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

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‚ÄĒdifficulty 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. ‚ÄúThis 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,‚ÄĚ she explained.

‚ÄúThe 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,‚Ä̬†continued Sloane. ‚ÄúEffectively,¬†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.‚ÄĚ

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‚ÄĒtests reviewed by¬†New York, which runs its own version of¬†the CLIA program, and which the FDA¬†authorized to validate tests back in May.

‚ÄúAs a result, absent an EUA‚ÄĒat least¬†until HHS develops a list of qualifying¬†tests or the state applies to review tests‚ÄĒclinical labs that use LDTs for COVID-19¬†detection have no guarantee that their¬†services will be reimbursed by commercial¬†payers,‚ÄĚ she commented.¬†‚ÄúIn-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,‚ÄĚ continued Sloane.

‚ÄúOut-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.‚ÄĚ

Uninsured Individuals

Sloane also emphasized that this is not¬†simply a commercial payer issue. That‚Äôs¬†because the Health Resources and Services¬†Administration (HRSA) Uninsured¬†Program provides reimbursement to¬†clinical labs performing COVID-19 tests¬†on uninsured individuals. ‚ÄúCoverage¬†for COVID-19 testing under the HRSA¬†Uninsured Program uses the same definition¬†discussed above,‚ÄĚ 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.

‚ÄúGiven 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,‚ÄĚ added Sloane.¬†‚ÄúWere 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.‚ÄĚ

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

‚ÄúConsidering the potential for LDTs‚ÄĒby¬†their very nature‚ÄĒto 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,‚ÄĚobserved 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.

‚ÄúHow 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‚Äôs one¬†consideration, as is market perception.¬†‚ÄúFor some customers,‚ÄĚ she continued,¬†‚Äúhaving 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‚Äôt go¬†through the process, it might not have the¬†opportunity to hear that feedback on the¬†test,‚ÄĚ she added.

Pros and Cons of an EUA

‚ÄúUltimately, each lab will have to weigh the¬†pros and cons of seeking an EUA for its¬†COVID-19 tests,‚ÄĚ says Javitt. ‚ÄúThere is no¬†one answer that will work for all.‚Ä̬†Sloane agrees. ‚ÄúUltimately, 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,‚ÄĚ 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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