U.S. Department of Health and Human Services 
Office of Inspector General 
 
 
DATA BRIEF 
Medicare 
Payments for 
Clinical Diagnostic 
Laboratory Tests  
in 2017: Year 4  
of Baseline Data 
 
OEI-09-18-00410 
September 2018 
Suzanne Murrin 
 
Deputy Inspector General 
oig.hhs.gov  Report in Brief  U.S. Department of Health and Human Services 
September 2018 
Office  of Inspector General 
OEI-09-18-00410 
 
 
Medicare Payments for Clinical Diagnostic 
Why OIG Did This Review 
Laboratory Tests in 2017: Year 4 of Baseline 
Effective in 2018, the Medicare 
program changed the way it sets 
Data 
payment rates for clinical diagnostic 
laboratory (lab) tests.  The Centers for 
What OIG Found 
Medicare & Medicaid Services (CMS) 
Medicare paid $7.1 billion under Part B  replaced current payment rates with 
Key Takeaway 
for lab tests in 2017, a total that has  new rates based on current charges in 
Total Medicare spending for 
changed very little in the 4-year period  the private health care market.  This is 
lab tests in 2017 was 
from 2014 through 2017.  The top  the first reform in 3 decades to 
concentrated among a small 
Medicares payment system for lab 
25 tests by Medicare payments totaled  number of tests and labs. 
tests.   
$4.5 billion and represented 64 percent  Changes in the Medicare 
of all Medicare payments for lab tests  payment rates for the top 25  As part of the same legislation 
in 2017.  The top five tests, which  tests could have a significant  reforming Medicares payment 
remained consistent with the top five  impact on overall Medicare  system, Congress mandated that the 
spending for lab tests in 2018.  Office of Inspector General (OIG) 
from the previous 3 years, totaled 
monitor Medicare payments for lab 
$2.2 billion in 2017. 
tests and the implementation and 
Although more than 50,000 labs received Medicare payments in 2017,  effect of the new payment system for 
3 labs received $1.1 billion of the $7.1 billion (15 percent) in total  those tests.  This data brief provides 
payments for lab tests.  Spending on the top 25 tests was similarly  the fourth set of annual baseline 
analyses of the top 25 lab tests. 
concentrated among a few labs: 1 percent of labs received 55 percent of 
all Medicare payments for the top 25 lab tests in 2017. 
How OIG Did This Review 
We analyzed claims data for lab tests 
What OIG Concludes 
that CMS paid for under Medicares 
Clinical labs play a critical role in delivering health care to millions of 
Clinical Laboratory Fee Schedule.  
Medicare beneficiaries.  The new payment system for lab tests took 
These tests are covered under 
effect on January 1, 2018, and resulted in significant changes to the 
Medicare Part B, and do not include 
Medicare payment rates for lab tests.   This data brief, like those before 
tests that Medicare paid for under 
it, will provide baseline statistics that OIG will use to measure the effects  other payment systems, such as the 
of changes to the payment system when data from 2018 become  payment system for critical access 
available.  We will continue to monitor Medicare payments for lab tests  hospitals or the Outpatient 
and to identify emerging trends in these payments and vulnerabilities to  Prospective Payment System.  We 
identified the top 25 tests based on 
potential cost savings.
Medicare payments in 2017.  We also 
identified key statistics and emerging 
trends, including Medicare payments 
by procedure code, beneficiary, lab, 
ordering provider, and test category. 
Full report can be found at oig.hhs.gov/oei/reports/oei-09-18-00410.asp   
TABLE OF CONTENTS 
BACKGROUND  1 
   
   
   
FINDINGS   
Medicare Part B paid $7.1 billion for lab tests in 2017, a total that changed very little over  2 
4 years  
In 2017, 64 percent of Medicare Part B payments for lab tests were for 25 tests   
   
   
CONCLUSION   
   
   
APPENDIX   
A. Prior OIG reports on Medicare payments and rates for lab tests  6 
B. Methodology  7 
   
   
ACKNOWLEDGMENTS  8 
   
 
   
