A Final Verdict in ACLA vs Azar?

April 05, 2021 By: Quadax

Lawsuit over lab testing reimbursement rates dismissed as "moot" 

The ongoing legal battle between the American Clinical Laboratory Association (ACLA) and the Health and Human Services (HHS) Secretary may have come to an end, meaning there was a lack of subject matter jurisdiction.

The Background

In 2013, the Department’s Office of Inspector General found that Medicare was paying 18-30% more for laboratory tests than private insurers were paying. Congress passed Protecting Access to Medicare Act of 2014 (PAMA) in an effort to make Medicare’s reimbursement rates comparable to those paid by private insurers for the same laboratory tests.

The HHS Secretary announced a rule in June 2016 to implement PAMA’s provisions, including its data collection requirements. This Rule included its own definition for “applicable laboratory:” a laboratory that bills Medicare Part B under its own NPI. The NPI, or National Provider Number, is a unique billing number assigned by the Department to healthcare providers to use when submitting claims for Medicare reimbursement.

The ACLA filed a lawsuit on December 11, 2017, challenging the Secretary’s regulatory definition of “applicable laboratory.” According to the ACLA, defining the term to mean only laboratories that bill Medicare under their own NPIs excluded significant numbers of hospital laboratories that provide outreach services from the Secretary’s data collection—this is because most hospital laboratories bill under their hospitals’ NPIs, rather than their own. The lawsuit alleges:

  • The Secretary improperly treated the entire hospital as a laboratory for purposes of evaluating whether the statutory revenue requirements are satisfied and;
  • Effectively carved out hospital laboratories from the statutory requirements—ensuring the reporting obligations would be imposed primarily on only independent and physician-office laboratories.

At the end of the day, less than 1% of the total number of laboratories that currently serve Medicare beneficiaries reported data to the Secretary in 2016.

The Ruling

The Court did not reach the merits of ACLA’s claim that this narrowing of the definition was arbitrary and capricious. A motion to dismiss was filed, and in light of a provision Congress included in PAMA, the Court concluded that judicial review was precluded, and it dismissed the case for lack of subject matter jurisdiction on September 21, 2018.

ACLA appealed the ruling. Two months later, on November 23, 2018, the Secretary announced another rule that amended the definition of “applicable laboratory” to address the problem ACLA had identified. The 2018 Rule revised the definition to add “hospital outreach laboratories” that bill Medicare Part B on the CMS 1450 under bill type 14x, a claim form used by hospitals for non-patient laboratory services.

On July 30, 2019, the D.C. Circuit overturned the dismissal of the case, remanding the matter to the Court “to address in the first instance the merits of petitioner’s arbitrary and capricious challenge.” After remand, ACLA filed a motion for summary judgement on October 14, 2019. HHS filed a cross-motion for summary judgment and opposition on November 22, 2019.

HHS argues that ACLA’s claims concerning the 2016 Rule are moot because the Secretary revised the definition of “applicable laboratory” in the 2018 Rule, and the challenged definition is no longer applicable. This lawsuit does not challenge the new rule, so the only remedy that would be available to plaintiff here would be retrospective relief for any past payments that were calculated using the only 2016 Rule—that is, payments calculated for 2018–20 based on data collected data in early 2017 using the challenged definition. At first blush, that would appear to create a live controversy. But HHS argues that the Court cannot provide ACLA or its members any relief as to the payment calculations for 2018–20 because the statute bars judicial review of “the establishment of payment amounts” under PAMA.

ACLA, on the other hand, emphasizes that its complaint does not directly challenge the determination of the 2018–20 payment amounts. It challenges the “unlawful reporting rule” used to determine which laboratories would report data to the Secretary. ACLA emphasizes that the D.C. Circuit recognized the “bifurcated structure” of PAMA, which divided the statute into the data collection process and the establishment of payment amounts. Although the results of the data collection process are used to establish Medicare payment amounts, the data collection provision is distinct from its rate-estimation provisions. ACLA argues that its inability to challenge the reimbursement rates themselves does not prevent the Court from requiring the Secretary to comply with the data collection provision, even if this “necessarily result[s] in a change to the rates.”

According to Judge Jackson, even if the Court were to rule in ACLA’s favor, it could not order the agency to revise any payment amounts in the fee schedules used to determine 2018–20 payments or any particular payments to plaintiff’s members.

In addition, the Court could not vacate the challenged definition and order the Secretary to bring his regulations into compliance with the Medicare statute since the definition is no longer in effect. In other words, any decision “will neither presently affect the parties’ rights nor have a more-than-speculative chance of affecting them in the future.” For these reasons, the Court finds that this dispute is moot.

ACLA plans to discuss this decision with their legal team as well as the ACLA Board to determine next steps.

Stay tuned! We’ll do our best to keep you informed, visit our PAMA Reporting For Labs webpage for updates. 

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