Payers Using Two Approaches To Price Molecular and Genetic Tests

One is nuanced, sophisticated, the other is more about lower prices for genetic tests

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EXECUTIVE SUMMARY: This analysis, unique to THE DARK REPORT, contrasts the decision of Palmetto GBA to distinguish between “hotspot” tumor panels (meaning those targeting 5 to 50 genes and 51 or more genes) versus “sequencing” tumor panels in coding and pricing NGS test panels, with simpler approaches used by other health insurers. Understanding these differences is critical for labs as Medicare and private insurers wrestle with the fast-growing number of molecular/genetic tests now offered in the clinical marketplace.

This article is an excerpt from a 1,600-word article in the Feb. 29 issue of THE DARK REPORT. Full details of the different approaches to coding and billing for NGS panels are included in the original article, available to paid members.


PRIVATE PAYERS and Medicare contractors are taking divergent approaches to establishing coverage policies and setting prices for molecular and genetic tests. That’s what Kuo Bianchini Tong, MS, CEO of Quorum Consulting Inc., sees happening.

“One approach seeks to recognize the clinical utility and value of these tests with nuanced, more discreet coding and pricing,” he observed. “Other payers are less inclined to differentiate based on content, and are simply applying a one-size-fits-all price to these tests.

“Neither approach can be considered wrong or fundamentally better than the other,” noted Tong. “Rather, each approach is an effort to solve the challenges that the explosion in the number of molecular and genetic tests has presented to private payers and Medicare Administrative Contractors (MACs).

“If you look at what individual private payers and MACs do when coding and setting prices for all these tests, there are definite differences,” explained Tong. “For example, Palmetto GBA recently set new rules for hotspot tests versus more comprehensive panels. By doing this, Palmetto carved out hotspot tests using this new set of rules. By contrast, other MACs and private payers prefer not to make such distinctions for hotspot tests.

“What we may be seeing, then, is the first evidence that payers are aligning into different camps based on which approach they prefer when deciding how to cover and price molecular and genetic tests,” said Tong. “When it comes to coding and pricing, Medicare contractors and other payers know exactly what they’re doing. The net result is we can see these different philosophies in the marketplace.

“My view is that Palmetto is trying to take a subtle and nuanced approach by making interpretations based on the evolution of lab-developed tests and other assays,” he added. “Palmetto knows that FDA-approved panels will be coming into the clinical marketplace. Thus, its newest coding and pricing may be built to reflect that reality.

Cruder Methodology

“By contrast, there are other MACs, such as National Government Services (NGS), and some commercial health insurers that use what might be called a cruder methodology—one that is designed to force these tests to a lower price point,” explained Tong.

“It’s not that one method is right and one is wrong or that one approach is igno- rant and one is enlightened,” he said. “I’ve watched payers struggle with these coding and pricing issues. Each payer has to develop an approach to coding and pric- ing that works for them. It’s whether a payer wants to apply a fine surgical knife or a blunt machete to the field.

“Unfortunately, labs can find themselves caught in the middle of these different approaches to coverage and reimbursement,” added Tong. “That’s because price can vary based on the payer or geography. Thus, the price a lab gets for its molecular or genetic test can depend on the payer to which it submits its request and which approach that payer takes.”


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