By Turna Ray
Although the Centers for Medicare & Medicaid Services has yet to decide how it will manage reimbursement for genetic tests, the agency has signaled that it is open to public discussion and stakeholder input on the subject.
CMS is scheduled to hold a meeting on July 18 at its headquarters in Baltimore to hear recommendations on payment levels for new Current Procedural Terminology codes that will be added to the Medicare clinical laboratory fee schedule in 2012. Following this meeting in the morning, CMS will hold a separate hearing in the afternoon to discuss new genetic testing codes being developed by the American Medical Association.
"While we are not accepting payment recommendations at this time for genetic testing, we would like to open discussions to the public on recommendations going forward on how these codes should be addressed," CMS stated in a release announcing the meeting. Specifically, CMS is seeking stakeholder input about the types of tests that should fall in to the clinical laboratory fee schedule versus the physician fee schedule; how current CPT codes can best reflect the methods involved in genetic tests; and how new genetic tests may be similar or different to currently reimbursed laboratory tests.
"CMS is the decision-maker here regarding fee schedule placement [of genetic tests] and we are pleased they are recognizing the importance … of having stakeholders provide input on the questions they've asked," David Mongillo, vice president for policy and medical affairs at the American Clinical Laboratory Association, told PGx Reporter. ACLA will be present at the July meeting and plans to comment on all three discussion topics on the agenda.
Wall Street analysts have also been keeping a close watch on whether CMS will alter payment levels for certain genetic tests by categorizing them under the PFS (generally tests that fall in the surgical pathology, hematopathology, or cytopathology services category) or the CLFS (generally tests performed in a clinical lab that don't require physician interpretation). There is uncertainty as to whether tests such as Myriad Genetics' BRACAnalysis could see their current reimbursement levels reduced depending on whether they are assigned to the PFS or CLFS. Analysts have speculated that Myriad has a better chance of maintaining current reimbursement levels if its tests are included on the CLFS.
Myriad currently uses stacked CPT codes to bill Medicare $3,340 for BRACAnalysis.
By deciding to not discuss payment recommendations for genetic tests at the July CPT code meeting, CMS is effectively maintaining the practice of code stacking for molecular diagnostics through 2012 — a move that has reassured industry stakeholders and Wall Street that reimbursement levels will not be drastically impacted for the time being.
In a note following CMS' announcement, Jon Wood of the investment banking group Jefferies issued a note maintaining his previous fiscal year 2012 earnings per share forecast for Myriad Genetics' at $1.15 with a "buy" rating.
"While the announcement today does not specifically address the timing of new genetic testing code implementation, our discussion with a CMS representative … indicated that such new codes (including BRACAnalysis) will continue to be reimbursed using traditional code stacking procedures in 2012 while it evaluates the most appropriate mechanism/procedure for setting specific payment levels for each new code," Wood wrote in a note last week. "As such, we believe BRACAnalysis' reimbursement levels will remain at current levels in 2012."
David Ferreiro of Oppenheimer was cautiously optimistic in issuing a "perform" rating for Myriad, noting that while it is positive for the time being that Myriad's flagship BRACAnalysis test isn't included in the 2012 CLFS, the firm isn't "out of the woods yet," since it hasn't yet been decided whether BRACAnalysis will fall under the PFS or the CLFS in 2013.
"In our view, [Myriad] holds the best chance to maintain reimbursement levels if BRACAnalysis is included on the CLFS while inclusion on the PFS brings an uncertain outcome," Ferreiro wrote.
According to Myriad CEO Peter Meldrum, the company is in discussions with CMS about whether its Colaris and BRACAnalysis tests will fall under the PFS or CLFS. "We believe that BRACAnalysis is appropriate for the clinical fee schedule, as there really is no physician interpretation or interaction with that test," Meldrum said during an earnings call last month (PGx Reporter 05/04/2011).
Tiers and Fee Schedules
The AMA's CPT Editorial Panel Molecular Pathology Coding Workgroup has been working since December 2009 to develop new codes for molecular diagnostics. Under the proposed CPT coding structure, molecular diagnostics would fall into one of two tiers. Tier 1 codes represent "the majority of commonly performed clinical molecular analyses," according to AMA. Tier 2 codes represent "medically useful procedures that are generally performed in lower volumes than Tier 1 procedures." These codes are arranged by the level of technical resources and interpretive work required by the physician or other healthcare professional (PGx Reporter 03/16/2011).
The AMA has said that it intends to phase out the current practice of CPT code stacking by the end of 2012. However, some industry observers have projected that by the time stakeholder input has been factored in and the codes are finalized, it could be 2014 before code stacking is no longer used and the new codes are in effect.
Several issues need to be ironed out before the new codes are adopted. For instance, neither AMA nor CMS has addressed how multi-gene panel tests that are performed at a single lab, such as Genomic Health's Oncotype DX or Agendia's Mammaprint, will be coded and reimbursed under the new system. Oncotype DX is currently reimbursed with a miscellaneous CPT code and MammaPrint uses the CPT code 84999 for "an unlisted chemistry procedure."
