>>CEO SUMMARY: Clinical labs developing innovative tests face a challenge getting paid. While Medicare may reimburse for these tests, some commercial payers and state Medicaid programs are not paying for new proprietary laboratory analyses (PLA) codes and multianalyte assays with algorithmic analyses (MAAA) codes. For labs running these tests, experts say the codes themselves bias payers against payment.
When the Protecting Access to Medicare Act (PAMA) was enacted in 2014, some clinical laboratory directors expected that the law would improve billing and payment for new proprietary assays and that new codes would make it easier for payers to make coverage decisions for these tests. But six years later, this little-known element of PAMA worries lab directors seek-ing payment for proprietary laboratory analyses (PLAs) or multianalyte assays with algorithmic analyses (MAAAs). The PLA codes were added to the current procedural terminology (the CPT code set) that the American Medical Association CPT Editorial Panel oversees. PAMA designated certain tests to be included as PLA and MAAA codes along with:
• Advanced diagnostic laboratory tests,
• Clinical diagnostic laboratory tests,
• Genomic sequencing procedures (GSPs).
PLA codes are alpha-numeric CPT codes and include a description for the test in question, according to the AMA. Tests with PLA codes must be performed on human specimens, and labs that offer these tests must ask the AMA to issue these codes. In recent months, the PLA and the MAAA codes have been particularly troublesome, according to consultants work-ing with labs running these tests.
New Kinds of Lab Tests
“The PLA and MAAA codes were added because labs and the AMA needed to be specific about the kinds of new tests labs were developing,” said an industry expert who asked not to be named. “Previously, too many general categories of tests were lumped together into one category with all the other CPT codes.” The new tests with PLA and MAAA codes came from the MolDx program that McKesson developed. Palmetto GBA, a Medicare Administrative Contractor, implemented that program for labs seeking approval for assays that do not fall into the more general categories of tests. “PLA and MAAA codes were intended to be used to identify new and more unusual tests than Medicare, Medicaid, and commercial insurers may have paid for previously,” the expert commented.
“Instead, these new codes now serve as a red flag for insurers who use these codes to identify tests that they label as being experimental, investigational, or for research purposes only. “So, while the idea of using PAMA to establish more specific codes was a good one, implementation of these codes has become a nightmare for some labs,” added the expert. “Labs performing tests billed with these codes may be able to get Medicare to pay for these assays.
But often other payers—meaning commercial insurers and state Medicaid plans—reject claims with these codes without doing much to review the validity of these tests. Sometimes, payers don’t review the value of these tests at all. “While Medicare payment is welcome, that action alone does not persuade many commercial insurers or state Medicaid plans to follow suit,” they commented. “In fact, many commercial plans don’t recognize PLA codes at all. There’s a disconnect between the concept of using a new set of codes and implementing that concept. For labs running tests with these codes, the implementation is not going well at all.”
PLA, MAAA Codes
Some commercial payers and state Medicaid plans pay for some tests with PLA and MAAA codes, said Scott Liff, President and CEO of Kellison and Company, revenue cycle management consultants. “One interesting development is that, although payment for tests with MAAA codes is higher than it is for tests with PLA codes, the overall reimbursement for tests with MAAA codes continues to be much lower than the reimbursement commercial payers and state Medicaid programs pay for clinical lab tests with standard CPT codes,” he added.
One problem labs face is that when a physician orders a test with a PLA or an MAAA code, the lab will analyze the specimen and produce a result but then won’t get paid, leaving the lab with increased costs and no revenue unless it can appeal the denial successfully. As a result of a large number of denials for tests with PLA and MAAA codes, innovation is stifled. kCodes Could Help Innovation “When these codes first came out, labs thought they had an opportunity to develop innovative and creative tests to solve problems that their referring physicians faced when treating patients,” the expert explained.
