The medical reimbursement landscape in the United States today is too immature for many emerging molecular diagnostics products to gain traction in the marketplace, according to several people familiar with the industry.
Conventional wisdom has it that this archaic, lumbering system may also exert a financial strain on innovators and their reference lab customers because it may discourage payors from reimbursing physicians or patients who use them.
But is this coding system, known as current procedural terminology, or CPT, really to blame if payors fail to reimburse for new products that haven’t been coded?
Today, nearly all US-based payors use CPT codes to guide their reimbursement policies for procedures performed at doctors’ offices and certain outpatient clinics. [A separate book is used for hospital-based procedures.]
The CPT book, which includes roughly 7,000 codes, is updated annually and indirectly determines whether certain medical procedures are performed: If a code does not exist, the underlying procedure may not be covered, or will be covered inaccurately or incompletely. Certain new platforms face these reimbursement challenges.
It is estimated that roughly 20 molecular-biology codes and 40 codes for genes exist in the CPT. All of them are generically analytical — PCR, probe, and so on. This format was enacted deliberately years ago because it “allowed for greater flexibility” for the technology that had been evolving at the time, according to Mike Watson, director of the American College of Medical Genetics. Today, however, there are new technologies — primer-extension products, DNA arrays, and other multiplexing tools — that are not well covered by the CPT book.
A panel of American Medical Association editors meets quarterly to to consider updating the codes with new data supplied throughout the year by 100 or so advisors recruited from the major specialty societies. If approved, new codes move to the US Centers for Medicare and Medicaid Services, which assigns a rate reimbursement to them. New CPT books are published on the first day of every year.
According to Charles Root, president of consulting firm MCF Compliance, the “time required to obtain codes can be as long as 2 years, during which time reimbursement is often arbitrary or uncertain.” Root, who spoke at the first-annual Dx/Rx Summit in Reston, Va., this week, added that the process for reviewing and approving new codes is “relatively closed,” and “requires diligent follow-up to monitor progress [and] decisions.”
Individuals wishing to introduce new codes must follow some basic protocols. For instance, products must be approved by the FDA, they “must represent a significant change” from existing methodologies; “be supported in the medical literature;” and “be of potential broad clinical use,” said Root.
Critics of the CPT process gripe that its lumbering ways may inadvertently hurt molecular diagnostic-tool vendors. They argue that the panel of editors responsible for maintaining the CPT book are ignorant of new and emerging technologies, and have failed to adapt nomenclature to new tools and procedures quickly enough.
“The current CPT that provides the codes for clinical lab use has encountered problems due to the range of technologies emerging from the explosion in automated, gene-based research,” Joseph Ferrara, vice president of consulting services at Boston Healthcare, wrote in an article last year. “Not only does the relentless stream of new technologies make it difficult for the CPT editorial panel … to develop generic descriptions, but also the association faces the possibility that it may issue codes for technologies that may not be widely adopted or may shortly become obsolete.”
Root is more blunt: “The AMA system is not good for lab tests.”
One cause for this may be a conflict between the AMA editors and product manufacturers, Boston Healthcare’s Stewart told attendees of the Dx/Rx Summit.
For instance, “stakeholders” — diagnostic labs and platform shops — “want to be certain that new platform methodologies can be accommodated,” Stewart said. The AMA, however, “wants to simplify diagnostic coding and make it generalizable.”
Specifically, industry wants the CPT to create codes for individual steps “to provide flexibility as methodologies improve” and “create competitive advantage” through “exclusive coding,” while the AMA believes that “all steps necessary to reach a diagnostic conclusion should be encompassed under one code,” she said. She added that the AMA wants “general language” to “level the playing field.”
This puts the onus on technology companies, and not the reference labs, to learn about existing and upcoming codes, and to determine whether their products will offer labs a return on their investment. “Reference labs need good, robust ROI models,” Gregory Richard, vice president of managed care and insurer markets, said during the Dx/Rx Summit. “We don’t have them in-house, so we rely on the [test] manufacturer.”
Another issue that affects molecular diagnostics is that CPT codes for molecular diagnostic tests are based not on a particular gene or disease marker, but on the technology that a lab uses. This muddles reimbursement protocols for payors and may curtail demand and hamstring vendors’ ability to recoup R&D expenses, experts said.
“Coding and payment based only on analytical technology … may not account for important differences between tests, such as reagent expense that varies depending on the condition being tested,” Ferraro wrote in a recent commentary in IVD Technology, an industry publication. The CPT’s inability to account for these differences “directly affects a laboratory’s ability to obtain appropriate payment and offer certain tests profitably.”
In any event, the process appears to have stalled. According to Stewart, the AMA’s CPT panel has “halted discussion of requests for molecular diagnostic tests pending discussions about how to accommodate the plethora of new technologies.”
She added that a “molecular diagnostics task force” within the group is currently developing a “new system” for reporting molecular diagnostics tests.
The proposal under discussion includes mechanisms for reporting the disease tested, and will probably rely on “modifiers” with existing CPT codes to indicate the disease, Stewart said.
However, according to the AMA, the notion that the contents of the CPT book affect whether a product is reimbursed by payors is wrong. “There is no guarantee that just because your product is listed in the CPT book that it will be paid for,” a spokesman for the medical association told SNPtech Pharmacogenomics Reporter. “CPT is only a nomenclature — a system for identifying services in medical records … so it can be easily reported to a payor.
“CPT doesn't determine payment policies,” added the spokesman, who asked not to be named. “There are plenty of CPT codes that insurance companies will not pay for. [Molecular diagnostics companies’] beef is with insurance companies, not CPT.”
The spokesman also said that physicians wishing to prescribe a diagnostic or perform a service that is not listed as a CPT code may still be reimbursed. In this case, the physician “would only have to provide the proper documentation as defined by the third-party payor.”