PAMA Reimbursement: CMS Tells Labs How to Secure ADLT Status for New Tests

Although the 2018 market-based Clinical Laboratory Fee Schedule (CLFS) is officially in effect, implementation of the new PAMA Part B payment rules for lab tests remains a work in progress. On March 23, CMS filled in some of the missing details by issuing new guidance for labs seeking ADLT status for newly developed tests.

What Are ADLTs
ADLTs, or Advanced Diagnostic Laboratory Tests, are a new classification of tests created by PAMA. To qualify as an ADLT, a new test must:

  • Be covered under Medicare Part B;
  • Be offered, furnished and sold only by the single lab that develops the test (or a successor owner); and
  • Meet either of the following:
    • Criterion A: The test is an analysis of multiple biomarkers of DNA, RNA or protein combined with a unique algorithm to yield a single patient-specific result predicting if a patient will develop a condition(s), how the patient will respond to a therapy(ies) or providing new clinical diagnostic information that cannot be obtained from another test(s); or
    • Criterion B: The test receives FDA clearance or approval.

What’s At Stake
Securing ADLT status for a new test is a big deal because it means the test is subject to separate pricing rules. Specifically, prices of new ADLTs are the actual list charge for the test over the first three quarters that the test is available on the market. Labs are required to report the prices of their ADLTs during that period. When the initial period ends, CMS will use this pricing data to determine the test’s weighted median rate. If the list charge turns out to be more than 130% of the median, CMS can make the lab repay the difference.

By contrast, pricing of new tests that are not ADLTs is based on current CMS cross-walking or gap-filling methods:

  • Cross-walking to an existing HCPCS code is used if CMS determines that the new test is comparable to an existing test, multiple existing test codes or a portion of an existing test code;
  • Gap-filling is used for tests that have no existing HCPCS analog and is based not on a HCPCS code but charges for the test, routine discounts, resources required to perform the test, payment amount set by other payors, input from the clinical lab payment advisory committee and other factors.

What the Guidance Says
Labs must apply to CMS to secure ADLT status for their tests. The significance of the new guidance is that it explains the application process in specific detail.

Information Required to Apply for ADLT Status
First, the guidance specifies the information the lab must furnish to show that the test meets each element of the ADLT definition explained above:

Information Labs Must Submit to CMS to Get ADLT Approval
Element of ADLT Definition Required Documentation to Prove
Test is covered by Medicare Part B Evidence of coverage includes (but isn’t limited to)

  • Payment for test by a Medicare Administrative Contractor (MAC) based on a reasonable and necessary determination, e.g., MAC remittance notice for test
  • Molecular Diagnostic Services program coverage determination for test
  • Local coverage determination (LCD) for test
  • National coverage determination (NCD) for test
Test is furnished, sold and offered by single lab that develops (or successor) Information that may be required includes:

  • Name & address of all lab components furnishing test
  • Name, address & role of entity(ies) that owns lab which may offer, sell or design test
  • Name, address & role of entity(ies) that lab owns which may offer, sell or design test
  •  Indication of whether applying lab is a successor owner
  • All of single lab’s Tax Identification Number(s), NPI(s) and CMS Certification Number(s)
Pricing and payment information Current coding payment info for test which may include (for all payors to which test is billed):

  • Any existing HCPCS code or identifier used to bill test
  • Descriptor used to bill test
  • MAC’s local payment amount for test and date of payment determination
Pricing information about new ADLTs to be paid at actual list charge over initial period If test hasn’t been paid under CLFS before Jan. 1, 2018:

  • First date on which test is obtainable by patient or marketed to public
  • All amounts charged covered by private insurance or listed in marketing on such first date
  •  Actual list charge for test based on publicly available rate
  • If available, publicly available source(s) that report actual list charge & all other amounts charged on such first date
Test meets Criterion A (described above)
  • Identification of DNA, RNA or protein biomarkers analyzed by test
  • Description of test’s unique algorithm
  • Summary showing that analysis of biomarkers combined with unique algorithm yields result predicting patient condition, response to therapy and delivers new info not obtainable from existing tests on market
  • List of potential comparative tests
  • Comparison between test & other similar tests
Test meets Criterion B, i.e., has received FDA clearance or approval Documentation must include:

  • FDA premarket approval or notification number
  • Date of FDA clearance or approval
  • Name and branch of FDA reviewer

The lab must also agree to notify CMS of any changes to the information in the application it submits within 30 days of the change.

Additional Information Required If Lab Is Also Applying for Unique HCPCS Code
CMS will make ADLT status determinations (and, if necessary, accompanying HCPCS code assignments) on a quarterly basis based on the following calendar:

Quarterly ADLT Application Filing Window
  Quarter 1 Quarter 2 Quarter 3 Quarter 4
Dates on which CMS must Receive ADLT Application Jan. 1 to Jan. 31 April 1 to April 30 July 1 to July 31 Oct. 1 to Oct. 31

CMS’ review of ADLT applications will result in one of three possible outcomes:

  • Approval of the test for ADLT status (which may include assignment of a unique level II HCPCS code;
  • Denial of ADLT status for test via email notification to the lab contact person; or
  • Request for lab to supply additional information.

Takeaway: Along with the new guidance, CMS published the actual form that labs are supposed to use when applying for ADLT status. The good news is that breezing through this overview and carefully following the instructions set out in the application should spare you the agony of having to read all 30 pages of the guidance.


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