“But instead, innovation, creativity, and problem-solving went nowhere because labs couldn’t afford to develop new tests if there was no reimbursement for them. “Even though Medicare may pay for an innovative test, that payment alone is useful but the rest of the market for these tests, meaning the universe of payers, is almost nonexistent,” the expert said. “So, a lab would spend money to develop the test in the innovation stage when there’s no revenue yet,” he explained. “Then the lab would go through all the steps necessary to validate that test and then it can market the test to physicians treating patients.
“If Medicare approves the test, that lab might generate revenue from that assay but then the lab must spend as much if not more to prove to other payers that it’s a useful test,” the expert explained. “Doing more studies to produce more evidence of utility costs the lab money, but that work does not generate revenue. “At the same time, health plans will say they don’t have the expertise, or the staff, or other resources to review the validation data for each new test that labs propose for payment,” the expert commented.
“That may be true or not, but we’ve seen many payers that simply are not interested in determining if tests with PLA or MAAA codes have any value to their physicians or to members. “It’s almost as if many payers are simply seeking a way to say ‘No, we don’t pay for new tests, especially unusual ones,’” he added. “In essence, PLA and MAAA codes act like a red flag showing that these tests are innovative and that they may fill a void; however, many labs can’t even get payers to evaluate these assays,” the expert concluded. “In that way, these new codes are stifling innovation in labs.”
For Texas Lab, Medicare Approval for Its Test with a PLA Code Didn’t Help with Other Payers
Late in 2018, the Federal Centers for Medicare and medicaid Services (CMS) agreed to cover a new test that physicians use to monitor patients for compliance with prescriptions for pain medications. After agreeing to cover the test, CMS added it to the 2019 Clinical Laboratory Fee Schedule. That decision was a milestone for Firstox, a toxicology lab in Irving, Texas, that has a blood test called “AssuranceRx Micro Serum” to assess patient compliance with pain medications and opioid prescriptions, according to Firstox CEO M.P. George. Firstox developed this proprietary toxicology test that uses two drops of blood from a fingerstick to assess for the presence of more than 35 pain medications, George said.
Before George could offer the test, he needed to request a proprietary laboratory analysis (PLA) code from the American Medical Association’s CPT Editorial Panel. In 2017, he made that request and the test was classified as PLA 0054U, meaning these five digits were tacked onto the CPT code.
Once George had the PLA code, he sought approval and pricing from CMS. When CMS added the test to the 2019 fee schedule, the agency agreed to pay $165 for each use of the test. While George heralded the CMS approval, obtaining payment from other health plans has been mixed. Some state Medicaid programs pay for the test, but not others. Some insurers refused even to review the evidence from a clinical trial that Firstox conducted comparing AssuranceRx with urine drug testing.
“Some payers recognize the test, including UnitedHealthcare and the Blues plans in Texas and Illinois,” George said in an interview with THE DARK REPORT. “But others do not, such as Cigna. And, most state Medicaid plans do not recognize it.” Firstox uses an algorithm it developed to indicate the patient’s dose compliance for opiates and opioid drugs, he added. For George, such payment refusals are frustrating because clinical trials are supposed to be the gold standard that insurers say they need for coverage decisions, and the fact that Medicare added the test to the CLFS should send a positive signal to other payers, he said.
“For our company, payment denials from health insurers and state Medicaid programs have cut into lab revenue each month,” George explained. “Our lab has 27 employees and we do 2,000 to 3,000 tests each month, but 90% of the volume is for the AssuranceRx Micro Serum test,” he said. “The other 10% is for urine drug tests. Among those 90% of tests, payers reject about 25 requests for payment every day. That number of denials cuts into the lab’s revenue by about 10% to 20%.”
When asked why some payers might reject requests for payment, pathologist Frederick Kiechle, MD, PhD, a consultant to clinical labs and pathology groups, said that many payers recognize tests with G-codes as a red flag that a test could be suspect. Also, he added, some payers want to hear a fuller explanation of some of George’s claims about the validity of the test.
Contact M.P. George at email@example.com or 847-848-2995; Scott Liff at firstname.lastname@example.org.