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Final CMS 2016 Lab Fee Schedule Maintains Reimbursement Rates for Several Multi-Analyte Tests

NEW YORK (GenomeWeb) – The Centers for Medicare and Medicaid Services (CMS) yesterday issued its final Clinical Laboratory Fee Schedule (CLFS) for 2016, which includes a shift to price several multi-analyte algorithm-based assays (MAAAs) using the gapfill process rather than the crosswalk process initially proposed, which would have significantly reduced the reimbursement rates for these tests.

The 2016 CFLS has been a subject of much debate since September, when CMS released its initial draft in which several MAAAs that were priced using the crosswalk method at a much lower rate than they had previously been paid.

According to analysts, preliminary crosswalking would also have resulted in significant cuts for a number of different MAAAs ranging from an 80 percent reduction for Genomic Health's Oncotype DX colon cancer test to about a 33 percent reduction for Veracyte's Afirma.

For example, in the 2016 initial pricing, CMS crosswalked CareDx's AlloMap, an MAAA to identify heart transplant recipients at low risk for rejection, to an existing code describing a genetic test for hereditary non-polyposis colorectal cancer. Reimbursement for the test would have been reduced by 77 percent from the current rate of $2,821 to $645, CareDx estimated.

In response, CareDx assembled a team of legal and industry experts to lobby CMS that its test was worth more. Crosswalking in the initial CLFS also would have resulted in a 63 percent cut, from $575 to $211, for another MAAA: the Vectra DA rheumatoid arthritis test marketed by Myriad Genetics subsidiary Crescendo Bioscience.

Overall, under the new final CFLS, simple genetic codes have generally been crosswalked to existing genes, while complex genomic procedures and newer MAAA tests have been sent to the gapfill process.

Genomic Health's Oncotype DX, CareDX's Allomap, Myriad's Vectra DA, and Veracyte's Affirma tests are now all to be gapfilled rather than crosswalked. William Quirk, a senior research analyst at the investment firm Piper Jaffray, wrote in a note to investors that this should result in unchanged pricing for each of these four tests in 2016 rather than the significant reductions implied by the earlier preliminary CLFS determinations.

Tim Evans a senior analyst with Wells Fargo estimated in a note to investors that the final schedule is a net positive for both Genomic Health and Myriad Genetics, with gapfilling for the Oncotype DX colon and Vectra DA tests expected to maintain current reimbursement rates. However, the new CFLS has left unchanged its initial recommendation to crosswalk Myriad's BRCAnanlysis test resulting in a price of about 90 percent of what it was under prior codes.

Isaac Ro, senior research analyst with the Goldman Sachs Group, also said in a note that while the CFLS change is a positive one for Vectra DA, some uncertainty remains for the test after the end of 2016, when Medicare has proposed to implement the "Protecting Access to Medicare Act of 2014" by establishing a market-based payment system for diagnostics.

Under PAMA "applicable laboratories" would report rates from private payors to CMS for each clinical diagnostic lab test and the volumes for each test over a specified period of time. Based on this information, CMS will calculate a weighted median payment amount for each test.