American Clinical Laboratory Association Laboratory Medicare Reimbursement in the Crosshairs – Threats to Reimbursement & How The Industry is Fighting Back Alan Mertz President American Clinical Laboratory Association CCLA Annual Meeting November 2013

Introduction & Summary The Best of Times, The Worst of Times Age of Personalized Medicine, Innovation in Molecular DX Age of Unprecedented Budget Cutting & Regulation Key Reimbursement Threats Fall 2013 CMS Proposal to Cut 39 PFS AP Codes – “HOPPS” CMS Proposal to “Adjust” All 1200 Codes CLFS on Chopping Block (Again) to Pay For SGR Congressional Budget Conference Seeks Entitlement Cuts GapFill Process MAAA’s How Laboratory Industry Is Fighting Back

“Why is the Government Cutting Lab Reimbursement?” Big Picture – External Factors “Low Hanging Fruit” Already “Picked” by ACA & Other Annual SGR Extension, Provides Vehicle & Need for $$ Endless Debt Ceiling & Government Funding Showdowns More Aggressive CMS Cost Cutting Initiatives Specific to Laboratory Services CLFS Overall Viewed by Some as Out of Date Lab Utilization Up Outside Organizations Studies (OIG, MedPAC, Others) Labs Got “Pass” in 2013 SGR Payfor.

CMS Proposes Deep Cuts in 39 Pathology Codes (PFS) Capping PFS Pathology Codes TC to Hospital Outpatient PPS (HOPPS) Major Codes Include Flow, IHC, FISH Overall 26% Cut, Some Codes Cut 81% Hospital Outpatient Reimbursement Rates for Codes Never Intended to Set per Code Rates in PFS Reimbursement Below Direct Costs Advocacy Campaign to Stop Proposal is One of Largest Ever for Lab Community Deadline: September 6, 2013 Comments, Final Rule November 2013, Would Take Effect January 2014

CMS CLFS “Adjustment” Proposal from 2014 PFS Rule CMS Proposes Authority to Adjust CLFS Codes to Account for “Technological Changes” Statutory Basis Which Codes? Process for Adjustments What is “Technological Change” (TC) ACLA and Industry Reaction Putting “Guardrails” on Process Limiting Codes Fighting Presumption that TC Only Reduces Cost Transparency & Stakeholder Involvement

Medicare Payment for Lab Test Clinical Lab Fee Schedule (CLFS) Created in 1984 with Annual Update for Inflation… But Payments Have Increased Only 7 Times in Past 30 Years $21.81 Updated for Inflation Medicare Payment for Lab Test ($10 in 1984) Now, let me turn to what is happening to reimbursement for labs under the CLFS. When it was created in 1984, the fee schedule was supposed to be automatically updated each year by the CPI (not medical inflation, mind you). As the chart demonstrates, the CLFS has no where near kept up with CPI. In fact, by 2010, a $10 test was actually being reimbursed for less than it was in 1984, in REAL TERMS! Whereas a $10 test would have been $21.81 had it been adjusted for CPI, it was actually paid $8.32. Year 1984 2010

FOR IMMEDIATE RELEASE Contact: Adjoa Adofo July 9, 2013 703-548-0019 AMERICAN CLINICAL LABORATORY ASSOCIATION STATEMENT ON CMS PROPOSED PHYSICIAN FEE SCHEDULE RULE WASHINGTON, DC – The American Clinical Laboratory Association (ACLA) issued the following statement on the proposed rule published today in the Federal Register by the Centers for Medicare and Medicaid Services (CMS), “Medicare Program: Revisions to Payment Policies under the Physician Fee Schedule, Clinical Laboratory Fee Schedule & Other Revisions for Part B for CY 2014” (the “Proposed Rule”): ACLA is deeply concerned with two provisions in the Proposed Rule which would reduce payments to clinical laboratories and could threaten patient access to life enhancing and life-saving laboratory services. First, absent any discussion with clinical laboratories, patients, and other stakeholders, CMS proposes to identify codes and propose revised payments in the Clinical Laboratory Fee Schedule

Other Key Threats CLFS As “Payfor” to Fund SGR Extension President’s Proposal for 8 More Years of Cuts Permanent or Short Term “Patch?” Budget Conference Copays, Competive Bidding? Gapfill MAAAs

What Can Laboratories Do To Impact Government Reimbursement & Regulatory Policies? Laboratories CAN Make a Difference: Examples Competitive Bidding Repealed Federal Lab Tax Defeated Coinsurance Defeated MAAA’s rule delayed FDA IVD/MIA Guidance Shelved FDA LDT Guidance Still not Issued (3 Years) Be an Active Member of Industry Associations (ACLA, C21st Med, CCLA), & Professional Associations (CAP, etc) Get to Know Your Local Member of Congress & Contact Them on Issues of Concern File Comments on CMS, FDA Proposed Rulemaking Contact your Local Media on Issues of Concern (Letters, Op Eds)

Thank you For follow-up, please contact: Alan Mertz President ACLA amertz@acla.com 202-637-9466 PLEASE utilize www.acla.com for more information and use the grassroots network to easily contact your member of Congress and Federal agencies on important issues!