CEO SUMMARY: One after another, a series of breaking news stories points to more rough waters ahead for the entire clinical lab industry. Of greatest interest is the ongoing questions about when clinical labs and pathology groups will get paid for the molecular test claims they have submitted to government and private payers since January 1, 2013. However, last week saw its own surprise news event: a federal government report that says Medicare could save $910 billion annually by repricing lab tests.
BIG NEWS STORIES HAVE HIT the laboratory industry with regularity in recent weeks. Unfortunately, not all the news is good and the entire lab industry will need to prepare for severe challenges, particularly in how labs are paid for testing services.
This intelligence briefing summarizes current events and provides you with a road map of the topics presented in this issue of THE DARK REPORT.
For many clinical laboratories and pathology groups, the number one story is Medicare’s non-payment of claims for the 114 Tier 1 and Tier 2 molecular test CPT codes that took effect on January 1, 2013. Across the nation, many labs continue to wait for the various Medicare contractors to issue payment for these claims. (See TDR, April 15, 2013.)
The big development was that, in the month of April, nearly all the Medicare Administrative Contractors finally posted prices in response to a directive from the federal Centers for Medicare & Medicaid Services. However, as we reported, near the end of last month, few Medicare contracts had posted prices for all 114 new Tier 1 and Tier 2 molecular test CPT codes.
Further, in a significant number of cases, the Medicare contractor listed prices that were substantially below the reimbursement level paid for code-stacked claims during 2012.
And there is more bad news! Several Medicare contractors made comments to individual labs that the reason they had not posted prices for certain of the molecular CPT codes is because they considered those tests as medically unnecessary.
Of course, Medicaid and private payers are equally behind the curve in paying for molecular test claims. Private health insurers tend to wait for Medicare to establish coverage guidelines and reimbursement. They will then base their own policies and prices on what Medicare has done.
Two Big Concerns for Labs
Thus, the current situation carries two major concerns for clinical labs and pathology groups. First, if Medicare carriers are setting molecular test prices at levels 40% or more less than what was paid during 2012, this means labs are likely to see private payers set their own prices at similarly low levels.
Second, if, as noted above, certain of the Medicare contractors are deciding not to post prices for some of the new 114 molecular test CPT codes because they consider these tests to be medically unnecessary, then that is an unexpected development and it will create an entirely new set of challenges for labs that perform molecular and genetic tests affected by these determinations.
Both of these developments have the potential to negatively impact the financial stability of those labs which perform a large volume of the affected molecular CPT codes. Moreover, not all of these labs will have the staying power to work through the process of submitting documentation and appealing decisions made by the Medicare contractors and CMS.
Are Labs Getting Payments?
That brings up the next question: are labs now getting regular payment for molecular tests, given the fact that Medicare contractors did post prices in April?
The surprising answer is: “No one knows for sure.” THE DARK REPORT has been in regular contact with a number of lab billing companies and individual lab organizations. As recently as last week, most could not positively confirm that they were seeing a regular flow of payments for molecular claims submitted since January 1. Our report on this situation is found here.
Another related and important story is how laboratories are surviving almost six months without payment for these molecular tests. On pages 8-10, you can read what THE DARK REPORT is learning about the negative financial impact that non-payment of molecular test claims is having on labs. Among other things, we have identified one lab company that closed its doors in recent weeks because it cannot get payment for its molecular test— despite the fact that Medicare contractors reimbursed for this assay in past years.
New Molecular Coalition
What will be important news for many readers is that some clinical lab companies have come together to form a new association to advocate their position. It is called the Coalition to Strengthen the Future of Molecular Diagnostics.
Certainly this group would welcome new members and contributions of money so that it can educate members of Congress about the unprecedented situation of Medicare’s inability (and unpreparedness) to properly and timely pay labs for molecular tests covered by the 114 new CPT codes.
As if these ongoing events, now lasting almost six full months, were not enough bad news for the lab industry, last week saw another bombshell development. Some of you may have learned about it.
On Tuesday, June 11, The Wall Street Journal was the first national news outlet to report that the Office of the Inspector General (OIG) had delivered a report to CMS that claimed that the Medicare program could save $910 billion per year. We provide useful analysis of this development for you on pages 17-18.
Collectively, these events demonstrate how tough it will be for labs to maintain financial stability, and that’s with more budget cuts expected in 2014!