Medical lab trade group sues over U.S. reimbursement cuts

(Reuters) - A U.S. trade association representing medical laboratories filed a lawsuit on Monday challenging a new reimbursement system used by the federal government that it said would reduce how much Medicare pays for labs by about $670 million in 2018.

The American Clinical Laboratory Association (ACLA) in a lawsuit in federal court in Washington, D.C., said the U.S. Centers for Medicare & Medicaid Services (CMS) ignored Congressional intent by implementing the new system following the passage of a 2014 law.

That law, the Protecting Access to Medicare Act (PAMA), aimed to establish a market-based pricing for certain lab tests and required laboratories to report information to ensure Medicare reimbursement rates were closer to those private insurers pay.

CMS declined to comment on the litigation.

The lawsuit came after CMS last month rolled out deep cuts to reimbursement rates for some lab tests under Medicare that could save the government as much as $3 billion over five years but could hurt laboratory companies’ margins.

In its lawsuit, ACLA argued that while PAMA required all “applicable laboratories” report market information on private payors, CMS had arbitrarily exempted 99.3 percent of the laboratory market from the reporting requirement.

The vast majority of the data was instead collected from the country’s two largest laboratory owners, including Quest Diagnostics Inc, the lawsuit said.

As a result, CMS has implemented PAMA’s reporting requirements in a way that “cherry-picks data” from a small piece of the market that receives the lowest private payor rates, the lawsuit said.

“We have repeatedly advised CMS that there are significant, substantive deficiencies in the final rule, which fails to follow the specific commands of the PAMA statute,” ACLA President Julie Khani said in a statement.

Laboratory Corporation of America Holdings and Quest, who are both members of ACLA, in separate statements said that they supported the lawsuit.

“These rates, if allowed to take effect, will have significant negative consequences for Medicare beneficiaries and throughout the healthcare system,” LabCorp Chief Executive David King said in a statement.

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

Reporting by Nate Raymond in Boston; Editing by Andrew Hay