioid epidemic in America.

Aspenti Health ™ is a toxicology lab in Burlington, Vermont. Serving a rural state with a population of just over 600,000. Like most of the nation, we are in the grips of the opioid crisis with people suffering from substance use disorder. The combination of many of our patients residing in hard to reach rural communities and the state’s limited economic base offers a host of complexities to care for the patients we serve and their struggles to reach long-term recovery. The Surgeon’s General Report cites “The Treatment Gap” as one of major contributors to the opioid crisis today. Two of the major causes of that gap are the inability to access care and lack of screening for substance misuse. Toxicology labs like Aspenti fill that very gap. Our patient service centers serve as collection locations increasing recovery services, testing access to rural communities, and critical checkpoints in our patient’s substance use disorder treatment plan. The PAMA draft rates would deter toxicology labs from expanding to ease access for those in rural America and only increase “The Treatment Gap” that contributes to this nation’s opioid crisis.

Fault in the market representation PAMA used to calculate new pricing models

We believe the data collection process was severely flawed including:

  • By having a narrow definition of “applicable labs” PAMA excluded most of hospital labs which left the remaining 34% of the lab market to be driven by the data of two major labs representing 80% of the volume. These major labs use their economies of scale to negotiate deeply discounted lab fee schedules in exchange for exclusive contracts with private payers. Using a weighted median vs weighted average further skews the pricing towards the two larger labs.
  • Smaller commercial laboratories typically have less favorable payor agreements than hospital labs. Therefore, the financial impact is felt far greater to these commercials labs as CMS reduces rates coupled with out of network denials with private commercial payers. We believe the greater financial pressure on smaller, regional labs like Aspenti Health will potentially negatively impact the 3 critical factors to improving patient care – cost, quality & access.
  • PAMA’s data collection efforts were flawed as the data collection guidelines were not published until after data submission had already commenced.
  • G code reimbursements are set to decrease by 10% in 2018, and even further in the years to come. CMS stated that data reported to them for definitive G codes reflected reimbursements that were 23-59% lower than Medicare reimbursements for the same codes. However, XIFIN, a leader in the healthcare/laboratory revenue cycle management market, has stated that according to their data, Medicare reimbursements were 15% lower than the commercial market average.

Toxicology Under-Represented 

While some types of testing are generalized across the country through standard testing, there are a few forms of more niche fields of laboratory medicine. CMS through the PAMA regulations has appropriately constructed an advisory panel and a mechanism for culling specialized expertise through subcommittees. However, the extent of involvement of area experts appears to be limited to molecular pathology in the advisory panel and the creation of only two subcommittees focusing on Advanced Diagnostic Laboratory Tests and Automated Test Panels (5). The unique nature of the toxicology field, who plays a critical role in the opioid crisis and an ever-expanding incidence of substance use disorders, does not appear to have a representation. It is critical that all specialty laboratory care is represented on the advisory board.

Unique position of toxicology labs in healthcare

Clinical laboratories contribute 2.5% to health care costs but drive 70% of clinical decision-making (1). In this rapidly evolving era of value-based care and patient-centered outcomes, it is critical that the laboratory is not a derivative function. By using large volume-based laboratories’ reimbursements to drive CMS fee schedules (2), a greater emphasis is placed on the transactional system rather than an integrative system of care. Clinical laboratories contribute 2.5% to health care costs but drive 70% of clinical decision-making.

In the field of toxicology, most of testing remains in the hands of small toxicology laboratories who respond to regional needs  (3). By potentially driving the closure of these businesses, access to an effective, inexpensive part of treatment at the time of a declared opioid emergency by the White House (4), we may be unwittingly driving increased health care costs through emergency room visits, increased risks for the consequences of intravenous drug use such as hepatitis C and HIV and an astounding number of unintended downstream consequences. This does not align with the intent of PAMA nor does this represent quality patient care.

Call to Action

We cannot stand by and let inaccurate data alter our ability to serve our patients. The immediate solution is for PAMA to delay implementation of the changes until more accurate data from all segments of the laboratory market is collected.

CMS is accepting comments until October 23. Join us in submitting your comment electronically by October 23 to this CMS mailbox: 


(1) Crawford JM, Shotorbani K, Sharma G, Crossey M, Kothari T, Lorey TS, Prichard JW, Wilkerson M and Fisher N. Improving American Healthcare Through “Clinical Lab 2.0”A Project Santa Fe Report. Acad Pathology 4: April 2017 (2) Four challenges of PAMA (from ACLA?)

(3) Curran J. IBISWorld Industry Report OD5459 Toxicology Laboratories in the US, January 2017.



Chris Powell, Aspenti Health CEO has over 30 years of healthcare experience. Chris started his career with IBM as a field sales professional before moving to IDX Systems Corporation, a healthcare technology company leading the sales and marketing function. IDX was acquired by GE Healthcare in 2006 and Mr. Powell worked as Vice President and General Manager of GE Healthcare Americas Commercial Healthcare IT business, including the United States, Canada and Central and South America. Mr. Powell left GE in 2011 and went on to become CEO at Precyse. Under Chris’ leadership and growth, Precyse was acquired to form nThrive, a healthcare revenue cycle, and service company before coming to Aspenti Health.

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