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CMS Still Unwilling to Pay for Algorithm Portion of Multi-analyte Algorithm-based Assays

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Originally published Oct. 1.

In its preliminary policy for next year's clinical laboratory fee schedule, the Centers for Medicare & Medicaid Services maintained that the algorithm portion of multi-analyte algorithm-based assays doesn't fit within its definition of a diagnostic test, and therefore the agency will not factor it in to pricing.

In the proposed policy release last week, CMS listed several codes describing MAAAs and laid out the payment rationale for these tests. CMS proposed to use either the gapfill method or various crosswalk calculations combining existing laboratory codes to establish the price for multi-analyte algorithm-based assays that currently have MAAA codes.

Without an established definition for MAAAs, however, CMS will calculate the price for each test as it comes before it in lieu of issuing an overarching national policy on this subset of tests. "At this time, it does not appear that there is a single, consistent definition for a MAAA. It can be a numeric score or a probability finding based on an analysis of the results of laboratory tests that already exist on the CLFS and, in some cases, patient information," CMS wrote in its preliminary policy.

"An algorithm is not a clinical diagnostic test," the agency stated. "The CLFS only pays for clinical diagnostic laboratory tests," and as such, "CMS considers this MAAA code to be not payable under CLFS," the government payor maintained. "As we have previously stated, we will continue to consider each individual test that comprises a MAAA code on its own merits."

CMS outlined this policy on pricing MAAAs last year, raising concern among industry players (PGx Reporter 9/19/2012). MAAAs don't fit the agency's traditional definition of diagnostics performed at laboratories, since such tests use a mathematic formula to analyze multiple markers associated with patients' risk for a disease or the likelihood that they will respond to a particular treatment. Unlike "unbranded" tests for analytes that can be gauged at multiple laboratories, MAAAs are considered "boutique" or "branded" tests performed by a single lab that owns the underlying algorithm. After analyzing patients' biological samples using an MAAA, the lab reports a composite score or result and usually doesn't break out the presence of all the markers gauged by the test panel.

With its latest proposed policy stance on MAAAs, it's clear that CMS is still working through its stance on this subset of tests. "While CMS has not covered any of the diverse MAAA tests with CPT codes, CMS is reluctant to make what would sound like a major and permanent agency policy, as they know this is a hot-button issue for the molecular lab industry and personalized medicine," Bruce Quinn, senior health policy advisor at Foley Hoag and Medicare policy expert, told PGx Reporter. "By not covering any of these diverse tests, yet leaving the door open, the decision is more easily revised by CMS in the future without calling the next change a reversal of prior federal policy."

Tests that assess the risk of a woman's early-stage breast cancer returning, such as Genomic Health's 21-gene expression Oncotype DX and Agendia's 70-gene signature MammaPrint, fall into the MAAA category. Some other MAAAs include XDx's 11-gene expression AlloMap test for gauging the risk of rejecting a heart transplant; Vermillion's five-protein OVA1 test for assessing whether an ovarian mass is malignant ahead of surgery; and Myriad's 46-gene expression prostate cancer prognostic test Prolaris.

The American Medical Association has assigned Tier 1 and Tier 2 current procedural terminology codes – identifiers that describe medical services that healthcare providers submit to payors for reimbursement – for various genetic tests. Tier 1 lists CPT codes for commonly performed tests described by the specific analytes they gauge. Tier 2 lists codes for less commonly performed tests and describes them based on their complexity.

The algorithm underlying MAAAs set them apart from more commonly utilized Tier 1 analyte-specific tests, such as assays that gauge KRAS or BRAF gene mutations associated with cancer patients' response to certain drugs. As such, MAAAs are not listed in the Tier 1 code list. In fact, the AMA has decided to deal with MAAAs separately, and said it will grant Category I CPT codes for MAAAs that it has reviewed and considers analytically and clinically valid. For MAAAs that the association hasn't yet reviewed or found wanting in terms of evidence, the AMA has proposed to list them in an appendix that identifies the tests by their brand name. The MAAAs with CPT codes will not be identified by their proprietary name.

Although MAAAs currently comprise a very small subset of the MDx market, many healthcare industry experts predict that these types of algorithm-based multi-analyte tests will dominate the space in the future as scientific advances identify hundreds of gene markers associated with a complex illness and with patients' ability to respond to treatments.

For the time being, given CMS's uncertain stance, very few developers of MAAA tests have applied for and received a code from the AMA. Among companies that have an MAAA code is Vermillion for its OVA1 test (code 81503). CMS has designated 81503 as a code describing "oncology (ovarian), biochemical assays of five proteins (CA-125, apoliproprotein A1, beta-2 microglobulin, transferrin, and pre-albumin), utilizing serum, algorithm reported as a risk score." Although the individual proteins analyzed by the test are listed, the brand name "OVA1" is not mentioned.

CMS has indicated to Vermillion that it will crosswalk payment for OVA1 by pegging pricing to a calculation of what the agency previously paid labs for separately testing each of the five markers. Vermillion has expressed concern about this proposal and has requested the agency use the gapfill method to establish the reimbursement rate for OVA1 (PM 8/16/2013).

