CEO SUMMARY: On May 14, Predictive Biosciences learned that its Medicare contractor had determined that one of its three molecular tests for bladder cancer was a screening test. It also never got a determination on its other two molecular tests. Because Medicare is half of the lab’s payer mix, and since the company was worried that private payers would follow Medicare’s lead, its investors decided to close the laboratory and go out of business on May 31. This is one example of the disruption caused by the Medicare program’s bollixed handling of the new molecular CPT codes.
FIVE MONTHS AFTER IT STOPPED getting payment for its molecular diagnostic test claims that were covered by the new molecular test CPT codes, Predictive Biosciences (PB) of Lexington, Massachusetts, closed its doors for good.
Its financial collapse was due to the mishandling of the new CPT codes by the Medicare program, according to the company’s CEO. More than 10,000 patients are now without a test for bladder cancer as a result of a single non-coverage decision by one Medicare Administrative Contractor (MAC). Further, these patients will now likely undergo an invasive diagnostic procedure.
The big news across the clinical laboratory industry is how the Medicare program botched the implementation of the 114 new molecular test CPT codes that took effect on January 1, 2013. Now, six months later, some labs still await payment for some or all of the molecular test claims they have submitted since January 1. (See TDRs, April 15, 2013 and May 28, 2013.)
Two Disruptive Payment Issues
Further, Predictive Biosciences and other labs performing these molecular tests found themselves dealing with issues, one of which was more disruptive than simple non-payment. One issue involves prices posted by Medicare contractors that are lower by 40% or more than what was paid for the same tests in 2012 as code-stacked claims.
Another issue centers around determinations by MACs—and also possibly Medicaid programs and private health insurers—that many molecular tests are medically unnecessary. As a consequence, labs offering these tests are being asked to submit extensive documentation to support the medical necessity, including physicians’ clinical notes.
For Predictive Biosciences, what turned out to be the lab company’s financial death blow came when CGS Administrators, LLC, a Medicare Administrative Contractor, decided one of PB’s three molecular assays was a screening assay. Medicare does not reimburse for screening tests.
Once CGS made its decision, Predictive Biosciences had no recourse. Without Medicare reimbursement, the company decided it could not continue to operate and closed on May 31, said PB’s CEO Pierre Cassigneul.
Closure of this formerly growing lab company means that more than 900 urologists are unable to use this test and instead must now resort to invasive cystoscopy testing for their patients with bladder cancer. At the same time, a full time staff of 91 professionals was thrown out of work as a result of this negative coverage determination.
Lab Experts Warned Medicare
Many lab industry experts had warned the Centers for Medicare & Medicaid Services (CMS) that its failure to properly handle the transition from code-stacked molecular test claims to the new molecular test CPT codes that took effect on January 1 would have far-reaching consequences.
These consequences included disrupting physicians’ access to useful molecular diagnostic assays and setbacks in patient care. It was also predicted that investors would cease providing both capital and the resources needed by molecular testing labs to advance molecular and genetic testing to support personalized medicine.
Several of these predictions proved true in the case of Predictive Biosciences. Its investors decided to close the clinical lab company after it learned of CGS’s determination that one of its proprietary molecular tests did not meet medical necessity as defined by the Medical Director of the MAC.
“We had three tests for bladder cancer,” explained Cassigneul. “These were the CertNDx Bladder Cancer Assays. One assay is used to diagnose bladder cancer, one is to evaluate and grade tumors, and one is for identifying recurrence of bladder cancer.
“All three tests were introduced at the end of 2011 and we have been commercializing them ever since,” he continued. “There are 9,000 urologists in the United States. About 900 of them were using the tests. Medicare and private payers were paying us for running these tests.”
Since 2011, the company had performed 36,000 tests and had a referral base of about 900 urologists nationwide who had used the tests for more than 10,000 patients. When it closed, PB was running 150 tests a day.
“After January 1, however, Medicare stopped paying for our tests, which was worrisome,” observed Cassigneul. “We heard that the Medicare contractor had suspended payments until the new molecular testing codes and publication of the new payment amounts. We heard payment would be okay.
“But by the end of March, we still didn’t have any payment from Medicare,” he noted. “At that time, I attended a meeting in Washington and heard a representative from Medicare speak. I asked why PB was not getting paid and was told that Medicare had not instructed the contractors not to pay bills. Again, we considered that a positive sign that the non-payment situation would soon be resolved.
“Not long after that, we scheduled a conference call with our Medicare contractor, CGS, which covers our lab in Cleveland, Ohio,” Cassigneul said. “On the conference call we were told that CGS had decided not to cover the test.
“This was a total surprise to us because, before this moment, they had never spoken to us and had never asked us for anything—no documentation of any kind!” he recalled. “There was no prior communication with anyone from CGS.
“After the call, we sent CGS a full set of peer-reviewed publications, along with information on how we validated our tests,” added Cassigneul. “Unfortunately, we were told that the documentation we submitted didn’t mean anything and that the test would remain uncovered.
