U.S.  Department of Health and Human Services 
Office of Inspector General 
 
 
HHS OIG DATA BRIEF
     
Medicare Payments for 
Clinical Diagnostic 
Laboratory Tests  
in 2016:  Year 3  
of Baseline Data  
OEI-09-17-00140  Suzanne Murrin 
September 2017  Deputy Inspector General for 
OEI-00-00-00000  Evaluation and Inspections 
 
July 2017 
oig.hhs.gov 
 
oig.hhs.gov  Report in Brief  U.S. Department of Health & Human Services 
September 2017  Office of Inspector General 
OEI-09-17-00140 
 
Why OIG Did This Review   Medicare Payments for Clinical Diagnostic  
Beginning in 2018, the Medicare 
Laboratory Tests:  Year 3 of Baseline Data 
program will change the way it sets 
payment rates for clinical diagnostic  What OIG Found 
Key Takeaway 
laboratory (lab) tests.  The Centers  Medicare paid $6.8 billion under Part B for lab 
Total Medicare spending for 
for Medicare & Medicaid Services  tests in 2016, a total that changed very little in 
lab tests in 2016 was 
(CMS) will replace current payment  the 3-year period from 2014 through 2016.  
concentrated among a small 
rates with new rates based on  Medicare payments were concentrated among 
number of tests and labs.  
current charges in the private  a small number of tests and labs.  The top  Changes in the Medicare 
health care market.  This is the first  25 tests by Medicare payments totaled  payment rates for the top 
reform in 3 decades to Medicares  $4.3 billion and represented 60 percent of all  25 tests could have a 
payment system for lab tests.    Medicare payments for lab tests in 2016.  The  significant impact on overall 
top 6 tests, which remained consistent with the  Medicare spending for lab 
As part of the same legislation 
top 6 from the previous 2 years, totaled  tests when the new payment 
reforming Medicares payment  $2.4 billion in 2016.  More than half of  system for lab tests goes into 
system, Congress mandated that  payments for the top 25 tests went to  effect in 2018.   
the Office of Inspector General  1 percent of labs. 
(OIG) monitor Medicare payments 
Medicare payments for four 
for lab tests and the 
categories of tests changed notably  More than 60 percent of Medicare lab test 
implementation and effect of the 
over time, despite little change in  payments in 2016 were for 25 test codes 
new payment system for those 
the total payments for all lab tests.  
tests.  This data brief provides the 
In comparison to Medicare  All Lab Tests:  $6.8 billion 
third set of annual baseline 
payments for other test categories, 
analyses of the top 25 lab tests.  payments for two categories of  Top 25 Lab Tests:  $4.3 billion 
testsan emerging category of tests 
How OIG Did This Review 
and microbiology testsincreased  Top 6 Lab Tests:   
We analyzed claims data for lab  $2.4 billion 
notably from 2015 to 2016.  Drug 
tests that CMS paid for under 
tests and molecular pathology tests 
Medicares Clinical Laboratory Fee 
decreased notably during the same 
Schedule.  These tests are covered 
period. 
under Medicare Part B, and do not 
Source:  OIG analysis of Medicare Part B lab test 
include tests that Medicare paid for  What OIG Concludes     payments, 2017. 
under other payment systems, such  Lab tests play a critical role in delivering health care for the millions of 
as the payment system for critical  Medicare beneficiaries who receive tests each year.  Although CMS paid for 
Medicare beneficiaries to receive over 1,000 different lab tests in 2016, 
access hospitals or the Outpatient 
25 tests accounted for 60 percent of Medicare payments for all tests.  
Prospective Payment System.  We 
Changes in the Medicare payment rates for these 25 tests could have a 
identified the top 25 tests based on 
significant impact on overall Medicare spending for lab tests when the new 
Medicare payments in 2016.  We 
payment system for lab tests goes into effect in 2018.  The information 
also identified key statistics and 
presented here will be useful in monitoring the effects of changes to 
emerging trends, including 
Medicares payment system for lab tests.  We will continue to monitor 
Medicare payments by procedure 
Medicare payments for lab tests and to identify emerging trends. 
code, beneficiary, lab, ordering 
provider, and test category.     
 