It will be important for stakeholders to come to an agreement on how to code and what to pay for in vitro diagnostic multivariate index assays, such as Oncotype DX and MammaPrint, which are already being used in cancer prognosis and show signs of being rapidly adopted by physicians. AMA's CPT Editorial Panel is holding a July 20 meeting in Chicago to discuss the coding structure for these types of tests.
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Furthermore, it is unclear how the two tiers of proposed CPT codes would map to the current fee schedules. According to a research note from Jefferies' Wood, there are three possible scenarios: all molecular tests would fall under CLFS; all codes would fall under PFS; or Tier 1 codes would be included in CLFS and Tier 2 codes in PFS.
Whether a test is reimbursed under the PFS or the CLFS could impact its reimbursement amount. "Like it or not, the CPT code description [of a test] has a connection to CMS fee schedule placement and thus payment issues," ACLA's Mongillo said, though he noted that the actual schedule placement may not be as important as how CMS accounts for the work involved in performing the test.
Mongillo used the example of a common, non-genetic laboratory-developed test reimbursed under the CLFS, such as a microbiology culture and sensitivity test, to illustrate how the current payment schedule is problematic for laboratories developing, performing, or interpreting genetic tests. In analyzing the results of a microbiology culture for the diagnosis and treatment of a patient's infection, the doctor takes a biological sample from the patient and sends it to a lab for analysis, where the sample is placed on a Petri dish and then analyzed to see which antibiotics will be efficacious against the bacteria that grow.
"The reason I bring this example up is because there is a form of an interpretation associated with that test" that is currently accounted for under the CLFS, Mongillo observed. "Somebody, a microbiology technician, has to look at that and make a decision as to which antibiotic is performing correctly, and report that to the doctor who ordered it." Reasoning that many genetic tests similarly require interpretation by PhD scientists in a lab, ACLA will discuss with CMS ways in which it can carve out payments for this additional work regardless of whether a test is assigned to a particular schedule.
"That's one way that we think some of these genetic tests are similar, in that they require an experienced geneticist to look at those results and make a decision as to what those mutations mean in terms of clinical conditions," Mongillo said. "Some might argue that is the kind of interpretation that is required for the clinical lab fee schedule services, so that there may be a distinction between those tests and tests that are in the physician fee schedule currently that require a pathologist to interpret tissue samples."
Currently, genetics experts aren't permitted to bill for services they render related to the analysis and interpretation of genetic tests under the PFS. "As this thing moves forward, that's one of the issues we grapple with because if there is a form of interpretation needed and the person performing that service currently cannot bill for it, it will have an impact on clinical laboratory operations," Mongillo said.
Paying for Value
Industry groups are hoping that with input from stakeholders CMS will advance a means by which molecular diagnostics are reimbursed at a level commensurate with the value they add to patient care. "Regardless of what fee schedule these tests are placed on … the main thing is they need to be appropriately valued," Mongillo said. "Most of these tests add advancements, enhancements, to quicker and more precise diagnostic procedures, and are really driving the area of personalized medicine."
The proposed changes come amid a challenging financial landscape for diagnostic development. It's been estimated that diagnostic tests impact between 60 percent and 70 percent of healthcare decision-making, but comprise less than 5 percent of hospital costs and around 1.6 percent of all Medicare costs.
Furthermore, an assessment of the reimbursement landscape of novel diagnostics released earlier this year reported that the practice of stacked CPT codes has ultimately impeded investment in these advanced technologies. "These coding practices have led to increased payor scrutiny, in turn pushing developers to generate economic studies geared towards payers and providers to justify value-based pricing," notes the report, which was written by healthcare consulting firm Health Advances and funded by the Biotechnology Industry Organization. "However, without standardized approaches, these studies are often met with skepticism, leaving true value-based pricing elusive for many tests."
The report characterizes efforts to establish test-specific codes, like those being developed by the AMA, as "niche solutions [that] address specific issues in the short- to mid-term."
As an alternative, the report's authors suggest the establishment of a "single coverage and value assessment body for novel diagnostics," though they note that this proposal would require significant time and resources. "No individual reform measure can positively impact the entire system," the report states. "A multi-solution approach to the current system’s limitations can provide short-term benefits while building towards broader diagnostic reimbursement reform."
In the opinion of Anne-Marie Lynch, AdvaMed's executive VP for payment and healthcare delivery policy, an independent advisory panel that could provide a better understanding of the complexity of molecular diagnostics would be one solution toward "reducing uncertainty" in the diagnostics industry "so there are opportunities for investment and bringing new tests to market."
"What we see in both the PFS and CLFS are issues that we think could be improved by better understanding and accounting for the value of [molecular] tests in terms of what they bring to patient care," she told PGx Reporter.
AdvaMed also commended CMS for planning the informational session and moving forward with stakeholder input. The medical device trade association is planning to attend the agency's meetings in July.
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