“Officials at CGS said our test was a screening test,” he stated. “It is relevant to also note that—whenever they referred to our three tests—they always called it ‘our test’ (singular), meaning that they reviewed only one of our three diagnostic tests. That was the specific test used by urologists to diagnose whether the patient has cancer or not.
“Keep in mind that this test is done only after there is a symptom, meaning blood in urine,” continued Cassigneul. “But they did not agree to that logic and instead said it was a screening test.
“We asked for an explanation and on May 14 we received an email from CGS saying the test was a screening test and so was not covered,” he noted. “But we have not received any communication on the other two molecular tests we offer.
No Explanation Given
“From a process standpoint, the May 14 decision by CGS was surprising,” observed Cassigneul. “It had been reviewing these tests since January. Yet CGS made a determination that involved just one test and gave no explanation except to say it was a screening test. Our lab had performed this test for urologists for two years and clearly they were not screening tests.
“At that point, we asked what it would take to get a positive coverage decision,” continued Cassigneul. “The medical director for CGS told us we would need to have new studies published in a peer-reviewed journal such as the New England Journal of Medicine (NEJM) or the Journal of the American Medical Association (JAMA). We would also need to have our molecular test written into the clinical guidelines.
“In response, we explained, that getting published in either of those journals and getting written into the guidelines would take years,” he said. “We did point out that about 900 physicians were already using this test. CGS stood firm, however, and said that’s what it would take to get a positive coverage determination.
“We were absolutely taken aback by these criteria,” recalled Cassigneul. “Our investors decided these requests were unreasonable. They also were concerned that even if we succeeded in getting these publications and guidelines, the reimbursement could be below our cost to run the tests.
“The investors at Predictive Biosciences recognized that it would take at least a couple of years to get articles published in those two medical journals,” he said. “They could not afford to keep the product on the market without being paid. That was their concern: We couldn’t continue to do the tests without payment.
“We have had several articles published in peer-reviewed publications and six of them were independent studies,” explained Cassigneul. “But to get published in a peer reviewed journal such as NEJM or JAMA would require very long and expensive studies and would take at least two years.
“Then there would be no guarantee of a positive determination after all this time and expense,” he explained. “And, don’t forget, during this entire time, Predictive Biosciences would not be getting paid. The financial position was just not practical.
Reaction of Private Payers
“Medicare represents half of our business,” he said. “Virtually overnight, we discovered that half of the business disappeared and it would be a least a couple of years before we would have any hope of getting paid.
“In addition, we were concerned about how private health insurers would react,” noted Cassigneul. “They usually follow Medicare on decisions like this. But our investors didn’t want to wait to see what the private health plans would do. Thus, because we were losing money, the investors did not want to continue offering these tests with the uncertainty of what payers would do about our tests.
“That is a very tough business proposition,” declared Cassigneul. “Given this situation, our investors decided they could no longer support the company.
“What made matters worse, we had no recourse,” he added. “CGS is the Medicare contractor for Ohio and we have our lab in Cleveland. It’s a CLIA-licensed and CAP-certified lab and because we operate a lab under CLIA, we have to bill the Medicare contractor where the lab is located.
“The most frustrating aspect of this whole situation is that we had one medical director at one Medicare contractor making a decision that one test should not be covered because he felt that the clinical utility had not been demonstrated,” explained Cassigneul. “But, in fact, we have 900 urologists using this test routinely and they recognized its clinical utility in diagnosing their patients who showed symptoms consistent with bladder cancer.”
Cassigneul discussed how the medical director at CGS had explained the non-coverage decision. “The medical director said hematuria is diagnosed in many ways and usually with a dipstick,” he said. “The patient pees in the cup and then a strip is put in the cup. If red blood cells show up, it is positive.
“But since the dipstick tests are not considered very precise and accurate, the Medical Director estimated that the CertNDx test was used as a screening test,” he explained. “But that is a specious argument because our test was penalized and it is not the dipstick test.
“We know that blood in the urine is one of the symptoms of bladder cancer,” observed Cassigneul. “Yes, it is not exclusively a sign of cancer. But it is one symptom that is almost always present when the patient has bladder cancer.
“That’s why it’s absolutely crazy to say that our molecular assay was a screening test,” he said. “Still, that’s the reason given to us by CGS.
“In addition, there’s another argument that we never got to make with our Medicare carrier before it made this determination,” Cassigneul stated. “It is important and relevant to understand that urologists have the clinical option to do the more invasive cystoscopy and get reimbursed for that, in lieu of ordering our molecular test.
“To change this standard of practice, with its fee-for-service aspect, we had to convince these physicians that our molecular assay is clinically useful,” he noted. “In that regard, it was a high hurdle to convince urologists to use our test.
“Clearly they had to see some clinical utility from the test,” stated Cassigneul. “That utility was that the test results gave them a clear decision about whether the patient had bladder cancer or not. It was a very actionable type of test.
