In a move that surprised many stakeholders in the molecular diagnostics industry, the American Medical Association and healthcare information technology firm McKesson last week announced that they are working together to harmonize their respective coding systems for molecular tests.
On Feb. 26 the physicians' interest group and McKesson said they had entered into a licensing agreement under which AMA-issued CPT codes – the most widely used codes for claims processing in the US – will be mapped to McKesson's unique test identifiers, called Z-Codes. The code-mapping effort, which is expected to bring some clarity to the complex molecular diagnostic reimbursement landscape, is in response to industry demands for a claims processing system that specifically captures which tests are being conducted, according to AMA's Robert Musacchio.
"Our constituents have been … asking for our help in clearing up some uncertainty and some confusion that existed in the market around diagnostic testing. So, [the AMA and McKesson] basically put our heads together and asked what can we do?" Musacchio, AMA's senior VP of business products and services, told PGx Reporter. "We certainly have a well-established process through the CPT editorial process. McKesson has a unique tracking system and a diagnostic registry, which they have spent a lot of time and effort on. How can we combine the best of what they do with the best of what we do to try to solve a problem?"
In a joint statement announcing the coding collaboration, the AMA and McKesson said that the aim of the effort is to create "a new reference product that maps Z-Code Identifiers to CPT codes." The AMA will use the information that labs submit through the McKesson Diagnostics Exchange to assign Z-Codes to CPT codes describing molecular tests. "Not all Z-Code Identifiers will immediately map to a CPT code, and, in many cases, multiple Z-Code Identifiers will map to a single CPT code," AMA and McKesson explained in a statement.
"Part of the problem is just the lack of ability to have enough specificity for labs to be able to differentiate their tests from one another and for payors to discern between one test or another to [assess] the clinical and financial impact of that test," Matthew Zubiller, VP of McKesson's decision management business, told PGx Reporter. "If you look at the growth and the potential we see for personalized medicine, particularly with these molecular and genetic tests, this is really an opportunity to help realize that full potential, and be able to distinguish tests that provide really good clinical and financial impacts to decision-making."
According to insurer UnitedHealthcare, for example, payors are in dire need of a program through which they can review the analytical and clinical validity of molecular diagnostics and evaluate how these tests improve patient outcomes and impact costs compared to the standard of care. In a working paper released in March, UHC reported that its health plan participants racked up nearly $500 million in genetic and molecular diagnostic testing costs in 2010, a 14 percent increase on a per-person basis since 2008. Overall, national spending on genetic tests and molecular diagnostics "may have reached around $5 billion" in 2010 and could reach as high as $25 billion by 2021, according to the report (PGx Reporter 3/14/2012).
Zubiller hopes that once the reference code map is released, "payors will be able to use it, providers will be able to use it to make better choices for their patients, and those labs that have not been able to distinguish themselves can now really differentiate themselves."
Rocky History
The collaboration between the AMA and McKesson comes as a surprise, however, since the AMA to date hasn't appeared to be a fan of McKesson's involvement in the medical claims coding arena.
The AMA develops CPT codes through its CPT Editorial Panel, owns the copyright to the CPT code set, and collects royalties on their use. Traditionally, when billing for a medical procedure that did not have a dedicated CPT code, healthcare providers grouped multiple CPT codes together, called a code stack, to attempt to describe the procedure. However, particularly when it came to molecular tests, code stacking didn't allow payors to discern exactly which diagnostics were being performed and didn't let labs differentiate proprietary tests using unique codes. With the increasing use of molecular diagnostics and the growing technological complexity of such tests, payors and labs have pushed for an alternative to code stacking.
In response to these calls, the AMA recently developed and published new molecular pathology codes: Tier 1 codes that describe the most commonly performed molecular diagnostics based on the specific analytes for which they test; and Tier 2 codes that describe less frequently performed tests based on the resources required to perform them. However, even these codes, payors held, wouldn't allow them to track tests at a level where they could ensure that only "medically necessary" diagnostics were being performed and reimbursed. Furthermore, the molecular pathology codes didn't address more complex types of molecular tests, such as next-generation sequencing-based diagnostics, which stand to play a greater role in healthcare decisions in the future.
