Palmetto GBA Issues Guidance On Billing NGS Test Panels

Medicare contractor attempts to accommodate growth in clinical use of NGS through billing codes

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CEO SUMMARY: Across the lab industry, next generation sequencing is taking hold as an effective and efficient testing platform. In response, payers are developing coding and payment policies that may affect the finances of clinical labs. Last month, Palmetto GBA, a Medicare contractor, issued NGS test guidelines that some experts see as an attempt to recognize the value of NGS testing as a technology that could lower the cost of care while giving physicians new tools to diagnose disease more accurately.

IN JANUARY, Palmetto GBA revised its billing guidance for next-generation gene sequencing. By taking this action, Palmetto is acknowledging that NGS is a fast-growing technology that is gaining widespread acceptance by physicians and clinical laboratories nationwide.

But Palmetto also signaled that it is taking an approach to coding for certain tests that is unlike that of other payers and Medicare Administrative Contractors, according to experts who observe how payers and MACs view coding and price setting for molecular and genetic tests. In the guidance [“Next Generation Sequencing (NGS) and Tier 1 and Tier 2 Coding and Billing Guidelines M00130, V2”] issued in late January and updated February 16, Palmetto recognized the growth of NGS testing and seeks to accommodate that growth through billing codes.

Kuo Bianchini Tong, MS, CEO of Quorum Consulting Inc., observed that, with these new NGS testing guidelines, Palmetto is taking a nuanced and sophisticated approach to coding for molecular and genetic tests compared with that of other payers. In contrast to Palmetto’s approach, many other Medicare contractors and private health insurers are simply setting low prices on most molecular and genetic tests, Tong pointed out.

“In general, payers are taking one of two approaches to setting prices for molecular and genetic tests,” stated Tong. “One approach is like that of Palmetto, which is nuanced and sophisticated. The other approach is cruder and focused on keeping prices low. Many other payers are still on the sidelines, so it remains to be seen how this all plays out.

“Keep in mind that each of these two approaches represents a different way to make a business decision about price setting,” he explained. (Tong offers additional comments here.)

palmetto’s NGS Guidelines

When Palmetto announced its NGS coding and billing guidelines for Tier 1 and Tier 2 MolDx tests, it said:

‘When the AMA developed and published the descriptions for the Tier 1 (T1) and Tier 2 (T2) codes in the Molecular Pathology Procedure Section, the technology for NGS was not fully developed. At that time labs typically used polymerase chain reaction (PCR) and non-NGS sequence analysis to interrogate a single gene or gene component. Therefore, the T1 and T2 codes describe services for a single or occasionally two-genes test and subdivide the descriptions by full gene sequence, common variants, duplication/deletion variants, and known familial variants.

NGS platforms have the ability to target and detect multiple specific genes of interest, including common variants, duplication/deletion variants, and known familial variants in one run to create a single report. Therefore, MolDx considers an NGS panel a single test with multiple potential indications. The AMA describes NGS gene panels in the ‘Genomic Sequencing Procedure and Other Molecular Multianalyte Assay (GSP) Section.’

In a commentary on Palmetto’s announcement, Bruce Quinn, MD, PhD, an expert on Medicare policy and a consultant with FaegreBD Consulting, said Palmetto’s MolDx policy aims to distinguish between ‘hotspot’ tumor panels (meaning those targeting 5 to 50 genes and 51 or more genes) versus ‘sequencing’ tumor panels, and the policy states that labs cannot submit hotspot or sequencing tumor panels using the same AMA CPT codes.

“The MolDx program uses a distinctive approach to coding, billing, and pricing which cannot always be predicted by the use of the AMA CPT code book and price tables from the Clinical Laboratory Fee Schedule,” he said. “The AMA has what it calls ‘genomic sequencing procedure’ codes 81445 (for 5 to 50 genes for a solid tumor), 81450 (for 5 to 50 genes for a hematologic tumor), and 81455 (for any tumor with more than 50 genes).

“But now—under the new MolDx policy—NGS “comprehensive genomic profiling” (Palmetto’s term) is to be coded differently,” noted Quinn. “For MolDx, the AMA CPT codes are eligible for use with hotspot or traditional sequence method panels. This may be a relief to some labs because CMS gave two of these codes (81445 and 81450) very low list prices of about $700 through the 2015 gapfill method, and those low list prices became effective January 1, 2016.”

Benefits of an Unlisted Code

For pathologists in states where Medicare follows the MolDx guidance, labs that perform NGS testing that fit MolDx’s definition of comprehensive genomic profiling are now instructed to bill with an unlisted code, 81479. “After using this code, MolDx will assign a price it determines to be appropriate,” Quinn said.

Tong agrees. “What Bruce is saying is that Palmetto is pricing hotspot panels and if your lab is not submitting a hotspot panel to Palmetto, your lab must still obtain a separate and unique test code, which is good,” he said. “It is important for labs to understand the Palmetto NGS guidelines because these guidelines represent one of several approaches to pricing molecular and genetic tests that are being used by other Medicare contractors and private payers.”

Contact Kuo Bianchini Tong at; Bruce Quinn at


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