Much Uncertainty About Pay for Molecular Codes

Medicare contractors posting prices that are 40% to 50% less than what labs received in 2012

CEO SUMMARY: Having gone unpaid since January 1 for the 114 new molecular CPT codes, many clinical labs and pathology groups have stopped running these tests or laid off staff. Some are considering closing their doors. Evidence indicates that certain Medicare contractors are deciding that some molecular tests are not medically necessary. Medicare officials launched the 60-day comment period on May 9, which gives labs until July 8 to submit comments about pricing and coverage decisions.

FIVE MONTHS INTO THE NEW YEAR and two things remain true about implementation of the 114 new Tier I and Tier II molecular pathology CPT codes, neither of which can be seen as positive for the clinical laboratory profession.

First, with almost half of the current year already gone, clinical labs and pathology group practices remain unsure about when they will be paid for the large and growing number of their molecular test invoices submitted to Medicare Administrative Contractors (MACs) and many private health insurers since January 1, 2013.

Second, reimbursement rates for the new molecular CPT codes recently posted by MACs are significantly less than what labs were being paid under the previous code-stacking arrangement. The Medicare program has started the clock on the required 60-day comment period as a necessary step to implement these prices.

As of late May, few laboratories report receiving payment for these molecular CPT codes. At the same time, some Medicare contractors are continuing to set prices for 114 new molecular test codes that became effective on January 1.

On May 9, one MAC, Palmetto GBA, said it would finalize rates by May 15. Previously, the federal Centers for Medicare & Medicaid Services (CMS) had said all MACs were supposed to have submitted their proposed rates for the 114 tests to CMS by April 1, and CMS was supposed to post those rates by April 30.

As of May 15, only two MACs had done so: Palmetto and Cahaba GBA. The remaining Medicare contractors were still setting prices and some MACs may choose not to set rates for certain codes. These Medicare contractors believe tests falling under these codes to be investigational, experimental, or non-eligible for Medicare coverage for other reasons, such as screening, which is not a covered Medicare benefit.

As well, certain MACs are not setting rates for codes for which they did not receive any claims. The MACs have said they would not make payments to labs submitting claims without first setting prices for the new molecular CPT codes.

Labs Are Cutting Staff

“As a result of not being paid for many of their molecular tests done since January 1, clinical labs are discontinuing molecular testing, laying off staff and some lab companies may be forced to close,” stated Kyle Fetter, Associate Vice President of Molecular Diagnostic Services at XIFIN, Inc., a revenue management company in San Diego, California.

Perhaps most concerning is that Medicare contractors have decided that some of the new molecular tests are not medically necessary. This unwelcome development is seen as setting back the movement toward personalized medicine.

“When labs don’t get reimbursed for certain tests, they will either decide not to run those tests or they will seek to charge patients directly,” Fetter said. “Also, if labs remove those tests from their test menus, that’s bad for patients—but also it means that development of those tests has stopped.

“When payers make the decision that some of these tests are medically unnecessary, that will have a chilling—but as yet unmeasurable effect—on the innovation needed to develop new molecular tests,” explained Fetter. “A meaningful number of AMA members have expressed frustration that tests that had been important to the doctors and their patients and covered previously, are now being denied by many payers, including Medicaid.

“Since April 15, when Palmetto and Cahaba published rates for most of the 114 tests, more Medicare contractors have published prices, but not all have done so,” continued Fetter. “Of the rates that have been published, XIFIN estimates that most are about 40% lower than what the Medicare contractors paid molecular labs for the same tests last year.”

“On May 20, NHIC updated its molecular test prices,” stated Genevieve Tang, Associate Director of Strategic Product Planning for Quorum Consulting in San Francisco, California. “But these prices did not reflect the rates included in the payment file that CMS released on May 9.

“The key point here is that some MACs are continuing to update their fee schedules outside of CMS’ 60-day comment period,” she added. “This gives labs an opportunity to continue engaging the MACs during this period.” NHIC serves providers in Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont.

“Not many payments for these molecular CPT codes have gone through yet, in part because there are still quite a few Medicare contractors who continue to make decisions about pricing,” Fetter said. “We understand, for example, that Noridian—one of the largest Medicare contractors—is just now starting to issue checks.” Noridian serves providers in Alaska, Arizona, Idaho, Montana, North Dakota, Oregon, South Dakota, Utah, Washington, and Wyoming.

Priced 22 of 114 CPT Codes

“Most Medicare contractors have priced more than 70 of the 114 new CPT codes and some contractors have priced almost all of the codes,” explained Fetter. “In the case of NGS, another large Medicare contractor, we have heard that it is not paying yet and has priced only 22 of the 114 codes.” NGS serves New York and Connecticut.

According to Fetter, the molecular pathology fee schedule NGS made public is a simple spreadsheet listing 22 prices for 22 CPT codes. There is no explanation about the remaining 92 codes.

“We heard that NGS reported to a number of labs that some of the molecular CPT codes that have not been priced are not medically necessary,” noted Fetter. “If true, then essentially NGS is saying that, of the 114 molecular codes available now, representing 90% of the most commonly ordered molecular diagnostic tests in prior years, it considers that there are only 22 that should be priced.”

To Fetter’s knowledge, none of the Medicare contractors has posted prices for all of the 114 new molecular CPT codes. “But setting prices for only 22 tests—as NGS did—is an unexpectedly low number,” observed Fetter.

