NEW YORK (GenomeWeb) – The American Medical Association is currently working with stakeholders to figure out how coding requirements under a new Medicare law can be implemented within the CPT coding framework it has developed and owns the copyrights to.
However, these efforts raise questions about the viability of unique identifiers developed by McKesson, called Z-Codes, which according to the information technology firm are already being used by a portion of the lab industry, one Medicare contractor, and several private payors.
The diagnostics industry is poised to face drastic changes in the way tests are priced with the implementation of the "Protecting Access to Medicare Act of 2014," which will put in place a market-based payment system by 2017. In September, CMS issued a proposed rule outlining how it planned to implement the system required by law.
Lab industry stakeholders have submitted comments on the proposed rule, taking issue with how CMS has defined the lab testing market and a new category called advanced diagnostic laboratory tests. How CMS decides to put into practice PAMA's coding provisions, particularly whether it decides to use a more specific CPT code set or to adopt separate unique identifiers, may become a particularly hairy aspect of implementation discussions.
AMA CEO James Madara told GenomeWeb that the statutory coding requirements in PAMA allow the HHS Secretary the option to establish specific codes within the Healthcare Common Procedure Coding System (HCPCS) — which comprises Level I CPT codes maintained and published by the AMA and Level II codes for non-physician services — or unique identifiers for clinical lab tests. "The agency also has the discretion under PAMA to determine whether HCPCS meets the statutory requirements for unique identifiers," he said.
Dan Todd, former senior aide to Sen. Orrin Hatch (R-Utah) who played a key role in writing PAMA, agreed that the law provides the option of specific codes or unique identifiers. He pointed out, however, that while PAMA calls for an HCPCS code, it doesn't provide additional guidance.
As such, under PAMA, HHS Secretary Sylvia Burwell can implement unique identifiers if she determines that HCPCS codes don't provide the level of specificity required by law. However, AMA's Madara noted that in CMS's proposed rule, the agency "has exercised its discretion to offer a HCPCS coding solution with specific granularity."
AMA, meanwhile, seems to be gathering stakeholder input for advancing a solution based on CPT codes. AMA's CPT Editorial Panel recently authorized the establishment of a new section in the CPT code set, which would create a way for labs to request a code "to more specifically" identify their tests. In a notice posted on its website, the AMA further states that "the proposed rule provides that use of the existing HCPCS system — comprised of CMS HCPCS Level II codes and HCPCS Level I CPT codes — does not require additional unique identifiers."
The AMA plans to issue these more specific codes on a quarterly basis, which would become effective the subsequent quarter so payors could load them into their systems. Lab industry players have complained in the past about the protracted process for getting new CPT codes, but Madara claimed that the AMA's CPT Editorial Panel would be able to meet PAMA requirements. In addition to issuing new codes in a 90-day time frame, "CPT codes that are on Medicare's clinical laboratory fee schedule could be put into operation by CMS in 10 months," he said. "For example, CPT codes for laboratory testing services approved at the CPT Editorial Panel meeting in February could be in use by Medicare on Jan. 1, 2017."
The AMA's position, however, raises questions about the status of a collaboration it inked with McKesson a few years ago to bridge CPT codes to McKesson's unique identifiers known as Z-Codes, which to date have been issued for more than 4,500 tests. This "mapping project continues to be an ongoing joint effort between AMA and McKesson," Madara said. "We have not launched the product yet because of the clarity we need from PAMA," added Matthew Zubiller, general manager and VP of strategic growth portfolio at McKesson. "Our relationship or work hasn't stopped."
McKesson's Z-Codes and its Diagnostics Exchange module for registering and submitting evidence on tests are being used within Medicare contractor Palmetto GBA's MolDx, a program launched in 2011 that identifies tests, evaluates evidence to determine their analytical validity, clinical validity, and clinical utility, and determines coverage. Labs at first were apprehensive about how MolDx might impact their businesses, and whether proprietary data submitted through the Diagnostics Exchange module would be protected, acknowledged Zubiller. But McKesson built relationships with industry associations, inked confidentiality agreements with national and local laboratories, and developed the Diagnostics Exchange into a secure, cloud-based national catalogue containing thousands of tests with granular coding and detailed information.
There is already in use an approach that could accommodate and be adapted to what CMS is looking for.
