Is HHS Ruling on COVID-19 LDTs Negative for Lab Reimbursement?

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WHILE SOME LABS CELEBRATE THE PERCEIVED FLEXIBILITY that comes from not having to get an emergency use authorization (EUA) for COVID-19 laboratory-developed tests (LDTs), there is a potential downside—difficulty getting reimbursed for the test. On Aug. 19, the Department of Health and Human Services (HHS) issued a new directive that said clinical laboratories are no longer required to obtain an EUA from the Food and Drug Administration (FDA) for their LDTs.

The announcement initially was met with relief by many in the lab community, which has long believed that the FDA does not have regulatory oversight over tests that labs develop themselves and use in their own laboratories.

To Get an EUA or Not?

But Danielle Sloane, an attorney with Nashville-based Bass, Berry and Sims PLC, says that not seeking an EUA from the FDA is likely to have a cascading effect on clinical lab reimbursement for COVID-19 LDTs. “This is because certain pieces of legislation have tied coverage expectations for COVID-19 tests to those that are provided pursuant to an FDA approval or an actual or pending EUA,” she explained.

“The Family First Coronavirus Response Act (FFCRA), as amended by the Coronavirus Aid, Relief and Economic Security (CARES) Act, requires most commercial payers to cover medically appropriate COVID-19 diagnostic tests, without requiring cost-sharing, prior-authorization, or medical-management limitations,” continued Sloane. “Effectively, FFCRA requires a commercial payer to reimburse laboratories even if the labs are not in-network with that payer. This is a big advantage, since it is often nearly impossible for some labs to obtain provider status with health plans.”

To Qualify for Reimbursement

There is a catch, though, noted Sloane. To qualify for FFCRA reimbursement protections, she said, a COVID-19 test must meet one of the following criteria:

1) Is approved, cleared, or authorized under section 510(k), 513m, 515, or 564 of the Federal Food, Drug, and Cosmetic Act (FDCA).

2) The developer has requested or intends to request an EUA under section 564 of the FDCA, unless and until the EUA has been denied or the developer does not submit a request within a reasonable timeframe [i.e., 15 days based on FDA guidance].

3) Is developed in and authorized by a state that has notified the Secretary of HHS of its intention to review tests intended to diagnose COVID-19.

4) Another test that the HHS Secretary determines appropriate in guidance.

Sloane said she is not aware of any COVID-19 LDTs that would fall under categories 1 (FDA approved), 3 (state authorized), or 4 (other HHS authorized), with one potential exception—tests reviewed by New York, which runs its own version of the CLIA program, and which the FDA authorized to validate tests back in May.

“As a result, absent an EUA—at least until HHS develops a list of qualifying tests or the state applies to review tests—clinical labs that use LDTs for COVID-19 detection have no guarantee that their services will be reimbursed by commercial payers,” she commented. “In-network laboratories might be able to negotiate rates for COVID-19 LDTs, but they still could be subject to cost-sharing, prior-authorization, and medical management measures,” continued Sloane.

“Out-of-network clinical laboratories may struggle to get their claims paid on an out-of-network basis. From a reimbursement standpoint, the easiest path to ensuring payment from commercial payors for COVID-19 LDTs is still to obtain an EUA.”

Uninsured Individuals

Sloane also emphasized that this is not simply a commercial payer issue. That’s because the Health Resources and Services Administration (HRSA) Uninsured Program provides reimbursement to clinical labs performing COVID-19 tests on uninsured individuals. “Coverage for COVID-19 testing under the HRSA Uninsured Program uses the same definition discussed above,” she stated.

“This suggests a lab submitting a claim for a COVID-19 LDT, absent an active or pending EUA, would run afoul of the terms and conditions of the HRSA Uninsured Program, at least until further guidance suggests unapproved COVID-19 LDTs qualify for one of the categories above.

“Given these restrictions, a laboratory could not submit a claim for a COVID-19 LDT for an uninsured person even if it wanted to take that step,” added Sloane. “Were a lab to submit a claim for a COVID-19 LDT test that did not have an active or pending EUA, there is a litany of potential penalties, including False Claims Act liability and exclusion from federal healthcare programs.”

Labs wanting to move forward with a COVID-19 LDT that lacks an EUA have another issue to consider. While the Public Readiness and Emergency Preparedness (PREP) Act typically provides immunity protection in cases of a public health emergency, clinical laboratories cannot qualify for such protection for COVID-19 LDTs if they are not approved by the FDA. This means clinical labs need to weigh the advantages of increased flexibility for their COVID-19 LDTs with the potential for being sued over an inaccurate test result.

Costly Ramifications

“Considering the potential for LDTs—by their very nature—to produce inaccurate results, such as false negatives, which could lead an infected individual to infect others, being ineligible for PREP Act protection could have costly ramifications to the lab that performed such tests,”observed Sloane.

However, there are other ways to limit liability, such as through contractual indemnification, notes Gail Javitt, an attorney with Hyman, Phelps and McNamara, based in Washington, D.C.

“How important the PREP Act protection is depends on the entity offering the COVID-19 LDT and what other means it might have to protect itself. That’s one consideration, as is market perception. “For some customers,” she continued, “having the EUA gives them reassurance that a third party has evaluated the COVID-19 LDT. Also, the FDA can provide useful feedback. If a lab doesn’t go through the process, it might not have the opportunity to hear that feedback on the test,” she added.

Pros and Cons of an EUA

“Ultimately, each lab will have to weigh the pros and cons of seeking an EUA for its COVID-19 tests,” says Javitt. “There is no one answer that will work for all.” Sloane agrees. “Ultimately, it is simply important for clinical laboratories to know and understand the implications of not obtaining an EUA for COVID-19 LDTs, so they can make an informed choice,” she concluded.

Contact Danielle Sloane at 615-742-7763 or dsloane@bassberry.com; Gail Javitt, at 202-737-4580 or gjavitt@hpm.com.

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