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Lab Group Tells CMS That Medicare Contractors Aren't Paying for MDx Tests With New CPT Codes

NEW YORK (GenomeWeb News) – Due to the challenges of using the gap-fill process to price molecular diagnostics with new CPT codes, some Medicare contractors are delaying payment for tests.

In a March 27 letter from the American Clinical Laboratory Association to Marc Hartstein, director of the hospital and ambulatory policy group at the Centers for Medicare & Medicaid Services, the lab interest group outlined the problems its constituents are facing due to delays by Medicare contractors in pricing tests.

"Despite being less than a week from the time when contractors are required to report to CMS, there still are a large number of codes that have yet to be priced by some of the contractors," ACLA President Alan Mertz wrote in the letter to CMS last week. "If the contractor has not yet priced the tests, then laboratories are not receiving payment for those codes"

Specifically, ACLA revealed the Medicare contractor Noridian has told labs that it will not begin paying for tests until April due to a software problem. Another contractor, Palmetto, has told labs to hold off on billing for tests that it hasn't yet priced. "Even among those contractors that have priced most of the codes, there still are some for which no information is available and for which no payment is being made," Mertz wrote.

The current delays in pricing are occurring because CMS is in the process of pricing new codes for molecular diagnostics. Two years ago, the American Medical Association developed a new set of CPT codes for approximately 100 molecular diagnostics, divided into two tiers. In the first tier are claims processing codes for commonly performed, analyte-specific tests and in Tier 2 are resource-level codes describing less common tests.

Although many stakeholders have felt that CMS should price these new codes through the more readily used crosswalk process, CMS has decided instead to use the gap-fill method. CMS has applied gap-fill – a process used to establish payment for tests when no comparable technology exists – three times in the last decade, experts estimate. The agency has more commonly used the crosswalk process to peg payment rates for new tests to existing tests that use comparable technologies, or for tests that are already described by stacked CPT codes.

ACLA charges in its letter that the process by which Medicare contractors are pricing molecular diagnostics has not been open and transparent. Despite in-person meetings between lab groups and Palmetto about test pricing, "it still is extremely difficult to determine how Palmetto arrived at its prices," Mertz wrote. According to Mertz, Palmetto officials have explained that they arrived at the new test prices after "making certain adjustments," and then averaging the pricing for the code stacks labs used in the past.

Before AMA came up with new codes for molecular tests, healthcare providers used to bundle or stack codes to bill payors for tests. However, payors felt that the stacked codes didn't allow them to track which specific tests were being performed and ensure that they were paying only for "medically necessary" tests.

Despite Palmetto's explanation of how it arrived at the new reimbursement levels, "we are unable to replicate the prices Palmetto has arrived at or even come close in most instances," Mertz said in the letter, adding that using the same pricing methodology, ACLA arrives at much higher test reimbursement levels than Palmetto does. As previously reported by GenomeWeb Daily News sister publication PGx Reporter, lab industry stakeholders expressed significant concern after Palmetto published initial prices for the new molecular diagnostic codes earlier this year. At the time, stakeholders said that the proposed Palmetto prices wouldn't allow labs to cover their costs for performing the tests.

"We have heard from some of our laboratories that they may stop offering some of these tests to Medicare beneficiaries in the near future because of inadequate reimbursement, which would have a direct and obvious impact on beneficiary access," Mertz wrote in the letter to CMS.

Most contractors that have published prices for some of the new molecular diagnostic codes have largely replicated Palmetto's pricing. Noridian has decided to price its test at around 90 percent of Palmetto's reimbursement levels. "The fact that so many of the contractors relied on Palmetto’s prices seems to undercut the whole purpose of the gap-filling process which is designed to obtain input from numerous sources," Mertz noted.

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 gap-fill process is paid at the "national limitation," established by calculating the median reimbursement rate paid by contractors. Meanwhile, under the crosswalk method, a new test is reimbursed at either the local fee schedule or national limitation amount for an existing test, depending on which is the lesser amount.

ACLA has put forth several recommendations to CMS to alleviate reimbursement delays as Medicare contractors work out prices for new test codes using gap-fill. Overall, the lab group has made no secret of the fact that it would have preferred CMS to use the crosswalk process to price new codes. However, now that CMS has decided to use the gap-fill process, ACLA has suggested that CMS crosswalk pricing for 2013 to give contractors more time to figure out how to price tests using gap-fill or issue temporary "G-Codes" and price them at the same level as the old code stacks, so that labs can continue to get paid.

"We do not believe that it is too late for CMS to consider these alternatives, given the way the process is unfolding," Mertz wrote in the letter.

CMS is slated to post Medicare contractors' prices by April 30, after which there will be a 60-day comment period allowing stakeholders to provide input. Ahead of this deadline, ACLA is requesting that CMS require contractors to publish their pricing methodologies and data ahead of the comment period.

"Without more information on the processes used by the contractors, laboratories will be denied the opportunity to submit meaningful comments," Mertz said in the letter. "We cannot be expected to explain our concerns about the way the prices were derived if we have no information to review.

"Without such information, stakeholders’ right to comment is meaningless," Mertz asserted.

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