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Lab Industry, Pathologists Still at Odds Over Fee Schedule for New Molecular Pathology CPT Codes

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At a meeting hosted by the Centers for Medicare & Medicaid Services this week to determine payment levels for genetic tests placed in the clinical laboratory fee schedule, lab industry professionals remained at loggerheads with pathologists who maintained that the physician fee schedule is the appropriate home for such diagnostics.

CMS organized the meeting in Baltimore to garner public comments on payment rates for tests that have received new or revised current procedural terminology codes and will be reimbursed under the CLFS. Since the American Medical Association has assigned new Tier 1 and Tier 2 CPT codes for approximately 100 genetic tests, the public comments at the meeting this week focused on the procedures by which CMS should determine reimbursement levels for such tests.

"We are following our process to determine the appropriate basis and payment amount for new test codes under the CLFS for 2013. Some of these tests are molecular pathology tests," CMS noted in a May 29 Federal Register notice announcing this week's meeting.

Although the meeting focused specifically on tests that might fall under the CLFS, CMS has yet to formally determine whether all genetic tests will be placed in this fee schedule. Medicare generally pays for laboratory diagnostics through CLFS and services that require physicians' work are calculated and reimbursed through the PFS. Lab industry players have been concerned that the payment for 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.

"Stakeholders in the molecular pathology community continue to debate whether Medicare should pay for molecular pathology tests under the CLFS or the PFS," CMS stated in the Federal Register notice for the meeting. "We believe that we would benefit from additional public comments on whether these tests are clinical diagnostic laboratory tests or whether they are services that should be paid under the PFS."

At the public meeting, stakeholders from laboratory interest groups such as the American Clinical Laboratory Association continued to urge CMS to place lab tests with Tier 1 and 2 CPT codes under CLFS. In contrast, speakers representing the pathology and physicians' communities refused to even acknowledge the possibility that molecular pathology tests could fall under the CLFS, asserting their belief that the appropriate place for Tier 1 and 2 codes is in the PFS.

"With regard to Tier 1 and Tier 2 molecular pathology codes … the College of American Pathologists will not provide crosswalk recommendations for [these tests] here today," Jonathan Myles, a pathologist with the Cleveland Clinic representing the CAP said at the meeting. "In contrast to the molecular pathology codes, codes on the CLFS do not require that data generated by an instrument be interpreted by a professional prior [to being] clinically useful data to the patients' physician.

"Professionals are currently paid for these services and CAP recommends that Tier 1 and Tier 2 molecular pathology codes be placed on the PFS," Myles stated.

Although CAP and the AMA previously presented CMS with the rates at which genetic tests should be reimbursed under the PFS (PGx Reporter 1/11/2012), the agency has chosen for the time being to treat all genetic tests as if they will be reimbursed under CLFS, and decide whether to place certain tests under the PFS after considering stakeholder views.

"We intend to post our proposed determinations with respect to the appropriate basis for establishing a payment amount under the CLFS for each of these new test codes by September 28, 2012," CMS wrote in the federal register notice. "If we later decide, based on comments received in response to the proposals set forth in the CY 2013 PFS proposed rule, that any of these codes are not clinical diagnostic laboratory test codes, we will post our final payment determinations only for the new test codes that we determine are clinical diagnostic laboratory test codes that will be paid under the CLFS."

CMS will release its final payment determinations for both PFS and CLFS in November. Meanwhile, previous comments from CMS suggest that the agency is leaning toward placing most genetic tests in a single fee schedule, noting "the homogeneity of the laboratory methodologies behind the laboratory test codes."

Bruce Quinn, senior health policy adviser at Foley Hoag, recently noted in a white paper detailing the ongoing controversy that CMS wants to place all such diagnostics in a single fee schedule in an effort to avoid unintentionally giving incentives to healthcare providers to choose certain lab tests over others depending on the specific fee schedule they fall under.

In Quinn's view, CMS is unlikely to place genetic tests in PFS, because in order to do so, the agency would have to revise current regulations and redefine the types of activities that are reimbursed under the fee schedule.

Under current regulations, CMS pays for pathology services administered by a physician if the intervention is a surgical pathology service; is a cytopathology, hematology, or blood banking service requiring the involvement of a physician; is a clinical consultation service; or is a clinical interpretive service that meets certain definitions and conditions.

