Medicare Taken to Task about Molecular Test Pricing Method

EDITOR’S NOTE: Submitted by Lâle White, CEO of XIFIN, Inc., of Carlsbad, California, this letter describes the problems caused by the Medicare program’s failure, as of January 1, 2013, to be ready to process and reimburse lab test claims for more than 100 new molecular diagnostic CPT codes.

Dear Editor:

Everyone should read Scott Gottlieb, M.D.’s Forbes article published on March 27, 2013, and titled: “Medicare Has Stopped Paying Bills for Medical Diagnostic Tests. Patients Will Feel the Effects.” I can only say, “Well put!”

Bravo to Dr. Gottlieb for so clearly describing the issue and its effect. He points out how the Medicare program’s current struggles to properly handle repricing of the new molecular diagnostic test CPT codes not only affect labs, but it also impacts patients.

What strikes me most about the entire “process” now in use by the Medicare program is the lack of transparency and the feelings of poor faith that blanket the proceedings. Palmetto GBA took the lead on the pricing front and asked for laboratory input and feedback about its pricing. It then proved reluctant to engage in any conversations about its methodologies or how laboratories have been coding their tests.

When the California Clinical Laboratory Association (CCLA) issued a press release warning that the molecular diagnostic test prices first announced by Palmetto could bankrupt California genetic labs, Palmetto directors responded with hurt and surprise. [See TDR, February 13, 2013.]

Again, at this time, Palmetto officials asked CCLA and clinical laboratories to work with them to sort out the pricing. Yet when CCLA members responded with the test pricing and cost data that Palmetto requested, Palmetto “went to ground” and failed to respond to repeated requests to discuss the data and findings.

Instead, Palmetto issued notice that it would provide new fee schedule updates by April 1st. On April 3rd, when prices were finally released, there was some improvement, but the top volume tests continue to be below expectations and—in some cases—below cost.

Once the revised rates were released, Palmetto pushed back to subsequent industry requests for dialogue under the premise that future comments should be directed at CMS. However, Palmetto had previously agreed to continue their review and discussion about industry-submitted data through the month of April and until the deadline when CMS requires it to publish pricing as a precursor to the CMS comment period.

CMS and contractors are demanding transparency to molecular services for which payment is being sought. But they seem unwilling to reciprocate regarding their processes or how they evaluate and pay for these services.

It was this very problem within government programs that resulted in the establishment of negotiated rule-making guidelines which finally provided industry with transparency and government programs with accountability. It would be a disservice to healthcare and the general public good to take a step backwards at this critical time in a transitioning healthcare delivery model.

The gap-fill process requires a level of interaction with providers to analyze data needed to adequately conduct the exercise. The truth is that gap-filling is a technique for establishing prices that is data intensive and time consuming. It requires significant collaboration between parties, both payers and providers, to make sure all data is properly submitted—and more importantly— properly vetted and interpreted.

Palmetto knew and understood that it was not feasible to properly complete the gap-filling process in a timely manner for over 100 tests, Palmetto defaulted to a cross-walking process and led labs to believe it was following the proposed recommendations of the American Clinical Laboratory Association (ACLA).

Palmetto then cross-walked primarily the highest volume tests. But Palmetto officials failed to disclose that their starting point for the cross-walk was an internal, unjustifiable, and arbitrary down-coding of the previously submitted stacking codes in a manner that was neither disclosed to labs nor supported by coding experts.

Once labs were informed of this—albeit with no details—they provided methodology and justification for their prior coding, vetted the coding through premier industry coding experts, and provided cost information to Palmetto. In return, the collective lab industry asked only for collaboration and transparency.

Instead, Palmetto released prices on April 3rd that only continued to reflect the contractor’s bias for using the pricing exercise to cut reimbursement on these critical services. This sentiment has been expressed by Elaine Jeter, M.D., Palmetto’s Medical Director, in numerous presentations where she has asserted that technology advances have reduced the cost of performing these tests. This same sentiment was repeated by Marc Hartstein, Director, Hospital & Ambulatory Policy for CMS at an ACLA conference on April 3rd.

While there continues to be technology improvements in molecular diagnostics and genetic testing, these advances do not all represent testing with superior clinical specificity. Nor are 100% of these technology improvements commercially accepted.

