The Medicare agency is dealing with the in vitro diagnostics boom with an unprecedented series of roadblocks, odd rules, and price cuts.

October 31, 2013

4 Min Read
The Evolving IVD Reimbursement Landscape in 2013

Despite unprecedented advances in laboratory medicine, the Medicare agency is dealing with the in vitro diagnostics boom with an unprecedented series of roadblocks, odd rules, and price cuts.

By Bruce Quinn, Foley Hoag LLP

Bruce_Quinn.jpgWe are living through a period of unprecedented advances in laboratory medicine, as evidenced by a just-released FDA report, “Paving the Way for Personalized Medicine.” In this report, FDA describes how it is generating informative new guidance documents, improving the internal collaboration between drug and in vitro device departments, and speeding targeted medicines to the clinic. The agency is also pushing forward initiatives to bring true genomic medicine to the clinic, such as high-resolution genomic HLA and blood group testing, which can now assess dozens of genes in efficient and rapid panel tests.

Unfortunately, in the world of reimbursement, there is no similar cross-agency report of goodwill and achievement. Instead, the Medicare agency is dealing with the boom in diagnostic medicine with an unprecedented series of roadblocks, odd rules, and price cuts. While the lab industry has experienced a lurching pattern of genetic test nonpayments and price cuts this year, this nonsense can be traced back to 2006, when Medicare promulgated its “14-day rule” for the date of service of laboratory tests. 

Under this short yet almost unreadable rule, a test performed as late as several weeks after an inpatient stay is “bundled” to the original hospital payment for that patient. That means no new payment. Of note: There is no corresponding rule that retroactively bundles CT or MRI tests to a prior hospital visit; this rule is unique to clinical laboratory tests. This rule is also extremely difficult to comply with. It actually assigns one of three different dates as a lab test’s date of service based on analysis of five other dates—the date of surgery, the date of discharge, the date the test is ordered, the date a specimen is pulled from an archive, and the date the test is performed! While originally intended to impact inpatient surgical specimens, the rule now applies equally to simple blood samples taken during an outpatient visit if the outpatient clinic has a hospital affiliation. 

In addition to the ongoing struggles with the 14-day rule, five entirely new challenges have emerged this year. First, Medicare was a year late in using the new genetic test codes, created in 2011, and priced them erratically, which, in turn, elicited much protest from the industry. This was called administrative price setting by the “gapfill” method. 

Then, in the summer of 2013, three more challenges arose. The agency announced it would attempt to reprice all clinical lab tests based on its estimation of technical costs; bundle all hospital outpatient lab tests to that day’s “service,” such as an office visit; and cap the price of some physician pathology tests at 50% or less of prior levels. The fifth and final challenge was the agency’s refusal, so far, to acknowledge that some modern lab tests are multi-analyte assays, such as the Genomic Health Oncotype DX test and the Vermillion Ova-1 test, of a type which result in a single report rather than a list of analyte measurements. 

All of these proposals triggered both written and in-person responses from the lab industry and those who understand its value. Many stakeholders from companies and associations alike also met with their congressional representatives, who, in turn, generated letters from Capitol Hill to the agency. 

The results of the current-year policy proposals would normally be released around November 1, but will be delayed a few weeks by the recent government shutdown. What is already clear, however, is that the agency probably cannot be trusted to do the right thing, or even the sensible thing, when faced with rapid change. The IVD industry needs to be active, insightful, and reasonable in educating the public, the Hill, and federal agencies such as Medicare about the value and enormous impact of IVD tests on modern healthcare. Too much bureaucracy and equivocal policy signals scare off much-needed investment and continued innovation when they’re needed.

Bruce Quinn will present on "The Evolving IVD Reimbursement Landscape: Healthcare Reform and Understanding Obstacles to FInancial Success" at the IVD Business Strategy Conference in San Diego November 6-8.

Bruce Quinn, MD, PhD, is senior healthcare policy specialist at Foley Hoag LLP and national expert on Medicare policy, the impact of health reform on innovation, and the crafting of successful business strategies within the U.S. healthcare reimbursement system. Since 2008, Dr. Quinn has been a full-time business strategist working with attorney and policy teams for healthcare and life sciences clients in the firm’s Government Strategies practice. Before joining Foley Hoag LLP, he was the regional Medicare medical director for the California Part B program. Earlier in his career, Dr. Quinn was a physician executive in the Health & Life Sciences division of Accenture, working with the pharma, biotech, and genomics industries.

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