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Palmetto's Jeter Discusses Efforts to Advance Value-Based Reimbursement System for MDx


By Turna Ray

SAN DIEGO, Calif. — Medicare contractor Palmetto GBA is seeking input from economists as part of its effort to develop a value-based payment system for molecular diagnostics.

Under the group's so-called MolDx program, launched in November, the Centers for Medicare & Medicaid Services "has given us the opportunity to consider [the] value" a test provides to patient care, Elaine Jeter, Palmetto's medical director, said at a reimbursement conference this week. According to Jeter, Palmetto is in discussions with reimbursement experts and test developers to assess by what metrics it will define "value" and establish payment levels for molecular diagnostics.

Although she couldn't provide details on these preliminary efforts, Jeter hinted that Palmetto will likely view single-analyte tests performed at labs, such as KRAS mutation testing, very differently in terms of value compared to more complex, multi-analyte, algorithm-based tests, such as Genomic Health's Oncotype DX breast cancer recurrence test.

"KRAS to me is an analyte. Is the mutation there? It provides a 'yes' or 'no' answer," said Jeter, who spoke at the Forum on Medical Device and Diagnostics Reimbursement Strategies. "I know there was R&D [investment] put into that, but for the 25 to 50 laboratories in California that are going to be doing KRAS, that's [testing for] an analyte, which to me is no different than [a] glucose or … a [lactate dehydrogenase test]."

However, with multivariate algorithm-based diagnostics for disease prognosis or treatment response prediction, "we're into a decision tree, where if Jane has this particular score or classification, then she will not have chemotherapy," Jeter said. "That has an entirely different value, at least to us, in how we're trying to develop the reimbursement for these assays."

In November, Palmetto announced it was implementing the MolDx Program for CMS, under which it requires labs to submit data on the clinical validity and utility of their tests in order to receive Medicare coverage. Under the program, each lab must also 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 will determine CMS's reimbursement policy and pricing for molecular diagnostics performed in six US states and territories (PGx Reporter 11/16/2011).

Well before the MolDx Program came to fruition, Palmetto launched its “Laboratory and Molecular Diagnostic Services Program," under which it began asking test providers to submit clinical validity and utility data on tests performed and billed under Medicare (PGx Reporter 10/5/2011). However, that program wasn't formally instituted until CMS asked Palmetto last year to develop a system that would allow the payor to track utilization of every single molecular assay with a unique identifier.

Palmetto has decided to use healthcare technology firm McKesson's Diagnostics Exchange module to collect evidentiary data on tests and track the utilization of every molecular diagnostic with a unique identifier called a Z-Code.

The American Medical Association is threatened by Palmetto's requirement that test providers submit McKesson's Z-Codes, since the AMA owns the copyright to and receives royalties on the use of current procedural terminology 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).

Meanwhile, CMS sought out Palmetto's help because under the current practice, where labs stack CPT codes in order to bill Medicare for performed tests, the payor could not discern which tests it was reimbursing and if these tests met 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," Jeter said.

The MolDx Program, however, runs up against the AMA's ongoing effort to develop new CPT codes for molecular diagnostics. The AMA has so far issued more than 100 codes for molecular diagnostic tests, split into two categories: Tier 1 codes for commonly performed analyte-specific tests and Tier 2 resource-level codes describing less common tests (PGx Reporter 3/16/2011).

However, by implementing the MolDx Program, it seems CMS isn't entirely confident that the AMA's new coding structure will help move payors toward a value-based reimbursement system for molecular diagnostics. "I've been harping to the AMA" about the need for unique identifiers for molecular assays, Jeter said. "And I feel like I'm in the desert still harping … And the AMA doesn't get it."

According to Palmetto, the AMA's reaction against the MolDx Program is unwarranted since it isn't trying to replace CPT codes. While Palmetto will use the Z-Codes to establish a value-based reimbursement price for each molecular diagnostic based on the impact it has on healthcare costs and patient outcomes, test providers will continue to submit CPT codes for billing purposes.