Several hundred new tests are registered each month through MolDx. McKesson also recently signed on its third private payor that is using Diagnostics Exchange and Z-Codes and is planning to sign on others soon. Zubiller added that McKesson currently averages 15 to 30 working days between the time a lab submits information on a test and the firm is able to issue a Z-Code for that test — a faster turnaround than AMA's proposed quarterly timeline.
As CMS figures out how to implement PAMA and AMA contemplates how it can provide what CMS wants, Zubiller believes Z-Codes offer a solution that can satisfy both parties. The comment period for CMS's proposed rule closed last week and AMA is hosting a call on Dec. 15 to gather additional input on the coding aspects of PAMA from stakeholders.
"Ultimately, CMS is going to make the decision about what PAMA means and they can choose to implement it with the level of control and influence that makes the most sense and is the best for industry," Zubiller said. With regard to the coding aspects of PAMA though, Zubiller believes "there is already in use an approach that could accommodate and be adapted to what CMS is looking for."
Navigating historic tensions
Establishing reimbursement for diagnostic processes involves three critical and distinct steps — coding, coverage, and pricing. "There's this intermixed notion of these three pieces," Zubiller said. "McKesson has been a proponent for a very long time that the three should be distinct."
Historically, in order to get a code for a test, it had to have coverage or meet certain requirements, while pricing has been tied to codes that describe procedural components of a test. In McKesson's view, every test should have its own code so payors can track its use and evaluate its impact on patient care. This data, facilitated by granular or specific coding, would enable payors to make coverage decisions, which eventually and ideally would inform value-based pricing.
In writing PAMA, Congress recognized that Medicare did not accurately reflect appropriate coding, coverage, and payment for diagnostics, said Todd, who now runs his own consulting firm Todd Strategy in Washington, DC. "Congress determined that the market could better serve as a proxy for value than the existing system," he said. "The intent was [to advance] a more robust coding structure that could be achieved several ways. But the existing system made value determinations very difficult."
As such, coding is a critical piece of achieving PAMA's overarching goal of advancing market-based payment. Codes that aren't specific means the test won't be tracked appropriately, which would throw off test coverage and pricing, too. "Pricing a test according to the value it creates and the outcome it produces starts with collecting the right data," Zubiller said. "And the only way one can collect the data is if there is granular coding."
The criticism with the present coding system is that it doesn't allow payors to drill down deep and assess the clinical contexts in which a particular test from a specific lab is being performed. The AMA developed and published Current Procedural Terminology (CPT) codes in 1966, and in the 1980s, CMS adopted CPT codes within HCPCS and mandated their use for Medicare billing. With the growth of the molecular diagnostics industry, however, labs found that the procedures described by CPT codes didn't describe the technologies underlying their tests, and so they grouped codes together, creating code stacks, to try to capture the resources needed to perform such tests.
Congress determined that the market could better serve as a proxy for value than the existing system.
Payors didn't like code stacking, however, because it obfuscated which molecular diagnostics were being performed for a particular clinical scenario. Meanwhile molecular diagnostic technologies were also getting more complicated, and some labs using next-generation sequencing or proprietary algorithms to analyze multiple biomarkers also wanted unique identifiers to set their tests apart from the competition and demand premium pricing.
In response to payor demands, the AMA in 2011 issued new CPT codes for molecular diagnostics — a set describing the most commonly assessed analytes and a second set describing less frequently performed tests based on the resources needed to perform them. But industry stakeholders criticized these new codes, too, for being too focused on DNA markers, and not flexible enough to address the diversity of molecular tests (RNA-based assays and epigenetic diagnostics) that will likely become part of future medical practice. Importantly, some payors also indicated that these codes still didn't provide the specificity to track test usage to ensure that they are only paying for "medically necessary" tests.
This is where McKesson's Z-Codes came in. In late 2011, CMS charged Medicare contractor Palmetto with launching the MolDx program to track test usage and determine Medicare coverage based on the tests' analytical validity, clinical validity, and clinical utility. Under this program, labs were asked to submit information on tests using McKesson's Diagnostics Exchange module, and every test received a unique identifier, called a Z-Code, for usage tracking. The idea was that after evaluating the evidence submitted by a lab and tracking the test's use, Palmetto would be able determine appropriate coverage.
Zubiller said that McKesson's Diagnostics Exchange and Z-Codes have had the most impact on coverage by enabling payors to be flexible in their determinations and retrieving granular usage information when they want it. Although achieving value-based pricing will take more work, McKesson's tools could also facilitate this, in Zubiller's view.
