Hepatitis C viral load tests will be among the first diagnostics to experience higher payment under CMS' "inherent reasonableness" authority, according to Ambulatory Services Division Director Don Thompson.

"One of the more egregious examples" of an underpaid test, the HCV viral load test "is an early candidate for us," Thompson remarked March 1 during the HHS Secretary's Advisory Committee on Genetics, Health & Society meeting in Bethesda, Md.

While HIV and HCV viral load tests each cost labs $99 to perform, the national limitation amount, or the highest rate regional Medicare carriers are allowed to reimburse, is $114 for HIV but only $58 for HCV.

The HIV rate permits labs to "recoup some of the costs and actually make a living," Andrea Ferreira-Gonzalez, PhD, Virginia Commonwealth University Molecular Diagnostics Laboratory director, noted. However, the low payment for HCV causes "extra stress on the laboratories," she said.

Granted to CMS under the Balanced Budget Act of 1997, IR authority allows regional Medicare carriers to raise or lower reimbursement levels when the agency faces "grossly excessive" charges or "grossly deficient" payments for services.

CMS expects to finish instructions on IR authority for the regional Medicare carriers by year-end. Once the instructions are issued, the agency will begin using IR to adjust payment rates.

"We want to ensure that we have a fair and equitable process because it will be used in both directions," Thompson stated. Noting that the agency could target high-volume, overpaid tests such as urinalysis and complete blood counts, he observed: "The cry, if we don't get the process right, will be loud."

Thompson readily acknowledged that IR authority alone will be unable to address the systematic shortcomings of the clinical laboratory fee schedule, which, he maintains, should be revamped by Congress.

SACGHS held the session specifically to gauge genetic test reimbursement issues, but Thompson emphasized that problems with obtaining adequate payment are common to many lab tests paid under the fee schedule.

Established in the early 1980s, the rates are updated annually for inflation. Congress froze lab payments, however, from 1998-2002. The Medicare Prescription Drug, Improvement & Modernization Act (MMA) re-freezes payments through 2008.

"There is no administrative discretion there, so there's not a whole heck of a lot we can do at CMS in terms of adjusting lab fees for existing tests until 2009," Thompson explained, adding that some of the "payment anomalies will continue to exist for some time."

Under the fee schedule, new test codes can be "cross-walked" to existing codes to determine a payment rate, but often "you're cross-walking to what may be a mispriced code," leading to inaccurate payment rates, he acknowledged.

Tests frequently will be cross-walked to several codes, which can have "lower payments associated with them than one whole test," Congressional Research Service genetics specialist Michele Schoonmaker, PhD, said.

All molecular diagnostic tests, for example, are cross-walked to 14 CPT codes. Consequently, Ferreira-Gonzalez advocated timely development of new codes to better ensure adequate payment.

If there is no viable cross-walk, new codes can be "gap-filled," or sent to regional Medicare carriers to determine rates, which are then averaged by CMS - a process long criticized by AdvaMed (¹ Also see "Cross-Walking Urged For Six Lab Test Codes By Laboratory Societies" - Medtech Insight, 4 August, 2003., p. 10).

"I'm not a huge fan of gap-filling," Thompson admitted. "It is a great process in concept, [but] not fantastic in execution."

As mandated by MMA, the agency will publish a proposed rule on its process for setting new lab test payment rates by year-end.

Thompson suggested that Congress could consider overhauling the fee schedule with a competitive bidding program for lab tests. The policy will be explored through a demonstration project also mandated by MMA.

Industry adamantly opposes competitive bidding. The American Clinical Laboratory Association reiterated its stance at a special March 3 CMS open door listening forum held to discuss the impending demonstration project. ACLA contended that the wide range of lab test codes would make the program difficult to implement.

AdvaMed likewise asserts that competitive bidding "changes Medicare's basic premise from providers and beneficiaries having access to 'any willing provider,' to a selection process that over time, by its very nature, will significantly reduce the number of entities to which Medicare providers and beneficiaries will have access."

In comments presented at the meeting, AdvaMed encourages CMS to establish "an independent, non-CMS advisory and oversight committee," which would include manufacturers, patients and practitioner advocates, to review the tests, labs and areas chosen for inclusion in the demonstration project.

The committee also should be given responsibility for reviewing CMS' implementation plan and be permitted to participate in reviewing and evaluating the program, according to AdvaMed. Furthermore, beneficiaries and manufacturers should be allowed to voice complaints through the committee.

The bidding process must be open and transparent, with CMS evaluating bids on their ability to provide "multi-sourced, quality tests and related services at the prices quoted," the industry group maintains.

Multiple winners should be selected to preserve competition, AdvaMed notes. The program likewise should contain provisions ensuring that beneficiaries will have access to new technology.

AdvaMed urges the agency to devise a way to prevent "lowball bids," or offers that are too low to meet quality and access needs of beneficiaries.

In addition, CMS should devise statistical measures to assure beneficiary access, satisfaction and quality, AdvaMed states. The agency also needs to determine a methodology for comparing the program's administrative costs with the savings.

The advice stems from AdvaMed's prior criticisms of the agency's methodology used in its durable medical equipment competitive bidding demonstration projects (² Also see "Competitive Bidding Open Process Essential – AdvaMed Policy Paper" - Medtech Insight, 3 February, 2003., p. 14).

CMS Readies Use Of “Inherent Reasonableness” Authority On Lab Tests

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