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With MDx Usage and Costs on the Rise, UnitedHealthCare Urges Reimbursement Reform


By Turna Ray

Amid rising adoption and costs of molecular diagnostics to personalize treatment decisions, insurer UnitedHealthCare is calling for improvements in the medical claims coding system that will enable accurate test utilization tracking.

In a working paper released this week by its Center for Health Reform & Modernization, UnitedHealthcare also advocates payor-supported clinical utility studies to demonstrate that molecular tests are improving patient outcomes and reducing healthcare costs.

"Reimbursement approaches used today, which involve setting an initial rate and subsequent indexing for inflation, may not reflect appropriately the value to the delivery system of a new technology and its continued use," UHC states in the report. "They also may contribute to the rising costs of new and complex tests. New approaches are needed and the working paper discusses some of the options."

In the paper, the insurer reports that its health plan participants racked up nearly $500 million in genetic and molecular diagnostic testing costs in 2010, a 14 percent increase on a per-person basis since 2008. Overall, national spending on genetic tests and molecular diagnostics "may have reached around $5 billion" in 2010 and could reach as high as $25 billion by 2021, according to the report.

The report also includes the results of a survey of consumers and physicians to gauge their attitudes about genetic testing. A poll of more than 1,200 physicians showed that more than 75 percent of doctors identified the cost of tests and reimbursement issues as the most difficult barrier to incorporating genetic tests in their practice.

Given that the US healthcare system is spending more on molecular diagnostics that will likely get more complex with advancing knowledge about the human genome, UHC makes a number of recommendations that could help payors ensure that they are paying for tests that are robustly validated, improve patient outcomes, and ultimately reduce healthcare costs.

"A new coding system could be a foundation for better analytics, evidence development and coverage," UHC states. "Such a system would assign specific codes to individual genetic tests and genetic testing services."

UHC's recommendations come amid a number of ongoing efforts to update the molecular diagnostic coding system.

The American Medical Association has created a two-tier current procedural terminology coding system for single analyte molecular diagnostics that will likely move into use next year. The AMA has also begun issuing Category 1 codes for multi-analyte, algorithm-based assays, such as Vermillion's OVA1 ovarian cancer test (PGx Reporter 3/7/2012).

Simultaneous with the AMA's coding efforts, under a scheme called MolDx, Medicare contractor Palmetto now requires that each molecular diagnostic it reviews for reimbursement be submitted with a unique code, either a Z-Code or a Palmetto Test Indicator, with which it will track test utilization and inform payment rates for tests (PGx Reporter 2/29/2012).

In the report, UHC recommends that codes "provide information on the analyte being tested as well as the procedure," and enable payors to identify which labs and test manufacturers are performing the test and which companion diagnostics are being used to personalize drugs. Although the AMA has raised objections to Palmetto's use of Z-Codes, fearing that this may lead to industry confusion and cause the association to lose royalty income from the use of CPT codes, UHC acknowledges in the report that "codes could be created either through the current CPT coding system, or through a different third-party entity."

Another proposal in the report is for payors and the molecular diagnostic developer to work together to gather the clinical utility data necessary to garner coverage. "Efforts similar to the Medicare program’s coverage with evidence development approach could be explored to create structured pathways for provisional coverage of certain genetic and molecular tests while data on clinical utility are collected and refined," UHC states in the report.

CMS is in the process of revamping its CED program and an agency official has said that CED could enable it to more readily provide conditional coverage for medical interventions, which in turn could provide a path for more molecular diagnostics to gather the necessary clinical utility evidence needed for reimbursement (PGx Reporter 11/16/2011).

Additionally, the insurer points out in its report that healthcare stakeholders could build on Palmetto’s MolDx program in order to focus specifically on "finding better ways to determine appropriate payment for laboratory services, within the guidelines created by the Centers for Medicare & Medicaid Services."

Although officials associated with the MolDx program have hinted that the coding and payment-setting efforts underway through Palmetto could potentially be extrapolated to other Medicare contractors and private payors, A UHC spokesperson told PGx Reporter that the insurer has no plans at this time to incorporate Z-codes or to conduct CED studies with test developers.

Rising Usage, Higher Costs

UHC's reimbursement recommendations coincide with growing test utilization within its system and throughout the US.

The 14 percent increase in spending on molecular tests that UHC saw between 2008 and 2010 was 70 percent attributable to increased utilization of test services and 30 percent due to higher prices of the tests due to their greater intensity or complexity, UHC found.

Approximately 39 percent of UHC's diagnostic spending in 2010 was attributed to testing for infectious diseases, 16 percent occurred in the cancer setting, and 45 percent was for tests performed for inherited disorders.

Approximately 80 percent of the testing for UHC beneficiaries with individual or employer-sponsored coverage was provided by independent laboratories, "reflecting the complexity of tests of this nature," UHC notes in the report. Only 13 percent of tests were conducted in a physician's office, with the balance conducted in "institutional settings."

According to UHC, cancer-related genetic tests and molecular diagnostic procedures tend to be the most complicated and expensive compared to other types of tests. Cancer diagnostics "appear to have cost about seven times more than infectious disease test procedures, and almost three times the cost of other test procedures, reflecting their greater complexity," the report states.

Given the rapidly evolving nature of the molecular testing market and the growing costs associated with advanced diagnostic technologies, UHC advocates for more informed payor coverage decisions to curb rising healthcare costs and reduce inappropriate spending. This is where UHC's recommendation for improvements to the coding system and CED studies will help.

"It is worth noting that although spending on genetic testing and molecular diagnostics is relevant in its own right, the more important question is what broader effects the use of such tests may have on the quality and costs of healthcare — particularly since, according to one estimate, clinical laboratory tests influence about 70 percent of healthcare decisions," UHC states in the report.

"While history suggests medical advances have often contributed to higher overall spending by making more complex and costly tests and treatments available, they also have the potential to improve health outcomes and the appropriateness of care — for example, by fostering the more targeted use of therapies for those patients who will benefit most from them."

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