One Lab’s Revenue Loss Due to CMS’ Slow Process

Some private payers continue to reimburse for lab’s molecular tests, while CMS pays nothing

CEO SUMMARY: How is it that some commercial payers for one lab running molecular tests have continued to pay the lab for tests it has run this year, but contractors for CMS have so far failed to pay? That’s the question one lab CEO is asking. Both the commercial payers and the CMS contractors are introducing new codes for molecular tests, this year. Yet some Medicare contractors have not paid for one test yet this year, the CEO said, while some of his lab’s commercial payers have continued to pay on time.

WHEN GOVERNMENT AND PRIVATE HEALTH PLANS cease paying for clinically-useful molecular diagnostic tests because of bureaucratic snafus, should clinical laboratories continue performing these tests in support of patient care?

Across the nation, many laboratories are asking this same question. At Genelex Corporation in Seattle, Washington, CEO Howard Coleman answered that question by continuing to serve client physicians who send patients’ samples to Genelex because the test results are essential to patient care.

But then he paused to think about the question again. “Continuing to operate without income is a challenge,” observed Coleman. “Every lab company has a responsibility to ensure accurate results and high quality service.

“At the same time, there are equally significant issues that must be considered,” he added. “Is it appropriate to continue to offer the three molecular tests Genelex performs without reimbursement? Genelex has a staff of 60 employees and just this year we’ve laid off three staff members because Medicare stopped paying. These are real human issues and the fiscal solvency of some laboratory companies are likely at stake.”

This situation exists because the federal Centers for Medicare & Medicaid Services was not prepared to handle claims for tests covered by the new molecular CPT codes on the effective date of January 1, 2013. This has affected every clinical lab and pathology group across the United States that performs molecular tests covered by these CPT codes.

Financial Pain for Labs

In some cases, the financial pain to certain clinical labs has been substantial. Lab employees have been laid off or terminated. With expected revenue—legally due the labs for the claims they have submitted—going unpaid for more than three full months, there is also the question as to whether some labs can survive until CMS begins issuing reimbursement for this already-sizeable and still-growing backlog of molecular test claims.

At Genelex, the last payment it received from CMS was back in January. That is when CMS paid the last of the claims from the molecular tests that Genelex had submitted through the end of 2012. Since January 1, CMS has not paid Genelex for any of the almost 2,000 claims it has submitted this year.

“It would be easy to stop doing these tests because Medicare isn’t paying us,” explained Coleman. “But our management team here recognizes that this is really about patient care. The results of these molecular tests are too important to patients and physicians. We want to continue providing these tests in support of more accurate diagnoses.

“We started this business in 2000 and only reached break-even in the past three years,” he noted. “We’ve stayed with it this long because these tests contribute greatly to patient care, especially for older, sicker patients who are on a lot of medications.

Testing to Improve Health

“By identifying what is going on with people’s medications, it is possible to change their lives for the better,” stated Coleman. “We have the most advanced diagnostic technologies for doing that.

“Our services include sophisticated medication management software and staff pharmacists to assist doctors with their interpretations,” he continued. “Our test menu is made up of just these three Cytochrome P450 tests.

“Labs like ours are being hit in two ways,” he added. “Not only is CMS reducing what it pays in 2013, it is also taking a very long time to revise its bill-paying procedures. Effectively, that means Genelex has no revenue from CMS for the year-to-date.

“By contrast, some commercial health plans are paying our claims,” he noted. “Several payers asked Genelex to resubmit some bills because the health plans are working with new CPT codes required by the American Medical Association (AMA).

“Payers required use of these new codes this year. That’s fine with us,” said Coleman. “We understand why they would do that. We also understand that—when there are new codes—there is sometimes a period of adjustment. So, when we were requested to resubmit some claims, we did that. The commercial health plans have eventually paid most of those bills.

“But the Medicare contractors have paid nothing for our three molecular tests,” he said. “Our testing is limited to only three Cytochrome P450 tests. They are CYP2C19 (CPT code 81225), CYP2D6 (CPT code 81226), and CYP2C9 (CPT code 81227).

“When we inquired about when we would be paid, it took a while and we didn’t get a straight answer at first,” he said. “Our billing department is very thorough and had been communicating with our contacts at Noridian, which is our Medicare contractor. But they had no success.

“It took a call from our attorney to officials at CMS to find out what was happening,” explained Coleman. “Originally, Noridian told us it was a software glitch with no information as to when they would be paying. After our attorney called CMS, we learned Noridian had never intended to pay until April 1 and that doesn’t seem like a software glitch at all.

May See Payments in April

“It turns out there was a problem setting prices for the new molecular costs. Now that they are about to announce new prices, we expect to get paid sometime this month [April],” he stated. “We have already resubmitted all of our CMS claims, almost 2,000 of them. Typically claims get paid in a couple of weeks. So we are hopeful we should be paid by the end of the month. We’ll see.”