Tests described by codes under the gapfill system are treated like new technologies. Contractors set reimbursement for gapfilled test codes based on a number of factors, such as local pricing patterns, the resources needed to perform the test, and how other payors price them. After one year, CMS uses the median rate from contractor-specific amounts to issue a national reimbursement rate for each code. New CPT codes that are priced based on the crosswalk method are matched to existing codes for comparable tests to determine payment.

Currently, the diagnostics industry and CMS appear to be in perpetual disagreement when it comes to picking the most appropriate pricing pathway for determining reimbursement levels for specific types of tests. CMS has decided to use the gapfill method for the Tier 1, analyte-specific CPT codes issued for the most commonly performed genetic tests. However, for this category of tests, many diagnostics developers felt it would have been more appropriate for CMS to peg pricing to existing codes for assays.

This week CMS issued final 2013 and 2014 pricing for Tier 1 codes. Using the gapfill method, CMS has made deep payment cuts for certain tests compared to what the agency paid when healthcare providers were billing based on older stacked CPT codes. For example, CMS has reduced payment for BRAF mutation testing by 38 percent compared to stacked codes and by 74 percent for KRAS mutation testing (see related story, in this issue).

For MAAA codes, while CMS said it is open to using the gapfill or crosswalk method based on the "merits" of a particular test, the agency can decide to use a pathway that doesn't yield the most favorable reimbursement for the test developer. For example, instead of crosswalking pricing for OVA1, Vermillion wants the agency to use the gapfill method, essentially treating the test as a new technology not simply based on the markers the diagnostic gauges, but based on the proprietary algorithm it applies to analyze what the panel of markers mean for patients' health.

Vermillion's experience may give other developers of MAAAs pause before applying for a CPT code. In fact, most diagnostics shops selling MAAAs haven't applied for CPT codes for their algorithm-based tests.

"The reason most companies have not applied for [MAAA] codes is that once they are assigned a CPT code, that does leave them open to pricing by CMS," Rina Wolf, VP of commercialization strategies, consulting, and industry affairs at Xifin, told PGx Reporter. "If they have been able to negotiate acceptable pricing through their own contractor based on using an unlisted code that could potentially put that pricing at risk."

Genomic Health, for example, has decided for the time being to continue to bill payors for Oncotype DX using an unlisted code. Although this is a time-consuming and expensive strategy, Genomic Health has successfully used it to garner reimbursement contracts with most major US payors.

"We continue to bill and get paid using an unlisted chemistry code paired with a Z code identifier [from Medicare contractor Palmetto] that indicates to … [the] contractor our specific test for coverage and reimbursement purposes under our Medicare coverage policy," a Genomic Health spokesperson said.

Genomic Health believes that the current process it is using to bill Medicare is in line with CMS's efforts to gain more transparency around the tests it is paying for. The spokesperson added, however, that "almost all laboratory tests, kits and test equipment include algorithm components to issue a patient specific result. We have never separated our test algorithm for reimbursement purposes."

Other MAAA developers, including Myriad, XDx, and Agendia are also using unlisted codes to bill payors for their tests. "When using unlisted codes, MAAAs are priced by individual negotiations both with local Medicare contractors and with each insurance company," Foley Hoag's Quinn said. "How CMS would, or will, price MAAA codes on a federal level is uncertain, and such pricing has historically acted as a benchmark for private contracting for other clinical lab fee schedule tests."

Furthermore, just by applying for MAAA codes, companies may be opening themselves up to risk. After evaluating a particular test for an MAAA code, the AMA may decide the test doesn't have sufficient evidence to receive a Category I code, and may place it in the MAAA appendix, listing tests without codes. This would place the test in a negative light and make getting payment even more challenging for diagnostics firms, Wolf explained.

For the Medicare population, Myriad is conducting prospective studies, called PROCEED, in the commercial and academic setting, in which researchers are gauging the degree to which the Prolaris score changes physicians' treatment decisions. The company is hoping that this analysis, slated for completion next year, will convince the CMS to cover Prolaris for the Medicare population.

“Advances in personalized medicine will sometimes require complex multi-analyte algorithms to address certain clinical questions. Each test should be valued based upon its ability to demonstrate clinical validity, clinical utility, and economic benefit," a Myriad spokesperson said. "We believe Prolaris has demonstrated through multiple robust clinical studies the ability to help men make a more informed decision about their prostate cancer treatment while providing substantial savings to the health care system." Myriad did not say if it planned to apply for an MAAA code or continue to bill payors through an unlisted code.

For this year, CMS focused its pricing decision to the Tier 1 and some Tier 2 genetic test codes that go in to effect in 2013, and did not comment on MAAAs. This meant that developers of MAAAs could continue to bill their tests using "miscellaneous" or "unlisted" CPT codes. "There is no requirement to apply for a MAAA code," the Genomic Health spokesperson noted. "However, we can’t be certain if or when coding for Oncotype DX may change."

Next year, Quinn believes CMS will continue to hold off on using MAAA codes. "We believe CMS will list these codes in calendar year 2014 as not used by CMS, meaning the next most accurate code should be used by the provider," he said. "The next most accurate code would be an unlisted chemistry code."

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