Palmetto Execs Explain Molecular Test Policies

Goal is to create a process to assess science and clinical value for molecular tests and LDTs

CEO SUMMARY: To create more transparency in the process clinical labs use to submit claims for genetic tests, molecular diagnostic tests, and for laboratory-developed tests (LDT), the nation’s largest Medicare Administrative Contractor (MAC) has proposed two new local coverage determinations (LCD). CMS has changed Palmetto GBA’s statement of work to include implementing a lab test registry and science review process for genetic, molecular, and laboratory-developed tests.

CLINICAL LABORATORIES AND PATHOLOGY GROUPS that submit claims for genetic tests and molecular assays are going to remember February 27, 2012. That’s the date Palmetto GBA proposes to implement new policies for molecular tests that utilize code stacked claims.

Palmetto GBA is the nation’s largest Medicare Administrative Contractor (MAC). It published two proposed local coverage determinations (LCD) this fall that address how clinical labs submit claims for molecular diagnostic tests (MDT) and laboratory-developed tests (LDT). (See TDR, November 7, 2011.)

In recent weeks, Palmetto GBA posted information on its website about what it calls the “Molecular Diagnostic Services Program” (MolDx). Collectively, the two proposed LCDs and MolDx represent important developments for any clinical lab or pathology group that currently uses code-stacked claims to bill for genetic and molecular tests.

Palmetto GBA gives a simple reason for proposing these new policies. “Currently, when a laboratory submits a claim for a genetic or molecular test which is built on a code stack, the payer is unable to identify the specific diagnostic test and how it supports appropriate care for the patient,” stated pathologist Elaine Jeter, M.D., who is Medical Director at Palmetto GBA.

“The goal is to provide transparency to the claims process and to have steps in place that allow laboratories to demonstrate the science and clinical utility of each genetic test and/or molecular diagnostic test,” she continued.

It is important for pathologists and lab administrators to understand which areas of the nation will be affected by the proposed LCDs and MolDx. At this time, the three proposals would affect labs only in Medicare Jurisdiction 1 (J1), meaning California, Hawaii, and Nevada.

Two Proposed LDTs

The two draft proposed local coverage determinations (LCDs) are:

  • DL32288—LCD for Molecular Diagnostic Tests
  • DL32286—LCD for Non-Standardized Organ or Disease-Oriented Panels.

Readers can find the two draft LCDs and more information on Palmetto’s website at After January 1, Palmetto will introduce these two LCDs in J11 (South Carolina, North Carolina, Virginia, and West Virginia).

The third proposal is a molecular test registry and reimbursement process that Palmetto calls the “Molecular Diagnostic Services Program” (MolDx). Readers can get information on MolDx by visiting and searching for “MolDx.” (See this article in this issue of TDR.)

Other Payers Are Watching

At this time, Palmetto GBA is the only MAC proposing these types of changes to code stacking for genetic and molecular tests. However, other MACs, the Centers for Medicare & Medicaid Services (CMS), the nation’s commercial health plans, and other private payers could follow Palmetto’s lead by adopting similar policies.

As well, it is known that some of the nation’s private health plans are taking steps to adopt programs designed to control the volume and complexity of molecular diagnostic and genetic tests. The U.S. market for molecular tests is estimated to be $6 billion to $7 billion annually.

“The window of time for public comment on these proposed LCDs is open and we encourage pathologists and others to submit their comments to us,” stated Mike Barlow, Vice President. Comments are due by December 5 and can be submitted at

“It’s very important for us to get feedback from the clinical lab industry,” urged Jeter. “We greatly encourage public comments about these proposals.”

The proposals are needed to address what Jeter and Barlow said is a lack of data about the 1,500 or so MDTs and the thousands of LDTs for which labs daily ask Medicare contractors to pay.

“For many of these tests, there is a lack of publicly available data,” commented Barlow. “As a payer, we don’t know enough about these tests. Our Molecular Diagnostic Services Program is a way for us to categorize each test so the science that supports a specific test can be identified.

Direction for Referring Doc

“When the laboratory submits a code-stacked claim for payment, it uses a number of methodologic codes to produce a single result,” Barlow explained. “That single result is intended to drive a specific clinical utilization or direction for the referring physician.

“We understand that the various procedures performed by the laboratory are designed to produce a single result,” he continued, “and, in that way, an MDT is no different from any other test that delivers a score or a value that a clinician uses.

“The Medicare program requires an assessment of the clinical utility of laboratory tests and other procedures,” observed Barlow, “But for an MDT’s single result, there are a number of tests and we do not know the clinical utility behind those tests. When we don’t know the science behind these tests, we have to draw a line, particularly for molecular diagnostic testing.”

For many MDTs and other tests, labs use stacks of codes, meaning bills from labs show several tests are run to produce the one result. Such code stacking makes it impossible for Palmetto to evaluate the clinical utility of these tests.

“Because there’s a lack of transparency, we had to define what the limitation would be,” Barlow said. “We’re simply telling the labs that, if you’re in this environment: 1) you have to tell us what specific service is represented by the claim; and, 2) how you are billing us. This information will allow us to determine whether coverage should be applied. Absent that, coverage is not automatic.

