Skip to main content
Premium Trial:

Request an Annual Quote

Industry-Backed Bill Introduced in House as Frustration Grows over CMS Payment Process for MDx

Premium

Originally published Oct. 1.

A new bill strongly supported within the diagnostics industry could put pressure on the Centers for Medicare & Medicaid Services to alter its procedures for setting reimbursement rates for molecular diagnostics.

HR 6446, introduced last week by Representative Peter Roskam (R-IL), would require the Secretary of the Department of Health and Human Services to establish payment rates for new diagnostics under CMS's gapfilling process by considering how the test impacts patient care, the technology underlying the test, utilization data, lab charges, private insurance rates, and recommendations from a new advisory panel.

With this legislation, the bill's drafters are hoping to advance a system of payment that compensates test developers for the impact their diagnostics have in improving health outcomes. Additionally, supporters of this bill, such as the medical diagnostics manufacturers' interest group AdvaMedDx and the patient advocacy organization National Health Council, believe that the advisory panel proposed by HR 6446 can bring much needed transparency to CMS' payment-setting process by giving added weight to the views of different stakeholders, such as experts in the clinical diagnostic lab testing field, patient representatives, doctors, health economists, and genetic counselors.

CMS currently holds public meetings and solicits stakeholder comments before issuing final reimbursement determinations for diagnostics. But industry players still characterize CMS's payment setting process as opaque. "If this legislation were enacted it would direct CMS to expand the criteria it takes into consideration when it sets rates for new tests," Andy Fish, executive director of AdvaMedDx, told PGx Reporter. "This [bill] is ultimately about more transparency and establishing a better value basis for all diagnostics.

The NHC, AdvaMed, and other stakeholders worked together to formulate some of the diagnostics provisions in the bill. According to Fish, HR 6446 has the full backing of the 75-plus members of AdvaMedDx, a division under AdvaMed that represents developers of diagnostic tests performed at labs, hospitals, doctor's offices, medical clinics, and patients' homes.

"The frustration that our members have with the current process is that even though there is a public comment process for getting input from manufacturers and other stakeholders for appropriate rates for new tests, CMS is often not forthcoming about how it then arrived at the test rates that it does establish," he reflected. "And it often seems that the input that was collected was not actually factored in."

HR 6446 has been submitted to the House Energy and Commerce Committee and the Ways and Means Committee, and has support from Representatives Leonard Lance (R-NJ) and Richard Neal (D-MA). Still, following the controversial passage of the Affordable Care Act, healthcare in general is likely to be a hot-button issue prior to the presidential election this November. As such, HR 6446 will likely not see any further action in Congress until next year. "We expect that the rest of this Congress will be crowded," Fish said. "We're laying the groundwork for Congress to look again at this type of legislation next year."

Some of the provisions of HR 6446 were previously included in the "Modernizing Our Drug & Diagnostics Evaluation and Regulatory Network Cures Act of 2011," or MODDERN, introduced last year by Representative Leonard Lance (R-NJ) (PGx Reporter 9/21/2011). "We pushed for introduction of this diagnostics-specific bill to help set up a foundation for action in the event that MODDERN is held up," Fish said.

Tactical Pushback

HR 6446 comes as CMS is gathering stakeholder input on how best to price and reimburse molecular diagnostics for which the American Medical Association has issued new current procedural terminology codes – identifiers that describe medical services that healthcare providers perform and submit to payors for reimbursement. The agency is considering whether to price these new CPT codes for molecular tests via the clinical lab fee schedule, the pathway through which most lab services are paid for, or the physician fee schedule, the process by which doctors are compensated for their services.

In a preliminary determination issued in August, CMS didn't indicate whether it had chosen the PFS or CLFS pathway for these tests. However, the agency appeared to favor the gapfill process for determining pricing for new diagnostic tests.

The gapfill method allows CMS to determine payment for molecular diagnostics when no comparable technology exists. The other option available to CMS is crosswalking payment from the old stacked CPT codes to the new codes, which many test developers prefer. Under this process CMS pegs payment rates for new diagnostics to existing tests that use comparable technologies, or are already described by stacked CPT codes.

Developers of molecular diagnostics, especially those tests performed in labs, are concerned that their reimbursement will be negatively impacted if these tests are placed in the PFS, while physicians and pathologists believe that they won't be appropriately compensated for interpreting complex diagnostics if certain molecular tests are placed in the CLFS. Other groups, such as AdvaMedDx, believe CMS should take a more flexible approach and consider whether molecular diagnostics fall into the CLFS or PFS pathway on a case-by-case basis, after considering the technology underlying a particular test and whether it actually involves physician interpretation.

CMS is currently accepting stakeholder comments on its preliminary determination and in November will issue a final decision with regard to fee schedule placement of molecular diagnostics. Because the introduction of HR 6446 comes as physicians' communities and diagnostics industry groups are embroiled in a heated battle to influence the direction of CMS' payment policies for molecular tests, the bill will certainly be a way for labs and test developers to pressure the agency to alter its procedures.

According to Fish, the timing of the bill is only coincidental. He noted that for some time now, the diagnostics industry and other stakeholder groups have been concerned about CMS' outdated payment procedures for diagnostic tests, and have been looking for ways to spur the agency to make changes. "This legislation is intended to address longstanding challenges with the diagnostics payment system," Fish said. "It's not in reaction to the recent developments at CMS."

In a 2000 report on CMS' payment policies for lab tests, the Institute of Medicine concluded that the agency "needs a more timely and appropriate method for integrating the proliferation of new technologies anticipated in the near future and simpler, more transparent administrative procedures." In that report, the IoM recommended that CMS form a "single, national, rational fee schedule that reflects the resources used to produce the services, simplify and open its administrative procedures, and collect data to monitor and assess the impact of the recommended changes."