“Also, patients loved it because it was noninvasive,” he noted. “The alternative is cystoscopy which involves looking for cancerous lesions inside the bladder. This method is like looking for a dark spot in a dark room. It’s a very difficult method to find lesions.
“By contrast, our test provides a systematic view about whether there is a lesion,” he explained. “Based on the test results, only after the urologist knows there is a lesion, would the patient be subjected to cystoscopy.
“In addition to these frustrations, we were never able to get a clear answer from our Medicare contractor on anything except this one molecular test—yet we have three tests,” added Cassigneul. “We asked CGS to provide us with a detailed answer about all three tests. However, all we received was one email about one test.
“None of this adds up. That’s why it is so frustrating that this dynamic, growing company fell victim to one particular decision,” observed Cassigneul. “And as much as we would like to get the company going again, we do not see how at this point. The studies and publications were sufficient to convince 900 urologists. But if what we have done so far is not enough to convince the MAC medical director, then I don’t know what else to try.”
The result is that the $77 million investment at Predictive Biosciences will be for naught. In January, although the company was not yet profitable, it was projecting that 2013 would be its best year.
“We had revenue of $1 million at the end of 2011 and that increased to revenue of $4.2 million in 2012,” explained Cassigneul. “We were on track to meet our projections to earn revenue of $14.5 million in 2013. In 2014, we expected to achieve our first breakeven and move into the black.”
National Reference Lab Saw Clinical Utility, Had Marketing Partnership with Predictive
EXECUTIVES AND PATHOLOGISTS at Predictive Biosciences were baffled when they learned that its Medicare contractor had determined that its molecular diagnostic assay for detecting bladder cancer was a screening test. Therefore, it would not meet medical necessity criteria and would not be covered.
The Predictive Bioscience’s executive team learned of this decision just as it was announcing a marketing partnership with ARUP Laboratories, one of the nation’s largest and more successful reference laboratory companies
Based in Salt Lake City, Utah, ARUP had evaluated Predictive Bioscience’s tests. It had decided to offer the company’s molecular diagnostic bladder cancer tests to its national network of hospitals, healthcare providers, academic medical centers, and military and government facilities around the country.
Under a non-exclusive agreement, ARUP clients could order the CertNDx tests, submit specimens, and receive all results through ARUP. Predictive Biosciences would perform the tests in its CAP and CLIA-certified laboratory in Cleveland, Ohio.
Karen A. Heichman, Ph.D., ARUP’s Vice President, Oncology Technology Development and Licensing, said she was involved in the technical evaluation of Predictive Biosciences’ tests and in developing the referral relationship.
“We reviewed the technology at the publication level and we spoke with the medical director,” stated Heichman. “To us, it looked like the science was sound. These tests were designed to fulfill an unmet medical need.
“That’s why it was surprising to learn that the lab testing company had gone out of business,” she said. “Predictive Biosciences had hundreds of urologists ordering the test to avoid invasive procedures with cystoscopy.
“This is a great use of molecular testing that benefits patients,” added Heichman. “It is important because there is a high incidence of recurrence with bladder cancer. Not having to do multiple repeat cystoscopies is a significant advantage to these patients.
“Plus, the CertNDx tests were not experimental,” she explained. “There is clear utility with these tests. You can see that from the clinical uptake in the urology community. That uptake alone showed that the doctors thought it was a useful test.
“Keep in mind that urologists are physicians who normally do procedures,” observed Heichman. “For them to utilize a molecular test in place of an invasive procedure shows that this molecular assay does provide something that is clinically useful to both the physician and the patient.”
Predictive Biosciences Had Three Molecular Tests: All for Patients with Bladder Cancer
BLADDER CANCER IS MOSTLY a disease that affects older males with a history of smoking. Therefore, Medicare beneficiaries represented half of the patient population served by Predictive Biosciences, said CEO Pierre G. Cassigneul.
After two years, the company was gaining revenue and expected to be profitable next year, he said. “We had started to gain nice traction in the marketplace with our three CertNDx tests. Two of the tests are done with urine and one test is done with tissue.
“The first test is for patients who have blood in the urine, a condition called hematuria and a symptom associated with bladder cancer,” said Cassigneul. “A patient gives a urine sample. Our molecular test provides the physician an answer that will be: very high negative, very high positive, or indeterminate. Even the indeterminate answer has a very high predictive value for either positive or negative.
“Our second test involves doing molecular analysis to evaluate the grade of the tumor,” he continued. “The third test involves analyzing urine to indicate the predictive risk of recurrence. With bladder cancer there is a very high risk of recurrence and so patients have to be monitored every quarter for that risk.
“Since 2011, our investors collectively had put in $77 million,” he said. The investors included Flybridge Capital Partners, Highland Capital Partners, Kaiser Permanente Ventures (the corporate venture capital arm of Kaiser Permanente), New Enterprise Associates, and ProQuest Investments.”