Home 5 Lab Industry Advisor 5 Essential 5 Reimbursement Top Challenge for Labs in 2025

Reimbursement Top Challenge for Labs in 2025

by | Jan 23, 2025 | Essential, Inside the Lab Industry-lir, Lab Industry Advisor

ACLA president Susan Van Meter discusses some of the key issues labs faced in 2024, along with work to address these developments through 2025

Unsurprisingly, reimbursement-related issues were among the top challenges for labs in 2024 and will likely stay top of mind through 2025. Lab Industry Advisor recently connected with Susan Van Meter, president of the American Clinical Laboratory Association (ACLA), to discuss these and other developments from last year, how those trends may progress in 2025, and how ACLA intends to help lab leaders address these issues going forward.

Q: What were the biggest challenges for the lab industry in 2024?

PAMA

A: Reimbursement is always going to be top of that list because you can’t have innovation and ensure that you’re delivering to patients the latest technology they deserve without rational reimbursement. Top of the list in reimbursement for us is, once again, the continued implementation of PAMA [Protecting Access to Medicare Act]. We were able to get a one-year reprieve on pending PAMA cuts and data reporting—that’s a big win for us. There’s much more to do but dealing with that pending implementation of those PAMA reductions while working to come up with a rational and reasonable way to fundamentally reform PAMA implementation is going to continue to be essential in 2025. We are seeing increasing recognition on both sides of the aisle and both sides of the Capitol of the need to do something sustainable.

Prior authorization

Also in 2024, we saw a lot of challenges with prior authorization. Prior authorization for clinical laboratories is very particular. It’s quite different from how we think about the challenges facing our colleagues in the hospital field or physicians in the community, for example, because often the workflow with clinical labs means that prior authorization actually doesn’t happen prior, as the name would suggest, but after that order is already placed. We are getting hit by prior authorization from many payers across the public and private sector, and these are often very aggressive processes. They’re burdensome, and they can lead to delays in patient access to critical diagnostics. Prior authorization processes strain administrative resources, and we’ve seen, many times, that these prior authorization policies, even after we’ve delivered medically necessary testing, lead to denial of payment for clinical laboratories.

We appreciate the work that CMS [Centers for Medicare & Medicaid Services] did this year to put out a prior authorization regulation. We think that will make a difference. There’s great promise, for example, in some of the API [application programming interface] technology. The proof will be in what happens in the years ahead. There’s much more to be done to [address issues with] prior authorization and, generally, medical utilization management processes, [such as] requests for overly burdensome amounts of medical documentation. We’ve seen cases, for example, when labs are asked for a patient’s complete medical record as part of a prior authorization. That’s inappropriate and is not a rational way to have a reasonable policy when it comes to what is covered and paid. We’re hoping to see Congress pass prior authorization legislation this year. We’re going to be working very hard on that [in 2025] to get these lab-specific policies put in place that we’ve been advocating for.

More is needed, particularly for clinical laboratories. We need to make sure that it’s well understood how to think about the ordering process for clinical labs and when any of these utilization management processes come into play, what makes sense in terms of when a test is ordered, how the test is ordered? How do we reduce medical documentation? In cases where insurers won’t allow labs to help pursue that prior authorization on behalf of the patient, how do we make sure that can happen?

FDA’s LDTs rule

Another major challenge for the field has been contending with the FDA’s massive overreach in finalizing a regulation that will impose the medical device authority onto LDTs [laboratory-developed tests]. We believe the agency lacks the authority to do this, and it’s the wrong direction for patients and innovation. Laboratory-developed testing services are professional services. They’re not medical devices. The current FDA medical device authorities don’t work particularly well for diagnostics in general, and they are absolutely inappropriate for laboratory-developed testing services. We believe that this rule is illegal and if fully implemented, would stifle innovation and limit patient access to necessary testing.

It’s not that the ACLA is opposed to a role for the FDA. We certainly could see a role for the FDA, though not under current law. We’ve worked earnestly in collaboration with the FDA in the past on legislation. It must be Congress that develops legislation that gives the FDA a role within a new diagnostic-specific regulatory apparatus. We’re doing two things: One is working very hard to support our members who must prepare to implement this regulation. Implementation of Stage One begins in May, unless the rule otherwise is changed. Two, we did file a lawsuit against the rule. That was not a decision we took lightly whatsoever, but we saw no alternative given that under the LDT rule the FDA considers all laboratory-developed testing services to be illegal. That’s an untenable situation for clinical laboratories. So, we’re fighting that on the legal front. We’re working with members of Congress to try to pursue a more rational regulatory apparatus that Congress has set and, of course, we’re working in a very practical way with our members as they prepare for implementation. There will be some kind of resolution to the litigation, and we’ve got a new administration that’s coming in.

