CEO SUMMARY: Bringing a new proprietary diagnostic test to market is an arduous process. It takes patience and planning to complete the journey from test development to payer reimbursement. This slow process stems from the fact that the healthcare reimbursement system is fragmented, with the three main segments being Medicare, Medicaid, and private payers, each with its own set of coverage requirements.
OBTAINING FAVORABLE PAYER COVERAGE AND REIMBURSEMENT DECISIONS for new diagnostic assays requires patience, long-term planning, and realistic assessments of their technologies by the lab companies bringing these tests to market.
That was the key message from Steve Stonecypher, Managing Partner at Shipwright Healthcare Group in Greensboro, N.C., during a presentation at April’s Executive War College Conference on Laboratory and Pathology Management. He later spoke exclusively to The Dark Report.
“It’s really about being open, transparent, and honest about your company’s diagnostic technology and where it fits,” said Stonecypher, a consultant who assists healthcare companies in navigating the payer marketplace. “Should a lab company fail to set realistic timelines and guidelines, the potential for a pitfall is great.”
Lab companies might wait longer than a year before their test even appears on the Medicare Part B Clinical Laboratory Fee Schedule (CLFS). And Medicare is just step one of a potentially lengthy process. Getting subsequent decisions from commercial health insurers and Medicaid can add another 12 to 24 months to the timeline at a minimum, and that’s if everything goes right, he added.
“I know organizations that are in their sixth and seventh year of seeking coverage for their lab test, and they’re just starting to get the payers to come on board,” Stonecypher warned. The process to introduce a new diagnostic test must have an eye toward a technology’s likely fit in patient care and how it’s going to be coded, he added.
Does a New Test Fit In?
Lab companies should perform a technical assessment that reflects how payers will ultimately make coverage decisions involving their new diagnostic test, he said.
One key question that Stonecypher focuses on: “Is the test a ‘nice to have’ or a ‘need to have’? The payer might look at the technology, and say, ‘Why do patients need it? You’re using a code that somebody else is already using.’ That’s just nice to have, versus a need to have. On the other hand, is the test filling a void? Is the test solving a problem for this payer and for the patient population?”
Contemplate Three Areas
Here are other considerations:
- Competing tests. Don’t discount the benefit of not being first to market. “Sometimes it’s great to follow a lab company that’s already been there,” Stonecypher said. “Maybe your lab company’s new test will be more sensitive and more specific. But the first test blazed a trail, so the payers might have already made positive determinations.”
- Cost-benefit analysis. Lab companies must determine how the test drives cost savings or appropriate patient care. Another aspect: Does the test impact the financial bottom line for the payer?
- Support from key influencers. “It’s very important to have big organizations behind you,” Stonecypher explained. This includes medical specialty societies where the test might fit into a clinical guideline, as well as key opinion leaders who may be using the technology. “Can these advocates demonstrate current utilization to the payer and thus market adoption?” he asked.
Many payers will want to see a dossier that documents the validity and utility of the diagnostic test. “But the clinical dossier needs to very concise,” Stonecypher advised. “I’ve seen 100-page dossiers, but what medical director is going to read that? So, get it down to something more like a 20-page term paper with a succinct executive summary: What is the test? What patient care problem does it solve? What is the intended use?”
Determining the Code
Navigating the American Medical Association’s (AMA) Current Procedural Terminology (CPT) codes can be challenging when it comes to a new diagnostics test. “One key question is: Does the lab get a new code or is there an existing code?” Stonecypher said. “That’s a very important determination because it drives next steps.”
If an existing CPT code accurately describes the test, that’s the path of least resistance. “Pricing is already set, and some determinations are already set. The lab doesn’t have to do anything other than go chase contracts,” he said. “On the other hand, the established rate may not be ideal, or there may be negative determinations that have to be addressed.”
A second option is to use an unlisted CPT code. These codes are set aside for broad categories of procedures, usually new ones, for which a specific code is not available. The AMA currently has three CPT codes for unlisted laboratory procedures:
- Chemistry procedures (code 84999).
- Miscellaneous pathology tests (code 89240).
- Molecular pathology procedures (code 81479).
The downside is payers don’t have established rates for unlisted codes, requiring extra documentation for favorable reimbursement decisions, Stonecypher noted.
Obtaining a New Code
A third option for a new lab test is to apply for a new CPT code from the AMA. Doing so will ultimately facilitate pricing and claims processing. But it also creates another set of hurdles to jump through.
“The application process can be time sensitive and resource intensive,” Stonecypher said. “It can take a minimum of 12 to 18 months from submission to coverage determination. To obtain a new code, labs are best served to provide documented evidence of clinical validity and clinical utility.”
Yet another obstacle is getting the new code on the Medicare CLFS. That process depends on whether the test is considered a crosswalk or a gapfill.
“Crosswalk means there’s a code that’s comparable, but it’s not a perfect match,” Stonecypher noted. Finalizing a crosswalk can take about a year from initial submission to placement on the fee schedule.
Labs should expect an additional year if a test is a gapfill, meaning “there’s nothing comparable,” he said.
Getting on the CLFS “is going to be the easiest thing a lab can do out of all this,” he added. “The documentation that’s required for Medicare is significantly different from what the commercial payers are requiring. And it’s different from what a state Medicaid program requires.”