BACKGROUND 
The Protecting Access to Medicare Act (PAMA) of 2014 requires reform of 
the payment system for clinical laboratory (lab) teststhe first such reform 
in 3 decades.1  Effective January 1, 2018, new rates based on rates paid by 
private payers replaced the previous payment system, which was based on 
lab charges from 1984 and 1985.  The new payment system established 
a single national fee schedule for lab tests, replacing 57 separate local fee 
schedules.  Both the new payment system and the system it replaced 
established the set of rates known as the Clinical Laboratory Fee Schedule. 
To provide oversight, PAMA mandated that the Office of Inspector General 
(OIG) monitor Medicare payments for lab tests and the implementation of 
the new payment system.  Specifically, PAMA requires OIG to publicly 
release an annual analysis of the top 25 tests, based on Medicare payments, 
and to conduct analyses that OIG determines appropriate regarding the 
implementation and effect of the new payment system.2  This report 
analyzes payments made in 2017, the final year for which CMS paid for lab 
tests under the pre-2018 system.  This is the fourth annual analysis and final 
year of baseline data before CMS begins making payments under the new 
system (see Appendix A). 
This data brief analyzes claims data for lab tests that CMS paid for under 
Medicares Clinical Laboratory Fee Schedule.  These tests are covered under 
Medicare Part B, and do not include tests that Medicare paid for under 
other payment systems, such as the Physician Fee Schedule, the payment 
system for critical access hospitals, or the Outpatient Prospective Payment 
System. 
Lab test payment rates: 2018 and after 
On January 1, 2018, CMS began paying for lab tests under the new system 
mandated by PAMA.3, 4  CMS issued the 2018 fee schedule in 
November 2017 and, under the new system, the fee schedule will be 
updated every 3 years.5 
To establish a new payment rate for each test on the fee schedule, CMS 
used the median of private payments for that test, weighted by the volume 
of payments reported.  These new payment rates are based on private 
payments that labs received during the first half of 2016 and reported to 
CMS in 2017. Certain labs were exempt from reporting their private payer 
data to CMS.   
 
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 Clinical Diagnostic Laboratory Tests in 2017: Year 4 of Baseline Data  1 
OEI-09-18-00410   
FINDINGS 
Medicare Part B  Medicare payments for lab tests under the Clinical Laboratory Fee Schedule 
totaled $7.1 billion in 2017.6  Total payments for tests increased slightly from 
paid $7.1 billion for 
the totals from 2014, 2015, and 2016, which were $7.0 billion, $7.0 billion, 
lab tests in 2017, 
and $6.8 billion, respectively.7, 8 
a total that changed 
Medicare Part B covers most lab tests ordered by physicians and pays 
very little over 
100 percent of allowable charges.  Beneficiaries do not have a copay under 
4 years  either the new payment system or the old one.  Lab tests are usually 
performed in independent labs, hospitals, and physicians offices and 
provide information integral to preventing, diagnosing, and treating disease. 
Exhibit 1: What Medicares $7.1 billion for lab tests went toward in 
2017 
 
Source: OIG analysis of Medicare Part B lab test payments, 2018. 
   
Medicare Payments for Clinical Diagnostic Laboratory Tests in 2017: Year 4 of Baseline Data  2 
OEI-09-18-00410   
In 2017, 64 percent  Medicare paid a total of $4.5 billion for the top 25 lab tests in 2017, 
representing 64 percent of Medicare payments for lab tests paid for under 
of Medicare Part B 
the Clinical Laboratory Fee Schedule.  The 2017 total is slightly higher than 
payments for lab 
the $4.3 billion that Medicare paid for the top 25 tests in 2016, the 
tests were for  $4.1 billion paid in 2015, and the $4.2 billion paid in 2014.  Exhibit 3 (see 
25 tests  page 4) lists the top 25 lab tests based on Medicare payments in 2017. 
Seventeen lab tests have remained in the top 25 tests for the last 4 years, 
reflecting relative stability within this group of high-volume tests.  Of these, 
the top 5 lab tests have maintained their respective positions among the 
top 25 tests for the last 4 years and accounted for 30 percent ($2.2 billion) 
of all payments for lab tests in 2017.  These five tests include four common 
blood tests and a test for Vitamin D  levels. 
3
More than half of Medicare payments for tests in the top 25 went 
to fewer than 300 labs 
One percent of labs (272 out of 27,171 labs) received 55 percent of all 
Medicare payments for the top 25 lab tests in 2017.  These labs each 
received an average of $9.2 million in 2017.  After the top 1 percent of labs, 
the next 4 percent of labs accounted for 24 percent of Medicare payments 
for the top 25 lab tests.  These labs each received an average of $1.0 million 
for these tests in 2017.  The remaining 95 percent of labs accounted for just 
21 percent of payments for the top 25 lab tests.  These labs each received 
an average of $36,636 in 2017.  Medicare payments were similarly 
concentrated among a small proportion of all labs in 2014, 2015, and 2016. 
Exhibit 2.  Fifty-five percent of Medicare payments went to the top 
1 percent of labs. 
Medicare
55% 24% 21%
Payments
1% 4%
Labs 95%
Source: OIG analysis of Medicare Part B lab test payments, 2018. 
 