"PAMA envisions a way to collect market data around pricing from the commercial plans around diagnostics tests," he said. "If you don't have that level of granularity associated with the coding it's going to make it almost impossible for you to effectively collect that data and submit it to CMS."
AMA has expressed strong objections in the past to the use of Z-Codes within MolDx. In a December 2011 letter to then Acting CMS Administrator Marilyn Tavenner, the physicians' group threatened to file a complaint alleging that MolDx was in violation of the Health Insurance Portability and Accountability Act (HIPPA), which mandates that all healthcare transactions use uniform code sets. The AMA's CPT codes are specifically named in federal regulations (45 CFR 162.1002(a)(5)) as the codes that CMS will use to process claims for clinical laboratory tests, medical diagnostic procedures, and various physicians' services.
In its letter, the AMA said that the MolDx program is causing massive confusion among health plans and labs as to when to stack CPT codes, when to use AMA's new Tier 1/2 codes, and when to use Z-Codes. Similarly, lab groups had concerns that MolDx was just a way for CMS to deny coverage and balked at divulging proprietary information through McKesson's Diagnostics Exchange.
"It has taken a long time to develop trust," Zubiller said, but he pointed to the more than 400 labs that have registered tests through the Diagnostics Exchange module as evidence that McKesson has been able to effectively address the industry's reservations about MolDx.
McKesson was making headway with the AMA, too. At first, in response to AMA pushback against Z-Codes, Palmetto allowed labs to apply for either Z-Code or a Palmetto Test Indicator (PTI), exclusively for use within MolDx. Over time, as labs have gotten more comfortable with Z-Codes, Palmetto stopped issuing PTIs.
Then, in a most unlikely alliance in 2013, AMA and McKesson announced they had entered into a licensing agreement under which CPT codes would be mapped to McKesson's Z-Codes. "CPT codes are meant to categorize, while Z-Codes are meant to specify," Zubiller reflected. Through this mapping exercise, the parties aimed to walk CPT codes to more specific Z-Codes, and bring some much-needed clarity to the diagnostic reimbursement landscape.
"We have been progressing with the Code Bridge product and then PAMA came about," Zubiller said, adding that AMA and McKesson are continuing to collaborate and figure out what the new law means for coding.
For some payors, the current CPT structure meets their requirements.
Best system for a growing industry
Whether CMS will decide to implement a CPT code-focused solution or unique identifiers, such as Z-Codes, depend on the level of granularity the agency determines it needs to achieve market-based pricing. While McKesson's perspective suggests payors increasingly desire the flexibility to dig deep into test usage details in certain cases, AMA doesn't see the same demand.
"Incidentally, greater specificity for molecular pathology codes is not a shared prerequisite among all payors," Madara said. "For some payors, the current CPT structure meets their requirements."
Currently Medicare uses the so-called gapfill and crosswalk methodologies to establish test pricing, and most private payors follow Medicare's lead. PAMA will flip the system, so that CMS will be paying labs according to a weighted median of rates from private payors.
PAMA will also create a new category of tests, called advanced diagnostic laboratory tests (ADLTs), defined as a single-source test that employs a unique algorithm to analyze multiple DNA, RNA, or protein markers; or a test cleared or approved by the FDA. For new ADLTs and new lab tests cleared or approved by the FDA, PAMA instructs CMS to adopt temporary HCPCS codes, until permanent codes are implemented.
For existing ADLTs and FDA approved/cleared lab tests, PAMA tells CMS to assign each test a unique HCPCS code by the start of 2016 and publicly report their payment rate. A lab or manufacturer can also request a unique identifier for such tests, and CMS has to "utilize a means to uniquely track such a test through a mechanism such as a HCPCS code or modifier," the law states.
As Zubiller sees it, PAMA leaves open the possibility for adopting Z-Codes under HCPCS or as unique identifiers. In working through an implementation process that meets CMS' requirements, the agency has the option to adopt Z-Codes, he said, adding that AMA also has the option to adopt Z-Codes as CPT codes to meet the provisions of the new law.
Ultimately, for Todd, the question is "what is the best system [that is] scalable for a growing industry?" He observed that labs introducing tests on the market would likely want to get a code as quickly as possible to facilitate pricing.
McKesson believes it's in a good position to satisfy both CMS and AMA. "We believe we have the infrastructure, the engagement from industry, and the technology to support the development of these codes at scale and adapted to CMS's requirements" Zubiller said.