Jane Hermansen Discusses PAMA in MedicalLab Management

Jane Hermansen, Network Manager at Mayo Medical Laboratories in Rochester, Minnesota, recently authored an article featured in MedicalLab Management on the 2014 Protecting Access to Medicare Act (PAMA), which went into effect January 1, 2018.

The act affects nearly every laboratory in the country that performs testing for Medicare beneficiaries. Laboratories will realize a decrease in reimbursement, regardless of laboratory size or type (hospital, independent, or physician office-based). Further, in most states, Medicaid fee schedules are based upon Medicare rates, thus Medicaid reimbursement is likely to also decrease.

In the article, Hermansen notes that though the act is far from ideal, the sky is not falling. All laboratories must face the future with PAMA in place and establish a framework for moving ahead in the industry’s new reality. "It is time to look past the sensational messaging and place perspective on the true impact of PAMA in order to create a positive action plan for laboratory survival into the future," she says.

When reviewing all possible avenues in light of PAMA (as well as other operational factors), Hermansen discusses certain considerations and actions a facility must take into account:

  • Medicare is not your only payor. It is unlikely that a hospital-based laboratory outreach program is serving exclusively Medicare and Medicaid patients.
  • Laboratory outreach is profitable. The typical hospital-based outreach program has a contribution margin of more than 30%.
  • Laboratory outreach programs continue to grow. Due to increasing physician employment by hospitals and health systems, outreach and outpatient test volumes performed by hospital laboratories continue to increase.
  • Use caution in contracting with payors. When establishing contracts with commercial payors, a frequent mode of fee schedule creation is to apply a multiplier to the Medicare rate.
  • Determine and communicate the laboratory outreach program's net operating income (NOI). It is essential that organizational leadership understands the laboratory outreach program’s net contribution.
  • Demonstrate the impact of volume on overall unit cost. The hospital-based laboratory’s primary role is to perform routine and urgent testing for hospital patients, 24 hours per day.
  • Drive efficiency and eliminate waste. Although it may seem obvious, we must find new ways to continually improve our laboratories by managing costs and reducing waste.

According to Hermansen, it is necessary to have a thorough understanding of the true impact that PAMA will have on your laboratory and demonstrate the value that outreach test volumes will continue to bring, even with reduced reimbursement. However, she notes, "The sky is not completely falling! Remain steadfast in the knowledge that the laboratory impacts nearly every patient within the health care system, and take the measures necessary to ensure that value is recognized and appreciated by every stakeholder within the health care system."

Kelley Luedke

Kelley Luedke

Kelley Luedke is a Marketing Channel Manager at Mayo Clinic Laboratories. She is the principle editor and writer of Insights and leads social media and direct marketing strategy. Kelley has worked at Mayo Clinic since 2013. Outside of work, you can find Kelley running, traveling, playing with her kitty, and exploring new foods.