“The information we are hearing is that—by not setting prices on certain tests—the Medicare contractors are saying these tests are not medically necessary,” he added. “Labs should keep in mind that no one knows what effect a Medicare contractor’s decision may have on the future use of these tests.

“On the issue of medical necessity, NGS is not alone,” explained Fetter. “Some of the other Medicare contractors have said they believe some tests are not medically necessary.

“That is a surprisingly negative stance and could have important consequences,” he continued. “For example, when one Medicare contractor decides not to cover these tests, it means those tests are not available to Medicare patients and their physicians in that jurisdiction.

“This creates a huge discrepancy in medical care from one Medicare jurisdiction to the next,” noted Fetter. “How can the Medicare program, which is designed to serve patients nationwide, justify that disparity? In each Medicare jurisdiction nationwide, patients and their physicians rely on these molecular tests.”

CMS is asking labs to comment on the contractors’ prices. Clinical labs and pathology groups have 60 days—until July 8—to do so. But not all contractors have issued prices and those that have published prices have not disclosed the methodology by which those surprisingly low prices were established. This makes it difficult for labs to comment.

Even though prices from the various MACs vary widely, Tang said, “We have observed that Noridian, CGS, Novitas, and WPS used Palmetto’s payment rates for nearly all of the MoPath codes, and, with a few exceptions, NGS and NHIC essentially have the same fee schedules.”

MACS Operate Independently

The problem for laboratories is they have to respond to CMS about what the Medicare contractors are doing and labs don’t have a unified message since each MAC operates independently, Fetter said.

“Because each Medicare contractor is making its own coverage and pricing decisions, it is extremely difficult for labs to comment,” noted Fetter.

“Also, having each Medicare contractor set prices on its own could put some labs at a severe competitive disadvantage,” he continued. “In one jurisdiction, a lab might get a much lower rate of payment for a test than another lab gets for the same test in another jurisdiction.

“The laboratory that gets the lower rate can be at a significant disadvantage,” noted Fetter. “This is especially true when you consider that the difference in payment might be $900 in one jurisdiction but only $200 in another.”

Seeking Consistency

On May 9, CMS sought to ensure consistency by suggesting that all Medicare contractors adopt Palmetto’s prices as their own. “What we’re seeing is that some of the contractors, such as Noridian and CGS, are implementing prices based on Palmetto data,” commented Fetter. “However, contractors in other jurisdictions—such as NGS—seem to have ignored the suggestion from CMS to use Palmetto’s prices.

“During 2012, Palmetto was the only contractor to prepare to set prices and pay for these 114 molecular tests,” he noted. “As a result of collecting data from clinical labs on molecular test pricing and the utility of molecular tests, Palmetto was in the best position of all Medicare contractors to set prices for these new molecular CPT codes.

“This whole issue of molecular test pricing and payment is really astounding when you consider how badly it’s been handled,” opined Fetter. “What once looked like a series of poor decisions made within the Medicare program last year has continued to drag on.

“Labs are asking themselves, ‘What are our options now?’” he emphasized. “Labs are facing very difficult questions today and they are not getting any timely or constructive answers from their Medicare contractors.

“Exacerbating the problem, private payers are beginning to adopt some of the incoherent Medicare contractor pricing for molecular tests,” he said. “This adds to the financial stress on the innovators of this new healthcare technology.”

New Medicare Molecular Test Payment Rates Are 40%-50% Lower than What Was Paid Last Year

PRICES POSTED FOR MOST of the new 114 Tier I and Tier II molecular lab test codes are about 50% to 60% lower than what labs were paid for those same tests last year, according to an analysis by XIFIN, Inc., a company that specializes in revenue management for labs.

“Right now, pricing in aggregate— meaning what prices labs will get based on the prices published so far and not counting the denials—represents a 50% to 60% discount over what they got paid under the stack codes last year,” stated Kyle Fetter, Associate Vice President of Molecular Diagnostic Services at XIFIN.

“Here’s an example. Take the EGFR test, which is common and a highly useful test,” said Fetter. “The Qiagen kit for this test was reimbursed last year at about $1,000 to $1,700—depending on the lab procedure used under the stack codes.

“Currently, Palmetto GBA has posted a price of $225 for the EGFR test under the current Palmetto fee schedule,” continued Fetter. “At $225, Palmetto is offering a discount off the stack code rate of 75% to 80%.

“Stack codes were a method of pricing molecular tests that labs and payers used through the end of last year,” added Fetter. “The new pricing system the Medicare contractors are using this year is designed to replace the stack codes. The new molecular CPT codes were created to enable payers to know what test was run by the laboratory submitting the claim.

“Frankly, the cost of a Qiagen kit is roughly around $200 and that’s before the lab pays for the reagents, shipping, transport, technician labor, lab overhead and other costs needed to perform this test,” Fetter explained. “For a test like that, lab costs would total about $450 to $700. Labs will lose money on this very common test if they get paid just $225 for the EGFR test.

“There are similar pricing issues with the BRAF, KRAS, and other tests on Tier II of the new molecular tests, such as CYP450 3A4 and 3A5,” Fetter added. “For these tests, the announced prices represent a reduction of 40% or more, which is a very dramatic reduction in the amount of money labs receive for performing these molecular diagnostic tests.”

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