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CMS Initial Ruling Places Genetic Tests in Lab Fee Schedule; Favors Gapfill to Fix Payment

This article has been updated to clarify CMS's initial determination on the reimbursement process for AMA's new molecular pathology test codes.

NEW YORK (GenomeWeb News) – The Centers for Medicare & Medicaid Services last week issued a preliminary decision to place new Current Procedural Terminology codes for molecular diagnostics that it determines fall under its clinical laboratory fee schedule to be reimbursed via the so-called "gapfill" process.

After the American Medical Association assigned new Tier 1 and Tier 2 CPT codes for approximately 100 genetic tests, CMS has been gathering stakeholder input on where to place these new codes, the CLFS or the physician fee schedule. The lab industry is concerned that reimbursement for its tests will be negatively impacted if they are placed in the PFS, while physicians and pathologists believe that they won't be appropriately compensated for interpreting complex diagnostics if such tests are placed in the CLFS.

CMS hasn't yet finalized under which fee schedule if will place these molecular pathology codes. However, the agency has indicated its preference that all codes be placed in a single fee schedule.

CMS also indicated that the gapfill process should be used to determine payment for clinical lab tests that have new Tier 1 and Tier 2 CPT codes. The agency uses the crosswalking 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.

The gapfill method allows CMS to determine payment for molecular diagnostics when no comparable technology exists. 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, 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.

Before the AMA developed new genetic testing codes, diagnostics developers were using stacked CPT codes or unlisted codes to bill payors for their tests. CMS believes that the gapfill process is more appropriate than crosswalking payment to new codes since test providers might bill the same tests by stacking different sets of codes or the stacked codes for a particular test has changed over time.

"For these reasons, we are recommending that the series of new molecular pathology codes be gapfilled for 2013," CMS said in its preliminary ruling. "This will allow CMS and its contractors the opportunity to gather current information about the manner in which the tests are performed and the resources necessary to provide them, so that ultimately CMS can set an appropriate payment rate for these tests."

In a note to investors, analyst David Ferreiro of Oppenheimer & Co., deemed the gapfill method as the more "ambiguous route" compared to the crosswalk method, since CMS won't announce final payment figures for gapfilled tests until April next year. The investment bank has been closely watching the impact the coding changes will have on Myriad Genetics' breast and ovarian cancer susceptibility test BRACAnalysis.

Although Ferreiro believes that Myriad could potentially maintain the payment level for BRACAnalysis, which currently bills at $3,340, he projected "an extreme scenario," where Myriad sees a 15 percent reimbursement cut for the test.

Additionally, CMS also indicated that while the laboratory tests underlying mutli-analyte algorithm based assays may be paid through CLFS, the algorithm upon which the test result or score is based does not fall under the fee schedule. MAAAs use complex algorithms to analyze multiple markers associated with disease, and are usually developed and marketed by a single laboratory.

"A MAAA is a numeric score(s) or a probability (i.e., "p-score") based on the results of laboratory tests and, in some cases, patient information. Medicare does not recognize a calculated or algorithmically derived rate or result as a clinical laboratory test since the calculated or algorithmically derived rate or result alone does not indicate the presence or absence of a substance or organism in the body," CMS said in its initial determination. "Medicare uses other codes for payment of the underlying clinical laboratory tests on which the MAAA is done and we continue to recommend not separately pricing the MAAAs codes."

Vermillion's OVA1, a test that gauges whether a woman's ovarian mass is malignant and requires surgery, is an example of a test that falls into the MAAA category. OVA1 has already been reimbursed through the gapfilling process by Medicare contractor Highmark.

CMS's latest determination is not the last word on whether molecular tests with Tier 1 and Tier 2 CPT codes will be reimbursed under CLFS. The agency will release its final payment determinations for both PFS and CLFS in November. Stakeholders have 30 days to comment on CMS's initial decision.

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