Revenue Cycle Insider

Big reductions in CDLT valuations are heading your way.

Labs don’t have much to look forward to in 2028 and 2029 if the Centers for Medicare & Medicaid Services (CMS) proposed rule for the 2027 Medicare Physician Fee Schedule (MPFS) passes without revision. That’s because CMS is considering implementing sweeping reductions in payments for clinical diagnostic laboratory tests (CDLTs). In addition, it is proposing changes in the way it will pay for software-driven analytical laboratory services while soliciting feedback on ways to eliminate duplication in diagnostic testing across health systems.

Here’s what you need to know about the proposals and how they might affect your lab moving forward.

Prepare for These Big Changes to the CLFS

The major proposal contained in the 2027 MPFS involves changes to Medicare’s Clinical Laboratory Fee Schedule (CLFS), which are potentially bad news for labs across the country. Driven by the Consolidated Appropriations Act (CAA) of 2026, these changes will result in across-the-board payment reductions, capped at 15 percent per year compared with the previous year’s rate, for calendar year (CY) 2027 through CY 2029.

What this would look like: Consider a CDLT such as 87502 (Infectious agent detection by nucleic acid (DNA or RNA); influenza virus, for multiple types or sub-types, includes multiplex reverse transcription, when performed, and multiplex amplified probe technique, first 2 types or sub-types), which is currently valued at $95.80 in the 2026 CLFS. Under the 2027 MPFS, the test will retain its valuation for the whole year, and the rate will remain protected from any reduction relative to 2025.

However, beginning in 2028, CMS will reduce its valuation of the test by 15 percent, or $14.37, and it will be valued at $81.43. Then, in 2029, CMS will impose a second 15 percent reduction on the 2028 valuation — a further $12.21 — for a final valuation of $69.22 in CY 2029. That’s a reduction of $26.58, or approximately 28 percent, from the end of CY 2027 to the beginning of CY 2029.

There’s also more bad news in the 2027 MPFS proposed rule if you are a lab that provides services for Medicare beneficiaries in skilled nursing facilities (SNFs) or home health agencies (HHAs). Beginning in CY 2027, CMS is also proposing correcting the laboratory specimen collection fee regulation to ensure continued implementation of the statutory $2 add-on payment when specimens are collected.

Understand CMS’ New SaMS Designation and Payment Proposal

Under a new policy driven by the artificial intelligence (AI) revolution, CMS is proposing to distinguish between traditional laboratory tests, which generate test results, and software-based analytical services, which interpret existing test data using proprietary algorithms or AI. This distinction, CMS argues, should lead to algorithm-only laboratory analyses (which it refers to as software as a medical service [SaMS]) being paid under the Physician Fee Schedule/Outpatient Prospective Payment System (PFS/OPPS) framework rather than under the CLFS, which will continue to be the payment framework for traditional lab tests.

This, in turn, is leading CMS to propose that the following proprietary lab analyses (PLA) and CPT^® lab analysis codes be paid through PFS/OPPS:

• 0220U (Oncology (breast cancer), image analysis with artificial intelligence assessment …)
• 0376U (Oncology (prostate cancer), image analysis of at least 128 histologic features and clinical factors, prognostic algorithm …)
• 0414U (Oncology (lung), augmentative algorithmic analysis of digitized whole slide imaging …)
• 0418U (Oncology (breast), augmentative algorithmic analysis of digitized whole slide imaging …)
• 0510U (Oncology (pancreatic cancer), augmentative algorithmic analysis …)
• 0511U (Oncology (solid tumor), tumor cell culture in 3D microenvironment …)
• 0512U (Oncology (prostate), augmentative algorithmic analysis of digitized whole-slide imaging of histologic features for microsatellite instability (MSI) status …)
• 0513U (Oncology (prostate), augmentative algorithmic analysis of digitized whole-slide imaging of histologic features for microsatellite instability (MSI) and homologous recombination deficiency (HRD) status …)
• +81416 (Exome (eg, unexplained constitutional or heritable disorder or syndrome); sequence analysis …)

NOTE: CMS also includes PLA code 0208U (Oncology (medullary thyroid carcinoma), mrna, gene expression analysis of 108 genes, utilizing fine needle aspirate, algorithm reported as positive or negative for medullary thyroid carcinoma) in the list, even though CPT^® deleted the code on Jan. 1, 2022.

Additionally, CMS is proposing “to assign any new codes that describe SaMS analysis performed on laboratory tests … to payment under the PFS.”

Take a Look at This Request for Information

Lastly, CMS is requesting feedback on the feasibility of sharing lab testing and imaging results across the healthcare system to avoid unnecessary duplication of, and duplicate payment for, these services. Making this information, which is currently confined to an individual’s medical record, sharable would also result in more timely care delivery, more complete medical information, and enhanced patient safety.

To facilitate such sharing, CMS is considering several possible policies, including:

• Clarifying billing instructions to labs and imaging facilities regarding duplicate testing;
• Implementing Medicare Administrative Contractor (MAC) edits to deny duplicate testing;
• Using payment integrity tools for duplicate testing payment payback; and
• Implementing frequency limits or specified timeframes for certain tests.

What you can do: If you feel your lab will be affected by these, or any other, Medicare proposals for 2027 and you wish to make your voice heard, make sure you submit your comments electronically on or before the deadline of Sept. 14, 2026.

Bruce Pegg, BA, MA, CPC, CFPC, Managing Editor, AAPC