 
 
Medicare Payments for Clinical Diagnostic Laboratory Tests in 2017: Year 4 of Baseline Data  3 
OEI-09-18-00410   
Exhibit 3.  Top 25 lab tests based on Medicare Part B payments in 2017 
National  Number of  Medicare  Change From 
Limitation  Tests  Payments  2016 Payments 
Test Description (Procedure Code)*  Amount**  (Millions)  (Millions)  (Millions) 
1.  Blood test, thyroid-stimulating hormone (TSH) 
(84443)         $23.05   21.5  $484    $1.6 
2.  Blood test, comprehensive group of blood 
chemicals (80053)         $14.49   41.6  $473    $3.0 
3.  Complete blood cell count (red blood cells, white 
blood cells, platelets) and automated differential         $10.66   41.5  $432    $1.3 
white blood cell count (85025) 
4.  Blood test, lipids (cholesterol and triglycerides) 
(80061)  -  28.9  $415    $4.4 
5.  Vitamin D3 level (82306)         $40.61  8.9  $348    $1.9 
6.  Drug test(s), definitive, per day, 22 or more drug 
class(es), including metabolite(s) if performed        $253.87  1.3  $307    $65.3 
(G0483) 
7.  Hemoglobin A1C level (83036)        $13.32   19.7  $257    $6.2 
8.  Testing for presence of drug (80307)     $79.81  3.3  $240  New code in 2017 
9.  Drug test(s), definitive, per day, 1521 drug 
class(es), including metabolite(s) if performed       $204.34   0.8  $162    $35.8 
(G0482) 
10.  Blood test, basic group of blood chemicals (80048)  $11.60  13.2  $130    $3.7 
11.  Parathormone (parathyroid hormone) level (83970)         $56.62   2.3  $125    $4.9 
12.  Gene analysis (colorectal cancer) (81528)        $512.43   0.2  $117    $55.3 
13.  Cyanocobalamin (vitamin B12) level (82607)         $20.68   5.6  $114    $1.0 
14.  Drug test(s), definitive, per day, 17 drug class(es), 
including metabolite(s) if performed (G0480)         $117.65   1.0  $110    $41.5 
15.  PSA (prostate specific antigen) measurement 
(84153)         $25.23   4.3  $105    $1.9 
16.  Drug test(s), definitive, per day, 814 drug class(es), 
including metabolite(s) if performed (G0481)        $160.99   0.7  $101    $27.6 
17.  Blood test, clotting time (85610)        $5.39   17.0  $92    $12.9 
18.  Thyroxine (thyroid chemical) measurement (84439)         $12.37   7.1  $86    $1.5 
19.  Bacterial colony count, urine (87086)       $11.07   7.5  $82    $0.2 
20.  Natriuretic peptide (heart and blood vessel 
protein) level (83880)         $46.56   1.6  $70    $1.3 
21.  Ferritin (blood protein) level (82728)      $18.70   3.8  $70    $2.5 
22.  Test for detecting genes associated with breast 
cancer (81519)  $3,443.30   0.02  $60    $0.2 
23.  Complete blood cell count (red cells, white blood 
cell, platelets), automated test (85027)          $8.87   6.6  $57    $0.6 
24.  Folic acid level (82746)         $20.17   2.8  $56    $0.4 
25.  Gene analysis (breast cancer 1 and 2) full sequence 
and duplication or deletion variants (81162)***     $2,503.20   0.02  $52    $10.9 
 
                                                                                   Total Medicare payments: $4.54 billion 
Sources: OIG analysis of Medicare Part B payments, 2018.    
* See endnote 9 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 2017 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 81162 ranked as Test 31 in 2016, by Medicare payments. 
 