Since several commercial health plans have used new codes and paid most of Genelex’s claims this year, Coleman draws a distinction between how CMS has responded to the introduction of new codes and the way private payers have responded.

“Most of our private insurers have paid our lab test claims without interruption—although our appeals have gone up because of the new codes,” stated Coleman. “But that’s to be expected. The appeals slow down cash flow a bit, but we have a good process for appeals and we follow up on each one.

“On the other hand, CMS has made a hash of it,” noted Coleman. “In May 2012, CMS announced in the Federal Register that it would announce new prices in September, 2012. That announcement was never made.

“In November 2012, CMS ordered their Medicare contractors to use the gap-filling process for the 100+ new molecular codes,” he stated. “Gap-filling is almost never used because it’s so difficult. Also, the process is opaque and that makes it impossible to know how CMS determined what it should pay for each of these CPT codes and be able to comment meaningfully.

Straightforward Test Pricing

“The process to identify the proper price for each test could be relatively straightforward,” he explained. “What’s needed is someone familiar with molecular diagnostics and a couple of good cost accountants. Next, have labs complete a form or an application that explains how each lab does its cost accounting for each molecular test.

“That would not be difficult to do and it would be transparent, allowing lab directors and pathologists to comment,” he said. “Since there are only 104 new molecular CPT codes currently on the clinical lab fee schedule, a process like this would simply take time and effort.”

Painful Consequences

The experience of Genelex in not getting paid by Medicare contractors since January 1, 2013, demonstrates the disruption that labs are suffering because the Medicare program was not prepared to implement payment for the new molecular CPT codes as of that date. This is a case study of the painful consequences that laboratory providers are enduring as a result of this situation.

At this point, it should be noted that CMS officials and the Medicare contractors are scrambling to resolve this situation. In the days before publication, Coleman notified us that some Medicare contractors had posted revised prices on or after April 1, and that these prices were much closer to the prices paid for code-stacked claims during 2012.

Genelex CEO Recommends Lab Leaders Take Direct Action to Correct Current Situation

WHAT TO DO ABOUT THE MESS associated with pricing for the new molecular CPT codes? That may be the most pressing question now facing pathologists and lab executives in lab organizations throughout the United States.

Labs offering these molecular tests have now gone more than three months into the current year without payment from the Medicare program. For some, this lack of payment has placed their labs in financial jeopardy.

“This is a crisis, particularly for labs like ours that only offer molecular assays defined by the new CPT codes,” declared Howard Coleman, CEO of Genelex Corporation in Seattle, Washington. “This is a time for lab directors and senior corporate leaders to get involved in addressing this situation and work toward a positive and speedy resolution.

“The first step is for lab directors and managers to engage with our industry trade associations to understand the issues and press for answers,” Coleman suggested. “Many lab executives are not familiar with the political process and how to go about working for change.

“As a laboratory executive, you have to get in the trenches, make noise, and communicate directly with the officials involved,” he continued. “Doing so can be a cost-effective way to deal with similar situations. You don’t do this work by choice, but when you have to save your company, there is no one else you can trust to be as thorough and persistent as you will be.”

Over the years, Coleman has gained valuable experience in government relations on behalf of Genelex, the Washington Biotechnology and Biomedical Association, and other organizations.

“Once it became clear in early January that this was going to be a problem, I’ve been as active as anyone–particularly at the CEO level–in providing leadership to deal with this,” he explained. “I also organized a small coalition of labs concerned with molecular CPT codes that were hit the hardest.”

Coleman has informed members of the state’s congressional delegation about the problems labs face. He is working with trade associations such as the American Clinical Laboratory Association.

“I also wrote a letter to acting CMS administrator Marilyn Tavenner to explain the problem from the lab industry’s perspective,” noted Coleman. Later this month, he plans to meet with CMS officials in Baltimore. “I’d like to find out how this is going to be handled going forward because there are many questions as to how this is going to play out over the rest of this year,” concluded Coleman.

“Labs like ours are being hit in two ways,” he added. “Not only is CMS reducing what it pays in 2013, it is also taking a very long time to revise its bill-paying procedures. Effectively, that means Genelex has no revenue from CMS for the year-to-date.”

CMS Contractors Slashed Prices for Certain Codes

IN FEBRUARY AND MARCH, several Medicare contractors announced pricing for molecular test costs for this year. The level of reimbursement caused concerns throughout the clinical lab industry.

The table below shows the 2012 Medicare Code Stack Reimbursement for several cytochrome P450 tests. Labs were paid at that level during 2012.

Next are presented the 2013 pricing for these same molecular CPT codes by three different Medicare contractors, as first posted by each contractor earlier this year. In recent weeks, the three Medicare contractors have posted different prices that, in most cases, are about 80% to 90% of the 2012 code stack reimbursement.

These three molecular assays are relatively high volume tests for the laboratories which offer them to physicians.

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