Since the Protecting Access to Medicare Act (PAMA) became law in 2014, the laboratory industry has faced nearly a decade of instability. While temporary delays to cuts and reporting requirements provide short-term relief, they do not address the deeper structural flaws that threaten access to diagnostic care and the long-term financial health of laboratories.
Short-Term Relief, Long-Term Instability
Congress has repeatedly postponed scheduled PAMA reimbursement cuts and data collection periods. These 12-month deferrals provide temporary relief but create planning challenges, discourage investment, and prevent long-term financial stability. Without meaningful reform, laboratories will remain vulnerable despite short-term pauses.
How PAMA’s Flawed Design Suppresses Payment Rates
From the start, PAMA was built on flawed assumption. The law aimed to capture “true market prices” for laboratory testing, but such a market has never truly existed. For decades, commercial payors have benchmarked their rates against Medicare’s Clinical Laboratory Fee Schedule (CLFS), creating a cycle that suppresses reimbursement and distorts any market-based calculation.
When the first PAMA data collection occurred, these already depressed rates were simply folded into the Medicare formula, resulting in steep and unsustainable cuts. Today, payors continue to tie their rates to Medicare’s schedule, locking laboratories into a downward pricing spiral.
The only exception has been advanced diagnostic laboratory tests (ADLTs), which are priced using actual market data because they were never part of the outdated CLFS framework. For all other tests, unless Congress intervenes, PAMA will continue to erode reimbursement to levels that threaten patient access and weakenthe nation’s diagnostic infrastructure. Congress has the evidence and the courts have validated the flaws. Now is the time to fix PAMA’s broken framework.
Temporary Delays Are No Solution
The most recent legislative delay, passed in late 2023, postponed both the next round of payment reductions and the second PAMA data reporting cycle until 2026. Without this action, laboratories would have faced an additional 15% cut to reimbursement rates that are already significantly reduced.
Although these delays have provided temporary relief, they have also created ongoing instability. Laboratories must operate under constant uncertainty, never knowing if drastic reimbursement cuts will take effect the following year. This stop-and-start cycle makes it nearly impossible to plan strategically, invest in infrastructure, or expand services. Leaders are forced to focus on short-term survival rather than long-term growth.
Temporary fixes also fail to address the root issue: the flawed data collection and payment-setting methodology within PAMA. Without permanent reform, each delay only postpones the inevitable return of unsustainable cuts that jeopardize patient access and the long-term stability of diagnostic testing.
Why Failure to Act Has High Stakes
- Access at Risk: Smaller and rural laboratories may find PAMA-driven rates unsustainable, forcing them to close or limit services and leaving patients underserved.
- Reduced Infrastructure Investment: Financial instability discourages laboratories from upgrading equipment, hiring staff, or expanding testing capabilities.
- Slower Innovation: Developing new diagnostics, including those for cancer, infectious disease, and genetic conditions, becomes financially risky under unstable reimbursement models.
- Public Health Preparedness Weakened: Strong laboratory networks are essential for public health response. Weakening them reduces readiness for future crises.
What’s the Permanent Fix?
Long-term solutions should focus on true modernization, not repeated delays:
- Improve data accuracy: Eliminate the “majority of Medicare revenue” rule, include hospital outreach and physician office labs in sampling, and exclude Medicaid managed care rates
- Stabilize reimbursement: Cap annual cuts at 5 percent instead of 15 percent to avoid destabilizing financial shocks
- Strengthen data quality: Exclude Medicaid managed care rates, use finalized payment amounts and collect information from more current time periods
- Adopt robust data sources: Use statistically reliable national claims databases for common, high-volume tests while allowing direct reporting for specialized or low-volume services
- Increase transparency and oversight: Require CMS to publish the rationale for payment decisions and allow judicial review of rate-setting methods
If adopted, these measures would create a fairer and more stable reimbursement system that protects patient access, encourages innovation, and secures the long-term sustainability of diagnostic services.
HealthRecon Connect Stands Ready
At HealthRecon Connect, we recognize the far-reaching impact of PAMA instability. Laboratories need stable reimbursement to plan strategically and continue delivering essential patient care.
How we help:
- We monitor policy developments and help laboratories anticipate financial impacts
- We support advocacy efforts to advance permanent PAMA reform
- We optimize revenue cycle workflows to reduce the burden of reporting requirements and minimize exposure to reimbursement disruption
The era of temporary fixes must end. It is time for Congress to enact lasting reform that protects laboratory sustainability, ensures patient access, and supports continued healthcare innovation.
References
- American Clinical Laboratory Association. “PAMA Reform.” ACLA.
https://www.acla.com/issues/pama-reform/ - Clark, A. “A Primer on PAMA: The impending legislation that may determine Medicare laboratory fees from 2025 onward.” ASCp, April 26, 2024.
https://www.ascp.org/news/news-details/2024/04/26/a-primer-on-pama-the-impending-legislation-that-may-determine-medicare-laboratory-fees-from-2025-onward - Wallace, S. “PAMA cuts averted again for clinical lab services.” Today’s Clinical Lab, October 1, 2024.
https://www.clinicallab.com/pama-cuts-averted-again-for-clinical-lab-services-28039 - Protecting Access to Medicare Act (PAMA) for Laboratories
https://www.cap.org/advocacy/laboratory-oversight-and-regulation/protecting-access-to-medicare-act-for-laboratories - Understanding the One-Year Delay to PAMA Implementation and Its Implications
https://apsmedbill.com/whitepapers/understanding-one-year-delay-pama-implementation-and-its-implications
