Report Shows Price Drop for Most Molecular Tests

Medicare contractors seem to be adopting prices developed and posted by Palmetto GBA

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CEO SUMMARY: In recent weeks, labs are reporting that Medicare contractors have begun to issue payments for molecular test claims filed—but unpaid—since January 1, 2013. A newly-issued analysis of this situation by Quorum Consulting indicates that, for many molecular assays, Medicare contractors are now paying less than they paid for the same tests last year. In particular, the analysis shows that, for six of 10 common molecular pathology test CPT codes, rates are lower than labs were paid last year.

SOMETIMES, COUNTRY AND WESTERN SONGS have a way of simplifying the most complex issues. “It’s All Over But the Crying,” a song by Hank Williams, Jr., is an excellent example. The title alone applies quite well to the situation clinical labs face this year regarding payment for molecular pathology test codes.

A growing list of labs are reporting that Medicare contractors are beginning to send payments for molecular test claims filed under the new molecular CPT codes. However, the news is not good for the clinical lab testing industry.

Confirmation of this situation comes from a new analysis issued by Quorum Consulting Inc., a strategic pricing, reimbursement, and health economics firm in San Francisco, California. Data gathered by Quorum from national reference labs show that—for six of 10 common molecular pathology test CPT codes—prices developed by the federal Centers for Medicare & Medicaid Services (CMS) are lower than the prices paid last year. The analysis also shows how one Medicare contractor raised preliminary gap fill payment rates on some tests after labs complained earlier this year.

Today (July 8) marked the end of the 60-day period that CMS allowed for labs to submit written comments on the rates proposed for 114 new molecular test codes introduced on January 1, 2013. Plenty of labs probably had much to say about how and why the new prices for molecular tests are too low.

Another source of major dissatisfaction is the fact that Medicare contractors classified an unexpectedly high number of these molecular tests as medically unnecessary. Such determinations mean that Medicare will not reimburse labs for these assays.

New Methods, New Rates

Now that payments are going out and the comment period is closed, the next step comes in September. That is when CMS releases its finalized pricing decisions. It will also begin setting rates for 2014, based on the prices it will release in September.

To set the rates for next year, each of the 114 new molecular pathology codes will be paid at the median of the final gap-fill rates that the Medicare Administrative Contractors (MACs) have determined this year, according to Jacqueline Huang of Quorum Consulting. This national payment rate, established by the median of the final gap-fill rates, is called the national limitation amount or NLA. After CMS posts the final rates in September, a 30-day reconsideration period will begin, Huang added.

The 2014 rates will be set based on what CMS calls the national limitation amounts or NLAs, Huang wrote. Quorum Consulting prepared a table showing how the NLAs compare with the rates paid last year.

“If the proposed gap-fill rates are finalized with no changes, the table (see sidebar below) identifies the corresponding NLAs for these tests in 2014. The table also identifies the associated payment rates for the 2012 code stacks billed by Quest Diagnostics Incorporated and Laboratory Corporation of America for these tests,” she wrote. “This analysis highlights the similarities and disparities between the historical payment rates and potential NLAs.”

Prices Less than Last Year

The table lists prices for 10 common CPT codes, including 81235, 81255, 81292, and 81243, which Huang noted are potentially lower than the rates paid to Quest and LabCorp last year under the previous code-stack payment rates. Also, Huang reported, “The calculated potential 2014 NLA for CPT 81243 demonstrates an 82% decrease in payment from Quest’s historical code-stack and a 90% decrease in payment from LabCorp’s historical code-stack.”

For six of the 10 tests listed in the table, the NLAs have the potential to be about the same as what Quest and LabCorp were billing last year or is in the range billed by to the two companies, Huang wrote.

In its report, Quorum Consulting also addressed the role Palmetto GBA has played in the rate-setting process. Recognizing that Palmetto is one of the influential Medicare Administrative Contractors (MACs) and has the most experience in setting prices for molecular tests, many of the nation’s MACs are adopting Palmetto’s prices, Huang wrote.

The table includes two sets of Palmetto rates. One set was posted early in the year. That is when clinical laboratories complained about how those rates were too low. Palmetto subsequently raised many of these rates, as the table shows.

Quorum Analyzes Regional Contractors’ Proposed Gap-Fill Payment Rates

IN A NEW REPORT, QUORUM CONSULTING INC. compared current molecular test payment rates. As a baseline, Quorum used 2012 code-stack rates paid to Quest Diagnostics and LabCorp. and the potential rate for next year (columns 1, 2, and 3). For six of 10 common tests, rates next year will drop. Quorum also compared prices Palmetto posted in January with Palmetto’s revised prices posted by CMS in May (columns 5 and 6). Except for CPT 81220 and 81243, Palmetto’s gap-fill prices have increased since January or stayed the same for these common molecular tests. Also, Quorum Consulting noted in its report that Palmetto increased payment rates for at least one test (CPT 81225) by 136%, compared to the price it first posted earlier in 2013.

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