That IoM report "called out that with advances in technology on the horizon that the problems" with CMS's payment structure "would be exacerbated in the future," Fish said. "And that's exactly what was seen. So, 12 years later after that key IoM report we're seeing the same flaws within the same system, but with technology that has advanced greatly and is even more important for patient care."

Proposed Changes

HR 6446 does not instruct CMS to place molecular tests on a particular fee schedule, but attempts to improve the way the agency prices tests by including different data sources. For example, currently in order to gapfill payment for a particular test, CMS asks its local Medicare contractors to determine a reimbursement amount for the first year by factoring in various data points, such as test charges, discounts, resources required to perform the diagnostic, and what other payors might be paying. In the second year, the test code under the gapfill process is paid at the "national limitation," established by calculating the median reimbursement rate paid by contractors.

HR 6446 instructs the HHS Secretary to identify changes to the gapfill process that would make it a more accurate, open, and predictable method for setting rates for tests. "The Secretary shall examine what and how many entities should perform gapfilling, under contract or otherwise, and how to ensure that the process is informed by appropriate expertise and proceeds in a transparent and accountable manner," the bill states.

The bill also asks the HHS Secretary to set up a process by which each molecular diagnostic receives a unique CPT code that payors can use to track utilization in their systems. Payors have been pushing for the establishment of unique identifiers for molecular diagnostics so they can make sure that they're reimbursing tests that meet their criteria for medically necessary and cost-effective interventions.

The AMA's newly issued genetic testing codes are general codes that describe the analytes a test gauges or the resources needed to run the test. The physicians' association, which derives royalties from the use of CPT codes, has balked at issuing unique identifiers, and has argued that such a system would lead to pricing inflation for boutique tests. Meanwhile, boutique test developers have argued that a single code per tests will move payors to track utilization and reimburse tests at rates commensurate to their value to patient care.

Boutique tests, such as Genomic Health's Oncotype DX multi-gene expression assay for assessing breast cancer recurrence risk, tend to be pricier than generic tests for single analytes, such as KRAS mutation testing for predicting response to colorectal cancer drugs. Oncotype DX has a list price of $4,175, while KRAS tests, which are offered as diagnostics kits and lab-developed tests, carry a price tag of around $400.

While CMS is trying to figure out how best to integrate AMA's new molecular diagnostic CPT codes within its existing reimbursement framework, the agency has also charged Medicare contractor Palmetto GBA to launch the MolDx program under which test developers must submit data on the clinical validity and utility of their tests in order to receive Medicare coverage, and apply for a unique identifier to enable Palmetto to track utilization of each. Based on the clinical evidentiary data submitted by labs and the utilization information gathered by Palmetto, the contractor will determine CMS's reimbursement policy and pricing for molecular diagnostics performed in six US states and territories (PGx Reporter 11/16/2011).

"I believe CMS is seeking to bring more transparency into the process," Fish said, highlighting that Palmetto is a regional contractor and that the MolDx program would only apply to labs in California, Nevada, and Hawaii. "We would like to see more nationwide transparency throughout the whole CMS rate-setting process."

A Fragmented Industry

CMS is struggling to incorporate the new CPT codes for molecular diagnostics in its existing payment system because the diagnostics industry is fragmented by a multitude of pathways and business models for bringing tests to market. The changes proposed by HR 6446 will likely be viewed by generic lab test developers, doctors, and pathologists as a move against their interests. Meanwhile, boutique test developers view CMS's current reimbursement procedures and even AMA's new coding structure for molecular diagnostics, as a major roadblock for future innovation in personalized medicine, especially as next-generation sequencing-based tests start to enter the market.

Among CMS's preliminary reimbursement determinations, what has raised the most eyebrows among diagnostics industry players is the agency's stance on so called multi-analyte algorithm based tests. The agency has indicated that these types of tests don't fit its traditional definition of diagnostics performed at laboratories, since they use a mathematic formula to analyze multiple markers associated with patients' risk for disease or their need for particular healthcare interventions. As such, CMS has said it will not pay for the algorithm portion of MAAAs via its CLFS pathway for traditional lab tests (PGx Reporter 9/18/2012).

MAAAs are considered to be boutique tests since they are performed at a single laboratory, which owns the algorithm. After analyzing patients' biological samples using MAAAs, these labs report a composite score or result, and don't break out the presence of individual markers in test reports.

HR 6446 doesn't separately address MAAAs. However, since the bill calls for each test to receive a unique identifier, these types of tests would be reimbursed under the proposed system alongside other molecular tests, branded and generics alike. "We are extremely concerned about CMS's proposal [regarding MAAAs]. The algorithmic portion of MAAAs is a critical part of the diagnostic itself," Fish said.

The agency's preliminary stance on reimbursing MAAAs "would basically set new policy," he said. "It really would be a huge barrier to advances in these types of diagnostic technologies." AdvaMedDx is planning to submit public comments to CMS's proposal on this point.

PGx Reporter
contacted the AMA, the College of American Pathologists, and the American Clinical Laboratory Association for comment for this story. The AMA did not respond to an emailed request for comment. ACLA and CAP declined to provide input.

The Scan

US Booster Eligibility Decision

The US CDC director recommends that people at high risk of developing COVID-19 due to their jobs also be eligible for COVID-19 boosters, in addition to those 65 years old and older or with underlying medical conditions.

Arizona Bill Before Judge

The Arizona Daily Star reports that a judge is weighing whether a new Arizona law restricting abortion due to genetic conditions is a ban or a restriction.

Additional Genes

Wales is rolling out new genetic testing service for cancer patients, according to BBC News.

Science Papers Examine State of Human Genomic Research, Single-Cell Protein Quantification

In Science this week: a number of editorials and policy reports discuss advances in human genomic research, and more.