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Palmetto's Loss of Jurisdiction E Medicare Contract Raises Questions About Fate of MolDx Program

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Originally published Oct. 12.

Medicare contractor Palmetto GBA has recently been outbid in its contract to administer services for the Centers for Medicare & Medicaid Services in several US states — a turn of events that has labs and molecular diagnostic companies wondering about the future of Palmetto's MolDx program, an effort to track utilization of molecular diagnostics and set reimbursement rates based on the value these tests provide to patient care.

CMS had 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, which comprises California, Hawaii, and Nevada (PGx Reporter 11/16/2011).

However, in late September, Palmetto lost its bid to serve as the Medicare contractor for this region for the next five years to another contractor, Noridian Administrative Services. CMS said that Palmetto will continue to administer claims for "up to six months" while it transfers the contract to Noridian. Palmetto can appeal the contract award, but industry insiders aren't hopeful that CMS will reverse its decision to go with Noridian.

Although Palmetto's implementation of the MolDx program has been controversial among certain segments of the healthcare sector, experts knowledgeable of the process said that Palmetto's loss of the administrative contract with CMS is unrelated to the molecular diagnostics reimbursement scheme, and has more to do with Palmetto's failure to meet other program goals.

"MolDx is not directly tied to this bid result, although it can be impacted," Matthew Zubiller, VP of healthcare technology firm McKesson's decision management business, told PGx Reporter. "We understand [there are] plans to continue full steam ahead with MolDx regardless. There has been continued interest expressed in expanding the program." Palmetto is using McKesson's Diagnostics Exchange module to collect evidentiary data on tests and track the utilization of every molecular diagnostic with a unique identifier.

Simultaneously, MolDx is also up for renewal at the end of the year, and it remains to be seen if CMS continues to fund the program via Palmetto or under Noridian.

Palmetto declined to provide comments for this article. Meanwhile, some industry insiders PGx Reporter spoke to believe that if Noridian maintains its contract bid with CMS, it will likely keep running MolDx, possibly with some changes. Others believe that intellectual capital and political will to run this program resides within Palmetto, led by Elaine Jeter, Palmetto's medical director. As such, CMS might continue to fund the program for a period of up to a year during which Palmetto appeals the contract award to Noridian.

Still, no final decisions have been made with regard to the fate of MolDx, leaving labs and test developers to wonder about where the molecular diagnostics reimbursement setting process initiated by Palmetto stands.

Palmetto has been reviewing the analytical validity, clinical validity, and clinical utility of tests and posting the reimbursement guidelines on its website. Since March, Palmetto has posted around 26 updates announcing coverage determinations or newly issued unique identifiers for tests. Some tests are referred to by their brand name, while other tests are generally described by the analytes they gauge, such as KIF6 genotyping or testing for HOXD3, PTEN, and ERG molecular markers for prostate cancer.

Through these technology assessments, Palmetto has found that a handful of tests fit the "reasonable and necessary" criteria for Medicare reimbursement, such as Genomic Health's Oncotype DX for breast cancer recurrence and CardioDx's Corus CAD test, a gene expression test that helps cardiologists determine if patients' chest pain is due to obstructive coronary artery disease. Meanwhile, the contractor has concluded that a number of tests have "insufficient evidence" for coverage, such as the LPA-aspirin genotype test, which gauges whether patients are at heightened risk for cardiovascular disease after aspirin therapy, and Life Technologies' Prevenio Lung RS (formerly Pinpoint Dx Lung Assay), which assesses whether early-stage non-small cell lung cancer patients are at high risk for experiencing disease progression after surgery.

CMS sought out Palmetto's help in implementing MolDx because under current practice, in which labs stack CPT claims processing codes to bill Medicare, the payor cannot discern which tests it is reimbursing and whether these tests meet CMS's coverage policies. The MolDx program was necessary "because we didn't know what we were paying for, we couldn't data mine, we knew there was inappropriate utilization, we knew there was no evidence-based coverage, and we knew there were payor inconsistencies," Palmetto's Jeter has said previously (PGx Reporter 2/29/2012).

Since its launch earlier this year, there has been significant pushback against the MolDx program from the American Medical Association and laboratory industry groups.

The AMA is threatened by Palmetto's requirement that test providers submit McKesson's unique identifiers, called Z-Codes, for tracking utilization since the AMA owns the copyright to and receives royalties on the use of CPT codes — the most widely used coding system for claims processing in the US. The AMA in December sent a letter to CMS Acting Administrator Marilyn Tavenner threatening to lodge a complaint under the Health Insurance Portability and Accountability Act unless the agency suspends the MolDx Program (PGx Reporter 1/4/2012).

Lab groups, meanwhile, have said that Palmetto's coding and tech reviews conducted under MolDx are just a way to deny coverage for the majority of tests performed, and have expressed concern about having to divulge proprietary data as part of the program.

The AMA has issued around 100 codes for analyte-specific genetic tests. According to the MolDx website, tests that have such codes from the AMA that are approved by the US Food and Drug Administration, are reviewed by the New York State Department of Health, or are included in the NIH Genetic Testing Registry are exempt from having to garner a technology assessment through Palmetto.

Palmetto has also made other concessions in an effort to appease critics of MolDx, such as allowing labs to apply for a Z-Code or a Palmetto Test Indicator. While the Z-Code may be used by labs outside the Palmetto program, the PTI may only used for the MolDx Program.

Despite the controversy surrounding MolDx and the contractual fallout between CMS and Palmetto, industry insiders closely following these issues believe that MolDx will continue and say there is a strong desire among decision makers to expand the program to other Medicare jurisdictions and among private payors.

CMS and Noridian did not respond to questions for this article ahead of press time.

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