“Basically, we are working in an unknown universe,” he added. “For most routine lab tests, we have published science and clinical studies to evaluate the utility of tests. But for MDTs, clinical labs submitting claims have not shared how they developed these assays. Nor have they showed us the supporting science.

Using Code Stack for Claims

“When a code stack is involved, we have yet to see a single test that is wholly described, wholly analyzed, and that accurately describes the complete test,” Barlow explained. “The variables of how code stacks are used are subject to interpretation by each clinical laboratory. The problem is that the test developers make decisions about what code stacks to use—irrespective of whether or not they are using accurate codes for all the tests that they include in that code stack.

“Also, many MDTs include algorithms that are not represented in the code stack. Yet it’s the algorithms that produce the final results that are intended to be actionable by the referring physician,” he said.

“Palmetto GBA’s position is that, if there is one test, there should be one result,” Barlow continued. “The lack of transparency on this point is demonstrated by the fact that the laboratory can’t describe the test completely with the code stack it uses. Instead, it uses one of the NOC codes, meaning ‘not otherwise classified.’

“For the past two and a half years, Palmetto GBA has advised labs to use NOC codes,” he added. “But laboratories persist in using code stacks, and, I repeat, the number one problem with code stacks is Palmetto GBA does not know what test is represented by the claim. Therefore, Palmetto doesn’t know what specific clinical service it is being asked to pay for.”

The Medicare contractor has a similar problem with LDTs. There is ongoing growth in the number of unique laboratory-developed tests where the lab runs a number of tests to produce one result, Barlow and Jeter explained.

Science in Support of Tests

“We issued the proposed LCD on non-standardized organ or disease-oriented panels because labs bundle tests together and bill Medicare for a series of tests under this construct, often using stacked codes,” explained Jeter. “Yet for half of the tests in a specific code stack construct, the lab offers no science to support that part of the test to be run.”

Another issue associated with test panels is how clinical laboratories organize the lab test requisition form they distribute to physicians. “Laboratories are using requisitions that ask physicians to check a box that represents a panel of tests,” she noted. “This means a single check item is used on the test requisition form for a comprehensive test. The physician understands that, by checking this box, he or she is ordering a panel of tests.

“The physicians do get richer information from the panel of tests than if the lab ran each test individually,” Jeter explained. “But some of these panels are used for risk assessment and screening, and CMS doesn’t pay for risk assessment and screening.

“Palmetto GBA knows it is paying for risk assessment and screening,” she continued. “But, in looking at a claim for one of these panels, it is impossible to sort out which tests are for diagnostic purposes and which tests are for screening.

“Palmetto GBA’s position is that, if there is one test, there should be one result,” Barlow continued. “The lack of transparency on this point is demonstrated by the fact that the laboratory can’t describe the test completely with the code stack it uses. Instead, it uses one of the NOC codes, meaning ‘not otherwise classified.’

“Palmetto GBA is asking laboratories to identify the clinical situations that support the physicians’ use of these tests,” stated Jeter. “If the laboratory can’t identify the reasons for each test, then it’s going to be noncovered.”

Both Jeter and Barlow encouraged labs to comment on the draft proposed LCDs and the MolDx policy as well.

THE DARK REPORT observes that these policies have the potential to change the review and payment policies significantly for molecular, genetic, and other complex tests. That is an important reason why pathologists and lab administrators should take the time to review the proposals and submit comments to Palmetto GBA by December 5.

Palmetto Wants to Encourage Innovation And Support Medicare Coverage Guidelines

EXECUTIVES AT PALMETTO GBA, the nation’s largest Medicare Administrative Contractor (MAC), told THE DARK REPORT that they have no desire to stifle innovation or impede good patient care.

Instead, two Palmetto executives, Medical Director Elaine Jeter, M.D., and Vice President Mike Barlow, said that they want to standardize how each molecular diagnostic test (MDT) and each laboratory-developed test (LDT) is reviewed and approved.

Handling Questions

“Recently, Palmetto GBA got a question involving thrombophilia (or abnormal blood coagulation),” recalled Jeter. “This test had two or three assays. We will not reject a thrombophilia test claim simply because it includes two or three assays. That’s not our goal here.

“Most laboratories are doing the right thing,” she added. “But problems occur when a lab submits a claim with the phrase ‘comprehensive workup’ on a test requisition and the lab does not define what ‘comprehensive’ means.

“Once the physician checks the box for comprehensive workup, it allows the lab to self-refer to itself, in essence, to make that determination,” she added.

“In addition, Palmetto GBA sees numerous instances where, if the lab has a templated way to handle ‘comprehensive workups’ for some conditions, then unnecessary molecular, FISH, and other testing is being done,” explained Jeter. “Although the requisition was submitted as a comprehensive test, the lab could have limited further testing when it had the flow cytometry results because the flow cytometry nailed the diagnosis. But the laboratory continued to do unnecessary testing.”

Jeter and Barlow emphasized that most labs are careful to run only those tests that are appropriate. “There’s a select and small subset of labs that will be most affected by these proposed policies,” observed Jeter. “Palmetto GBA proposed these draft policies because it saw how this problem was growing as some laboratories were using this one avenue to maximize their revenue.”


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