 
 
Full report can be found at http://oig.hhs.gov/oei/reports/oei-09-17-00140.pdf   
BACKGROUND 
The Protecting Access to Medicare Act (PAMA) of 
2014 requires reform of the payment system for clinical  LAB TESTS 
laboratory (lab) teststhe first such reform in 3 decades.1  
In 2018, new rates based on rates paid by private payers  What are they? 
Lab tests are performed on 
will replace the current payment rates, which are based on 
specimens taken from the human 
lab charges from 1984 and 1985.  The new payment 
body.  The tests provide information 
system will establish a single national fee schedule, 
integral to preventing, diagnosing, 
replacing 57 separate local fee schedules.   
and treating disease. 
To provide oversight, PAMA mandated that the Office of 
Where are they performed? 
Inspector General (OIG) monitor Medicare payments for  Lab tests are usually performed in 
lab tests and the implementation of the new payment  independent labs, hospitals, and 
system.  Specifically, PAMA requires OIG to publicly  physicians offices. 
release an annual analysis of the top 25 tests, based on 
How do lab tests differ from one 
Medicare payments, and to conduct analyses that OIG 
another? 
determines appropriate regarding the implementation and  There are different categories of lab 
effect of the new payment system.2  This is the third  tests.  For example, chemistry tests 
annual analysis.3  measure levels of specific 
substances, whereas molecular 
This data brief analyzes claims data for lab tests that CMS 
pathology tests analyze genetic 
paid for under Medicares Clinical Laboratory Fee 
material to detect variants in genes. 
Schedule.  These tests are covered under Medicare Part B, 
What does Medicare Part B cover? 
and do not include tests that Medicare paid for under 
Medicare Part B covers most lab 
other payment systems such as the Physician Fee 
tests ordered by physicians and pays 
Schedule, the payment system for critical access hospitals, 
100 percent of allowable charges.  
or the Outpatient Prospective Payment System. 
Beneficiaries do not have a copay 
under either the current payment 
Lab test payment rates:  2018 and after 
system or the new one. 
Beginning in 2018, CMS will update the Clinical Laboratory 
Fee Schedule using rates paid by private payers.4, 5  For each 
test, Medicare will use the median of private payer rates, weighted by the test volume, to set a new 
payment rate.  Medicare will update payment rates every 3 years using data reported by labs.6   
During the first 3 months of 2017, labs submitted information to CMS about the rates that private payers 
paid them for lab tests during the first half of 2016.7  Because labs reported difficulty in collecting the right 
payment information, CMS allowed 60 more days for labs to report without penalty. 8  Certain labs were 
exempt from reporting their private payer data to CMS.9 
 
Exhibit 1.  How will Medicares payment system change in 2018?  
 
CURRENT  FUTURE 
Implemented in 1984  To be implemented in 2018 
Payment rates for existing tests are based on lab  Payment rates for existing tests will be based on the 
charges in 19841985, adjusted annually for inflation  weighted median of current rates from private 
payers, and updated every 3 years using current data 
57 local fee schedules   Single national fee schedule 
   
   
  Source:  OIG analysis of Medicares new payment system for lab tests, 2017.  
Medicare Payments for Lab Tests in 2016:  Year 3 of Baseline Data (OEI-09-17-00140)  1 
 
   
MEDICARE PART B PAID $6.8 BILLION FOR LAB TESTS IN 2016, A TOTAL THAT CHANGED VERY 
LITTLE OVER 3 YEARS 
Medicare payments for lab tests under the Clinical Laboratory Fee Schedule totaled $6.8 billion in 2016, 
accounting for about 2 percent of all Part B payments in 2016.10, 11  Total payments for tests decreased 
slightly from the 2015 total ($7.0 billion) and the 2014 total (also $7.0 billion).12, 13   
Tests.  In 2016, Medicare paid for 437 million tests under 1,173 procedure codes from Medicares Clinical 
Laboratory Fee Schedule.14  These procedure codes include many categories of lab tests, from common 
chemistry tests (such as a test that determines a persons magnesium level) to less common genetic tests 
(such as a test that detects genes associated with breast cancer).   
Test volume is based on the number of units for which labs billed.  For most procedure codes, the number 
of units corresponds to the number of tests performed, but some procedure codes include multiple tests.  
For example, procedure code G0483 was newly effective in 2016 and includes testing for 22 or more drug 
classes.  In 2015, a lab would have instead billed using a different procedure code for each drug class.   
Beneficiaries.  Labs billed for tests for around half (28 million) of all Medicare beneficiaries under Part B in 
2016.15  On average, labs billed for 16 individual tests for each of these beneficiaries during 2016 and, for 
1 percent of these beneficiaries, labs billed for 86 or more tests.  On days that tests were billed for 
beneficiaries, labs billed for an average of 3.4 tests per day for each beneficiary.  For the top 1 percent of 
beneficiaries, labs billed for an average of 17 or more tests, all occurring on a single date of service.   
Labs.  Medicare paid 58,593 different labs an average of $115,546 each for lab test that they performed in 
2016.  Three labs received a combined total of $1.1 billion in 2016.  Each of these 3 labs performed tests at 
multiple locations1 lab performed tests at more than 150 locationswhich may account for their high 
total payments.  In contrast, half of all labs received less than $1,055 each.  In 2016, independent labs 
accounted for 55 percent of Medicare payments for lab tests.  Hospital labs accounted for 26 percent of these 
payments, and physician office labs accounted for 18 percent of payments.16 
Providers.  In 2016, 635,773 providers ordered lab tests for their patients.  On average, each provider 
ordered 485 individual tests during 2016.  One percent of these providers each ordered at least 6,176 tests 
during 2016. 
Exhibit 2.  What Medicares $6.8 billion for lab tests went toward in 2016 
     
