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September 19, 2014

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Reimbursement Issues Facing Molecular Pathology Services in Calendar Year 2013 and Beyond

On November 1, 2012, the Centers for Medicare & Medicaid Services (CMS) published its Revisions to Payment Policies Under the Physician Fee Schedule, DME Face-to-Face Encounters, Elimination of the Requirement for Termination of Non-Random Prepayment Complex Medical Review and Other Revisions to Part B for CY 2013 (the MPFS Final Rule).  Subsequently, on November 6, 2012, CMS issued its New and Reconsidered Clinical Laboratory Fee Schedule (CLFS) Test Codes and Final Payment Determinations.  Both publications contain important decisions for, and clarifications to, payment and coding for molecular pathology services that should be reviewed closely by laboratories, personalized medicine organizations and other industry stakeholders.

Molecular Pathology Codes

In the MPFS Proposed Rule issued in July 2012, CMS articulated its concern with improving the accuracy of coding and payment for molecular pathology services.  Currently, laboratories bill for molecular pathology services using unique combinations of CPT “stacking” codes that describe each step of the procedure required to perform the test.  Because of concerns that payers could not determine the specific tests performed when billed under the stacking codes, the American Medical Association’s Current Procedural Terminology (CPT®) Editorial Panel adopted an entire new subsection of the Pathology Section of CPT to describe molecular pathology procedures.  With the introduction of these new codes, the stacking codes will expire effective January 1, 2013, and laboratories will be required to report molecular pathology tests using the new codes beginning next year.

For purposes of implementation of the new codes, CMS requested public comments as to whether the new CPT codes appropriately report clinical diagnostic laboratory tests (and thus should be reimbursed under the CLFS) or are better classified as physicians’ services (leading to reimbursement under the MPFS). 

In the MPFS Final Rule CMS concluded that molecular pathology tests should be paid under the CLFS.  CMS stated its position that not all molecular diagnostic tests require interpretation by a physician, and explained that these tests oftentimes can be reviewed by other specialists (e.g., geneticists).  For those tests that require physician interpretation, CMS created a new G code (G0452) for physician interpretation and report, with reimbursement for this new code based on claims data from the soon-to-be-expired CPT stacking code for physician interpretation and report (total RVUs set at 0.55).

Insofar as the molecular pathology procedures will continue to be reimbursed under the CLFS, the publication of the Final Payment Determination under the CLFS is particularly important because it finalizes the process for rate-setting for the new codes.  Consistent with its Preliminary Payment Determination, CMS determined that the rates for each of the molecular pathology codes will be set using the gap-fill methodology.  In comparison to cross-walking—which would have assigned payment rates by reference to the rate established for comparable procedure(s)—the gap-fill methodology requires the Medicare Administrative Contractors (MACs) to set payment rates considering a number of factors, such as what laboratories charge (including discounts), resources, what other payors pay for the same test and what the contractor pays for similar tests (see 42 C.F.R. § 414.508).  As such, insofar as the actual 2013 payment rates for molecular pathology tests have not yet been determined, it is important for laboratory providers to communicate with their local MAC to help determine appropriate pricing.

Multianalyte Assays with Algorithmic Analyses

The CLFS preliminary and final payment determinations also contain instructions for coding of certain tests known as Multianalyte Assays with Algorithmic Analyses (MAAAs).  MAAAs are defined by the American Medical Association as, “procedures that utilize multiple results derived from assays of various types, including molecular pathology assays, fluorescent in situ hybridization assays and non-nucleic acid based assays (eg, proteins, polypeptides, lipids, carbohydrates).  Algorithmic analysis, using results from these assays plus other patient information (if used), is then performed and reported typically as a numeric score(s) or as a probability.”  Typically, MAAAs are unique to a single advanced diagnostics laboratory.

In its Preliminary Payment Determination CMS stated that it would not separately price the MAAA codes because, “Medicare does not recognize a calculated or algorithmically derived rate or result as a clinical laboratory test since the … rate or result alone does not indicate the presence or absence of a substance or organism in the body.”  This language could have potentially reduced payment or even denied coverage for many well-established diagnostic tests under the Medicare Program.  As a result, numerous stakeholders including the American Clinical Laboratory Association, the Personalized Medicine Coalition, the Coalition for 21st Century Medicine and the Advanced Medical Technology Association provided comments to CMS opposing the preliminary determination not to recognize the MAAA codes.

Responding to the input from these stakeholders, in the Final Payment Determination CMS announced that it would continue to study the MAAA codes during the CY2014 CLFS rate-setting process next year.  Notably, CMS removed the language stating that the Medicare Program does not reimburse for laboratory tests that are based on a calculation or algorithm.  Moreover, CMS instructed laboratories to, “continue using the existing HCPCS codes” to report the performance of MAAA tests.  As such, CMS has maintained the status quo for laboratories seeking reimbursement for the performance of MAAAs.  The agency did leave the door open for future recognition of MAAA codes under the Medicare Program. 

Analysis

The MPFS Final Rule and the CLFS Final Determination have important payment implications for laboratories that furnish molecular pathology services.  Laboratories and other interested stakeholders should carefully review these rules in the context of the ever-involving reimbursement framework for advanced diagnostics.  Insofar as CMS intends to work through its contractors to set rates for molecular pathology codes in 2013 and to solicit more information about MAAAs during next year’s CLFS rate-setting process, laboratory stakeholders should consider how best to influence these processes and to address unresolved reimbursement issues for this category of tests.

© 2014 McDermott Will & Emery

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About this Author

Associate

Elizabeth K. Isbey is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Washington, D.C., office.  She focuses her practice on health law.

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Joan Polacheck is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office. She represents a broad range of health care industry clients, including hospitals, suppliers, and drug and device companies.

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Paul Radensky, M.D. is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm's Washington, D.C., and Miami offices. Paul is co-chair of the Firm's Health Services and Medical Products Government Strategies team and a member of the Health Industry Advisory Practice Group.

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Eric Zimmerman is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm's Washington, D.C. office.  Eric is co-chair of the Firm’s Life Sciences Government Strategies team, and is a member of the Firm’s Government Strategies practice and Personalized Medicine team.  Eric is a recognized Medicare law and policy authority who helps clients navigate federal legislative and regulatory processes related to Medicare coverage, coding, reimbursement and compliance.  He primarily counsels and represents hospitals and health...

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