Medicare Payments for Clinical Diagnostic Laboratory Tests in 2017: Year 4 of Baseline Data  4 
OEI-09-18-00410   
CONCLUSION 
Clinical labs play a critical role in delivering health care to millions of 
Medicare beneficiaries, and the new method of setting payment rates for 
lab tests could have significant implications for Medicare spending and for 
the lab industry.  In 2017, Medicare paid $7.1 billion for tests; the top 25 tests 
accounted for 60 percent of this amount.  About 30 percent of all lab test 
payments were for five tests. 
The new payment system for lab tests took effect on January 1, 2018, and 
resulted in significant changes to the Medicare payment rates for lab tests.  
CMS estimated that these changes could save $670 million in 2018.10  OIG 
will use baseline statistics from this OIG data brief and its predecessors to 
measure the effects of the new payment system in next years analysis of 
2018 payments.  We will continue to monitor Medicare payments for lab 
tests and to identify emerging trends in these payments and vulnerabilities 
to potential Medicare cost savings.   
Medicare Payments for Clinical Diagnostic Laboratory Tests in 2017: Year 4 of Baseline Data  5 
OEI-09-18-00410   
APPENDIX A: Prior OIG reports on Medicare 
payments and rates for lab tests 
Setting Medicare Payment Rates for Clinical Diagnostic  OEI-09-17-00050  July 2018 
Laboratory Tests: Strategies To Ensure Data Quality 
Medicare Payments for Clinical Diagnostic Laboratory  OEI-09-17-00140  September 2017 
Tests in 2016:  Year 3 of Baseline Data 
Medicare Payments for Clinical Diagnostic Laboratory  OEI-09-16-00040  September 2016 
Tests in 2015:  Year 2 of Baseline Data 
 
Changing How Medicare Pays for Clinical Diagnostic  OEI-09-16-00100  September 2016 
Laboratory Tests:  An Update on CMS's Progress  
Medicare Payments for Clinical Laboratory Tests in 2014:  OEI-09-15-00210  September 2015 
Baseline Data 
Comparing Lab Test Payment Rates: Medicare Could  OEI-07-11-00010  June 2013 
Achieve Substantial Savings 
 
Variation in the Clinical Laboratory Fee Schedule   OEI-05-08-00400  July 2009 
   
Medicare Payments for Clinical Diagnostic Laboratory Tests in 2017: Year 4 of Baseline Data  6 
OEI-09-18-00410   
APPENDIX B: Methodology  
We based this data brief on our analysis of Medicares claims data for lab 
tests performed in 2017 and reimbursed under the Clinical Laboratory Fee 
Schedule.  For comparison, we also reviewed  the same claims data from 
2014, 2015, and 2016.  As a result of when we accessed  claims data, our 
analysis for 2016 and 2017 used a set of claims that was marginally more 
complete than the sets  we used for our 2014 and 2015 reports.  The  totals  
we report for 2017 are thus marginally higher than 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.11   
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, and 
ordering provider.  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 2017, and we  calculated total payments for these 
tests and analyzed payments by lab.   
Analysis by  beneficiary.   We identified beneficiaries by using the Health 
Insurance Claim Numbers on the claims.  We used the dates 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 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.  
Medicare Payments for Clinical  Diagnostic Laboratory Tests in  2017: Year 4  of Baseline Data   7 
OEI-09-18-00410    
ACKNOWLEDGMENTS 
Chelsea Samuel served as the team leader for this study.  Office of 
Evaluation and Inspections staff who provided support include 
Berivan Demir Neubert, Christine Moritz, and Michael Novello.  
We would also like to acknowledge the contributions of other Office of 
Inspector General staff, including Sarah Ambrose and China Tantameng.   
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.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
To obtain additional information concerning this report or to obtain copies, 
contact the Office of Public Affairs at Public.Affairs@oig.hhs.gov.  
Medicare Payments for Clinical Diagnostic Laboratory Tests in 2017: Year 4 of Baseline Data  8 
OEI-09-18-00410   
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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 Private payer rates include those paid by private health insurance companies, Medicaid 
managed care organizations, and Medicare Advantage plans. 
4 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). 
5 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).   
6 Medicare paid an additional $229 million in 2017 for specimen collection and validation. 
7 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).   
8 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).   
9 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 2016 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 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.  
10 Summary of Data Reporting for the Medicare Clinical Laboratory Fee Schedule (CLFS) Private 
Payor Rate-Based Payment System, available at https://www.cms.gov/Medicare/Medicare-
Fee-for-Service-Payment/ClinicalLabFeeSched/Downloads/CY2018-CLFS-Payment-System-
Summary-Data.pdf. 
11 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.