TESTS  BENEFICIARIES  LABS  PROVIDERS 
       
437 million tests   28 million Medicare  58,593 labs received  635,773 providers ordered 
billed  beneficiaries received at  Medicare payments  lab tests 
least 1 test 
3.4:  Average number of  16:  Average number of  $115,546:  Average  485:  Average number of 
tests a beneficiary received  individual tests per beneficiary  payments per lab  tests ordered per provider 
on a day 
17:  Average number of tests  86:  Average number of tests in  $1.1 billion:  Payments  6,176:  Average number of 
per day for top 1 percent of  2016 for the top 1 percent of  made to the top three  tests ordered by 
beneficiaries  beneficiaries  labs  top 1 percent of providers 
Source:  OIG analysis of Medicare Part B lab test payments, 2017. 
Medicare Payments for Lab Tests in 2016:  Year 3 of Baseline Data (OEI-09-17-00140)  2 
 
   
MORE THAN 60 PERCENT OF MEDICARE PART B PAYMENTS FOR LAB TESTS IN 2016 WERE FOR 
25 TESTS  
Medicare paid a total of $4.3 billion for the top 25 lab tests in 2016, representing 63 percent of Medicare 
payments for all lab tests paid for under the Clinical Laboratory Fee Schedule.  The 2016 total is slightly  
higher than the $4.1 billion that Medicare paid for the top 25 tests in 2015 and the $4.2 billion it paid in 
2014.  Exhibit 5 lists the top 25 lab tests based on Medicare payments in 2016. 
Seventeen lab tests have remained in the top  Exhibit 3.  More than one-third of Medicare 
25 tests for the last 3 years, reflecting relative  payments were for six tests  
stability within this group of high-volume tests 
ordered each year by physicians treating the  All Lab Tests:  $6.8 billion 
Medicare population.  Of these, the top 6 lab tests 
have maintained their respective positions among  Top 25 Lab Tests:  $4.3 billion 
the top 25 tests for the last 3 years and accounted 
for 35 percent ($2.4 billion) of all payments for lab  Top 6 Lab Tests:  $2.4 billion 
tests in 2016, as shown in Exhibit 3.  These six tests 
include common blood tests and a test for 
Vitamin D  levels.  Medicare payments for each of 
3
these tests increased over the last 3 years.  From 
2015 to 2016, payments for each test increased by 
at least $2 million, with a maximum increase of  Source:  OIG analysis of Medicare Part B lab test payments, 2017. 
$32 million for a test measuring blood lipid levels, 
as shown in Exhibit 5 on the next page.  
More than half of Medicare payments for  Exhibit 4.  Fifty-four percent of Medicare payments 
tests in the top 25 went to 1 percent of labs  went to fewer than 300 labs 
One percent of labs (284 out of 28,356 labs) 
received 54 percent of all Medicare payments for 
the top 25 lab tests in 2016, as shown in Exhibit 4.   21%
These labs each received an average of 
$8.2 million in 2016.  After the top 1 percent of 
25%
labs, the next 4 percent of labs accounted for 
25 percent of Medicare payments for the  95%
top 25 lab tests.  These labs each received an 
average of $935,611 for these tests in 2016.  The 
remaining 95 percent of labs accounted for just  54%
21 percent of payments for the top 25 lab tests.  
4%
These labs each received an average of $33,793 in 
1%
2016.  Medicare payments were similarly 
concentrated among a small proportion of all labs  Labs Medicare Payments
(28,356) ($4.1 billion)
in 2014 and 2015. 
 