Q: What major trends shaped the landscape of 2024 and how do you expect those to progress in 2025?

Coding-related changes

A: There have been changes in reimbursement, particularly related to coding. We have a lot of very robust engagement with the AMA [American Medical Association]. We do quite a bit of work in thinking about how for all these new technologies that laboratories are developing, what is the right type of code, the right type of code descriptor? There have been some successes this year in terms of getting some coding around neuro biomarker tests, for example, which are critically important to patients. We’ve also done a lot of work related to pricing policies under Medicare. This work is going to continue in 2025 as new tests are developed, focusing on how we make sure that rate setting under Medicare is appropriate and durable.

Also, with coverage policies, whether they’re local coverage decisions or national coverage decisions, we’re increasing our engagement with Medicare Administrative Contractors (MACs) and CMS to help improve processes around coverage. Earlier this month, we were pleased that MACs Novitas and First Coast Service Options (FCSO) made significant changes recommended by ACLA and our patient organization partners, to a coverage policy that was poised to disrupt broad access to genetic testing for Medicare beneficiaries with cancer. The finalized “Genetic Testing for Oncology: Specific Tests” Local Coverage Determinations (LCDs), incorporate ACLA’s core recommendation to eliminate a provision that would have automatically denied coverage for any genetic test not included in at least one of three identified third-party knowledge bases.

Artificial intelligence (AI) and the clinical lab

There’s also been increasing interest on the part of policymakers in thinking about AI in clinical laboratories. We’ve been able to establish a new Innovation Task Force at ACLA, led by some of our chief medical officers at member laboratories, who have been working to educate lawmakers in the House and Senate on how clinical laboratories can appropriately and safely leverage AI to not only improve business practices, but also to continue to deliver cutting-edge diagnostics for patients.

Improving pandemic preparedness

Another important trend relates to preparedness. This past year we saw H5N1, appropriately, get more and more attention. Our members are engaging daily with the CDC [Centers for Disease Control and Prevention] and other agencies within HHS [U.S. Department of Health and Human Services] and at the White House. Recently, the CDC put in place for the first time some contracts with ACLA members for test development, test capacity, and bidirectional data exchange. Those are general policies, but some of those contracts, in particular with H5N1, are to make sure we are never in a situation where there’s only one test for a new pathogen of concern, that there are multiple tests, and that we’ve got ACLA members that are able to provide testing at scale if necessary. We saw an uptick in mpox again this year. We did a lot of work in 2022 on this. In the DRC [Democratic Republic of the Congo], there’s a concern with a new clade of mpox. So, we’re going to see that work continue and that focus on public-private partnership we saw with those CDC contracts. We think that’s the right direction.

Increasing public awareness of the lab’s importance

One of the things we really try to bring to light for policymakers are trends within the clinical laboratory field. We’ve got a campaign called The Power of Knowing, where every month we bring to policymakers, whether they’re at HHS or on Capitol Hill, actual concrete examples of types of technology and how it makes a difference for patients. Policymakers got more of an understanding of diagnostics during the pandemic. Our job is to ensure they see the critical role diagnostics play in patients’ lives every day—whether it’s enabling early detection, supporting routine care, managing chronic conditions, or advancing personalized medicine. We want to make sure that this tremendous industry that’s doing so much for patients is better understood by policymakers. For us, we see that as a positive trend that policymakers are recognizing the importance of laboratories more and more, and we want to make sure that we continue that into 2025.

Q: With a new administration coming in, what work have you been doing with the transition team?

A: On the LDT front, we’ll be engaging with the new administration to not enforce compliance with the new rule when they take office. We also have a new chair of the Senate HELP Committee—Dr. Bill Cassidy, Senator from Louisiana, and Congressman Brett Guthrie is the new chair of the House Committee on Energy and Commerce. We’ve been engaging with Dr. Cassidy’s team and many members of the Energy and Commerce Committee for initial discussions about what they might want to pursue legislatively on diagnostics. I think they’re going to bring a fresh perspective to the discussion, and we are eager to work with them in 2025 on potential legislation.

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