2014 May Bring Unwelcome Change for In-Vitro Diagnostics Companies

Earlier this year, the Centers for Medicare and Medicaid, proposed a rule that does not spell welcome news for in-vitro diagnostics companies.

"If you come in for an outpatient procedure, and they're doing any laboratory work, it's all going to be packaged into the primary procedure. [If this is goes into effect] that would mean that it there would be no extra payment for those lab tests. Obviously that's a pretty big change," explained Barb Peterson, President and CEO of Emerson Consultants, which advises medtech companies on reimbursement strategies among other things.

This proposed rule is part of CMS' annual updates to its payment and fee schedules. The final rule is expected in November after a period of public comment, and the rule would go into effect Jan. 1.

A difficult government reimbursement environment is not the only challenge that in-vitro diagnostics companies are facing these days. Faced with the prospect of having to cover millions of previously uninsured people, and not knowing what their healthcare consumption is going to be like, private insurers are increasingly becoming very conservative.

"I know this is a general statement but they are saying "no' to pretty much everything," Peterson said, referring to payors' covering new products, be it new medical devices, procedures and tests.

So how should a company that has developed a new diagnostic test approach payors to get positive coverage decisions?

Learn to think like them, Peterson advised. In other words, IVD companies have to know answers to questions like, what the current test replaces in the standard of care, how many times the test would likely be administered and whether it is clinically effective.

"Maybe they used a battery of tests to come up with a diagnosis and now you have a confirmatory test that eliminates that, that's good to know," she said. "You need to position your diagnostic test to the payors that way, so that they understand that you are not adding to the burden."

Diagnostic companies also need to conduct randomized, controlled clinical data to get regulatory clearance as well as generate the unique CPT code needed to get reimbursement from Medicare. In fact, Peterson advises designing trials in such a way that the outcomes satisfy not only the FDA from a clinical standpoint but CMS too, from a reimbursement perspective.

One better would be to actually do the trials at integrated health systems like Kaiser Permanente or HealthPartners that have both provider and payor businesses, Peterson advised. That helps the cause of getting private payors to agree to cover a novel test.

"Payors will know that [Integrated health system] not only want to provide good, clinical care, but also are cost conscious," she said. "If you can get into a Kaiser or HealthPartners or anyone else with a provider-and-payor arm, it makes a lot of sense because other payors look at them."

Peterson will be conducting a workshop on reimbursement strategies at the IVD Business Strategy Conference, hosted by MD+DI's publisher UBM, in San Diego, Nov.6-8. 

[Photo Credit: iStockphoto.com user pheonix3d] 

-- By Arundhati Parmar, Senior Editor, MD+DI
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