In attempting to address these issues, the Centers for Medicare & Medicaid Services in late 2011 charged contractor Palmetto GBA with launching a program called MolDx, under which labs and test developers were asked to submit data on the clinical validity and utility of their tests in order to receive Medicare coverage. Labs submitted this information via McKesson's Diagnostics Exchange module. Additionally, under this program, McKesson also created a unique identifier, called a Z-Code, for every submitted test, with which Palmetto could track its utilization. Based on the clinical evidentiary data submitted by labs and the utilization information gathered by Palmetto, the idea was that the contractor would then be able to determine CMS's reimbursement policy and pricing for molecular diagnostics performed in Jurisdiction E territories — California, Hawaii, and Nevada (PGx Reporter 11/16/2011).
However, shortly after the MolDx program was launched, the AMA sent a letter to CMS Acting Administrator Marilyn Tavenner charging that the Z-Code requirement under the MolDx program was against regulations set forth under the Health Insurance Portability and Accountability Act. In the letter, AMA Executive VP James Madara wrote that the MolDx program was causing "massive confusion among providers, laboratories, and health plans" who were trying to figure out when to stack CPT codes, when to use the new CPT codes for molecular diagnostics developed by the AMA, and when to use Z-Codes (PGx Reporter 1/4/2012).
The AMA threatened in the letter that it would be "compelled to file a HIPAA complaint with CMS if this program is not immediately suspended prior to January 1, 2012." The association "strongly urge[d]" CMS to continue to work within the AMA's own processes for establishing CPT codes for molecular diagnostics.
The new code-mapping collaboration comes just as Palmetto has lost its contract to provide Medicare services for CMS in the JE territories. While MolDx isn't a part of that contract and Palmetto has aspirations to expand the program nationally, the future of that effort is uncertain beyond this year.
According to AMA's Musacchio, the association began working with McKesson to move toward a coding solution in the first half of last year. "We never opposed a unique identifier," he maintained. "Our concern was around the process. We've taken great pains over the last dozen years or so to make it much more transparent and make it much more universal, and including many stakeholders. Our concern was around full involvement of the stakeholders."
However, some in the industry viewed the AMA's 2011 letter as a sign of concern that the use of Z-Codes would upend the dominance of CPT codes in medical claims processing and cut into a significant source of the association's revenues. In 2011, the AMA reported $79.1 million in revenues from its Books and Products unit, a $4.1 million increase over the previous year. According to AMA's latest annual report, this unit, which includes CPT books among other products, saw a $5.2 million improvement in royalties for the year, "largely in CPT, offset by a 2.8 percent decline in book sales."
The AMA /McKesson collaboration will result in a new reference map of CPT codes and corresponding Z-Codes that stakeholders will have to license, which stands to add to AMA's revenues. Labs won't have to pay to receive Z-Codes for their tests or to access data on their tests through the McKesson Diagnostics Exchange, according to McKesson. The AMA hasn't disclosed pricing for the reference code map but said that "the new product will resemble similar reference map products offered by the AMA. Any payor, clinician, lab or vendor will be able to license a data file from the AMA containing the reference map for the CPT code set and Z-Codes Identifiers."
Industry Reaction
Danielle Pambianco Showalter, director of health policy and reimbursement at the consulting firm HillCo Health, had been aware for some time that a collaboration between AMA and McKesson may have been in the works. According to Showalter, the AMA has been under a lot of pressure because its Tier 2 codes weren't specific enough for payors seeking more granularity about what tests they were reimbursing.
"My interpretation is that the AMA was initially upset and probably felt like Palmetto and McKesson were infringing on their territory," Showalter told PGx Reporter. But the association decided to work with McKesson in an effort to "remain a player in this space." The code-mapping process is still "going to be controlled by the AMA but it is not going to be part of the CPT editorial panel for the CPT codes," she added.