This is evidenced by the cost data provided by labs performing the services to Palmetto. If labs could have adopted less costly methodologies even while obtaining higher reimbursement, they surely would have done so if quality of services was not at stake.

Both Palmetto and Marc Hartstein publicly blamed labs for not providing data, knowing there was an impending pricing exercise. However, exactly the opposite was the case, because those labs in Palmetto’s jurisdiction who meet with the contractor quarterly have provided a high level of data though Palmetto’s MolDx program. [See TDR, November 28, 2011.]

Since mid-2012, these same labs have regularly asked what additional data would be needed for gap-fill. They have also asked how they could work with Palmetto, only to be told by Palmetto that the contractor possesses the necessary data to adequately complete the exercise.

Next, the consistencies in messaging between Palmetto and CMS appear to reflect a more coordinated effort to reduce rates then either party is willing to admit. However, regulatory guidelines do not support this approach to cutting costs. In the end, the laboratory testing industry will need to assert its rights under established rules in order to obtain equity.

With so much at stake, it is in all our interests to keep lines of communication open to create a fee schedule that makes sense and has a defensible methodology behind it. As we explained in our blog[], Congress requires CMS to explain its rationale for payment amounts; this requirement for transparency is needed at the contractor level to allow advice and comment by stakeholders.

Because laboratories, in vitro diagnostics manufacturers, and diagnostic industry advocates are unable to replicate any of the price points established by Medicare contractors to date, the lack of a transparent and thoughtful process is likely to create more stonewalling. That is, at least until CMS or the contractors are forced to begin communicating more openly as required by section 1833(h)(B)(iv) of the Social Security Act.

This is an issue with serious consequences, starting with patients who may lose access to essential and unique molecular diagnostic tests. It also includes physicians who find themselves unable to order and use these diagnostic assays to improve patient outcomes and to reduce the cost of healthcare. The current coding and rate structure also discourages the enhancement of these assays through the addition of variants that increase their clinical utility.

For medical laboratories across the country, the request for relief is simple. So long as labs continue to struggle with inconsistent feedback from individual Medicare contractors, and so long as CMS remains mute on the issue of dramatically reduced fee schedules, unpublished pricing, and even software glitches that prevent claims from adjudicating, the threshold for how long molecular diagnostic providers can survive with severely reduced cash flow is being callously tested.

Our advice to impacted laboratories is to remain vocal in your appeals, and to stay active in laboratory associations like CCLA and ACLA.

Yours truly, Lâle White, CEO, XIFIN, Inc.

EDITOR: An expert in laboratory coding, billing, and collections, over the past two decades, Lâle White has participated in a number of national advisory committees and panels.

Estimated 2013 Prices Based on Gap-fill Rates For Selected New Molecular Test CPT Codes

This table shows how 2013 reimbursement is on track to be significantly less than 2012 reimbursement for the new molecular CPT codes. The data for Quest Diagnostics and LabCorp represent estimates of what these companies were paid under 2012 stack codes. The other columns show prices posted by Medicare contractors since January 1, 2013. The notes below the table explain sources and other relevant information. Among other things, this table demonstrates how Medicare contractors are reducing 2013 prices relative to estimates of 2012 stack-code pricing.

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Sources: “2013 Medicare Gap-filling for Molecular Pathology (MoPath) Codes: Cahaba GBA and Palmetto GBA Fee Schedule Amounts Released,” Quorum Consulting, San Francisco, February 1, 2013; and CodeMap LLC, Schaumburg, Illinois.

Note 1: Amounts for Quest Diagnostics and LabCorp in 2012 represent estimates only of what these lab companies received from Medicare contractors based on the CPT code stacks used to bill for each test in 2012 and the National Limitation Amounts (NLAs) for each code on Medicare’s 2012 Clinical Lab Fee Schedule. These amounts may not represent the actual payment amounts Quest and LabCorp received in 2012.

Note 2: Prices are estimated payments based on gap-fill rates posted by Cahaba and Palmetto and are from Quorum Consulting February. 1, 2013, and from Noridian on April 12, 2013. CodeMap national averages were collected from on April 12, 2013.


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