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Clinical Laboratory or Laboratory Services Rate Methodology Change

October 2017 Update: Revision to Data Collection Frequency

As a result of Assembly Bill (AB) 659 (Chapter 346, Statutes of 2017), the Department of Health Care Services (DHCS) will not collect provider calendar year 2017 (reporting period) third-party payer rate and utilization data in 2018. AB 659 changes the data reporting frequency from an annual basis to every three years. The next request for data will occur in January 2019, for the 2018 reporting period, and affected rates will be updated effective July 1, 2020.  

Background

In accordance with Assembly Bill (AB) 1494 (Committee on Budget), the DHCS is required to:

  • Develop a new rate setting methodology for clinical laboratory or laboratory services based on the average of the lowest prices other third-party payers are paying for similar services.

  • Implement a ten percent payment reduction, excluding services under the Family Planning, Access, Care and Treatment (FPACT) program and outpatient hospital services, effective July 1, 2012 through June 30, 2015, for clinical laboratory and laboratory services until a new rate setting methodology is approved by the Centers for Medicaid & Medicare Services (CMS).

    • The ten percent payment reduction is implemented under approved SPA 12-028

As required by statute, the AB 97 payment reduction is also applied to the new payment methodology.

Data Collection Process

DHCS underwent a significant stakeholder process to develop the data collection tool to be used for the development of the new methodology and to determine the new rates under that methodology.   

Beginning in 2012, DHCS conducted meetings with clinical laboratory stakeholders to develop a data collection methodology that was operationally feasible and consistent with the intent of the legislation.
 
DHCS requested third-party payer rate and utilization data from providers and limited the use of data to codes that met either of the following two thresholds based on the prior year's Medi-Cal paid claims data:
  • Medi-Cal paid claims volume equal to or greater than 1,000
  • Total Medi-Cal paid amount equal to or greater than $500,000  
 
The thresholds for choosing providers required to submit utilization data are:
  • Medi-Cal paid claims volume equal to or greater than 5,000
  • Total Medi-Cal paid amount equal to or greater than $100,000 

New Rate Methodology

DHCS utilizes the data collected to develop the new rate methodology. The following represents the steps taken in the determination of the average of the lowest rate.  

  1. DHCS uses the range of rates that fall between zero and eighty percent of the calculated California specific Medicare rate. (Note: Medi-Cal does not have the authority to reimburse above eighty percent of the Medicare rate. Rates exceeding this threshold were excluded.)

  2. These rates are then weighted based on the units billed to create an average.

  3. The methodology is individually applied to each code meeting threshold requirements, excluding codes for which no third-party rate and/or utilization data was submitted, or if the services under that code were terminated or no longer a Medi-Cal benefit.

To ensure that requirements of the provisions of statute continue to be met, DHCS will collect third-party payer rate and utilization data every three years, beginning in 2019, from clinical laboratory or laboratory services providers. Rates are required to be calculated based on the prior year’s data and application of the new methodology will be limited to those codes meeting either of the two thresholds. DHCS will continue to monitor the thresholds and methodology and make changes as necessary to comply with the law, access requirements, and account for other operational or programmatic issues.

Contact DHCS

Questions or comments can be submitted to the DHCS Clinical Laboratory email box: labcomments@dhcs.ca.gov.  

Legislation

Last modified on: 10/23/2017 4:29 PM