     Source:  OIG analysis of Medicare Part B lab test payments, 2017. 
 
   
Medicare Payments for Lab Tests in 2016:  Year 3 of Baseline Data (OEI-09-17-00140)  3 
 
   
Exhibit 5.  Top 25 lab tests based on Medicare Part B payments in 2016 
National  Number of  Medicare  Change From 
Limitation  Tests  Payments  2015 Payments 
Test Description (Procedure Code)*  Amount**  (Millions)  (Millions)  (Millions) 
1.  Blood test, thyroid-stimulating hormone (TSH) 
(84443)         $22.89   21.5  $482    $7.4 
2.  Blood test, comprehensive group of blood chemicals 
(80053)         $14.39   41.6  $470    $11.7 
3.  Complete blood cell count (red blood cells, white 
blood cells, platelets) and automated differential         $10.59   42.0  $433    $5.5 
white blood cell count (85025) 
4.  Blood test, lipids (cholesterol and triglycerides) 
(80061)  -  29.0  $411    $31.7 
5.  Vitamin D3 level (82306)         $40.33  9.0  $350    $13.3 
6.  Hemoglobin A1C level (83036)         $13.22  19.3  $250    $9.8 
7.  Drug test(s), definitive, per day, 22 or more drug 
class(es), including metabolite(s) if performed         $215.23   1.2  $241  New code in 2016 
(G0483) 
8.  Drug test(s), presumptive, any number of drug 
  $79.25  3.0  $221  New code in 2016 
classes, per date of service (G0479)  
9.  Blood test, basic group of blood chemicals (80048)         $11.52   13.7  $133    $0.7 
10.  Drug test(s), definitive, per day, 1521 drug class(es), 
$166.03  0.8  $127  New code in 2016 
including metabolite(s) if performed (G0482) 
11.  Parathormone (parathyroid hormone) level (83970)         $56.23   2.2  $120    $6.2 
12.  Cyanocobalamin (vitamin B12) level (82607)         $20.54   5.6  $113    $2.7 
13.  Blood test, clotting time (85610)         $5.36   19.6  $105    $11.5 
14.  PSA (prostate specific antigen) measurement (84153)         $25.06   4.2  $103    $0.1 
15.  Thyroxine (thyroid chemical) measurement (84439)         $12.28   7.1  $85    $3.7 
16.  Bacterial colony count, urine (87086)         $11.00   7.6  $82    $2.3 
17.  Drug test(s), definitive, per day, 814 drug class(es), 
       $122.99   0.6  $73  New code in 2016 
including metabolite(s) if performed (G0481) 
18.  Natriuretic peptide (heart and blood vessel protein) 
level (83880)         $46.24   1.5  $69    $1.3 
19.  Drug test(s), definitive, per day, 17 drug class(es), 
     $79.94   1.0  $69  New code in 2016 
including metabolite(s) if performed (G0480) 
20.  Ferritin (blood protein) level (82728)         $18.57   3.7  $67    $3.5 
21.  Gene analysis (colorectal cancer) (81528)      $508.87   0.1  $62  New code in 2016 
22.  Test for detecting genes associated with breast 
$3,419.40   0.02  $60  New code in 2016 
cancer (81519) 
23.  Complete blood cell count (red cells, white blood cell, 
platelets), automated test (85027)          $8.81   6.8  $58    $0.3 
24.  Folic acid level (82746)         $20.03   2.9  $56    $0.7 
25.  Evaluation of antimicrobial drug (antibiotic, 
antifungal, antiviral) (87186)***         $11.78   4.5  $51    $0.6 
 
                                                                                   Total Medicare payments:   $4.29 billion 
Sources:  OIG analysis of Medicare Part B payments, 2017.    
* See endnote 10 for the American Medical Association (AMA) copyright notice. 
** The national limitation amount is a capped rate established by Congress to contain costs.  The national limitation amounts listed in this column 
are from the 2016 Clinical Laboratory Fee Schedule.  Medicare pays the lowest of the following three amounts:  the labs charge, the local fee 
schedule rate, or the national limitation amount. 
*** Procedure code 87186 ranked as Test 25 in 2014 and ranked as Test 26 in 2015, by Medicare payments. 
Medicare Payments for Lab Tests in 2016:  Year 3 of Baseline Data (OEI-09-17-00140)  4 
 
