Molecular Testing in Trouble from Medicare. Who’s on First?

Posted by Judi Space on Tue,Apr 02, 2013 @ 06:00 PM

Only a Bureaucracy as Inefficient and Unwieldy as Medicare Could Create a Mess This Bad and Then Walk Away Whistling, Hands in Pockets

Medicare's decision to stop reimbursing labs for molecular testing threatens both the labs and the patients who badly need these potentially life-saving testsI’m referring to Medicare’s decision to stop paying bills for molecular testing and other diagnostic tests that are transforming the way many life-threatening diseases are being treated.  This is a decision affecting hundreds of labs, including labs performing proprietary tests that target treatments for cancer patients and other serious conditions. To be clear, this is not a decision to permanently stop paying, but to withhold payments until a favorable alternative has been found to the current system of reimbursement.

Could this have come at a worse time, a time at which significant medical and diagnostic gains are being made by molecular testing?

What began as an honest effort to reduce costs has devolved into a quagmire of indecision, with no one taking charge of resolving the mess.  In the meantime, bills from hundreds of labs and health care companies are going unpaid, with no clear resolution in sight. Just how long labs and health care companies will continue to perform these expensive services without being reimbursed is anyone’s guess, but the situation should be causing alarm bell to go off inside Medicare and the Obama administration. 

Here’s How the Medicare Reimbursement System for Molecular Testing Broke Down

First, Medicare, in a much-needed effort to address an abuse-prone billing and reimbursement system, decided to seek an alternative to the billing process known as “code stacking”, a system whereby the costs and reimbursements for diagnostic tests are determined by identifying the codes and associated costs for each step in performing a particular molecular test.  Rather than paying based on the true value of the test, the code stacking system paid for the steps, I.e., the complexity of a test. This of course opened the door to abuse and inconsistency, with some labs identifying and charging for additional steps.

116 New Codes Went Into Effect in 2011, but Medicare Sat Them Out

In order to replace this with a system of paying based on what was being tested form, in 2010 Medicare asked the American Medical Association to create codes for the most critical and common molecular tests. 116 new codes went into effect in 2011, but Medicare decided to wait until 2012 to use the new system, and until then to continue using the old code stacking method until it could set pricing for the new codes.  In the year since, Medicare has done virtually nothing, and (stunningly) has instead decided to have local Medicare carriers assign prices to each of the diagnostic codes! Now, at the last minute, instead of a unified pricing and reimbursement standard, the local Medicare carriers are forced to determine pricing.

Tests Going Unpaid, at Least for Now

As a result, many prices have not been established, and many tests are going unpaid. The market for the development of new tests is being hammered with uncertainty, with many investors sidelined until the pricing issues are resolved. To get by, some contractors are beginning to mirror the pricing charged by the Medicare contractor for California, the only carrier who has managed to set rates. One can question whether a state as large and unique as California should be driving the rates for the US as a whole.  That said, other contractors are not following the California model, and are not getting paid.

On April 30, Medicare contractors are scheduled to submit their 2013 pricing, including their prices for molecular testing. Once this occurs, it is possible that the labs will get paid after the fact. However, this is not guaranteed, and the deadline is not firm.

Is it Fair for Medicare to Delay Payments for Molecular Testing?

One must ask, is it fair for Medicare to refuse to pay for molecular testing simply because they bungled their own deadline for producing a viable reimbursement system? Should the agency be permitted to walk away from the problem by throwing it into the hands of the Medicare contractors, while in the meantime testing labs go unpaid and patients run a growing risk of having to do without potentially life-saving diagnostic testing?

For more information on this timely issue, see the full article that inspired this post on Forbes.


Pennside Partners is a leading pharmaceutical and biotech consulting firm with over 25 years experience. They have offices in the United States, United Kingdom, and Switzerland.

Tags: Oncology, Targeted Therapy, Molecular Testing

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