"The AMA doesn't like that we're using the word 'code,'" Jeter said. "So we had our hands sort of tied."

In an effort to mitigate concerns from the AMA and the lab industry, as represented by the American Clinical Laboratory Association, Palmetto has made changes to the MolDx Program to make the transition less painful for test providers. For example, on Palmetto's website, the contractor notes that labs may 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.

"So, now, we have a duplicate system that doesn't create any stumbling blocks for anybody not to get an identifier, either a Z-Code or a PTI," Jeter said.

As a further concession, for labs that don't want to implement either the Z-Code or the PTI, Palmetto is allowing them to attach and fax a "MolDx Test Information Form" with each test claim to identify the billed service until Sept. 1. "If you want to do that, you can do it," Jeter said, warning "that is definitely going to slow down your reimbursement."

Under the MolDx Program, all new tests will need to undergo a tech assessment in order to receive Medicare coverage. Palmetto has developed an evaluation committee of academic and industry experts, who will use the Grading of Recommendations, Assessment, Development, and Evaluation System, or GRADE, to gauge the strength of evidence submitted by labs on their tests, and determine if the tests are improving patient outcomes and are cost effective compared to standard interventions.

ACLA has objected to this, expressing reservations about labs having to submit their proprietary data to tech assessment experts who are not Palmetto employees. However, Jeter attempted to mollify these fears at the conference by noting that evaluation committee members will sign confidentiality agreements and will only review publicly available evidentiary data on tests. Jeter and other Palmetto officials will review all proprietary data on tests and make the actual coverage decisions, factoring in the evaluation committee's determinations.

However, not all tests will need to undergo tech assessments. Certain tests will be grandfathered into the MolDx program, such as assays that have CPT codes under AMA's new molecular pathology coding system.

Palmetto will also publish only positive tech assessments, according to Jeter. "If there is insufficient evidence, I'm going to deal one-on-one with the company … and I'm going to get you to the point where you need to be to get coverage," she said.

Although Palmetto maintains that the MolDx program will provide more granularity around what CMS is paying for and help create a more sophisticated payment system for advanced diagnostics, labs have expressed concern that the program is really a mechanism by which CMS can limit coverage for the majority of tests currently on the market and deny payment for new diagnostics.

At the meeting, Jeter assured that CMS will continue to pay for molecular diagnostics currently billed under Medicare if the test is FDA cleared and has a CPT code. CMS will also continue to reimburse for tests that are FDA cleared but don't have CPT codes, or for LDTs with and without CPT codes, but payment for assays in these categories will be subject to further review by Palmetto.

"We're not going to drop payment and we're not going to change payment at this present time," Jeter said, warning that that in the future, coverage policies may change for some tests because with the unique identifiers Palmetto will be able to identify diagnostics that CMS should not be paying for .

Jeter used the example of KRAS testing once again to note that she has seen data suggesting that a dozen labs performing such assays use 12 different CPT code stacks to bill CMS, and the reimbursement varies from $172 to $860. "Why would anybody pay 12 different labs 12 different prices?" Jeter posited. "I know where this is going, because I have to feed this into CMS."

McKesson's Diagnostics Exchange, through which labs will register tests, is slated for launch by the end of the month. The requirements under MolDx were originally supposed to become mandatory for test providers starting in March. However, after laboratories complained that they couldn't update their computer systems in that time frame to accommodate the unique identifiers, that deadline is now pushed back to May.

Jeter suggested that by launching the MolDx Program in states where Palmetto has claims-processing jurisdiction, CMS has a starting point for potentially advancing similar programs in other locales. "I cannot say what CMS is going to do but it's not very difficult to think that … this could go national," Jeter said. She predicted that ultimately what could happen is different Medicare contractors may adopt similar local coverage policies based on Palmetto's program or other centers of excellence.

"CMS does understand that molecular diagnostics are the wave of the future and they have to be on top of it on the front end and not trying to do this 10 years from now," Jeter said.

Have topics you'd like to see covered in Pharmacogenomics Reporter? Contact the editor at tray [at] genomeweb [.] com.