Quinn believes that genetic tests don't meet any of these criteria. Moreover, he points out that relative value units, the formula by which physicians' fees are calculated, "seem a poor match for the actual economics of laboratory testing." Most importantly, "there is no valuation whatever for genomics and informatics – these would either be uncompensated at all, or would be considered part of the 'overhead cost' of pathology," he wrote.

Crosswalk vs. Gapfill

If CMS decides that the majority of Tier 1 and 2 genetic tests will fall in to the CLFS category, the agency will determine payment levels for these diagnostics via two methods: the crosswalk and the gapfill procedures.

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.

For example, at the meeting, most stakeholders agreed that J&J subsidiary Veridex's FDA-cleared CellSearch assay – a circulating tumor cell blood test that assesses the progression of metastatic breast, colorectal, and prostate cancers – should be crosswalked to tumor cell chromosomal analysis. Similarly, most presenters felt that BG Medicine's Galectin-3 blood test for gauging prognosis of heart failure patients should be crosswalked to vitamin D or natriuretic peptide test.

Labs marketing molecular diagnostics that for many years have been reimbursed via stacked CPT codes, but now have received Tier 1 or Tier 2 molecular pathology codes from the AMA, urged CMS to use the crosswalk procedure to determine payment levels for their tests and maintain existing payment levels.

Myriad Genetics' Kimberly Linthicum urged CMS to crosswalk old CPT codes to new analyte-specific Tier 1 and 2 codes in order to establish payment for its BRACAnalysis test for assessing women's risk of hereditary breast and ovarian cancer. In recommending this, she reasoned that the procedures involved in the test are "very analogous" to the procedures used at other laboratories. "We basically follow the steps of isolation, sequencing, analysis, and interpretation and all of this is overseen by a certified, PhD laboratory director, and none of it involves a physician," Linthicum said.

"It's important to note that these are new codes and not new tests," Linthicum added. "The creation of the new molecular pathology replacement codes [was] in fact not in response to any scientific changes … to the tests themselves, but these were intended to streamline the administrative reimbursement process and in the future allow gene-specific information to be easily conveyed."

The gapfill process, meanwhile, offers a path for determining payment for molecular diagnostics when no comparable technology exists upon which to peg reimbursement rates. 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; payments, resources used, and charges for other relevant tests. In the second year, the test code under the gapfill process is paid at the "national limitation," which is established by calculating the median reimbursement rate paid by contractors.

Stakeholders, whether they are pathologists or lab professionals, tended to agree that CMS should, for the most part, determine reimbursement levels for so called multi-analyte algorithm-based assays, or MAAAs, using the gapfilling process. These tests use complex algorithms to analyze multiple markers associated with disease, and are usually developed and marketed by a single laboratory. For example, Vermillion's protein-based MAAA OVA1, which assesses whether a woman's ovarian mass is malignant are requires surgery, has already been reimbursed through the gapfilling process by Medicare contractor Highmark.

"In terms of the MAAA analysis … there needs to be a strategy to recognize the developmental costs associated with those assays when there is a proprietary investment and it's the very first test being done," said Matthew Schulze speaking for the American Society for Clinical Pathology, which represents laboratory pathologists and professionals.

Because MAAAs are only available from a single source lab, stakeholders developing new molecular pathology codes for genetic tests have had difficulties establishing codes for them, with some fearing that establishing a unique code for MAAAs would allow test developers to charge especially high prices for such tests.

A speaker representing ACLA cautioned CMS to tread carefully when it came to establishing payment for MAAAs. "Failure to account for [MAAAs] would hinder the development of these tests in the future and would kill the innovation in this rapidly evolving area," the representative from ACLA said. "The most challenging aspect of the gapfilling process will likely be establishing a value for the algorithm component [of MAAAs] in addition to the underlying test."

Eric Zimmerman, a partner at the law firm McDermott Will & Emery, who was speaking for Coalition for 21st Century Medicine, a group representing the interests of diagnostic firms and clinical labs, encouraged CMS officials to provide more detail on the Tier 1 and Tier 2 molecular pathology codes and be more flexible in the methods it uses to establish payment for genetic tests.

Noting that most MAAAs will likely require CMS to use the gapfilling process for payment setting, he noted that in certain circumstances the crosswalk method may also be applicable for such tests. Zimmerman generally advised CMS to crosswalk analyte-specific tests that were previously reimbursed with CPT code stacking and to gapfill where such code stacks are not available.

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