In recent weeks the Centres for Medicare and Medicaid Services (CMS) released several significant updates affecting reimbursement for clinical laboratory tests in 2015 and beyond. In particular, the CMS:

  • announced two important updates related to molecular diagnostic (MolDx) tests;
  • removed a regulation related to clinical laboratory payment made obsolete by Congress's enactment of Section 216 of the Protecting Access to Medicare Act of 2014 (Pub L 113-93, April 1 2014); and
  • declined to finalise certain proposed changes to the local coverage determination (LCD) process used by Medicare administrative contractors (MACs) to make coverage decisions at the local level.

In addition, the Department of Health and Human Services Office of Inspector General (OIG) announced that, using data mining techniques, it will increase its scrutiny of laboratory billing in 2015 and pursue enforcement actions against laboratories showing unusual claims and billing patterns. These actions demonstrate the department's ongoing efforts to modernise the clinical laboratory payment system, as laboratory diagnostic testing – particularly in the genetic and genomic realm – becomes an even more critical component of patient care.

Payment for MolDx codes in 2015

On November 25 2013 the CMS released its Clinical Laboratory Fee Schedule (CLFS) Final Determinations related to developing payment levels for new and reconsidered laboratory codes for 2015. Among other things, the CMS indicated that it plans to use the 'gapfill' regulatory process – rather than the 'crosswalking' process typically favoured by industry – to determine prices for certain new Tier 1 codes (genetic tests), as well as for 21 new Tier 2 codes (also referred to as 'genomic tests', 'next-generation sequencing' or 'genomic sequencing procedures') being priced for 2015. Industry has generally favoured cross-walking (ie, using prices of existing similar laboratory tests to price new tests); however, the CMS continues to believe that MACs are in the best position to develop appropriate prices for these novel tests through the more labour-intensive gapfilling process, using data obtained from laboratories and other payers, as well as the MAC's internal expertise, to set prices. Tier 1 genetic tests that were priced last year under the gapfill process were generally priced at lower-than-expected values for most tests, raising some concern that use of the gapfill process for Tier 1 and Tier 2 codes this year will produce similarly low payment rates.

With respect to certain new oncology tests classified as multianalyte assays with algorithmic analysis (MAAAs), the CMS indicated that MACs will continue to individually review codes classified as MAAAs for coverage and payment purposes in 2015. The CMS continues to question whether every MAAA code will qualify as a clinical diagnostic laboratory test subject to the CLFS, and thus is leaving these tests under the purview of the MACs at this time.

The CMS is expected to release its final 2015 payment determinations for these genetic, genomic and MAAA codes before the end of 2014 in order to enable payments to be made under the CLFS in 2015. Laboratories will then have to avail themselves of regulatory processes to seek reconsideration of the payment decisions.

Palmetto policy on billing for MolDx panels

Palmetto GBA, the MAC administering the MolDx Programme governing coverage and payment for molecular pathology tests, announced that laboratories performing test panels (ie, tests for multiple molecular biomarkers ordered together and completed on a single sample, whether the test requisition form lists the tests individually or as a panel) must begin to register each panel under the MolDx Programme. Laboratories now must obtain a unique MolDx identifier for each panel and bill such panels with a single current procedural terminology (CPT) code and the applicable unique MolDx identifier. Currently, many laboratories submit these multiple biomarker 'panels' as individual tests, providing a CPT code for each biomarker included in the panel. Palmetto's action here is consistent with its movement away from the 'stacking' methodology used by laboratories before the development of the Tier 1 and Tier 2 MolDx CPT codes; but these changes will require many laboratories and pathologists to adjust their MolDx test billing practices for many tests, likely resulting in reduced payments.

Palmetto began notifying affected laboratories on November 17 2014, and laboratories will have 30 days to obtain unique MolDx identifiers for their panels in accordance with this new Palmetto guidance. From January 1 2015, claims will be rejected for tests performed as panels and registered and submitted with CPT codes for each biomarker in the panel, rather than with a single CPT code and a unique MolDx identifier for each such panel.

Medicare Physician Fee Schedule Final Rule updates

On November 13 2014 the CMS issued its 2015 Medicare Physician Fee Schedule (PFS) Final Rule, which includes updates related to payments for clinical laboratory services applicable 2015. Consistent with the revisions to laboratory payment methodology mandated by Congress in Section 216 of the Protecting Access to Medicare Act, the CMS removed 42 CFR §414.511 from its regulatory scheme. This section would have authorised the CMS to adjust payments for various clinical laboratory tests based on 'technological changes' beginning in the 2015 PFS Final Rule. Instead, the CMS will use its rule-making process to develop a data collection and reporting system to enable the Protecting Access to Medicare Act's market-based payment methodology for laboratory tests, which is scheduled to take effect in 2017. The CMS did not specify a timeframe for issuance of this proposed rule, but the Protecting Access to Medicare Act requires such rulemaking to be finalised by June 30 2015 in order to permit reporting to begin in 2016. The CMS is in the process of assembling an advisory group consisting of outside laboratory experts to assist with the development of this new market-based reimbursement system, but has not released any further guidance to the act at this time.

Laboratories should continue to watch for issuance of the Protecting Access to Medicare Act proposed rule in the coming months, and should submit comments to the CMS on the data collection, reporting and fraud and abuse aspects of the rule, in order to ensure a new payment methodology that is functional and manageable for reporting laboratories and other stakeholders that will be affected by the new payment rates.

LCD proposals dropped

The CMS declined to adopt its proposed changes to the local coverage determination (LCD) process for clinical diagnostic laboratory testing, which had included – among other things – shortened timelines and public comment periods, as well as elimination of the requirement that MACs hold open stakeholder meetings. The Protecting Access to Medicare Act provides that MACs may issue laboratory coverage policies only through the LCD process effective January 1 2015, purportedly as one means to ensure that MACs use a more consistent process to regulate MolDx tests. Stakeholders should monitor any changes to the LCD process to ensure they will have the level of input and recourse needed as the CMS implements the new market-based payment system under the Protecting Access to Medicare Act and new coverage and payment policies under the MolDx Programme.

Fraud and abuse — OIG Work Plan includes review of clinical lab billing

The OIG announced plans to review Medicare payments to independent clinical laboratories in its recently released Work Plan Fiscal Year 2015. The OIG did not specify particular billing practices subject to review, instead offering a general reference to its various audits, investigations and inspections that have identified compliance risk areas. However, it did indicate that it will focus on laboratories with claims that may be at risk of overpayments.

Given the proliferation of laboratories, especially smaller genetic and genomic testing laboratories; a highly competitive environment; the multitude of changes to laboratory billing rules; and the increased scrutiny reflected in the OIG Work Plan, laboratories should carefully analyse their billing and coding data and practices, NPI enrolment and reporting, physician and patient relationships and sales and marketing arrangements in order to ensure compliance with applicable law.

Barbara Cammarata and Richard D Raskin

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.