Medicare Advantage Plans
Even getting coverage from Medicare Advantage plans may be a challenge, Stonecypher cautioned. Federal regulations typically require these plans to follow Medicare rules and determinations, but they “aren’t always going to follow them, or you have to remind them they have to follow.”
Success in this effort can also depend on which company is offering the Medicare Advantage plan and the specifics of the contract.
State Medicaid plans are supposed to follow Medicare determinations, but that does not always happen due to budget constraints and the delegation of contracting capabilities on the state’s part, he said.
Further complicating the matter, each state has its own rules, and in some states, such as Tennessee, policies and their determination are delegated to the Medicaid HMOs. Tennessee is divided into three regions managed by three different Medicaid HMOs.
“So, in one state, you could have one plan covering the test and another not covering it,” he observed. “Subsequently, payers may bring their own unique requirements into the process.” (See sidebar below for more details.)
“This is a long-term process to bring a test and a technology to market,” Stonecypher advised. “It’s about mapping out the process and creating a timeline.”
Contact Steven Stonecypher at sstonecypher@shipwrighthg.com.
With 175,000 Genetic Tests Available, Payers Struggle to Manage Utilization
ANY DISCUSSION ABOUT HOW TO SEEK REIMBURSEMENT FOR NEW DIAGNOSTIC TESTS must also acknowledge the pressures that private payers face as tens of thousands of new diagnostic assays are introduced each year.
One database of genetic tests maintained by Concert Genetics of Nashville, Tenn., currently catalogs more than 175,000 genetic tests offered by hundreds of U.S. laboratory companies.
For context, back in 2000, a complete lab test catalog offered by major national reference lab companies listed only 2,000 diagnostic assays.
Exponential Growth
Seen from this perspective, growth over the past decade in the number of different genetic tests has been exponential. Payers were unprepared for the sheer volume of genetic test claims, often billed with between 10 and 40 Current Procedural Terminology (CPT) codes.
“Declining cost of sequencing, inflow of investment capital, heightened public interest, and the relatively permissive regulatory framework around laboratory-developed tests have all contributed to the rise in the number of available tests,” Rob Metcalf, CEO at Concert Genetics, told The Dark Report. The company develops solutions that help providers and health plans manage genetic test selection, coverage criteria, coding, and payments.
The Dark Report has noted in the past that a significant consequence from the tidal wave of new genetic tests is that the Medicare program and private payers are overwhelmed with claims for these novel tests. (See TDR, “Genetic Tests Grow in Number, Complexity,” July 26, 2021.)
Many genetic testing companies performing these new lab tests do not have sufficient evidence of analytic validity and clinical utility. Consequently, insurers must deal with large volumes of claims for genetic tests that may have little clinical value.
Health insurance plans face three fundamental problems in managing genetic testing, as outlined by Metcalf:
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- Test identification. “Most billing codes align to individual genes rather than tests, yet the majority of testing volume and claims comes from multi-gene panels represented by multiple codes,” he noted. Variability in how tests are represented in coding compounds the problem for health insurers.
- Rapidly changing evidence. It is challenging to track proof of analytic validity and clinical utility of new assays. “The evidence and clinical guidelines for testing change rapidly—often much faster than health plans update their medical policies,” Metcalf explained. “The plan often finds itself in a position where its understanding of the test and the evidence are both out of date.”
- Lack of coordination. Accurate reimbursement requires synchronization among groups that handle network contracting, medical management, and claims. However, achieving this is difficult without a unified view of tests, policy, coding, and pricing.
Managing Test Utilization
Carriers are seeking ways to better manage test utilization.
“Prior authorization is costly and burdensome, especially in genetic testing where multiple codes may reference multiple policies for one test,” Metcalf said. “Most utilization management programs do not deliver a cohesive test ID system or coding standards, which means payment integrity remains a challenge.”
Contact Rob Metcalf at rmetcalf@concertgenetics.com.
Payers Use Different Policies in Test Reviews
AMONG COMMERCIAL PAYERS, Aetna, Elevance Health (formerly Anthem), UnitedHealthcare, and Cigna implement and manage their own medical policies or have a subsidiary company that manages their policies.
Some plans delegate medical policy decisions and can opt in or out of specific decisions, said Steve Stonecypher, Managing Partner at Shipwright Healthcare Group. For example, Blue Cross Blue Shield plans may subscribe to a third-party company for medical policies, but the plans can opt out of a particular determination if they are so inclined.
Technology assessment organizations such as ECRI, InformedDNA, and others also influence coverage policies even though they don’t enforce them. “So, plans can opt into using those organizations,” he said.
Lab benefit management companies— such as Avalon Healthcare Solutions, eviCore Healthcare, and AIM Specialty Health—are also playing a bigger role.
“That’s good and bad,” he said. “You can have a dialog with some of these companies, whereas you can’t with some of the payers. But if a test gets a negative decision, it may be for multiple plans. On the other side, if everything’s in order, a test may get a positive decision and suddenly go from zero plans to 20 overnight.”
To deal with inevitable setbacks when introducing a new test, labs should think strongly about how to respond to denials and prepare to go through multiple levels of appeal if a plan initially declines to cover the test.
“This is key to building attention in the marketplace for your new test technology,” Stonecypher said.