   
MEDICARE PART B PAYMENTS FOR FOUR TEST CATEGORIES CHANGED NOTABLY OVER 3 YEARS 
Compared with changes in other test categories from 2014 to 2016, Medicare payments changed notably 
for four test categories.  Payments for an emerging category of testsmultianalyte assays with algorithmic 
analyses (MAAAs)increased by 665 percent from 2015 to 2016.  Payments for microbiology tests increased 
by 10 percent from 2015 to 2016.  Payments for drug tests and molecular pathology tests decreased by 
26 percent and 37 percent, respectively, from 2015 to 2016.  Exhibit 6 shows changes in Medicare 
payments over a 3-year timeframe among the eight test categories for which Medicare paid the most.  
Although payments in four of these categories changed notably, the other four categories changed by no 
more than 5 percent from one year to the next. 
Exhibit 6.   Changes in Medicare payments over 3 years among eight test categories were notable for 
four categories of lab tests, with the greatest change in MAAAs 
 
 $3,000 4%
s 
n
o  $2,500
Milli 2014 2015 2016
 $2,000
 $1,500
4%
 $1,000 26%
1%
10%
 $500 5%
665% 37%
 $-
MAAA Microbiology Drug Test Molecular Chemistry Organ or Hematology Immunology
Pathology Disease- and
Oriented Coagulation
Panels
Note:  The percentage differences represent changes from 2015 to 2016. 
Source:  OIG analysis (2017) of Medicare Part B lab test payments for the test categories for which Medicare paid the most in 2016. 
 
  
Multianalyte assays with algorithmic analyses (MAAAs).  Payments for MAAAs increased considerably 
from 2015 to 2016.  MAAAs are an emerging category of tests that combine multiple test results with 
other patient information to yield a predictive score, such as the risk of a cancers recurrence or a drug 
response.  These tests are typically offered only by the lab companies that developed the tests. 
In 2015, Medicare included the first MAAAa colorectal cancer screening teston the Clinical Laboratory 
Fee Schedule.  Medicare payments for this test more than doubled between 2015 and 2016, from 
$28 million to $62 million.17  In 2016, Medicare began paying for 10 new tests in the MAAA category and 
paid a total of $216 million for MAAAs.  On average, Medicare paid $890 per MAAA test, making this the 
most expensive category on the Clinical Laboratory Fee Schedule in terms of payment per test.  Two of 
these 10 tests appear in the top 25 in 2016:  a genetic colorectal cancer screening test that is paid for at 
$509 per test (Test 21 in Exhibit 5), and a test detecting genes associated with breast cancer that is paid for 
at $3,419 per test (Test 22 in Exhibit 5).   
Medicare Payments for Lab Tests in 2016:  Year 3 of Baseline Data (OEI-09-17-00140)  5 
 
