- Medicare Part B spending on lab tests decreased year over year by 10% in 2022 to $8.4 billion, according to a report released in December by the Department of Health & Human Services’ Office of Inspector General.
- The pullback in spending was largely driven by changes in the volume of tests, as payment rates for individual tests did not change between 2021 and 2022, according to the report.
- Independent labs such as Bio-Reference, Labcorp and Quest Diagnostics receive more than 80% of their Medicare revenues from services paid under Medicare’s Clinical Lab Fee Schedule, TD Cowen analyst Eric Assaraf wrote in a research note on Wednesday.
Medicare spending has increased overall since 2014, when the OIG first started tracking the data, with year over year drops seen in 2016 and 2022. Declines in 2022 were spread across most types of tests, including COVID-19 tests, genetic tests, and chemistry and other tests.
The volume of COVID-19 tests decreased 10% to 23.3 million tests in 2022, as at-home tests became more available, according to the report.
Genetic tests covered by Part B saw a sharper decline, falling 39% to 1.7 million tests in 2022. The change was largely driven by a sharp decrease in spending for molecular pathology tests, which have “received scrutiny due to potential fraudulent billing activities by providers,” the OIG wrote.
In total, spending on the top 25 Medicare Part B lab tests decreased 13% to $4.8 billion in 2022.
In November, Congress delayed planned Medicare reimbursement cuts for clinical laboratory services in a stopgap funding bill. The cuts would be through the Protecting Access to Medicare Act, which was passed in 2014 and sets laboratory payment rates according to market data reported by industry.
Rate cuts are expected to be capped at 15% in 2025, Assaraf wrote, although the lab testing industry is likely to pursue legislation in 2024 to reform rate setting. Lab testing groups pursued the passage of the Saving Access to Laboratory Services Act (SALSA) last year, which would simplify the data reporting process used to set Medicare rates and put in place “guardrails” for rate changes.