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Palmetto Loses Appeal to Remain JE CMS Contractor, but May Continue Running MolDx

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This article has been updated to include comments from Palmetto Medical Director Elaine Jeter. Originally published Jan. 26.

Despite having lost its bid to continue providing Medicare services for certain states, contractor Palmetto GBA will likely go on administering its MolDx program in that region and possibly expand it nationally, according to industry insiders.

In October last year, Palmetto was outbid by Noridian in its contract to administer Medicare services for California, Hawaii, and Nevada, collectively referred to as Jurisdiction E (formerly Jurisdiction 1). This in turn left uncertain the fate of Palmetto's MolDx program, an effort currently limited to that jurisdiction to track utilization of molecular tests and set reimbursement rates based on the value they provided to patient care (PGx Reporter 10/17/2012).

Palmetto appealed the Centers for Medicare & Medicaid Services' decision to award the contract to Noridian. However, according to Government Accountability Office records, the appeal was denied. Palmetto can appeal again, but experts knowledgeable of the process believe that a second appeal is unlikely. As such, Noridian is slated to begin managing CMS's Medicare contract for the jurisdiction starting this summer for the next five years.

Regardless of losing the contract, Palmetto will likely continue to administer MolDx for CMS. "Since the MolDx program and [Jurisdiction E] are separate contracts, I believe [Palmetto] will still continue down the innovative path that MolDx established, while looking to expand the program nationally," Matthew Zubiller, VP of decision management at healthcare technology firm McKesson, told PGx Reporter. Palmetto is using McKesson's Diagnostics Exchange module for the MolDx program to collect evidentiary data on tests and track the utilization of every molecular diagnostic with a unique identifier.

Palmetto's Medical Director Elaine Jeter told PGx Reporter that the company is discussing options with CMS. "The program has clearly demonstrated the need for its continuation and CMS has recognized the value of the program overall," Jeter said. CMS did not respond to a request for comment ahead of deadline.

Under current practice, in which healthcare providers stack CPT claims processing codes to bill Medicare, the government payor cannot discern which tests it is reimbursing and whether these tests meet CMS's coverage policies. To better track test utilization and ensure that only "medically necessary" tests were being paid for, CMS charged Palmetto with launching MolDx, under which labs and test developers are being asked to submit data on the clinical validity and utility of their tests in order to receive Medicare coverage. Each lab also has to submit a diagnostic claim with a unique identifier to enable Palmetto to track its utilization. Based on the clinical evidentiary data submitted by labs and the utilization information gathered by Palmetto, the contractor determines CMS's reimbursement policy and pricing for molecular diagnostics performed in Jurisdiction E territories (PGx Reporter 11/16/2011).

Since the ultimate goal of MolDx is to establish value-based reimbursement for molecular tests, Palmetto is working with stakeholders to define the criteria by which "value" will be gauged. "Data and a structure to support, as well as the specific criteria are still in development," Jeter said. "We are working closely with industry, test developers, CMS, and others, but this is a long term goal of the program."

The service being provided under MolDx is at once critical and controversial. This year, healthcare providers will begin using more than 100 newly published CPT codes to claim payment for genetic tests they've performed. The reimbursement levels for most of these new codes, created and issued by the American Medical Association, will need to be established through the gap-fill process, a method that CMS hasn't readily used for setting payment.

Historically, the agency has preferred the cross-walking method to peg payment rates for new tests to existing tests that use comparable technologies, or are already described by stacked CPT codes. Under this process, the new test is reimbursed at either the local fee schedule or national limitation amount for the existing test, depending on which is the lesser amount.

Meanwhile, through the gap-fill method – which experts estimate CMS has applied three times in the last decade – CMS determines payment for molecular diagnostics when no comparable technology exists. Under this scenario, 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.

Palmetto's MolDx would play a key role in this process by evaluating the clinical utility and establish pricing of tests performed by Jurisdiction E labs. However, the AMA, which earns royalties from CPT codes, has objected to the fact that tests reviewed by the program will receive a unique identifier with which payors can track their utilization. Moreover, some labs have worried whether Palmetto has sufficient safeguards in place to keep private the proprietary evidentiary data submitted to MolDx.

Palmetto is also facing significant pushback from pathology associations regarding the MolDx requirement that tests reviewed under this program will be assigned a unique identifier. The College of Molecular Pathologists "retains significant and serious concern regarding the codes/code identifiers that are being generated as part of the Palmetto MolDx Program, and requests that the CMS work with Palmetto to stop or suspend indefinitely the MolDx program," the group wrote in a Dec. 31 letter to CMS Acting Administrator Marilyn Tavenner.

In the letter, CAP asserts that AMA's newly issued analyte-specific CPT codes make the need for unique identifiers, called Z-Codes, unnecessary and a violation of the Health Insurance Portability and Accountability Act. Although CAP claims AMA-issued CPT codes account for "greater than 95 percent of molecular pathology services," many industry observers have said these codes still won't enable payors to track test utilization at the level that a unique identifier would allow. However, CAP has charged that Palmetto is just duplicating AMA's coding structure with Z-codes, and unduly burdening labs.

"On its website Palmetto has indicated that multiple laboratories may be assigned the same Z-Code or [Palmetto Test Identifier] if their tests are similar. This is further evidence that the Palmetto MolDx Program involves a 'code set' in that a single code is used to identify a particular kind of item or service, and is assigned systematically, regardless of who is providing the item or service," CAP said in the letter. "This is in fact conceptually strictly analogous to the AMA CPT code development process, which is the lawful recognized process for the development of CPT codes for laboratory tests and services."

Still, Palmetto doesn't appear to be winding down the MolDx program, if activity on the program's website is any indication. The contractor has continued to post new guidelines about the reimbursement status of specific molecular diagnostics. This month alone, as of Jan. 7, Palmetto had posted 14 notices about the reimbursement status of individual tests and groups of tests.

Additionally, Palmetto posted a notice about the criteria by which MolDx will assess whether a test is considered clinically useful, or in other words, whether the test improves patient outcomes compared to standard methods. Additionally, for labs that lack the evidentiary data to gain coverage, Palmetto has also described on its website how labs can go about requesting coverage with evidence development – a process by which tests can gain coverage from CMS for use of the test within a clinical study designed to garner data supporting the test's clinical utility, technical performance, and safety.

According to industry observers PGx Reporter has spoken to, there are several thousand molecular diagnostics that will likely need to go through MolDx review. One industry insider estimates that Palmetto expects to review more than 100 tests per year.

Jeter noted that more than a hundred dossiers on tests have either been submitted by labs or been reviewed by Palmetto's own motion for tech assessments. "All but a few have been completed or are in further development by the labs," she added. Jeter further explained that Palmetto will review genetic tests with Tier 1 analyte specific CPT codes mostly for billing compliance and conduct tech assessments for less commonly performed tests that fall into Tier 2 codes, multi-analyte algorithm based tests, and for emerging technologies.

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