Musacchio explained to PGx Reporter that the process by which labs get CPT codes for tests will remain the same. However, when it comes time to link specific CPT codes to Z-Codes, "we're going to be using McKesson technology, using the unique identifiers, and then running that through a CPT editorial-like process," he said. The AMA has a special workgroup for this effort. However, "the CPT editorial process is not changed at all," Musacchio emphasized. "In fact, it will be enhanced by the use of the software."
Given that the reimbursement environment for molecular diagnostics has undergone drastic changes in the past few years, industry players were "a little freaked out," according to Showalter, by the announcement that AMA and McKesson were working together on a new CPT/Z-Code reference map.
"Since then they've kind of calmed down and said that this seems like it's not that bad," she said. "But it's also just kind of the tip of the iceberg because what does this mean down the road?" she posited. "If all these [CPT] codes are going to be linked to McKesson's [Diagnostics Exchange database], that will then help payors make other determinations."
Several lab industry groups PGx Reporter contacted for comment, including the American Clinical Laboratory Association, declined to discuss their views on the AMA/McKesson collaboration. Many industry observers are waiting for more details about the effort before taking a public position.
"This is yet another in a series of changes by AMA recognizing that personalized medicine requires the organization to make drastic changes to how they do business and they are doing it," Amy Miller, VP of public policy at the Personalized Medicine Coalition, told PGx Reporter. "They have resisted unique codes up until this moment and yet now are embracing them."
Miller, however, expressed concern that unique codes will make it easier for payors to "black-list" certain tests they find lacking in terms of clinical utility evidence. "For example, the way CPT was, payors, including CMS, probably paid for warfarin testing even before they deemed it worthy of coverage."
However, both Zubiller and Musacchio both emphasized that McKesson and the AMA are certainly not trying to "black-list" codes through the CPT/Z-Code mapping effort. "We at AMA are not in the business of determining reimbursement or black-listing tests. Our sole purpose here is to provide better decision-support tools for people to make the appropriate decisions," Musacchio said. "There is uncertainty that exists now. There isn't a standardized procedure. But by us coming together, we are trying to marry the technology of McKesson with a well-defined medical terminology."
Not just in the molecular diagnostics space, but across the healthcare delivery spectrum, payors are exploring different ways to garner deeper insights into what they are paying for. Zubiller suggested that "with any degree of granularity" there will be payor behavior that may not bode well for all. "This effort really doesn’t change that," he said over email. "Providers, labs, and payors will continue to need to make informed choices to ensure and pay for the right care. This will support them in doing so."
Payors McKesson has spoken to in recent months have asked the firm to help them identify tests that are most useful in improving patient outcomes. "In the confusion that exists today it's really hard to answer those questions," Zubiller said. "Frankly, sometimes it's easier for payors to basically say in general that molecular and genetic tests don't have proven value. And we've seen that happen over the past year or so, and payors have asked, 'What is the impact of these tests?' And this is an opportunity to show that."
While Zubiller and Musacchio both characterize the AMA/McKesson coding collaboration as a way to increase transparency within the healthcare system, it remains to be seen how broadly industry players and even members of the public will have access to CPT codes and the corresponding Z-Codes without paying for the reference map.
Since the AMA controls the copyrights to CPT codes, the association can restrict other parties from publishing the codes with their corresponding Medicare prices. Any member of the public can go to AMA's CodeManager database and search for a limited number of CPT codes. To gain greater access and see more codes and their reimbursement rates, however, one must pay. For access to different versions of the CodeManager Online products, for example, prices range between $400 and $800 for non AMA members, and are discounted for members. And since the AMA essentially controls the medical claims codes process in the US, the association has faced longstanding criticism that by monetizing CPT code and price lists, it is essentially restricting the public from comparison shopping for medical services.
"We’ll be working on making sure we can provide more transparency here," Zubiller said. "We’ll talk more about that over the coming months."
The AMA and McKesson will provide the funds necessary develop the reference code map, but will not disclose specific costs associated with the effort.