   
Microbiology tests.  Payments for microbiology tests increased consistently from 2014 to 2016, going from 
$472 million in 2014 to $517 million in 2015 and then to $570 million in 2016.  These tests detect and 
identify microorganisms that may cause serious infections.  Two of these tests appear in the top 25 in 2016:  
a test measuring bacterial count in urine that is paid for at $11.00 per test (Test 16 in Exhibit 5) and a test 
evaluating antimicrobial drugs that is paid for at $11.78 per test (Test 25 in Exhibit 5). 
Drug tests.  Payments for drug tests decreased from 2015 to 2016, reversing the increase from 2014 to 
2015.  Drug tests gauge the presence or level of drugs in a persons body.  Some tests are for therapeutic 
drugs that have the potential for abuse, such as opiates.  Other tests are for illicit drugs, such as 
methamphetamine.  Medicare payments for drug tests increased from $910 million in 2014 to $1.1 billion 
in 2015 before dropping to $808 million in 2016.   
The decrease in Medicare payments for drug tests coincided with CMSs use of a new payment approach 
for these tests.  In 2015, CMS paid separately for each drug class for which the patient was tested.  In 2016, 
CMS paid a set amount for multiple tests, regardless of which drugs were being tested.  Because of the new 
payment approach, it is unknown how often tests for specific drug classessuch as opioidswere 
conducted in 2016.  Of the 7 new drug test codes, 5 (Tests 7, 8, 10, 17, and 19 in Exhibit 5) appear in the 
top 25 tests in 2016.  Medicare paid for these tests at rates ranging from $79 to $215 per test.  
Molecular pathology tests.  Payments for molecular pathology tests decreased consistently from 2014 to 
2016.  Molecular pathology tests detect variants in genetic material and often help doctors determine how 
their patients will respond to treatment.  Medicare payments for molecular pathology tests decreased from 
$466 million in 2014 to $260 million in 2015.18  In 2016, total payments for these tests dropped further, to 
$165 million.  The number of molecular pathology tests appearing in the top 25 has also fallen, from 2 tests 
in 2014, to 1 test in 2015, and no tests in the top 25 in 2016. 
The decrease in billing for molecular pathology tests coincided with efforts by CMS, the Department of 
Justice, and OIG to prevent and reduce medically unnecessary genetic testing.  For example, in late 2015 a 
company agreed to pay $10 million to resolve allegations that it had submitted claims for genetic testing 
that was performed routinely and without an individualized assessment of need, and entered a corporate 
integrity agreement with OIG.19   
CONCLUSION 
Lab tests play a critical role in delivering health care for the millions of Medicare beneficiaries who receive 
tests each year.  Forthcoming payment reforms could have significant implications for Medicare spending 
and for the lab industry.  In 2016, Medicare paid $6.8 billion for tests; the top 25 tests accounted for 
60 percent of this amount.  More than one-third of all lab test payments were for six tests.  Changes in the 
Medicare payment rates for these tests could have a significant impact on Medicare spending when the 
new payment system for lab tests goes into effect in 2018.   
The information presented here will be useful in monitoring the effects of changes to Medicares payment 
system for lab tests.  CMS projects that forthcoming payment reforms could save $3.9 billion over 
10 years.20  Statistics from this and past OIG data briefs will serve as baselines that OIG will use to measure 
the effects of changes to the payment system.  We will continue to monitor Medicare payments for lab 
tests and to identify emerging trends and vulnerabilities to potential Medicare cost savings.   
Medicare Payments for Lab Tests in 2016:  Year 3 of Baseline Data (OEI-09-17-00140)  6 
 
   
METHODOLOGY 
We based this data brief on our analysis of Medicares claims data for lab tests performed in 2016 and 
reimbursed under the Clinical Laboratory Fee Schedule.  For comparison, we also reviewed the same claims 
data from 2014 and 2015.  As a result of when we accessed claims data, our analysis in 2016 used a set of 
claims that was slightly more complete (i.e., by less than 1 percent) than the sets used for our 2014 and 
2015 reports.  The totals we report for 2016 are thus marginally higher, when compared with those 
reported for 2014 and 2015.  The claims data were from the National Claims History Physician/Supplier 
Part B claims files and National Claims History Outpatient files.  The Physician/Supplier Part B files primarily 
include lab test claims from independent labs and physician office labs.  The Outpatient files primarily 
include lab test claims from hospital labs.  We did not include lab tests that were paid for under other 
payment systems, such as the payment system for critical access hospitals or the Outpatient Prospective 
Payment System.21  We also did not include claims for physicians interpretations of tests.   
We analyzed the claims data to identify key statistics and emerging trends for Medicare Part B payments 
for lab tests.  We analyzed Medicare payments and test volume by procedure code, beneficiary, lab, 
lab type, ordering provider, and test category.  Test volume is based on the number of units for which labs 
billed.  We identified the top 25 lab tests based on total payments for each procedure code in 2016, and we 
calculated total payments for these tests and analyzed payments by lab.   
Analysis by beneficiary.  We identified the beneficiary using the Health Insurance Claim Number on the 
claim.  We used the date of service to determine the number of tests that beneficiaries received per day. 
Analysis by lab.  We used different variables to identify individual labs that billed Medicare.  For lab tests in 
the Physician/Supplier Part B claims files, we used a labs Tax Identification Number (TIN) to identify a 
unique lab.  We chose the TIN because the TIN is the highest level identifier in the claims data and includes 
multiple locations for a lab.  For tests in the Outpatient claims files, we identified a unique lab based on the 
organizations CMS Certification Number.  The Outpatient claims files do not include a variable for a 
providers TIN. 
Analysis by lab type.  We used each claims place of service or type of bill to identify the type of lab 
(independent lab, physician office lab, or hospital lab) that performed the test.  For tests in the 
Physician/Supplier Part B claims files, we identified the lab type according to the place of service variable.  
For tests in the Outpatient claims files, we identified lab type according to the type of bill variable, which 
indicates the type of facility and service.  We identified a labs type according to the majority of its claims 
for lab tests. 
Analysis by ordering provider.  We used the ordering providers National Provider Identifier (NPI) reported 
on the claim to identify the physician who ordered the lab test.  Because the ordering providers NPI is 
reported only for claims from the Physician/Supplier claims file, our analysis is limited to claims in that file 
and does not include claims from the Outpatient claims file for lab tests performed by hospital labs. 
Analysis by category.  We determined a tests category (drug test, molecular pathology, etc.) according to 
its subsection within the 2016 edition of Current Procedural Terminology (CPT).  Each lab test that has a 
Level I Healthcare Common Procedure Coding System (HCPCS) code is assigned to a CPT subsection.  For lab 
tests on the 2016 Clinical Laboratory Fee Schedule that have Level II HCPCS codes, we asked CMS to assign 
test categories for the purpose of our analysis.   
Standards  
This study was conducted in accordance with the Quality Standards for Inspection and Evaluation issued by 
the Council of the Inspectors General on Integrity and Efficiency. 
Medicare Payments for Lab Tests in 2016:  Year 3 of Baseline Data (OEI-09-17-00140)  7 
 
