Labs Have New Hurdles as Some Payments Start

Commercial and Medicaid plans demanding documentation for molecular pathology tests

CEO SUMMARY: Some payments are beginning to flow for claims submitted under the new molecular test CPT codes. But there is a new issue. Medicare contractors, Medicaid programs, and private health insurers are deeming certain molecular tests to be medically unnecessary. These payers are requesting that labs submit more documentation before they will pay for the molecular test claims. This new burden is another financial blow to labs. “It’s a nightmare,” said one lab billing expert.

PATHOLOGISTS AND CLINICAL laboratories may be entering a new phase in their quest for payment from Medicare contractors for molecular pathology testing.

Although some labs have started to receive payments for invoices for molecular tests submitted since January 1, not all labs have been paid. At least two labs have closed, some labs are discontinuing testing for some patients, and other labs are laying off staff and downsizing operations.

Delays in payment by the nation’s Medicare Administrative Contractors (MACs) dragged on since January 1 while the MACs were setting prices for 114 new molecular test CPT codes that were added to the clinical laboratory fee schedule this year. The MACs took until April to set prices for some but not all of the 114 tests.

Now, in the past few weeks, THE DARK REPORT has learned that labs in Illinois, New Jersey, New York, and Texas are starting to see payments from MACs, according to Larry Siedlick, CEO of the ARx Group, a lab billing company in Long Island, New York.

“Our lab clients are getting paid from Medicare for the new molecular codes,” Siedlick added. “However, we are seeing more requests for medical necessity documentation from the Medicare contractors and private payers.

“Also, a number of molecular tests are being considered not medically necessary,” he noted. “Another thing we see is that many tests are being billed under the unlisted code 81479, which generally requires additional documentation and rarely results in payment.”

Demand for Documentation

Medicare contractors are asking clinical laboratories and pathology groups to submit additional documentation to support the labs’ requests for payment for these molecular diagnostic tests. Laboratory billing experts tell THE DARK REPORT that this new phase requires gathering and submitting a considerable volume of data to support the contractors’ requests for reimbursement.

“We are aware of two laboratory companies that have closed their doors due to lack of investor confidence over the coverage and reimbursement landscape,” commented Lâle White, Executive Chairman and CEO of XIFIN, Inc., a lab revenue management company in San Diego, California. “One company is Pathwork Diagnostics and the other is Predictive Biosciences. I am aware of another lab company in Southern California that laid off 25% of its staff.”

THE DARK REPORT reported earlier on what happened with Pathwork Diagnostics. In a coming issue, we will cover the issues that led Predictive Biosciences to cease lab testing and business operations.

“Some labs have reduced their offering of tests or defaulted to less effective FDA-approved versions of tests,” noted White. “They did this because reimbursement or coverage decisions did not support the laboratory-developed test (LDT) that was more medically appropriate.

“We also hear that some doctors have complained about losing access to molecular tests that previously they provided to their patients,” White said. While Palmetto GBA, the nation’s largest MAC, has been making payments for molecular pathology testing, all MACs have increased the number of non-coverage decisions, including—in the case of Palmetto—not covering the LDT versions of common tests, she added.

Non-Coverage Decisions

An increase in non-coverage decisions may be one reason many labs do not want to discuss these reimbursement challenges, said Michael Arnold, Executive Director of the California Clinical Laboratory Association. “Specific information is difficult to obtain and that may be due to concerns lab executives have that such developments will prove worrisome to investors and shareholders.”

Another problem labs face is that health plans generally follow the lead of Medicare, which is just what’s happening now, said Mark Edwards, Vice President and Chief Information Officer for Kellison & Company, a multi-specialty billing company in Cleveland, Ohio.

“The biggest issue we see now is that both commercial and Medicaid plans are not paying for some molecular pathology tests, especially those defined by Tier 2 codes and the new miscellaneous code, CPT 81479,” he said. “Much of the Medicaid HMO business is handled by commercial payers, and we’re having problems with all of these plans. They say they can’t pay or now require pre-authorization because the new tests are not on the Medicaid fee schedule, or are ‘manually priced.’

Few Tier 2 Codes Are Priced

“Even though many prices for the new molecular test CPT codes were released, most of the Medicare contractors priced only the Tier 1 codes,” Edwards explained. “Further, only two Medicare contractors have priced any of the Tier 2 codes.

“We see that the biggest problems are now with the commercial plans,” he continued. “None of these health plans have established fees for these molecular codes.

“At the same time, both the commercial and Medicaid plans are asking for increased documentation,” noted Edwards. “Lack of an established fee schedule for these codes has led to numerous requests for medical records and documentation to support medical necessity for tests that were previously paid without question under the old code stacks.

“Because AMA deleted the old molecular stacked codes 83898 to 83914 from the CPT book in 2013, all of these plans deleted the stacked codes,” he said. “Many payers don’t have the new molecular test CPT codes loaded into their fee schedules nor have they integrated these codes into their medical policy documents yet.

“This situation means labs are unable to bill under the codes they used last year,” noted Edwards. “Instead, they get denials and must undergo a long manual appeals process when billing with the new codes.

“Basically none of the molecular laboratories we service have gotten paid this year by any Medicaid plan,” concluded Edwards. “Further, our client labs tell us they cannot see a clear end to this situation.”

One CPT Code Generates Many Payer Questions

CLINICAL LABORATORIES are finding that claims coded to one particular new CPT code can be particularly troublesome. Use of CPT code 81479 under the new molecular pathology codes automatically generates requests from Medicare Administrative Contractors (MACs) for more documentation.

When it established the procedures for the 114 new molecular test codes in Tier 1 and Tier 2, the American Medical Association (AMA) also established CPT code 81479, stated Mark S. Synovec, M.D., of the College of American Pathologists. He is a member of the AMA’s CPT Editorial Panel.

Synovec explained the new codes during a presentation last fall. He said that CPT code 81479 was established for labs that had an unlisted molecular pathology procedure—meaning it would be used for analyses not captured in Tiers 1 or 2.

In a publication explaining the new codes, McKesson describes CPT code 81479 as follows: “Molecular pathology procedures that are not specified in Tier 1 category should be reported using the appropriate Tier 2 code. In the event the assay performed is not specifically listed in the Tier 1 or Tier 2 category, AMA states to use the unlisted nonspecific CPT code 81479. The AMA states that you may not add a molecular pathology assay to either the Tier 1 or Tier 2 category that is not specifically listed. Therefore, if the molecular test (e.g., the gene(s) being tested) in question is not specifically listed under either the Tier 1 or Tier 2 category codes, then those must be coded with the CPT 81479.”

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