At Lab Institute, Thorny Reimbursement Dilemmas Weigh Heavily On Heads

If there is an unwritten code about industry gatherings, it is that civility rules the day. But a verbal scrap at G2 Intelligence's Laboratory Institute in Washington earlier this month highlighted anxiety the sector is experiencing over the seismic shifts in how they will be paid for their work in the coming years, as the painfully written CPT codes dictating how they are reimbursed are upended by federal regulators and fiscal intermediaries.

The sharp exchange between Julie Scott Allen, government relations director with the Washington law/lobbying firm of Drinker Biddle & Reath LLP, and Alan Mertz, president of the American Clinical Laboratory Association (ACLA), occurred during a session discussing how the Clinical Laboratory Fee Schedule was being overhauled, and was related to the shaping of the lab reporting requirements codified in last year's Protecting Access to Medicare Act (PAMA).

PAMA has prompted deep concern throughout the entire sector. Under that law, labs will be required to report their reimbursement levels from private payers to the Centers for Medicare & Medicaid Services (CMS), ostensibly to give the Medicare program a floor at which new rates could be set. Hospital laboratories, which tend to receive higher payment rates, would mostly be excluded from this process but would be subjected to the new rates nonetheless. Mertz noted that there has been little success in reaching out to the hospital labs through the American Hospital Association—most are more concerned about the reporting rather than the financial burden.

Not only did the conference explore the concerns regarding PAMA, but dramatic cuts being faced by the toxicology labs and the proposed crosswalking for several molecular codes were also topics that had been extensively—and sometimes emotionally— explored. Mertz had said that the reporting requirement under PAMA was negotiated in lieu of immediate deep technical component cuts and acrossthe- board cuts proposed by Congress. But Allen, who sat on a panel with Mertz and Vince Stine, director of government affairs for the American Association for Clinical Chemistry (AACC), didn't buy it.

"Alan, you led them down that path," she retorted, claiming that the reporting rule was contrary to the wishes of the National Independent Laboratory Association. Allen also asserted that the delays negotiated under PAMA will not stop CMS from making its planned cuts anyway.

"CMS' objective is absolutely to drive prices down," Allen said, noting that despite performing only 12 percent of Medicare's volume, industry giants LabCorp and Quest Diagnostics account for half of the volume among private payers, often at rates smaller laboratories cannot hope to match. Allen indicated the rates they offered to providers in lieu of higher volumes are likely to serve as the predominant template for the anticipated changes under PAMA.

Mertz—and by extension, much of the general laboratory arena—was also taken to task from the audience by Susan Hertzberg, chief executive officer of Boston Heart Diagnostics, one of the fastest growing specialty laboratories.

Hertzberg said that the call from the ACLA and laboratories—including Quest Chief Executive Officer Steve Rusckowski during a keynote address— to collaborate on raising rates was coming too late. "What led us here is you used Medicare (rates) to subsidize low-priced contracts for years," she told Mertz, criticizing the two nationals for moving to narrow lab networks and trading price for volume among private sectors over the past decade. As a result, they won't face extinction while other labs will get "pushed to the brink"—a statement that drew brief applause from the attendees. Mertz reiterated that the lab sector's choices in shaping PAMA were limited, and paraphrasing Benjamin Franklin, said it needed to hang together by being more vocal about proposed cuts, or hang separately by squabbling over the issue.

Unhappiness Elsewhere
But the anxiety radiating through that session was repeated elsewhere. In a session about the Food and Drug Administration's attempt to better regulate laboratory- developed tests, Rina Wolf, vice president of commercialization strategies, consulting and industry affairs at XIFIN, referred to the pending reimbursement cuts for toxicology services as "demonic."

Interviewed after her presentation, Wolf noted that the payment structure CMS had proposed on Sept. 25 was far below what had been discussed by the agency in the past, and even below that of proposals floated at the recent PAMA advisory meeting.

CMS proposed three tiered codes for presumptive testing, based on increments of the $19.79 currently paid for code G0434, and would range from $9.89 to $59.37. There would also be four codes for definitive testing, crosswalked to code 82542, which currently pays $24.58. The reimbursement would range from $61.46 to $167.24, depending on the complexity of the test being performed. According to Wolf, some labs could see a drop in revenue of more than 60 percent if these changes are implemented. And while she did acknowledge that there has been some overtesting in the toxicology realm, the vast majority of labs are good corporate citizens that will pay for the misdeeds of a few rogues.

Fears were also high regarding the proposed crosswalking of various molecular codes, specifically for advanced molecular tests. According to Mertz, CMS disregarded recommendations to gapfill the new codes, and instead crosswalked them to codes many in the industry do not consider to be technical equals. As a result, Medicare payments for these tests are expected to be cut between 30 percent and 90 percent starting in January.

Wolf noted that Genomic Health's Oncotype DX test for the BRCA gene would be cut from $3,416 to $2,900—although that is likely to be reversed due to the omission of some data from fiscal intermediary Noridian. Meanwhile, Agendia's Mammaprint pricing was unchanged. She suggested that CMS may have not had the time to complete the gapfill process as recommended by CMS Advisory Panel on Clinical Diagnostic Laboratory Tests and instead chose crosswalking for the sake of expediency.

Diana Voorhees, a coding expert based in Salt Lake City, noted that some of the crosswalking appeared to be appropriate, but that in other instances, prices were cut well below what they had been before.

Some big commercial tests, such as Veracyte's Afirma GEC, would be cut from $3,200 to about $2,152, which raised strong objections from the company.

"We believe the agency went against precedent by setting rates using a 'crosswalk' pricing approach. As a result, prices for an entire group of precision medicine diagnostic tests ... are based on other, lower-priced tests that differ significantly—both in technical performance and intended use," said Veracyte Chief Executive Officer Bonnie Anderson in a statement.

CareDx's AlloMap assay would be cut even further, the result of being crosswalked to the gene sequence analysis of hereditary non-polyposis colorectal cancer. The result would be a 77 percent reimbursement reduction, from $2,821 to $644.62.

"CMS is proposing drastic changes in reimbursement for a number of established molecular diagnostic tests," CareDx said in a statement.

The AACC's Stine, in attempting to calm the audience during the sometimes tense exchanges in the PAMA-focused panel discussion, tried to unify the sector under the reality every lab faces. "We all agree up here we don't like what's out there, we want to make changes. So let's focus on that part."

Takeaway: One of the most intense themes of Lab Institute was the high anxiety laboratory leaders are feeling over impending reimbursement cuts, and whether they will be able to unify over the issue or become fragmented and fractious.