   
ACKNOWLEDGMENTS 
Sarah Ambrose and China Tantameng served as the team leaders for this study, and Chelsea Samuel served 
as the lead analyst.  Office of Evaluation and Inspections central office staff who provided support include 
Joe Chiarenzelli, Berivan Demir Neubert, Althea Hosein, and Christine Moritz.  This report was prepared 
under the direction of Blaine Collins, Regional Inspector General for Evaluation and Inspections in the 
San Francisco regional office, and Abby Amoroso and Michael Henry, Deputy Regional Inspectors General. 
 
Medicare Payments for Lab Tests in 2016:  Year 3 of Baseline Data (OEI-09-17-00140)  8 
 
   
 
ENDNOTES 
1 PAMA, P. L. No. 113-93,  216(a) (adding Social Security Act (SSA),  1834A, 42 U.S.C. 1395m-1).   
2 PAMA,  216(c)(2). 
3 The first two annual analyses are:  Medicare Payments for Clinical Laboratory Tests in 2014:  Baseline Data 
(OEI-09-15-00210), September 2015, and Medicare Payments for Clinical Laboratory Tests in 2015:  Year 2 of Baseline 
Data (OEI-09-16-00040), September 2016.  We also reported on CMSs implementation of the new payment system 
for lab tests; see Changing How Medicare Pays for Clinical Diagnostic Laboratory Tests:  An Update on CMSs Progress 
(OEI-09-16-00100), September 2016. 
4 Private payer rates include those paid by private health insurance companies, Medicaid managed care organizations, 
and Medicare Advantage plans. 
5 SSA  1834A(b)(1)(A), 42 U.S.C.  1395m-1(b)(1)(A), requires CMS to implement the new payment system beginning 
January 1, 2017; however, CMS moved the implementation date to January 1, 2018.  81 Fed. Reg. 41036, 41037 
(June 23, 2016). 
6 42 CFR  414.504(a).  In the case of advanced diagnostic lab tests (ADLTs), Medicare will update the payment rates 
annually.  PAMA established advanced diagnostic lab tests as a new category of test.  The category includes tests that 
are performed by a single lab and either (1) analyze multiple biomarkers combined with a unique algorithm to yield a 
single patient-specific result, (2) are cleared or approved by the Food and Drug Administration, or (3) meet other 
similar criteria established by the Secretary of Health and Human Services.  SSA  1834A(d)(5), 42 U.S.C. 
 1395m-1(d)(5).   
7 81 Fed. Reg. 41066 and 41098 (June 23, 2016).  See also 42 CFR  414.502 (defining data collection period, data 
reporting period, and private payor).  
8 CMS Announces 60-Day Period of Enforcement Discretion for Reporting Applicable Information Under the Medicare 
Clinical Laboratory Fee Schedule, available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-
Payment/ClinicalLabFeeSched/Downloads/2017-March-Announcement.pdf. 
9 Both PAMA and the final rule implementing PAMA exempt certain labs from reporting their private payer data to 
CMS.  Labs that do not receive the majority (i.e., more than 50 percent) of their Medicare revenue from the Clinical 
Laboratory Fee Schedule or Physician Fee Schedule will not have to report, nor will labs that receive less than 
$12,500the low-expenditure thresholdin lab test revenues from the Clinical Laboratory Fee Schedule during a 
data collection period.  Out of consideration for the administrative burden that reporting would impose, CMS 
exempted labs under the low-expenditure threshold from reporting.  The low-expenditure threshold does not apply to 
single labs with respect to ADLTs they offer and furnish.  SSA  1834A(a)(2), 42 U.S.C.  1395m-1(a)(2).  81 Fed. Reg. 
4104151 and 41098 (June 23, 2016).  See also 42 CFR  414.502 (defining applicable laboratory).   
10 U.S. Department of Health and Human Services, 2016 CMS Statistics, p. 25.  Accessed at 
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/CMS-Statistics-Reference-
Booklet/Downloads/2016_CMS_Stats.pdf on August 7, 2017.  According to this source, total payments under the 
Medicare Part B benefit were projected to be $294.4 billion for fiscal year 2016. 
11 For lab tests and other Medicare fee-for-service claims dated on or after April 1, 2013, Medicare paid 2 percent less 
than the payment rate in accordance with the Budget Control Act of 2011, P.L. No. 112-25, Section 302, and the 
American Taxpayer Relief Act of 2012, P.L. No. 112-240, Section 901 (i.e., sequestration).   
12 Congress mandated a 1.75-percent reduction in Medicare payments for lab tests under the Clinical Laboratory Fee 
Schedule in 20112015.  Patient Protection and Affordable Care Act, P. L. No. 111-148,  3401(l).   
13 Medicare paid an additional $236 million in 2016 for specimen collection and validation. 
14 Labs bill for each test on the Clinical Laboratory Fee Schedule using a Healthcare Common Procedure Coding System 
(HCPCS) code, which we refer to as a procedure code.  The HCPCS is divided into two subsystems, referred to as 
Level I and Level II.  Level I HCPCS codes are composed of Current Procedural Terminology codes.  The five character 
codes and descriptions included in this study are obtained from Current Procedural Terminology (CPT), copyright 
2014 by the American Medical Association (AMA).  CPT is developed by the AMA as a listing of descriptive terms 
and five character identifying codes and modifiers for reporting medical services and procedures.  Any use of CPT 
outside of this study should refer to the most current version of the Current Procedural Terminology available from 
 
Medicare Payments for Lab Tests in 2016:  Year 3 of Baseline Data (OEI-09-17-00140)  9 
 
   
                                                                                                                                                                                                 
AMA.  Applicable FARS/DFARS apply.  Level II HCPCS codes are established by CMS primarily for items, supplies, and 
nonphysician services not covered by CPT codes.    
15 U.S. Department of Health and Human Services, 2016 CMS Statistics, p. 2.  The projected enrollment in 
fee-for-service Medicare in 2016 was 56.6 million beneficiaries.   
16 In addition, 1 percent of tests were performed in other settings, such as skilled nursing facilities and dialysis 
facilities. 
17 Although the colorectal cancer screening test (procedure code G0464) was not on the 2014 Clinical Laboratory Fee 
Schedule, CMS recognized it as a covered service effective October 2014.  CMS Transmittal 183, Change Request 9115. 
In 2014, CMS paid $1.2 million for the test.   
18 The $260 million in 2015 Medicare payments for molecular pathology tests reported in this report includes 
payments for codes that were uncategorized in 2015 but categorized as molecular pathology tests in 2016.  Because 
of these additional codes, the $259 million for molecular pathology tests reported in our 2015 report increased to a 
rounded total of $260 million in this report. 
19 Department of Justice, Millennium Health Agrees to Pay $256 Million to Resolve Allegations of Unnecessary Drug 
and Genetic Testing and Illegal Remuneration to Physicians.  Accessed at https://www.justice.gov/opa/pr/ 
millennium-health-agrees-pay-256-million-resolve-allegations-unnecessary-drug-and-genetic on August 28, 2017. 
20 81 Fed. Reg. 41097 (June 23, 2016). 
21 Many of the lab tests performed in outpatient settings (such as hospitals, skilled nursing facilities, and dialysis 
facilities) are paid for under Medicare payment systems other than the Clinical Laboratory Fee Schedule.  As we have 
noted, our analysis included only lab tests paid for under Medicares Clinical Laboratory Fee Schedule. 
Medicare Payments for Lab Tests in 2016:  Year 3 of Baseline Data (OEI-09-17-00140)  10